1.1                          A bill for an act 
  1.2             relating to the military; providing for special 
  1.3             "Support Our Troops" plates; establishing an account; 
  1.4             providing funding for certain National Guard incentive 
  1.5             programs; providing funding for a World War II 
  1.6             veterans memorial and the maintenance and improvement 
  1.7             of veterans homes; providing certain income tax 
  1.8             benefits; appropriating money; amending Minnesota 
  1.9             Statutes 2004, sections 289A.02, subdivision 7; 
  1.10            290.01, subdivisions 19, 19b, 31; 290.06, subdivision 
  1.11            2c; 290.091, subdivision 2; 290A.03, subdivision 15; 
  1.12            291.005, subdivision 1; proposing coding for new law 
  1.13            in Minnesota Statutes, chapters 168; 190. 
  1.14  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.15                             ARTICLE 1 
  1.16                           LICENSE PLATES 
  1.17     Section 1.  [168.1298] [SPECIAL "SUPPORT OUR TROOPS" 
  1.18  LICENSE PLATES.] 
  1.19     Subdivision 1.  [GENERAL REQUIREMENTS AND PROCEDURES.] (a) 
  1.20  The commissioner shall issue special "Support Our Troops" 
  1.21  license plates to an applicant who: 
  1.22     (1) is an owner of a passenger automobile, one-ton pickup 
  1.23  truck, recreational vehicle, or motorcycle; 
  1.24     (2) pays a fee of $10 to cover the costs of handling and 
  1.25  manufacturing the plates; 
  1.26     (3) pays the registration tax required under section 
  1.27  168.013; 
  1.28     (4) pays the fees required under this chapter; 
  1.29     (5) contributes a minimum of $30 annually to the Minnesota 
  2.1   "Support Our Troops" account established in section 190.19; and 
  2.2      (6) complies with laws and rules governing registration and 
  2.3   licensing of vehicles and drivers. 
  2.4      (b) The license application under this section must 
  2.5   indicate that the annual contribution specified under paragraph 
  2.6   (a), clause (5), is a minimum contribution to receive the plate 
  2.7   and that the applicant may make an additional contribution to 
  2.8   the account. 
  2.9      Subd. 2.  [DESIGN.] After consultation with interested 
  2.10  groups, the adjutant general and the commissioner of veterans 
  2.11  affairs shall design the special plate, subject to the approval 
  2.12  of the commissioner. 
  2.13     Subd. 3.  [NO REFUND.] Contributions under this section 
  2.14  must not be refunded. 
  2.15     Subd. 4.  [PLATE TRANSFERS.] Notwithstanding section 
  2.16  168.12, subdivision 1, on payment of a transfer fee of $5, 
  2.17  plates issued under this section may be transferred to another 
  2.18  passenger automobile, one-ton pickup truck, recreational 
  2.19  vehicle, or motorcycle owned by the individual to whom the 
  2.20  special plates were issued. 
  2.21     Subd. 5.  [CONTRIBUTION AND FEES CREDITED.] Contributions 
  2.22  under subdivision 1, paragraph (a), clause (5), must be paid to 
  2.23  the commissioner and credited to the Minnesota "Support Our 
  2.24  Troops" account established in section 190.19.  The fees 
  2.25  collected under this section must be deposited in the vehicle 
  2.26  services operating account in the special revenue fund. 
  2.27     Subd. 6.  [RECORD.] The commissioner shall maintain a 
  2.28  record of the number of plates issued under this section. 
  2.29     Sec. 2.  [190.19] [MINNESOTA "SUPPORT OUR TROOPS" ACCOUNT.] 
  2.30     Subdivision 1.  [ESTABLISHMENT.] The Minnesota "Support Our 
  2.31  Troops" account is established in the state treasury.  The 
  2.32  account shall consist of contributions from private sources and 
  2.33  appropriations. 
  2.34     Subd. 2.  [GRANTS.] (a) Money in the Minnesota "Support Our 
  2.35  Troops" account is appropriated to the adjutant general for the 
  2.36  purpose of making grants: 
  3.1      (1) directly to eligible individuals; or 
  3.2      (2) to one or more eligible foundations for the purpose of 
  3.3   making grants to eligible individuals, as provided in this 
  3.4   section. 
  3.5      (b) The term "eligible individual" includes any person who 
  3.6   is: 
  3.7      (1) a member of the Minnesota National Guard or a reserve 
  3.8   unit based in Minnesota who has been called to active service as 
  3.9   defined in section 190.05, subdivision 5; 
  3.10     (2) a Minnesota resident who is a member of a military 
  3.11  reserve unit not based in Minnesota, if the member is called to 
  3.12  active service as defined in section 190.05, subdivision 5; 
  3.13     (3) any other Minnesota resident performing active service 
  3.14  for any branch of the military of the United States; and 
  3.15     (4) members of the immediate family of an individual 
  3.16  identified in clause (1), (2), or (3).  For purposes of this 
  3.17  clause, "immediate family" means the individual's spouse and 
  3.18  minor children and, if they are dependents of the member of the 
  3.19  military, the member's parents, grandparents, siblings, 
  3.20  stepchildren, and adult children. 
