1.1                          A bill for an act 
  1.2             relating to the operation of state government; 
  1.3             modifying parental contributions; modifying several 
  1.4             MFIP provisions; modifying medical assistance estate 
  1.5             recovery provisions; eliminating recoveries for 
  1.6             alternative care costs; removing liens against life 
  1.7             estates and joint tenant interests; limiting income 
  1.8             tax deductions; appropriating money; amending 
  1.9             Minnesota Statutes 2002, sections 256J.46, by adding a 
  1.10            subdivision; 290.01, subdivision 6b; 290.17, 
  1.11            subdivisions 2, 4; Minnesota Statutes 2003 Supplement, 
  1.12            sections 252.27, subdivision 2a; 256B.15, subdivisions 
  1.13            1, 1a, 2, 3, 4; 256J.21, subdivision 2; 256J.42, 
  1.14            subdivision 5; 256J.46, subdivision 1; 256J.521, 
  1.15            subdivisions 1, 2; 256J.53, subdivision 2; 256J.95, 
  1.16            subdivision 9; 290.01, subdivision 19d; 514.981, 
  1.17            subdivision 6; 524.3-805; repealing Minnesota Statutes 
  1.18            2003 Supplement, sections 256B.15, subdivisions 1c, 
  1.19            1d, 1e, 1f, 1g, 1h, 1i, 1j, 1k; 256J.37, subdivisions 
  1.20            3a, 3b; 514.991; 514.992; 514.993; 514.994; 514.995. 
  1.21  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.22                             ARTICLE 1
  1.23                           HUMAN SERVICES
  1.24     Section 1.  Minnesota Statutes 2003 Supplement, section 
  1.25  252.27, subdivision 2a, is amended to read: 
  1.26     Subd. 2a.  [CONTRIBUTION AMOUNT.] (a) The natural or 
  1.27  adoptive parents of a minor child, including a child determined 
  1.28  eligible for medical assistance without consideration of 
  1.29  parental income, must contribute monthly to the cost of health 
  1.30  services used by making monthly payments on a sliding scale 
  1.31  based on income, unless the child is married or has been 
  1.32  married, parental rights have been terminated, or the child's 
  1.33  adoption is subsidized according to section 259.67 or through 
  2.1   title IV-E of the Social Security Act. 
  2.2      (b) For households with adjusted gross income equal to or 
  2.3   greater than 100 percent of federal poverty guidelines, the 
  2.4   parental contribution shall be computed by applying the 
  2.5   following schedule of rates to the adjusted gross income of the 
  2.6   natural or adoptive parents: 
  2.7      (1) if the adjusted gross income is equal to or greater 
  2.8   than 100 percent of federal poverty guidelines and less than 175 
  2.9   percent of federal poverty guidelines, the parental contribution 
  2.10  is $4 per month; 
  2.11     (2) if the adjusted gross income is equal to or greater 
  2.12  than 175 percent of federal poverty guidelines and less than or 
  2.13  equal to 375 575 percent of federal poverty guidelines, the 
  2.14  parental contribution shall be determined using a sliding fee 
  2.15  scale established by the commissioner of human services which 
  2.16  begins at one percent of adjusted gross income at 175 percent of 
  2.17  federal poverty guidelines and increases to 7.5 percent of 
  2.18  adjusted gross income for those with adjusted gross income up to 
  2.19  375 575 percent of federal poverty guidelines; 
  2.20     (3) if the adjusted gross income is greater than 375 575 
  2.21  percent of federal poverty guidelines and less than 675 percent 
  2.22  of federal poverty guidelines, the parental contribution shall 
  2.23  be 7.5 percent of adjusted gross income; 
  2.24     (4) if the adjusted gross income is equal to or greater 
  2.25  than 675 percent of federal poverty guidelines and less than 975 
  2.26  percent of federal poverty guidelines, the parental contribution 
  2.27  shall be ten percent of adjusted gross income; and 
  2.28     (5) if the adjusted gross income is equal to or greater 
  2.29  than 975 percent of federal poverty guidelines, the parental 
  2.30  contribution shall be 12.5 percent of adjusted gross income. 
  2.31     If the child lives with the parent, the annual adjusted 
  2.32  gross income is reduced by $2,400 $5,000 prior to calculating 
  2.33  the parental contribution.  If the child resides in an 
  2.34  institution specified in section 256B.35, the parent is 
  2.35  responsible for the personal needs allowance specified under 
  2.36  that section in addition to the parental contribution determined 
  3.1   under this section.  The parental contribution is reduced by any 
  3.2   amount required to be paid directly to the child pursuant to a 
  3.3   court order, but only if actually paid. 
  3.4      (c) The household size to be used in determining the amount 
  3.5   of contribution under paragraph (b) includes natural and 
  3.6   adoptive parents and their dependents under age 21, including 
  3.7   the child receiving services.  Adjustments in the contribution 
  3.8   amount due to annual changes in the federal poverty guidelines 
  3.9   shall be implemented on the first day of July following 
  3.10  publication of the changes. 
  3.11     (d) For purposes of paragraph (b), "income" means the 
  3.12  adjusted gross income of the natural or adoptive parents 
  3.13  determined according to the previous year's federal tax form, 
  3.14  except, effective retroactive from July 1, 2003, taxable capital 
  3.15  gains to the extent the funds have been used to purchase a home 
  3.16  and funds from early withdrawn qualified retirement accounts 
  3.17  under the Internal Revenue Code shall not be counted as income. 
  3.18     (e) The contribution shall be explained in writing to the 
  3.19  parents at the time eligibility for services is being 
  3.20  determined.  The contribution shall be made on a monthly basis 
  3.21  effective with the first month in which the child receives 
  3.22  services.  Annually upon redetermination or at termination of 
  3.23  eligibility, if the contribution exceeded the cost of services 
  3.24  provided, the local agency or the state shall reimburse that 
  3.25  excess amount to the parents, either by direct reimbursement if 
  3.26  the parent is no longer required to pay a contribution, or by a 
  3.27  reduction in or waiver of parental fees until the excess amount 
  3.28  is exhausted. 
  3.29     (f) The monthly contribution amount must be reviewed at 
  3.30  least every 12 months; when there is a change in household size; 
  3.31  and when there is a loss of or gain in income from one month to 
  3.32  another in excess of ten percent.  The local agency shall mail a 
  3.33  written notice 30 days in advance of the effective date of a 
  3.34  change in the contribution amount.  A decrease in the 
  3.35  contribution amount is effective in the month that the parent 
  3.36  verifies a reduction in income or change in household size. 
  4.1      (g) Parents of a minor child who do not live with each 
  4.2   other shall each pay the contribution required under paragraph 
  4.3   (a).  An amount equal to the annual, except that a court-ordered 
  4.4   child support payment actually paid on behalf of the child 
  4.5   receiving services shall be deducted from the adjusted gross 
  4.6   income contribution of the parent making the payment prior to 
  4.7   calculating the parental contribution under paragraph (b). 
  4.8      (h) The contribution under paragraph (b) shall be increased 
  4.9   by an additional five percent if the local agency determines 
  4.10  that insurance coverage is available but not obtained for the 
  4.11  child.  For purposes of this section, "available" means the 
  4.12  insurance is a benefit of employment for a family member at an 
  4.13  annual cost of no more than five percent of the family's annual 
  4.14  income.  For purposes of this section, "insurance" means health 
  4.15  and accident insurance coverage, enrollment in a nonprofit 
  4.16  health service plan, health maintenance organization, 
  4.17  self-insured plan, or preferred provider organization. 
  4.18     Parents who have more than one child receiving services 
  4.19  shall not be required to pay more than the amount for the child 
  4.20  with the highest expenditures.  There shall be no resource 
  4.21  contribution from the parents.  The parent shall not be required 
  4.22  to pay a contribution in excess of the cost of the services 
  4.23  provided to the child, not counting payments made to school 
  4.24  districts for education-related services.  Notice of an increase 
  4.25  in fee payment must be given at least 30 days before the 
  4.26  increased fee is due.  
  4.27     (i) The contribution under paragraph (b) shall be reduced 
  4.28  by $300 per fiscal year if, in the 12 months prior to July 1: 
  4.29     (1) the parent applied for insurance for the child; 
  4.30     (2) the insurer denied insurance; 
  4.31     (3) the parents submitted a complaint or appeal, in writing 
  4.32  to the insurer, submitted a complaint or appeal, in writing, to 
  4.33  the commissioner of health or the commissioner of commerce, or 
  4.34  litigated the complaint or appeal; and 
  4.35     (4) as a result of the dispute, the insurer reversed its 
  4.36  decision and granted insurance. 
  5.1      For purposes of this section, "insurance" has the meaning 
  5.2   given in paragraph (h). 
  5.3      A parent who has requested a reduction in the contribution 
  5.4   amount under this paragraph shall submit proof in the form and 
  5.5   manner prescribed by the commissioner or county agency, 
  5.6   including, but not limited to, the insurer's denial of 
  5.7   insurance, the written letter or complaint of the parents, court 
  5.8   documents, and the written response of the insurer approving 
  5.9   insurance.  The determinations of the commissioner or county 
  5.10  agency under this paragraph are not rules subject to chapter 14. 
  5.11     Sec. 2.  Minnesota Statutes 2003 Supplement, section 
  5.12  256B.15, subdivision 1, is amended to read: 
  5.13     Subdivision 1.  [POLICY, APPLICABILITY, PURPOSE, AND 
  5.14  CONSTRUCTION; DEFINITION.] (a) It is the policy of this state 
  5.15  that individuals or couples, either or both of whom participate 
  5.16  in the medical assistance program, use their own assets to pay 
  5.17  their share of the total cost of their care during or after 
  5.18  their enrollment in the program according to applicable federal 
  5.19  law and the laws of this state.  The following provisions apply: 
  5.20     (1) subdivisions 1c to 1k shall not apply to claims arising 
  5.21  under this section which are presented under section 525.313; 
  5.22     (2) the provisions of subdivisions 1c to 1k expanding the 
  5.23  interests included in an estate for purposes of recovery under 
  5.24  this section give effect to the provisions of United States 
  5.25  Code, title 42, section 1396p, governing recoveries, but do not 
  5.26  give rise to any express or implied liens in favor of any other 
  5.27  parties not named in these provisions; 
  5.28     (3) the continuation of a recipient's life estate or joint 
  5.29  tenancy interest in real property after the recipient's death 
  5.30  for the purpose of recovering medical assistance under this 
  5.31  section modifies common law principles holding that these 
  5.32  interests terminate on the death of the holder; 
  5.33     (4) all laws, rules, and regulations governing or involved 
  5.34  with a recovery of medical assistance shall be liberally 
  5.35  construed to accomplish their intended purposes; 
  5.36     (5) a deceased recipient's life estate and joint tenancy 
  6.1   interests continued under this section shall be owned by the 
  6.2   remaindermen or surviving joint tenants as their interests may 
  6.3   appear on the date of the recipient's death.  They shall not be 
  6.4   merged into the remainder interest or the interests of the 
  6.5   surviving joint tenants by reason of ownership.  They shall be 
  6.6   subject to the provisions of this section.  Any conveyance, 
  6.7   transfer, sale, assignment, or encumbrance by a remainderman, a 
  6.8   surviving joint tenant, or their heirs, successors, and assigns 
  6.9   shall be deemed to include all of their interest in the deceased 
  6.10  recipient's life estate or joint tenancy interest continued 
  6.11  under this section; and 
  6.12     (6) the provisions of subdivisions 1c to 1k continuing a 
  6.13  recipient's joint tenancy interests in real property after the 
  6.14  recipient's death do not apply to a homestead owned of record, 
  6.15  on the date the recipient dies, by the recipient and the 
  6.16  recipient's spouse as joint tenants with a right of 
  6.17  survivorship.  Homestead means the real property occupied by the 
  6.18  surviving joint tenant spouse as their sole residence on the 
  6.19  date the recipient dies and classified and taxed to the 
  6.20  recipient and surviving joint tenant spouse as homestead 
  6.21  property for property tax purposes in the calendar year in which 
  6.22  the recipient dies.  For purposes of this exemption, real 
  6.23  property the recipient and their surviving joint tenant spouse 
  6.24  purchase solely with the proceeds from the sale of their prior 
  6.25  homestead, own of record as joint tenants, and qualify as 
  6.26  homestead property under section 273.124 in the calendar year in 
  6.27  which the recipient dies and prior to the recipient's death 
  6.28  shall be deemed to be real property classified and taxed to the 
  6.29  recipient and their surviving joint tenant spouse as homestead 
  6.30  property in the calendar year in which the recipient dies.  The 
  6.31  surviving spouse, or any person with personal knowledge of the 
  6.32  facts, may provide an affidavit describing the homestead 
  6.33  property affected by this clause and stating facts showing 
  6.34  compliance with this clause.  The affidavit shall be prima facie 
  6.35  evidence of the facts it states. 
  6.36     (b) For purposes of this section, "medical assistance" 
  7.1   includes the medical assistance program under this chapter and 
  7.2   the general assistance medical care program under chapter 256D 
  7.3   and but does not include the alternative care program for 
  7.4   nonmedical assistance recipients under section 256B.0913. 
  7.5      Sec. 3.  Minnesota Statutes 2003 Supplement, section 
  7.6   256B.15, subdivision 1a, is amended to read: 
  7.7      Subd. 1a.  [ESTATES SUBJECT TO CLAIMS.] If a person 
  7.8   receives any medical assistance hereunder, on the person's 
  7.9   death, if single, or on the death of the survivor of a married 
  7.10  couple, either or both of whom received medical assistance, or 
  7.11  as otherwise provided for in this section, the total amount paid 
  7.12  for medical assistance rendered for the person and spouse shall 
  7.13  be filed as a claim against the estate of the person or the 
  7.14  estate of the surviving spouse in the court having jurisdiction 
  7.15  to probate the estate or to issue a decree of descent according 
  7.16  to sections 525.31 to 525.313.  
  7.17     A claim shall be filed if medical assistance was rendered 
  7.18  for either or both persons under one of the following 
  7.19  circumstances: 
  7.20     (a) the person was over 55 years of age, and received 
  7.21  services under this chapter, excluding alternative care; 
  7.22     (b) the person resided in a medical institution for six 
  7.23  months or longer, received services under this chapter, 
  7.24  excluding alternative care, and, at the time of 
  7.25  institutionalization or application for medical assistance, 
  7.26  whichever is later, the person could not have reasonably been 
  7.27  expected to be discharged and returned home, as certified in 
  7.28  writing by the person's treating physician.  For purposes of 
  7.29  this section only, a "medical institution" means a skilled 
  7.30  nursing facility, intermediate care facility, intermediate care 
  7.31  facility for persons with mental retardation, nursing facility, 
  7.32  or inpatient hospital; or 
  7.33     (c) the person received general assistance medical care 
  7.34  services under chapter 256D.  
  7.35     The claim shall be considered an expense of the last 
  7.36  illness of the decedent for the purpose of section 524.3-805.  
  8.1   Any statute of limitations that purports to limit any county 
  8.2   agency or the state agency, or both, to recover for medical 
  8.3   assistance granted hereunder shall not apply to any claim made 
  8.4   hereunder for reimbursement for any medical assistance granted 
  8.5   hereunder.  Notice of the claim shall be given to all heirs and 
  8.6   devisees of the decedent whose identity can be ascertained with 
  8.7   reasonable diligence.  The notice must include procedures and 
  8.8   instructions for making an application for a hardship waiver 
  8.9   under subdivision 5; time frames for submitting an application 
  8.10  and determination; and information regarding appeal rights and 
  8.11  procedures.  Counties are entitled to one-half of the nonfederal 
  8.12  share of medical assistance collections from estates that are 
  8.13  directly attributable to county effort.  Counties are entitled 
  8.14  to ten percent of the collections for alternative care directly 
  8.15  attributable to county effort. 
  8.16     Sec. 4.  Minnesota Statutes 2003 Supplement, section 
  8.17  256B.15, subdivision 2, is amended to read: 
  8.18     Subd. 2.  [LIMITATIONS ON CLAIMS.] The claim shall include 
  8.19  only the total amount of medical assistance rendered after age 
  8.20  55 or during a period of institutionalization described in 
  8.21  subdivision 1a, clause (b), and the total amount of general 
  8.22  assistance medical care rendered, and shall not include 
  8.23  interest.  Claims that have been allowed but not paid shall bear 
  8.24  interest according to section 524.3-806, paragraph (d).  A claim 
  8.25  against the estate of a surviving spouse who did not receive 
  8.26  medical assistance, for medical assistance rendered for the 
  8.27  predeceased spouse, is limited to the value of the assets of the 
  8.28  estate that were marital property or jointly owned property at 
  8.29  any time during the marriage.  Claims for alternative care shall 
  8.30  be net of all premiums paid under section 256B.0913, subdivision 
  8.31  12, on or after July 1, 2003, and shall be limited to services 
  8.32  provided on or after July 1, 2003. 
  8.33     Sec. 5.  Minnesota Statutes 2003 Supplement, section 
  8.34  256B.15, subdivision 3, is amended to read: 
  8.35     Subd. 3.  [SURVIVING SPOUSE, MINOR, BLIND, OR DISABLED 
  8.36  CHILDREN.] If a decedent is survived by a spouse, or who was 
  9.1   single or who was the surviving spouse of a married couple and 
  9.2   is survived by a child who is under age 21 or blind or 
  9.3   permanently and totally disabled according to the supplemental 
  9.4   security income program criteria, a no claim shall be filed 
  9.5   against the estate according to this section. 
  9.6      <b>[EFFECTIVE DATE.]</b> This section is effective retroactive 
  9.7   from July 1, 2003. 
  9.8      Sec. 6.  Minnesota Statutes 2003 Supplement, section 
  9.9   256B.15, subdivision 4, is amended to read: 
  9.10     Subd. 4.  [OTHER SURVIVORS.] If the decedent who was single 
  9.11  or the surviving spouse of a married couple is survived by one 
  9.12  of the following persons, a claim exists against the estate in 
  9.13  an amount not to exceed the value of the nonhomestead property 
  9.14  included in the estate and the personal representative shall 
  9.15  make, execute, and deliver to the county agency a lien against 
  9.16  the homestead property in the estate for any unpaid balance of 
  9.17  the claim to the claimant as provided under this section: 
  9.18     (a) a sibling who resided in the decedent medical 
  9.19  assistance recipient's home at least one year before the 
  9.20  decedent's institutionalization and continuously since the date 
  9.21  of institutionalization; or 
  9.22     (b) a son or daughter or a grandchild who resided in the 
  9.23  decedent medical assistance recipient's home for at least two 
  9.24  years immediately before the parent's or grandparent's 
  9.25  institutionalization and continuously since the date of 
  9.26  institutionalization, and who establishes by a preponderance of 
  9.27  the evidence having provided care to the parent or grandparent 
  9.28  who received medical assistance, that the care was provided 
  9.29  before institutionalization, and that the care permitted the 
  9.30  parent or grandparent to reside at home rather than in an 
  9.31  institution. 
  9.32     <b>[EFFECTIVE DATE.]</b> This section is effective retroactive 
  9.33  from July 1, 2003. 