  3.21     (c) The term "eligible foundation" includes any 
  3.22  organization that: 
  3.23     (1) is a tax-exempt organization under section 501(c)(3) of 
  3.24  the Internal Revenue Code; 
  3.25     (2) has articles of incorporation under chapter 317A 
  3.26  specifying the purpose of the organization as including the 
  3.27  provision of financial assistance to members of the Minnesota 
  3.28  National Guard and other United States armed forces reserves and 
  3.29  their families and survivors; and 
  3.30     (3) agrees in writing to distribute any grant money 
  3.31  received from the adjutant general under this section to 
  3.32  eligible individuals as defined in this section and in 
  3.33  accordance with any written policies and rules the adjutant 
  3.34  general may impose as conditions of the grant to the foundation. 
  3.35     (d) The maximum grant awarded to an eligible individual in 
  3.36  a calendar year with funds from the Minnesota "Support Our 
  4.1   Troops" account, either through an eligible institution or 
  4.2   directly from the adjutant general, may not exceed $2,000. 
  4.3      Subd. 3.  [ANNUAL REPORT.] The adjutant general must report 
  4.4   by February 1, 2007, and each year thereafter, to the chairs and 
  4.5   ranking minority members of the legislative committees and 
  4.6   divisions with jurisdiction over military and veterans affairs 
  4.7   on the number, amounts, and use of grants issued from the 
  4.8   Minnesota "Support Our Troops" account in the previous year. 
  4.9                              ARTICLE 2 
  4.10                       NATIONAL GUARD FUNDING 
  4.11     Section 1.  [APPROPRIATION.] 
  4.12     (a) $3,850,000 is appropriated in fiscal year 2006 and 
  4.13  $3,850,000 is appropriated in fiscal year 2007 from the general 
  4.14  fund to the adjutant general to provide the additional amount 
  4.15  necessary for full funding of the tuition reimbursement program 
  4.16  in Minnesota Statutes, section 192.501, subdivision 2. 
  4.17     (b) $1,500,000 is appropriated in fiscal year 2006 and 
  4.18  $1,500,000 is appropriated in fiscal year 2007 from the general 
  4.19  fund to the adjutant general to provide for reenlistment bonuses 
  4.20  under Minnesota Statutes, section 192.501, subdivision 1b. 
  4.21                             ARTICLE 3 
  4.22                              BONDING 
  4.23     Section 1.  [APPROPRIATION.] 
  4.24     (a) $670,000 is appropriated from the bond proceeds fund to 
  4.25  the commissioner of administration for the construction of a 
  4.26  World War II veterans memorial on the Capitol Mall.  The design 
  4.27  is subject to approval by the Capitol Area Architectural and 
  4.28  Planning Board. 
  4.29     (b) $6,306,000 is appropriated from the bond proceeds fund 
  4.30  to the Veterans Homes Board for the maintenance and improvement 
  4.31  of Minnesota's veterans homes, including $6,000,000 for asset 
  4.32  preservation and $306,000 for the Luverne Veterans Home dementia 
  4.33  unit common area. 
  4.34     Sec. 2.  [BOND SALE.] 
  4.35     To provide the money appropriated in this act from the bond 
  4.36  proceeds fund, the commissioner of finance shall sell and issue 
  5.1   bonds of the state in an amount up to $6,976,000 in the manner, 
  5.2   upon the terms, and with the effect prescribed by Minnesota 
  5.3   Statutes, sections 16A.631 to 16A.675, and by the Minnesota 
  5.4   Constitution, article XI, sections 4 to 7. 
  5.5      Sec. 3.  [EFFECTIVE DATE.] 
  5.6      Sections 1 and 2 are effective the day following final 
  5.7   enactment. 
  5.8                              ARTICLE 4
  5.9                              INCOME TAX
  5.10     Section 1.  Minnesota Statutes 2004, section 289A.02, 
  5.11  subdivision 7, is amended to read: 
  5.12     Subd. 7.  [INTERNAL REVENUE CODE.] Unless specifically 
  5.13  defined otherwise, "Internal Revenue Code" means the Internal 
  5.14  Revenue Code of 1986, as amended through June 15 November 15, 
  5.15  2003. 
  5.16     <b>[EFFECTIVE DATE.]</b> This section is effective for actions 
  5.17  required on or after November 11, 2003. 