  9.34     Sec. 7.  Minnesota Statutes 2003 Supplement, section 
  9.35  256J.21, subdivision 2, is amended to read: 
  9.36     Subd. 2.  [INCOME EXCLUSIONS.] The following must be 
 10.1   excluded in determining a family's available income: 
 10.2      (1) payments for basic care, difficulty of care, and 
 10.3   clothing allowances received for providing family foster care to 
 10.4   children or adults under Minnesota Rules, parts 9545.0010 to 
 10.5   9545.0260 and 9555.5050 to 9555.6265, and payments received and 
 10.6   used for care and maintenance of a third-party beneficiary who 
 10.7   is not a household member; 
 10.8      (2) reimbursements for employment training received through 
 10.9   the Workforce Investment Act of 1998, United States Code, title 
 10.10  20, chapter 73, section 9201; 
 10.11     (3) reimbursement for out-of-pocket expenses incurred while 
 10.12  performing volunteer services, jury duty, employment, or 
 10.13  informal carpooling arrangements directly related to employment; 
 10.14     (4) all educational assistance, except the county agency 
 10.15  must count graduate student teaching assistantships, 
 10.16  fellowships, and other similar paid work as earned income and, 
 10.17  after allowing deductions for any unmet and necessary 
 10.18  educational expenses, shall count scholarships or grants awarded 
 10.19  to graduate students that do not require teaching or research as 
 10.20  unearned income; 
 10.21     (5) loans, regardless of purpose, from public or private 
 10.22  lending institutions, governmental lending institutions, or 
 10.23  governmental agencies; 
 10.24     (6) loans from private individuals, regardless of purpose, 
 10.25  provided an applicant or participant documents that the lender 
 10.26  expects repayment; 
 10.27     (7)(i) state income tax refunds; and 
 10.28     (ii) federal income tax refunds; 
 10.29     (8)(i) federal earned income credits; 
 10.30     (ii) Minnesota working family credits; 
 10.31     (iii) state homeowners and renters credits under chapter 
 10.32  290A; and 
 10.33     (iv) federal or state tax rebates; 
 10.34     (9) funds received for reimbursement, replacement, or 
 10.35  rebate of personal or real property when these payments are made 
 10.36  by public agencies, awarded by a court, solicited through public 
 11.1   appeal, or made as a grant by a federal agency, state or local 
 11.2   government, or disaster assistance organizations, subsequent to 
 11.3   a presidential declaration of disaster; 
 11.4      (10) the portion of an insurance settlement that is used to 
 11.5   pay medical, funeral, and burial expenses, or to repair or 
 11.6   replace insured property; 
 11.7      (11) reimbursements for medical expenses that cannot be 
 11.8   paid by medical assistance; 
 11.9      (12) payments by a vocational rehabilitation program 
 11.10  administered by the state under chapter 268A, except those 
 11.11  payments that are for current living expenses; 
 11.12     (13) in-kind income, including any payments directly made 
 11.13  by a third party to a provider of goods and services; 
 11.14     (14) assistance payments to correct underpayments, but only 
 11.15  for the month in which the payment is received; 
 11.16     (15) payments for short-term emergency needs under section 
 11.17  256J.626, subdivision 2; 
 11.18     (16) funeral and cemetery payments as provided by section 
 11.19  256.935; 
 11.20     (17) nonrecurring cash gifts of $30 or less, not exceeding 
 11.21  $30 per participant in a calendar month; 
 11.22     (18) any form of energy assistance payment made through 
 11.23  Public Law 97-35, Low-Income Home Energy Assistance Act of 1981, 
 11.24  payments made directly to energy providers by other public and 
 11.25  private agencies, and any form of credit or rebate payment 
 11.26  issued by energy providers; 
 11.27     (19) Supplemental Security Income (SSI), including 
 11.28  retroactive SSI payments and other income of an SSI recipient, 
 11.29  except as described in section 256J.37, subdivision 3b; 
 11.30     (20) Minnesota supplemental aid, including retroactive 
 11.31  payments; 
 11.32     (21) proceeds from the sale of real or personal property; 
 11.33     (22) state adoption assistance payments under section 
 11.34  259.67, and up to an equal amount of county adoption assistance 
 11.35  payments; 
 11.36     (23) state-funded family subsidy program payments made 
 12.1   under section 252.32 to help families care for children with 
 12.2   mental retardation or related conditions, consumer support grant 
 12.3   funds under section 256.476, and resources and services for a 
 12.4   disabled household member under one of the home and 
 12.5   community-based waiver services programs under chapter 256B; 
 12.6      (24) interest payments and dividends from property that is 
 12.7   not excluded from and that does not exceed the asset limit; 
 12.8      (25) rent rebates; 
 12.9      (26) income earned by a minor caregiver, minor child 
 12.10  through age 6, or a minor child who is at least a half-time 
 12.11  student in an approved elementary or secondary education 
 12.12  program; 
 12.13     (27) income earned by a caregiver under age 20 who is at 
 12.14  least a half-time student in an approved elementary or secondary 
 12.15  education program; 
 12.16     (28) MFIP child care payments under section 119B.05; 
 12.17     (29) all other payments made through MFIP to support a 
 12.18  caregiver's pursuit of greater economic stability; 
 12.19     (30) income a participant receives related to shared living 
 12.20  expenses; 
 12.21     (31) reverse mortgages; 
 12.22     (32) benefits provided by the Child Nutrition Act of 1966, 
 12.23  United States Code, title 42, chapter 13A, sections 1771 to 
 12.24  1790; 
 12.25     (33) benefits provided by the women, infants, and children 
 12.26  (WIC) nutrition program, United States Code, title 42, chapter 
 12.27  13A, section 1786; 
 12.28     (34) benefits from the National School Lunch Act, United 
 12.29  States Code, title 42, chapter 13, sections 1751 to 1769e; 
 12.30     (35) relocation assistance for displaced persons under the 
 12.31  Uniform Relocation Assistance and Real Property Acquisition 
 12.32  Policies Act of 1970, United States Code, title 42, chapter 61, 
 12.33  subchapter II, section 4636, or the National Housing Act, United 
 12.34  States Code, title 12, chapter 13, sections 1701 to 1750jj; 
 12.35     (36) benefits from the Trade Act of 1974, United States 
 12.36  Code, title 19, chapter 12, part 2, sections 2271 to 2322; 
 13.1      (37) war reparations payments to Japanese Americans and 
 13.2   Aleuts under United States Code, title 50, sections 1989 to 
 13.3   1989d; 
 13.4      (38) payments to veterans or their dependents as a result 
 13.5   of legal settlements regarding Agent Orange or other chemical 
 13.6   exposure under Public Law 101-239, section 10405, paragraph 
 13.7   (a)(2)(E); 
 13.8      (39) income that is otherwise specifically excluded from 
 13.9   MFIP consideration in federal law, state law, or federal 
 13.10  regulation; 
 13.11     (40) security and utility deposit refunds; 
 13.12     (41) American Indian tribal land settlements excluded under 
 13.13  Public Laws 98-123, 98-124, and 99-377 to the Mississippi Band 
 13.14  Chippewa Indians of White Earth, Leech Lake, and Mille Lacs 
 13.15  reservations and payments to members of the White Earth Band, 
 13.16  under United States Code, title 25, chapter 9, section 331, and 
 13.17  chapter 16, section 1407; 
 13.18     (42) all income of the minor parent's parents and 
 13.19  stepparents when determining the grant for the minor parent in 
 13.20  households that include a minor parent living with parents or 
 13.21  stepparents on MFIP with other children; 
 13.22     (43) income of the minor parent's parents and stepparents 
 13.23  equal to 200 percent of the federal poverty guideline for a 
 13.24  family size not including the minor parent and the minor 
 13.25  parent's child in households that include a minor parent living 
 13.26  with parents or stepparents not on MFIP when determining the 
 13.27  grant for the minor parent.  The remainder of income is deemed 
 13.28  as specified in section 256J.37, subdivision 1b; 
 13.29     (44) payments made to children eligible for relative 
 13.30  custody assistance under section 257.85; 
 13.31     (45) vendor payments for goods and services made on behalf 
 13.32  of a client unless the client has the option of receiving the 
 13.33  payment in cash; and 
 13.34     (46) the principal portion of a contract for deed payment. 
 13.35     Sec. 8.  Minnesota Statutes 2003 Supplement, section 
 13.36  256J.42, subdivision 5, is amended to read: 
 14.1      Subd. 5.  [EXEMPTION FOR CERTAIN FAMILIES.] (a) Any cash 
 14.2   assistance received by an assistance unit does not count toward 
 14.3   the 60-month limit on assistance during a month in which the 
 14.4   caregiver is age 60 or older, including months during which the 
 14.5   caregiver was exempt under section 256J.56, paragraph (a), 
 14.6   clause (1). 
 14.7      (b) From July 1, 1997, until the date MFIP is operative in 
 14.8   the caregiver's county of financial responsibility, any cash 
 14.9   assistance received by a caregiver who is complying with 
 14.10  Minnesota Statutes 1996, section 256.73, subdivision 5a, and 
 14.11  Minnesota Statutes 1998, section 256.736, if applicable, does 
 14.12  not count toward the 60-month limit on assistance.  Thereafter, 
 14.13  any cash assistance received by a minor caregiver who is 
 14.14  complying with the requirements of sections 256J.14 and 256J.54, 
 14.15  if applicable, does not count towards the 60-month limit on 
 14.16  assistance. 
 14.17     (c) Any diversionary assistance or emergency assistance 
 14.18  received prior to July 1, 2003, does not count toward the 
 14.19  60-month limit. 
 14.20     (d) Any cash assistance received by an 18- or 19-year-old 
 14.21  caregiver who is complying with an employment plan that includes 
 14.22  an education option under section 256J.54 does not count toward 
 14.23  the 60-month limit. 
 14.24     (e) Payments provided to meet short-term emergency needs 
 14.25  under section 256J.626 and diversionary work program benefits 
 14.26  provided under section 256J.95 do not count toward the 60-month 
 14.27  time limit. 
 14.28     (f) Any monthly cash assistance received by an assistance 
 14.29  unit while on MFIP that is repaid or reimbursed for reasons 
 14.30  other than fraud does not count toward the 60-month limit. 
 14.31     Sec. 9.  Minnesota Statutes 2003 Supplement, section 
 14.32  256J.46, subdivision 1, is amended to read: 
 14.33     Subdivision 1.  [PARTICIPANTS NOT COMPLYING WITH PROGRAM 
 14.34  REQUIREMENTS.] (a) A participant who fails without good cause 
 14.35  under section 256J.57 to comply with the requirements of this 
 14.36  chapter, and who is not subject to a sanction under subdivision 
 15.1   2, shall be subject to a sanction as provided in this 
 15.2   subdivision.  Prior to the imposition of a sanction, a county 
 15.3   agency shall provide a notice of intent to sanction under 
 15.4   section 256J.57, subdivision 2, and, when applicable, a notice 
 15.5   of adverse action as provided in section 256J.31. 
 15.6      (b) A sanction under this subdivision becomes effective the 
 15.7   month following the month in which a required notice is given.  
 15.8   A sanction must not be imposed when a participant comes into 
 15.9   compliance with the requirements for orientation under section 
 15.10  256J.45 prior to the effective date of the sanction.  A sanction 
 15.11  must not be imposed when a participant comes into compliance 
 15.12  with the requirements for employment and training services under 
 15.13  sections 256J.515 to 256J.57 ten days prior to the effective 
 15.14  date of the sanction.  For purposes of this subdivision, each 
 15.15  month that a participant fails to comply with a requirement of 
 15.16  this chapter shall be considered a separate occurrence of 
 15.17  noncompliance.  If both participants in a two-parent assistance 
 15.18  unit are out of compliance at the same time, it is considered 
 15.19  one occurrence of noncompliance.  
 15.20     (c) Sanctions for noncompliance shall be imposed as follows:
 15.21     (1) For the first occurrence of noncompliance by a 
 15.22  participant in an assistance unit, the assistance unit's grant 
 15.23  shall be reduced by ten percent of the MFIP standard of need for 
 15.24  an assistance unit of the same size with the residual grant paid 
 15.25  to the participant.  The reduction in the grant amount must be 
 15.26  in effect for a minimum of one month and shall be removed in the 
 15.27  month following the month that the participant returns to 
 15.28  compliance.  
 15.29     (2) For a second, third, fourth, fifth, or sixth occurrence 
 15.30  of noncompliance by a participant in an assistance unit, the 
 15.31  assistance unit's shelter costs shall be vendor paid up to the 
 15.32  amount of the cash portion of the MFIP grant for which the 
 15.33  assistance unit is eligible.  At county option, the assistance 
 15.34  unit's utilities may also be vendor paid up to the amount of the 
 15.35  cash portion of the MFIP grant remaining after vendor payment of 
 15.36  the assistance unit's shelter costs.  The residual amount of the 
 16.1   grant after vendor payment, if any, must be reduced by an amount 
 16.2   equal to 30 percent of the MFIP standard of need for an 
 16.3   assistance unit of the same size before the residual grant is 
 16.4   paid to the assistance unit.  The reduction in the grant amount 
 16.5   must be in effect for a minimum of one month and shall be 
 16.6   removed in the month following the month that the participant in 
 16.7   a one-parent assistance unit returns to compliance.  In a 
 16.8   two-parent assistance unit, the grant reduction must be in 
 16.9   effect for a minimum of one month and shall be removed in the 
 16.10  month following the month both participants return to 
 16.11  compliance.  The vendor payment of shelter costs and, if 
 16.12  applicable, utilities shall be removed six months after the 
 16.13  month in which the participant or participants return to 
 16.14  compliance.  If an assistance unit is sanctioned under this 
 16.15  clause, the participant's case file must be reviewed to 
 16.16  determine if the employment plan is still appropriate. 
 16.17     (d) For a seventh occurrence of noncompliance by a 
 16.18  participant in an assistance unit, or when the participants in a 
 16.19  two-parent assistance unit have a total of seven occurrences of 
 16.20  noncompliance, the county agency shall close the MFIP assistance 
 16.21  unit's financial assistance case, both the cash and food 
 16.22  portions, and redetermine the family's eligibility for food 
 16.23  support.  The MFIP case must remain closed for a minimum of one 
 16.24  full month.  Closure under this paragraph does not make a 
 16.25  participant automatically ineligible for food support, if 
 16.26  otherwise eligible.  Before the case is closed, the county 
 16.27  agency must review the participant's case to determine if the 
 16.28  employment plan is still appropriate and attempt to meet with 
 16.29  the participant face-to-face.  The participant may bring an 
 16.30  advocate to the face-to-face meeting.  If a face-to-face meeting 
 16.31  is not conducted, the county agency must send the participant a 
 16.32  written notice that includes the information required under 
 16.33  clause (1). 
 16.34     (1) During the face-to-face meeting, the county agency must:
 16.35     (i) determine whether the continued noncompliance can be 
 16.36  explained and mitigated by providing a needed preemployment 
 17.1   activity, as defined in section 256J.49, subdivision 13, clause 
 17.2   (9); 
 17.3      (ii) determine whether the participant qualifies for a good 
 17.4   cause exception under section 256J.57, or if the sanction is for 
 17.5   noncooperation with child support requirements, determine if the 
 17.6   participant qualifies for a good cause exemption under section 
 17.7   256.741, subdivision 10; 
 17.8      (iii) determine whether the participant qualifies for an 
 17.9   exemption under section 256J.56 or the work activities in the 
 17.10  employment plan are appropriate based on the criteria in section 
 17.11  256J.521, subdivision 2 or 3; 
 17.12     (iv) determine whether the participant qualifies for the 
 17.13  family violence waiver; 
 17.14     (v) inform the participant of the participant's sanction 
 17.15  status and explain the consequences of continuing noncompliance; 
 17.16     (vi) identify other resources that may be available to the 
 17.17  participant to meet the needs of the family; and 
 17.18     (vii) inform the participant of the right to appeal under 
 17.19  section 256J.40. 
 17.20     (2) If the lack of an identified activity or service can 
 17.21  explain the noncompliance, the county must work with the 
 17.22  participant to provide the identified activity. 
 17.23     (3) The grant must be restored to the full amount for which 
 17.24  the assistance unit is eligible retroactively to the first day 
 17.25  of the month in which the participant was found to lack 
 17.26  preemployment activities or to qualify for an exemption under 
 17.27  section 256J.56, a family violence waiver, or for a good cause 
 17.28  exemption under section 256.741, subdivision 10, or 256J.57. 
 17.29     (e) For the purpose of applying sanctions under this 
 17.30  section, only occurrences of noncompliance that occur after July 
 17.31  1, 2003, shall be considered.  If the participant is in 30 
 17.32  percent sanction in the month this section takes effect, that 
 17.33  month counts as the first occurrence for purposes of applying 
 17.34  the sanctions under this section, but the sanction shall remain 
 17.35  at 30 percent for that month. 
 17.36     (f) An assistance unit whose case is closed under paragraph 
 18.1   (d) or (g), may reapply for MFIP and shall be eligible if the 
 18.2   participant complies with MFIP program requirements and 
 18.3   demonstrates compliance for up to one month.  No assistance 
 18.4   shall be paid during this period. 
 18.5      (g) An assistance unit whose case has been closed for 
 18.6   noncompliance, that reapplies under paragraph (f), is subject to 
 18.7   sanction under paragraph (c), clause (2), for a first occurrence 
 18.8   of noncompliance.  Any subsequent occurrence of noncompliance 
 18.9   shall result in case closure under paragraph (d). 
 18.10     Sec. 10.  Minnesota Statutes 2002, section 256J.46, is 
 18.11  amended by adding a subdivision to read: 
 18.12     Subd. 3.  [SIX MONTHS OF COMPLIANCE.] A participant who has 
 18.13  had one or more sanctions imposed under this section must remain 
 18.14  in compliance with the provisions of this chapter for six months 
 18.15  in order for a subsequent occurrence of noncompliance to be 
 18.16  considered a first occurrence of noncompliance. 
 18.17     Sec. 11.  Minnesota Statutes 2003 Supplement, section 
 18.18  256J.521, subdivision 1, is amended to read: 
 18.19     Subdivision 1.  [ASSESSMENTS.] (a) For purposes of MFIP 
 18.20  employment services, assessment is a continuing process of 
 18.21  gathering information related to employability for the purpose 
 18.22  of identifying both participant's strengths and strategies for 
 18.23  coping with issues that interfere with employment.  The job 
 18.24  counselor must use information from the assessment process to 
 18.25  develop and update the employment plan under subdivision 2 or 3, 
 18.26  as appropriate, and to determine whether the participant 
 18.27  qualifies for a family violence waiver and an employment plan 
 18.28  under subdivision 3. 
 18.29     (b) The scope of assessment must cover at least the 
 18.30  following areas: 
 18.31     (1) basic information about the participant's ability to 
 18.32  obtain and retain employment, including:  a review of the 
 18.33  participant's education level; interests, skills, and abilities; 
 18.34  prior employment or work experience; transferable work skills; 
 18.35  child care and transportation needs; 
 18.36     (2) identification of personal and family circumstances 
 19.1   that impact the participant's ability to obtain and retain 
 19.2   employment, including:  any special needs of the children, the 
 19.3   level of English proficiency, family violence issues, and any 
 19.4   involvement with social services or the legal system; 
 19.5      (3) the results of a mental and chemical health screening 
 19.6   tool designed by the commissioner and results of the brief 
 19.7   screening tool for special learning needs.  Screening tools for 
 19.8   mental and chemical health and special learning needs must be 
 19.9   approved by the commissioner and may only be administered by job 
 19.10  counselors or county staff trained in using such screening 
 19.11  tools.  The commissioner shall work with county agencies to 
 19.12  develop protocols for referrals and follow-up actions after 
 19.13  screens are administered to participants, including guidance on 
 19.14  how employment plans may be modified based upon outcomes of 
 19.15  certain screens.  Participants must be told of the purpose of 
 19.16  the screens and how the information will be used to assist the 
 19.17  participant in identifying and overcoming barriers to 
 19.18  employment.  Screening for mental and chemical health and 
 19.19  special learning needs must be completed by participants who are 
 19.20  unable to find suitable employment after six weeks of job search 
 19.21  under subdivision 2, paragraph (b), and participants who are 
 19.22  determined to have barriers to employment under subdivision 2, 
 19.23  paragraph (d).  Failure to complete the screens will result in 
 19.24  sanction under section 256J.46; and 
 19.25     (4) a comprehensive review of participation and progress 
 19.26  for participants who have received MFIP assistance and have not 
 19.27  worked in unsubsidized employment during the past 12 months.  
 19.28  The purpose of the review is to determine the need for 
 19.29  additional services and supports, including placement in 
 19.30  subsidized employment or unpaid work experience under section 
 19.31  256J.49, subdivision 13. 
 19.32     (c) Information gathered during a caregiver's participation 
 19.33  in the diversionary work program under section 256J.95 must be 
 19.34  incorporated into the assessment process. 
 19.35     (d) The job counselor may require the participant to 
 19.36  complete a professional chemical use assessment to be performed 
 20.1   according to the rules adopted under section 254A.03, 
 20.2   subdivision 3, including provisions in the administrative rules 
 20.3   which recognize the cultural background of the participant, or a 
 20.4   professional psychological assessment as a component of the 
 20.5   assessment process, when the job counselor has a reasonable 
 20.6   belief, based on objective evidence, that a participant's 
 20.7   ability to obtain and retain suitable employment is impaired by 
 20.8   a medical condition.  The job counselor may assist the 
 20.9   participant with arranging services, including child care 
 20.10  assistance and transportation, necessary to meet needs 
 20.11  identified by the assessment.  Data gathered as part of a 
 20.12  professional assessment must be classified and disclosed 
 20.13  according to the provisions in section 13.46. 
 20.14     Sec. 12.  Minnesota Statutes 2003 Supplement, section 
 20.15  256J.521, subdivision 2, is amended to read: 
 20.16     Subd. 2.  [EMPLOYMENT PLAN; CONTENTS.] (a) Based on the 
 20.17  assessment under subdivision 1, the job counselor and the 
 20.18  participant must develop an employment plan that includes 
 20.19  participation in activities and hours that meet the requirements 
 20.20  of section 256J.55, subdivision 1.  The purpose of the 
 20.21  employment plan is to identify for each participant the most 
 20.22  direct path to unsubsidized employment and any subsequent steps 
 20.23  that support long-term economic stability.  The employment plan 
 20.24  should be developed using the highest level of activity 
 20.25  appropriate for the participant.  Activities must be chosen from 
 20.26  clauses (1) to (6), which are listed in order of 
 20.27  preference.  Notwithstanding this order of preference for 
 20.28  activities, priority must be given for activities related to a 
 20.29  family violence waiver when developing the employment plan.  The 
 20.30  employment plan must also list the specific steps the 
 20.31  participant will take to obtain employment, including steps 
 20.32  necessary for the participant to progress from one level of 
 20.33  activity to another, and a timetable for completion of each 
 20.34  step.  Levels of activity include: 
 20.35     (1) unsubsidized employment; 
 20.36     (2) job search; 
 21.1      (3) subsidized employment or unpaid work experience; 
 21.2      (4) unsubsidized employment and job readiness education or 
 21.3   job skills training; 
 21.4      (5) unsubsidized employment or unpaid work experience and 
 21.5   activities related to a family violence waiver or preemployment 
 21.6   needs; and 
 21.7      (6) activities related to a family violence waiver or 
 21.8   preemployment needs. 
 21.9      (b) Participants who are determined to possess sufficient 
 21.10  skills such that the participant is likely to succeed in 
 21.11  obtaining unsubsidized employment must job search at least 30 
 21.12  hours per week for up to six weeks and accept any offer of 
 21.13  suitable employment.  The remaining hours necessary to meet the 
 21.14  requirements of section 256J.55, subdivision 1, may be met 
 21.15  through participation in other work activities under section 
 21.16  256J.49, subdivision 13.  The participant's employment plan must 
 21.17  specify, at a minimum:  (1) whether the job search is supervised 
 21.18  or unsupervised; (2) support services that will be provided; and 
 21.19  (3) how frequently the participant must report to the job 
 21.20  counselor.  Participants who are unable to find suitable 
 21.21  employment after six weeks must meet with the job counselor to 
 21.22  determine whether other activities in paragraph (a) should be 
 21.23  incorporated into the employment plan.  Job search activities 
 21.24  which are continued after six weeks must be structured and 
 21.25  supervised. 
 21.26     (c) Beginning July 1, 2004, activities and hourly 
 21.27  requirements in the employment plan may be adjusted as necessary 
 21.28  to accommodate the personal and family circumstances of 
 21.29  participants identified under section 256J.561, subdivision 2, 
 21.30  paragraph (d).  Participants who no longer meet the provisions 
 21.31  of section 256J.561, subdivision 2, paragraph (d), must meet 
 21.32  with the job counselor within ten days of the determination to 
 21.33  revise the employment plan. 
 21.34     (d) Participants who are determined to have barriers to 
 21.35  obtaining or retaining employment that will not be overcome 
 21.36  during six weeks of job search under paragraph (b) must work 
 22.1   with the job counselor to develop an employment plan that 
 22.2   addresses those barriers by incorporating appropriate activities 
 22.3   from paragraph (a), clauses (1) to (6).  The employment plan 
 22.4   must include enough hours to meet the participation requirements 
 22.5   in section 256J.55, subdivision 1, unless a compelling reason to 
 22.6   require fewer hours is noted in the participant's file. 
 22.7      (e) The job counselor and the participant must sign the 
 22.8   employment plan to indicate agreement on the contents.  Failure 
 22.9   to develop or comply with activities in the plan, or voluntarily 
 22.10  quitting suitable employment without good cause, will result in 
 22.11  the imposition of a sanction under section 256J.46. 
 22.12     (f) Employment plans must be reviewed at least every three 
 22.13  months to determine whether activities and hourly requirements 
 22.14  should be revised. 
 22.15     Sec. 13.  Minnesota Statutes 2003 Supplement, section 
 22.16  256J.53, subdivision 2, is amended to read: 
 22.17     Subd. 2.  [APPROVAL OF POSTSECONDARY EDUCATION OR 
 22.18  TRAINING.] (a) In order for a postsecondary education or 
 22.19  training program to be an approved activity in an employment 
 22.20  plan, the participant must be working in unsubsidized employment 
 22.21  or unpaid work experience at least 20 12 hours per week.  A 
 22.22  postsecondary education or training program must be an approved 
 22.23  activity if the participant provides documentation that the 
 22.24  hourly unsubsidized employment or unpaid work experience 
 22.25  requirement will be met within 30 days of the start of the 
 22.26  postsecondary education or training program. 
 22.27     (b) Participants seeking approval of a postsecondary 
 22.28  education or training plan must provide documentation that: 
 22.29     (1) the employment goal can only be met with the additional 
 22.30  education or training; 
 22.31     (2) there are suitable employment opportunities that 
 22.32  require the specific education or training in the area in which 
 22.33  the participant resides or is willing to reside; 
 22.34     (3) the education or training will result in significantly 
 22.35  higher wages for the participant than the participant could earn 
 22.36  without the education or training; 
 23.1      (4) the participant can meet the requirements for admission 
 23.2   into the program; and 
 23.3      (5) there is a reasonable expectation that the participant 
 23.4   will complete the training program based on such factors as the 
 23.5   participant's MFIP assessment, previous education, training, and 
 23.6   work history; current motivation; and changes in previous 
 23.7   circumstances. 
 23.8      (c) The hourly unsubsidized employment or unpaid work 
 23.9   experience requirement may be reduced does not apply for 
 23.10  intensive education or training programs lasting 12 24 weeks or 
 23.11  less when full-time attendance is required and for participants 
 23.12  enrolled in training programs intended to alleviate worker 
 23.13  shortages in the health care and human services industries.  In 
 23.14  addition, the hourly requirement must be waived or modified as a 
 23.15  reasonable accommodation for a participant with a disability or 
 23.16  a participant caring for a person with a disability. 
 23.17     (d) Participants with an approved employment plan in place 
 23.18  on July 1, 2003, which includes more than 12 months of 
 23.19  postsecondary education or training shall be allowed to complete 
 23.20  that plan provided that hourly requirements in section 256J.55, 
 23.21  subdivision 1, and conditions specified in paragraph (b), and 
 23.22  subdivisions 3 and 5 are met. 
 23.23     (e) Participants with an approved employment plan in place 
 23.24  on July 1, 2003, which includes more than 12 months of 
 23.25  postsecondary education or training, whose case is subsequently 
 23.26  closed for three months or less for reasons other than 
 23.27  noncompliance with program requirements and who return to MFIP, 
 23.28  shall be allowed to complete that plan, provided that hourly 
 23.29  requirements in section 256J.55, subdivision 1, and conditions 
 23.30  specified in paragraph (b) and subdivisions 3 and 5 are met. 
 23.31     Sec. 14.  Minnesota Statutes 2003 Supplement, section 
 23.32  256J.95, subdivision 9, is amended to read: 
 23.33     Subd. 9.  [PROPERTY AND INCOME LIMITATIONS.] The asset 
 23.34  limits and exclusions in section 256J.20 apply to applicants and 
 23.35  recipients of DWP.  All payments, unless excluded in section 
 23.36  256J.21, must be counted as income to determine eligibility for 
 24.1   the diversionary work program.  The county shall treat income as 
 24.2   outlined in section 256J.37, except for subdivision 3a.  The 
 24.3   initial income test and the disregards in section 256J.21, 
 24.4   subdivision 3, shall be followed for determining eligibility for 
 24.5   the diversionary work program. 
 24.6      Sec. 15.  Minnesota Statutes 2003 Supplement, section 
 24.7   514.981, subdivision 6, is amended to read: 
 24.8      Subd. 6.  [TIME LIMITS; CLAIM LIMITS; LIENS ON LIFE ESTATES 
 24.9   AND JOINT TENANCIES.] (a) A medical assistance lien is a lien on 
 24.10  the real property it describes for a period of ten years from 
 24.11  the date it attaches according to section 514.981, subdivision 
 24.12  2, paragraph (a), except as otherwise provided for in sections 
 24.13  514.980 to 514.985.  The agency may renew a medical assistance 
 24.14  lien for an additional ten years from the date it would 
 24.15  otherwise expire by recording or filing a certificate of renewal 
 24.16  before the lien expires.  The certificate shall be recorded or 
 24.17  filed in the office of the county recorder or registrar of 
 24.18  titles for the county in which the lien is recorded or filed.  
 24.19  The certificate must refer to the recording or filing data for 
 24.20  the medical assistance lien it renews.  The certificate need not 
 24.21  be attested, certified, or acknowledged as a condition for 
 24.22  recording or filing.  The registrar of titles or the recorder 
 24.23  shall file, record, index, and return the certificate of renewal 
 24.24  in the same manner as provided for medical assistance liens in 
 24.25  section 514.982, subdivision 2. 
 24.26     (b) A medical assistance lien is not enforceable against 
 24.27  the real property of an estate to the extent there is a 
 24.28  determination by a court of competent jurisdiction, or by an 
 24.29  officer of the court designated for that purpose, that there are 
 24.30  insufficient assets in the estate to satisfy the agency's 
 24.31  medical assistance lien in whole or in part because of the 
 24.32  homestead exemption under section 256B.15, subdivision 4, the 
 24.33  rights of the surviving spouse or minor children under section 
 24.34  524.2-403, paragraphs (a) and (b), or claims with a priority 
 24.35  under section 524.3-805, paragraph (a), clauses (1) to (4).  For 
 24.36  purposes of this section, the rights of the decedent's adult 
 25.1   children to exempt property under section 524.2-403, paragraph 
 25.2   (b), shall not be considered costs of administration under 
 25.3   section 524.3-805, paragraph (a), clause (1). 
 25.4      (c) Notwithstanding any law or rule to the contrary, the 
 25.5   provisions in clauses (1) to (7) apply if a life estate subject 
 25.6   to a medical assistance lien ends according to its terms, or if 
 25.7   a medical assistance recipient who owns a life estate or any 
 25.8   interest in real property as a joint tenant that is subject to a 
 25.9   medical assistance lien dies. 
 25.10     (1) The medical assistance recipient's life estate or joint 
 25.11  tenancy interest in the real property shall not end upon the 
 25.12  recipient's death but shall merge into the remainder interest or 
 25.13  other interest in real property the medical assistance recipient 
 25.14  owned in joint tenancy with others.  The medical assistance lien 
 25.15  shall attach to and run with the remainder or other interest in 
 25.16  the real property to the extent of the medical assistance 
 25.17  recipient's interest in the property at the time of the 
 25.18  recipient's death as determined under this section. 
 25.19     (2) If the medical assistance recipient's interest was a 
 25.20  life estate in real property, the lien shall be a lien against 
 25.21  the portion of the remainder equal to the percentage factor for 
 25.22  the life estate of a person the medical assistance recipient's 
 25.23  age on the date the life estate ended according to its terms or 
 25.24  the date of the medical assistance recipient's death as listed 
 25.25  in the Life Estate Mortality Table in the health care program's 
 25.26  manual. 
 25.27     (3) If the medical assistance recipient owned the interest 
 25.28  in real property in joint tenancy with others, the lien shall be 
 25.29  a lien against the portion of that interest equal to the 
 25.30  fractional interest the medical assistance recipient would have 
 25.31  owned in the jointly owned interest had the medical assistance 
 25.32  recipient and the other owners held title to that interest as 
 25.33  tenants in common on the date the medical assistance recipient 
 25.34  died. 
 25.35     (4) The medical assistance lien shall remain a lien against 
 25.36  the remainder or other jointly owned interest for the length of 
 26.1   time and be renewable as provided in paragraph (a). 
 26.2      (5) Subdivision 5, paragraph (a), clause (4), paragraph 
 26.3   (b), clauses (1) and (2); and subdivision 6, paragraph (b), do 
 26.4   not apply to medical assistance liens which attach to interests 
 26.5   in real property as provided under this subdivision. 
 26.6      (6) The continuation of a medical assistance recipient's 
 26.7   life estate or joint tenancy interest in real property after the 
 26.8   medical assistance recipient's death for the purpose of 
 26.9   recovering medical assistance provided for in sections 514.980 
 26.10  to 514.985 modifies common law principles holding that these 
 26.11  interests terminate on the death of the holder. 
 26.12     (7) Notwithstanding any law or rule to the contrary, no 
 26.13  release, satisfaction, discharge, or affidavit under section 
 26.14  256B.15 shall extinguish or terminate the life estate or joint 
 26.15  tenancy interest of a medical assistance recipient subject to a 
 26.16  lien under sections 514.980 to 514.985 on the date the recipient 
 26.17  dies. 
 26.18     (8) The provisions of clauses (1) to (7) do not apply to a 
 26.19  homestead owned of record, on the date the recipient dies, by 
 26.20  the recipient and the recipient's spouse as joint tenants with a 
 26.21  right of survivorship.  Homestead means the real property 
 26.22  occupied by the surviving joint tenant spouse as their sole 
 26.23  residence on the date the recipient dies and classified and 
 26.24  taxed to the recipient and surviving joint tenant spouse as 
 26.25  homestead property for property tax purposes in the calendar 
 26.26  year in which the recipient dies.  For purposes of this 
 26.27  exemption, real property the recipient and their surviving joint 
 26.28  tenant spouse purchase solely with the proceeds from the sale of 
 26.29  their prior homestead, own of record as joint tenants, and 
 26.30  qualify as homestead property under section 273.124 in the 
 26.31  calendar year in which the recipient dies and prior to the 
 26.32  recipient's death shall be deemed to be real property classified 
 26.33  and taxed to the recipient and their surviving joint tenant 
 26.34  spouse as homestead property in the calendar year in which the 
 26.35  recipient dies.  The surviving spouse, or any person with 
 26.36  personal knowledge of the facts, may provide an affidavit 
 27.1   describing the homestead property affected by this clause and 
 27.2   stating facts showing compliance with this clause.  The 
 27.3   affidavit shall be prima facie evidence of the facts it states. 
 27.4      Sec. 16.  Minnesota Statutes 2003 Supplement, section 
 27.5   524.3-805, is amended to read: 
 27.6      524.3-805 [CLASSIFICATION OF CLAIMS.] 
 27.7      (a) If the applicable assets of the estate are insufficient 
 27.8   to pay all claims in full, the personal representative shall 
 27.9   make payment in the following order: 
 27.10     (1) costs and expenses of administration; 
 27.11     (2) reasonable funeral expenses; 
 27.12     (3) debts and taxes with preference under federal law; 
 27.13     (4) reasonable and necessary medical, hospital, or nursing 
 27.14  home expenses of the last illness of the decedent, including 
 27.15  compensation of persons attending the decedent, a claim filed 
 27.16  under section 256B.15 for recovery of expenditures for 
 27.17  alternative care for nonmedical assistance recipients under 
 27.18  section 256B.0913, and including a claim filed pursuant to 
 27.19  section 256B.15; 
 27.20     (5) reasonable and necessary medical, hospital, and nursing 
 27.21  home expenses for the care of the decedent during the year 
 27.22  immediately preceding death; 
 27.23     (6) debts with preference under other laws of this state, 
 27.24  and state taxes; 
 27.25     (7) all other claims. 
 27.26     (b) No preference shall be given in the payment of any 
 27.27  claim over any other claim of the same class, and a claim due 
 27.28  and payable shall not be entitled to a preference over claims 
 27.29  not due, except that if claims for expenses of the last illness 
 27.30  involve only claims filed under section 256B.15 for recovery of 
 27.31  expenditures for alternative care for nonmedical assistance 
 27.32  recipients under section 256B.0913, section 246.53 for costs of 
 27.33  state hospital care and claims filed under section 256B.15, 
 27.34  claims filed to recover expenditures for alternative care for 
 27.35  nonmedical assistance recipients under section 256B.0913 shall 
 27.36  have preference over claims filed under both sections 246.53 and 
 28.1   other claims filed under section 256B.15, and.  Claims filed 
 28.2   under section 246.53 have preference over claims filed under 
 28.3   section 256B.15 for recovery of amounts other than those for 
 28.4   expenditures for alternative care for nonmedical assistance 
 28.5   recipients under section 256B.0913. 
 28.6      Sec. 17.  [APPROPRIATION.] 
 28.7      $....... is appropriated from the general fund to the 
 28.8   commissioner of human services for the fiscal year beginning 
 28.9   July 1, 2004, for the purposes of this article.  
 28.10     Sec. 18.  [REPEALER.] 
 28.11     (a) Minnesota Statutes 2003 Supplement, sections 256B.15, 
 28.12  subdivisions 1c, 1d, 1e, 1f, 1g, 1h, 1i, 1j, and 1k; 514.991; 
 28.13  514.992; 514.993; 514.994; and 514.995, are repealed 
 28.14  retroactively from July 1, 2003. 
 28.15     (b) Minnesota Statutes 2003 Supplement, section 256J.37, 
 28.16  subdivisions 3a and 3b, are repealed effective July 1, 2004. 
 28.17     Sec. 19.  [EFFECTIVE DATE.] 
 28.18     Sections 1, 7, and 14 are effective July 1, 2004.  Sections 
 28.19  2, 3, 4, 15, and 16 are effective retroactively from July 1, 
 28.20  2003. 
 28.21                             ARTICLE 2
 28.22         INDIVIDUAL INCOME TAX AND CORPORATE FRANCHISE TAX
 28.23     Section 1.  Minnesota Statutes 2002, section 290.01, 
 28.24  subdivision 6b, is amended to read: 
 28.25     Subd. 6b.  [FOREIGN OPERATING CORPORATION.] The term 
 28.26  "foreign operating corporation," when applied to a corporation, 
 28.27  means a domestic corporation with the following characteristics: 
 28.28     (1) it is part of a unitary business at least one member of 
 28.29  which is taxable in this state; 
 28.30     (2) it is not a foreign sales corporation under section 922 
 28.31  of the Internal Revenue Code, as amended through December 31, 
 28.32  1999, for the taxable year; and 
 28.33     (3) either (i) the average of the percentages of its 
 28.34  property and payrolls assigned to locations inside outside the 
 28.35  United States and the District of Columbia, excluding the 
 28.36  commonwealth of Puerto Rico and possessions of the United 
 29.1   States, as determined under section 290.191 or 290.20, is 20 80 
 29.2   percent or less greater and it has at least $2,000,000 of 
 29.3   property and $1,000,000 of payroll as determined under section 
 29.4   290.191 or 290.20; or (ii) it has in effect a valid election 
 29.5   under section 936 of the Internal Revenue Code. 
 29.6      <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
 29.7   beginning after December 31, 2003. 
 29.8      Sec. 2.  Minnesota Statutes 2003 Supplement, section 
 29.9   290.01, subdivision 19d, is amended to read: 
 29.10     Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
 29.11  TAXABLE INCOME.] For corporations, there shall be subtracted 
 29.12  from federal taxable income after the increases provided in 
 29.13  subdivision 19c:  
 29.14     (1) the amount of foreign dividend gross-up added to gross 
 29.15  income for federal income tax purposes under section 78 of the 
 29.16  Internal Revenue Code; 
 29.17     (2) the amount of salary expense not allowed for federal 
 29.18  income tax purposes due to claiming the federal jobs credit 
 29.19  under section 51 of the Internal Revenue Code; 
 29.20     (3) any dividend (not including any distribution in 
 29.21  liquidation) paid within the taxable year by a national or state 
 29.22  bank to the United States, or to any instrumentality of the 
 29.23  United States exempt from federal income taxes, on the preferred 
 29.24  stock of the bank owned by the United States or the 
 29.25  instrumentality; 
 29.26     (4) amounts disallowed for intangible drilling costs due to 
 29.27  differences between this chapter and the Internal Revenue Code 
 29.28  in taxable years beginning before January 1, 1987, as follows: 
 29.29     (i) to the extent the disallowed costs are represented by 
 29.30  physical property, an amount equal to the allowance for 
 29.31  depreciation under Minnesota Statutes 1986, section 290.09, 
 29.32  subdivision 7, subject to the modifications contained in 
 29.33  subdivision 19e; and 
 29.34     (ii) to the extent the disallowed costs are not represented 
 29.35  by physical property, an amount equal to the allowance for cost 
 29.36  depletion under Minnesota Statutes 1986, section 290.09, 
 30.1   subdivision 8; 
 30.2      (5) the deduction for capital losses pursuant to sections 
 30.3   1211 and 1212 of the Internal Revenue Code, except that: 
 30.4      (i) for capital losses incurred in taxable years beginning 
 30.5   after December 31, 1986, capital loss carrybacks shall not be 
 30.6   allowed; 
 30.7      (ii) for capital losses incurred in taxable years beginning
 30.8   after December 31, 1986, a capital loss carryover to each of the 
 30.9   15 taxable years succeeding the loss year shall be allowed; 
 30.10     (iii) for capital losses incurred in taxable years 
 30.11  beginning before January 1, 1987, a capital loss carryback to 
 30.12  each of the three taxable years preceding the loss year, subject 
 30.13  to the provisions of Minnesota Statutes 1986, section 290.16, 
 30.14  shall be allowed; and 
 30.15     (iv) for capital losses incurred in taxable years beginning
 30.16  before January 1, 1987, a capital loss carryover to each of the 
 30.17  five taxable years succeeding the loss year to the extent such 
 30.18  loss was not used in a prior taxable year and subject to the 
 30.19  provisions of Minnesota Statutes 1986, section 290.16, shall be 
 30.20  allowed; 
 30.21     (6) an amount for interest and expenses relating to income 
 30.22  not taxable for federal income tax purposes, if (i) the income 
 30.23  is taxable under this chapter and (ii) the interest and expenses 
 30.24  were disallowed as deductions under the provisions of section 
 30.25  171(a)(2), 265 or 291 of the Internal Revenue Code in computing 
 30.26  federal taxable income; 
 30.27     (7) in the case of mines, oil and gas wells, other natural 
 30.28  deposits, and timber for which percentage depletion was 
 30.29  disallowed pursuant to subdivision 19c, clause (11), a 
 30.30  reasonable allowance for depletion based on actual cost.  In the 
 30.31  case of leases the deduction must be apportioned between the 
 30.32  lessor and lessee in accordance with rules prescribed by the 
 30.33  commissioner.  In the case of property held in trust, the 
 30.34  allowable deduction must be apportioned between the income 
 30.35  beneficiaries and the trustee in accordance with the pertinent 
 30.36  provisions of the trust, or if there is no provision in the 
 31.1   instrument, on the basis of the trust's income allocable to 
 31.2   each; 
 31.3      (8) for certified pollution control facilities placed in 
 31.4   service in a taxable year beginning before December 31, 1986, 
 31.5   and for which amortization deductions were elected under section 
 31.6   169 of the Internal Revenue Code of 1954, as amended through 
 31.7   December 31, 1985, an amount equal to the allowance for 
 31.8   depreciation under Minnesota Statutes 1986, section 290.09, 
 31.9   subdivision 7; 
 31.10     (9) amounts included in federal taxable income that are due 
 31.11  to refunds of income, excise, or franchise taxes based on net 
 31.12  income or related minimum taxes paid by the corporation to 
 31.13  Minnesota, another state, a political subdivision of another 
 31.14  state, the District of Columbia, or a foreign country or 
 31.15  possession of the United States to the extent that the taxes 
 31.16  were added to federal taxable income under section 290.01, 
 31.17  subdivision 19c, clause (1), in a prior taxable year; 
 31.18     (10) 80 percent of royalties, fees, or other like income 
 31.19  accrued or received from a foreign operating corporation or a 
 31.20  foreign corporation which is part of the same unitary business 
 31.21  as the receiving corporation; 
 31.22     (11) income or gains from the business of mining as defined 
 31.23  in section 290.05, subdivision 1, clause (a), that are not 
 31.24  subject to Minnesota franchise tax; 
 31.25     (12) (11) the amount of handicap access expenditures in the 
 31.26  taxable year which are not allowed to be deducted or capitalized 
 31.27  under section 44(d)(7) of the Internal Revenue Code; 
 31.28     (13) (12) the amount of qualified research expenses not 
 31.29  allowed for federal income tax purposes under section 280C(c) of 
 31.30  the Internal Revenue Code, but only to the extent that the 
 31.31  amount exceeds the amount of the credit allowed under section 
 31.32  290.068; 
 31.33     (14) (13) the amount of salary expenses not allowed for 
 31.34  federal income tax purposes due to claiming the Indian 
 31.35  employment credit under section 45A(a) of the Internal Revenue 
 31.36  Code; 
 32.1      (15) (14) the amount of any refund of environmental taxes 
 32.2   paid under section 59A of the Internal Revenue Code; 
 32.3      (16) (15) for taxable years beginning before January 1, 
 32.4   2008, the amount of the federal small ethanol producer credit 
 32.5   allowed under section 40(a)(3) of the Internal Revenue Code 
 32.6   which is included in gross income under section 87 of the 
 32.7   Internal Revenue Code; 
 32.8      (17) (16) for a corporation whose foreign sales 
 32.9   corporation, as defined in section 922 of the Internal Revenue 
 32.10  Code, constituted a foreign operating corporation during any 
 32.11  taxable year ending before January 1, 1995, and a return was 
 32.12  filed by August 15, 1996, claiming the deduction under section 
 32.13  290.21, subdivision 4, for income received from the foreign 
 32.14  operating corporation, an amount equal to 1.23 multiplied by the 
 32.15  amount of income excluded under section 114 of the Internal 
 32.16  Revenue Code, provided the income is not income of a foreign 
 32.17  operating company; 
 32.18     (18) (17) any decrease in subpart F income, as defined in 
 32.19  section 952(a) of the Internal Revenue Code, for the taxable 
 32.20  year when subpart F income is calculated without regard to the 
 32.21  provisions of section 614 of Public Law 107-147; and 
 32.22     (19) (18) in each of the five tax years immediately 
 32.23  following the tax year in which an addition is required under 
 32.24  subdivision 19c, clause (16), an amount equal to one-fifth of 
 32.25  the delayed depreciation.  For purposes of this clause, "delayed 
 32.26  depreciation" means the amount of the addition made by the 
 32.27  taxpayer under subdivision 19c, clause (16).  The resulting 
 32.28  delayed depreciation cannot be less than zero. 
 32.29     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
 32.30  beginning after December 31, 2003. 
 32.31     Sec. 3.  Minnesota Statutes 2002, section 290.17, 
 32.32  subdivision 2, is amended to read: 
 32.33     Subd. 2.  [INCOME NOT DERIVED FROM CONDUCT OF A TRADE OR 
 32.34  BUSINESS.] The income of a taxpayer subject to the allocation 
 32.35  rules that is not derived from the conduct of a trade or 
 32.36  business must be assigned in accordance with paragraphs (a) to 
 33.1   (f):  
 33.2      (a)(1) Subject to paragraphs (a)(2), (a)(3), and 
 33.3   (a)(4) clauses (2) and (3), income from wages as defined in 
 33.4   section 3401(a) and (f) of the Internal Revenue Code is assigned 
 33.5   to this state if, and to the extent that, the work of the 
 33.6   employee is performed within it; all other income from such 
 33.7   sources is treated as income from sources without this state.  
 33.8      Severance pay shall be considered income from labor or 
 33.9   personal or professional services. 
 33.10     (2) In the case of an individual who is a nonresident of 
 33.11  Minnesota and who is an athlete or entertainer, income from 
 33.12  compensation for labor or personal services performed within 
 33.13  this state shall be determined in the following manner:  
 33.14     (i) The amount of income to be assigned to Minnesota for an 
 33.15  individual who is a nonresident salaried athletic team employee 
 33.16  shall be determined by using a fraction in which the denominator 
 33.17  contains the total number of days in which the individual is 
 33.18  under a duty to perform for the employer, and the numerator is 
 33.19  the total number of those days spent in Minnesota.  For purposes 
 33.20  of this paragraph, off-season training activities, unless 
 33.21  conducted at the team's facilities as part of a team imposed 
 33.22  program, are not included in the total number of duty days.  
 33.23  Bonuses earned as a result of play during the regular season or 
 33.24  for participation in championship, play-off, or all-star games 
 33.25  must be allocated under the formula.  Signing bonuses are not 
 33.26  subject to allocation under the formula if they are not 
 33.27  conditional on playing any games for the team, are payable 
 33.28  separately from any other compensation, and are nonrefundable; 
 33.29  and 
 33.30     (ii) The amount of income to be assigned to Minnesota for 
 33.31  an individual who is a nonresident, and who is an athlete or 
 33.32  entertainer not listed in clause (i), for that person's athletic 
 33.33  or entertainment performance in Minnesota shall be determined by 
 33.34  assigning to this state all income from performances or athletic 
 33.35  contests in this state.  
 33.36     (3) For purposes of this section, amounts received by a 
 34.1   nonresident as "retirement income" as defined in section (b)(1) 
 34.2   of the State Income Taxation of Pension Income Act, Public Law 
 34.3   104-95, are not considered income derived from carrying on a 
 34.4   trade or business or from wages or other compensation for work 
 34.5   an employee performed in Minnesota, and are not taxable under 
 34.6   this chapter.  
 34.7      (4) Wages, otherwise assigned to this state under clause 
 34.8   (1) and not qualifying under clause (3), are not taxable under 
 34.9   this chapter if the following conditions are met: 
 34.10     (i) the recipient was not a resident of this state for any 
 34.11  part of the taxable year in which the wages were received; and 
 34.12     (ii) the wages are for work performed while the recipient 
 34.13  was a resident of this state. 
 34.14     (b) Income or gains from tangible property located in this 
 34.15  state that is not employed in the business of the recipient of 
 34.16  the income or gains must be assigned to this state. 
 34.17     (c) Income or gains from intangible personal property not 
 34.18  employed in the business of the recipient of the income or gains 
 34.19  must be assigned to this state if the recipient of the income or 
 34.20  gains is a resident of this state or is a resident trust or 
 34.21  estate.  
 34.22     Gain on the sale of a partnership interest is allocable to 
 34.23  this state in the ratio of the original cost of partnership 
 34.24  tangible property in this state to the original cost of 
 34.25  partnership tangible property everywhere, determined at the time 
 34.26  of the sale.  If more than 50 percent of the value of the 
 34.27  partnership's assets consists of intangibles, gain or loss from 
 34.28  the sale of the partnership interest is allocated to this state 
 34.29  in accordance with the sales factor of the partnership for its 
 34.30  first full tax period immediately preceding the tax period of 
 34.31  the partnership during which the partnership interest was sold. 
 34.32     Gain on the sale of goodwill or income from a covenant not 
 34.33  to compete that is connected with a business operating all or 
 34.34  partially in Minnesota is allocated to this state to the extent 
 34.35  that the income from the business in the year preceding the year 
 34.36  of sale was assignable to Minnesota under subdivision 3.  
 35.1      When an employer pays an employee for a covenant not to 
 35.2   compete, the income allocated to this state is in the ratio of 
 35.3   the employee's service in Minnesota in the calendar year 
 35.4   preceding leaving the employment of the employer over the total 
 35.5   services performed by the employee for the employer in that year.
 35.6      (d) Income from winnings on a bet made by an individual 
 35.7   while in Minnesota is assigned to this state.  In this 
 35.8   paragraph, "bet" has the meaning given in section 609.75, 
 35.9   subdivision 2, as limited by section 609.75, subdivision 3, 
 35.10  clauses (1), (2), and (3).  
 35.11     (e) All items of gross income not covered in paragraphs (a) 
 35.12  to (d) and not part of the taxpayer's income from a trade or 
 35.13  business shall be assigned to the taxpayer's domicile. 
 35.14     (f) For the purposes of this section, working as an 
 35.15  employee shall not be considered to be conducting a trade or 
 35.16  business. 
 35.17     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
 35.18  beginning after December 31, 2003. 
 35.19     Sec. 4.  Minnesota Statutes 2002, section 290.17, 
 35.20  subdivision 4, is amended to read: 
 35.21     Subd. 4.  [UNITARY BUSINESS PRINCIPLE.] (a) If a trade or 
 35.22  business conducted wholly within this state or partly within and 
 35.23  partly without this state is part of a unitary business, the 
 35.24  entire income of the unitary business is subject to 
 35.25  apportionment pursuant to section 290.191.  Notwithstanding 
 35.26  subdivision 2, paragraph (c), none of the income of a unitary 
 35.27  business is considered to be derived from any particular source 
 35.28  and none may be allocated to a particular place except as 
 35.29  provided by the applicable apportionment formula.  The 
 35.30  provisions of this subdivision do not apply to business income 
 35.31  subject to subdivision 5, income of an insurance company, or 
 35.32  income of an investment company determined under section 290.36. 
 35.33     (b) The term "unitary business" means business activities 
 35.34  or operations which result in a flow of value between them.  The 
 35.35  term may be applied within a single legal entity or between 
 35.36  multiple entities and without regard to whether each entity is a 
 36.1   sole proprietorship, a corporation, a partnership or a trust.  
 36.2      (c) Unity is presumed whenever there is unity of ownership, 
 36.3   operation, and use, evidenced by centralized management or 
 36.4   executive force, centralized purchasing, advertising, 
 36.5   accounting, or other controlled interaction, but the absence of 
 36.6   these centralized activities will not necessarily evidence a 
 36.7   nonunitary business.  Unity is also presumed when business 
 36.8   activities or operations are of mutual benefit, dependent upon 
 36.9   or contributory to one another, either individually or as a 
 36.10  group. 
 36.11     (d) Where a business operation conducted in Minnesota is 
 36.12  owned by a business entity that carries on business activity 
 36.13  outside the state different in kind from that conducted within 
 36.14  this state, and the other business is conducted entirely outside 
 36.15  the state, it is presumed that the two business operations are 
 36.16  unitary in nature, interrelated, connected, and interdependent 
 36.17  unless it can be shown to the contrary.  
 36.18     (e) Unity of ownership is not deemed to exist when a 
 36.19  corporation is involved unless that corporation is a member of a 
 36.20  group of two or more business entities and more than 50 percent 
 36.21  of the voting stock of each member of the group is directly or 
 36.22  indirectly owned by a common owner or by common owners, either 
 36.23  corporate or noncorporate, or by one or more of the member 
 36.24  corporations of the group.  For this purpose, the term "voting 
 36.25  stock" shall include membership interests of mutual insurance 
 36.26  holding companies formed under section 60A.077.  
 36.27     (f) The net income and apportionment factors under section 
 36.28  290.191 or 290.20 of foreign corporations and other foreign 
 36.29  entities which are part of a unitary business shall not be 
 36.30  included in the net income or the apportionment factors of the 
 36.31  unitary business.  A foreign corporation or other foreign entity 
 36.32  which is required to file a return under this chapter shall file 
 36.33  on a separate return basis.  The net income and apportionment 
 36.34  factors under section 290.191 or 290.20 of foreign operating 
 36.35  corporations shall not be included in the net income or the 
 36.36  apportionment factors of the unitary business except as provided 
 37.1   in paragraph (g). 
 37.2      (g) The adjusted net income of a foreign operating 
 37.3   corporation shall be deemed to be paid as a dividend on the last 
 37.4   day of its taxable year to each shareholder thereof, in 
 37.5   proportion to each shareholder's ownership, with which such 
 37.6   corporation is engaged in a unitary business.  Such deemed 
 37.7   dividend shall be treated as a dividend under section 290.21, 
 37.8   subdivision 4.  The dividend received deduction shall not be 
 37.9   allowed on dividends, interest, royalties, or capital gains 
 37.10  received by the foreign operating corporation included in the 
 37.11  deemed dividend. 
 37.12     Dividends actually paid by a foreign operating corporation 
 37.13  to a corporate shareholder which is a member of the same unitary 
 37.14  business as the foreign operating corporation shall be 
 37.15  eliminated from the net income of the unitary business in 
 37.16  preparing a combined report for the unitary business.  The 
 37.17  adjusted net income of a foreign operating corporation shall be 
 37.18  its net income adjusted as follows: 
 37.19     (1) any taxes paid or accrued to a foreign country, the 
 37.20  commonwealth of Puerto Rico, or a United States possession or 
 37.21  political subdivision of any of the foregoing shall be a 
 37.22  deduction; and 
 37.23     (2) the subtraction from federal taxable income for 
 37.24  payments received from foreign corporations or foreign operating 
 37.25  corporations under section 290.01, subdivision 19d, clause (10), 
 37.26  shall not be allowed. 
 37.27     If a foreign operating corporation incurs a net loss, 
 37.28  neither income nor deduction from that corporation shall be 
 37.29  included in determining the net income of the unitary business. 
 37.30     (h) For purposes of determining the net income of a unitary 
 37.31  business and the factors to be used in the apportionment of net 
 37.32  income pursuant to section 290.191 or 290.20, there must be 
 37.33  included only the income and apportionment factors of domestic 
 37.34  corporations or other domestic entities other than foreign 
 37.35  operating corporations that are determined to be part of the 
 37.36  unitary business pursuant to this subdivision, notwithstanding 
 38.1   that foreign corporations or other foreign entities might be 
 38.2   included in the unitary business.  
 38.3      (i) Deductions for expenses, interest, or taxes otherwise 
 38.4   allowable under this chapter that are connected with or 
 38.5   allocable against dividends, deemed dividends described in 
 38.6   paragraph (g), or royalties, fees, or other like income 
 38.7   described in section 290.01, subdivision 19d, clause (10), shall 
 38.8   not be disallowed. 
 38.9      (j) Each corporation or other entity, except a sole 
 38.10  proprietorship, that is part of a unitary business must file 
 38.11  combined reports as the commissioner determines.  On the 
 38.12  reports, all intercompany transactions between entities included 
 38.13  pursuant to paragraph (h) must be eliminated and the entire net 
 38.14  income of the unitary business determined in accordance with 
 38.15  this subdivision is apportioned among the entities by using each 
 38.16  entity's Minnesota factors for apportionment purposes in the 
 38.17  numerators of the apportionment formula and the total factors 
 38.18  for apportionment purposes of all entities included pursuant to 
 38.19  paragraph (h) in the denominators of the apportionment formula. 
 38.20     (k) If a corporation has been divested from a unitary 
 38.21  business and is included in a combined report for a fractional 
 38.22  part of the common accounting period of the combined report:  
 38.23     (1) its income includable in the combined report is its 
 38.24  income incurred for that part of the year determined by 
 38.25  proration or separate accounting; and 
 38.26     (2) its sales, property, and payroll included in the 
 38.27  apportionment formula must be prorated or accounted for 
 38.28  separately. 
 38.29     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
 38.30  beginning after December 31, 2003.