  5.18     Sec. 2.  Minnesota Statutes 2004, section 290.01, 
  5.19  subdivision 19, is amended to read: 
  5.20     Subd. 19.  [NET INCOME.] The term "net income" means the 
  5.21  federal taxable income, as defined in section 63 of the Internal 
  5.22  Revenue Code of 1986, as amended through the date named in this 
  5.23  subdivision, incorporating the federal effective dates of 
  5.24  changes to the Internal Revenue Code and any elections made by 
  5.25  the taxpayer in accordance with the Internal Revenue Code in 
  5.26  determining federal taxable income for federal income tax 
  5.27  purposes, and with the modifications provided in subdivisions 
  5.28  19a to 19f. 
  5.29     In the case of a regulated investment company or a fund 
  5.30  thereof, as defined in section 851(a) or 851(g) of the Internal 
  5.31  Revenue Code, federal taxable income means investment company 
  5.32  taxable income as defined in section 852(b)(2) of the Internal 
  5.33  Revenue Code, except that:  
  5.34     (1) the exclusion of net capital gain provided in section 
  5.35  852(b)(2)(A) of the Internal Revenue Code does not apply; 
  5.36     (2) the deduction for dividends paid under section 
  6.1   852(b)(2)(D) of the Internal Revenue Code must be applied by 
  6.2   allowing a deduction for capital gain dividends and 
  6.3   exempt-interest dividends as defined in sections 852(b)(3)(C) 
  6.4   and 852(b)(5) of the Internal Revenue Code; and 
  6.5      (3) the deduction for dividends paid must also be applied 
  6.6   in the amount of any undistributed capital gains which the 
  6.7   regulated investment company elects to have treated as provided 
  6.8   in section 852(b)(3)(D) of the Internal Revenue Code.  
  6.9      The net income of a real estate investment trust as defined 
  6.10  and limited by section 856(a), (b), and (c) of the Internal 
  6.11  Revenue Code means the real estate investment trust taxable 
  6.12  income as defined in section 857(b)(2) of the Internal Revenue 
  6.13  Code.  
  6.14     The net income of a designated settlement fund as defined 
  6.15  in section 468B(d) of the Internal Revenue Code means the gross 
  6.16  income as defined in section 468B(b) of the Internal Revenue 
  6.17  Code. 
  6.18     The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 
  6.19  1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 
  6.20  1616, 1617, 1704(l), and 1704(m) of the Small Business Job 
  6.21  Protection Act, Public Law 104-188, the provisions of Public Law 
  6.22  104-117, the provisions of sections 313(a) and (b)(1), 602(a), 
  6.23  913(b), 941, 961, 971, 1001(a) and (b), 1002, 1003, 1012, 1013, 
  6.24  1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 1131(b) 
  6.25  and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and 
  6.26  1604(d)(1) of the Taxpayer Relief Act of 1997, Public Law 
  6.27  105-34, the provisions of section 6010 of the Internal Revenue 
  6.28  Service Restructuring and Reform Act of 1998, Public Law 
  6.29  105-206, the provisions of section 4003 of the Omnibus 
  6.30  Consolidated and Emergency Supplemental Appropriations Act, 
  6.31  1999, Public Law 105-277, and the provisions of section 318 of 
  6.32  the Consolidated Appropriation Act of 2001, Public Law 106-554, 
  6.33  shall become effective at the time they become effective for 
  6.34  federal purposes. 
  6.35     The Internal Revenue Code of 1986, as amended through 
  6.36  December 31, 1996 November 15, 2003, shall be in effect for 
  7.1   taxable years beginning after December 31, 1996 at the same time 
  7.2   it becomes effective for federal purposes. 
  7.3      The provisions of sections 202(a) and (b), 221(a), 225, 
  7.4   312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 
  7.5   (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 
  7.6   1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 
  7.7   1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 
  7.8   of the Taxpayer Relief Act of 1997, Public Law 105-34, the 
  7.9   provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002, 
  7.10  and 7003 of the Internal Revenue Service Restructuring and 
  7.11  Reform Act of 1998, Public Law 105-206, the provisions of 
  7.12  section 3001 of the Omnibus Consolidated and Emergency 
  7.13  Supplemental Appropriations Act, 1999, Public Law 105-277, the 
  7.14  provisions of section 3001 of the Miscellaneous Trade and 
  7.15  Technical Corrections Act of 1999, Public Law 106-36, and the 
  7.16  provisions of section 316 of the Consolidated Appropriation Act 
  7.17  of 2001, Public Law 106-554, shall become effective at the time 
  7.18  they become effective for federal purposes. 
  7.19     The Internal Revenue Code of 1986, as amended through 
  7.20  December 31, 1997, shall be in effect for taxable years 
  7.21  beginning after December 31, 1997. 
  7.22     The provisions of sections 5002, 6009, 6011, and 7001 of 
  7.23  the Internal Revenue Service Restructuring and Reform Act of 
  7.24  1998, Public Law 105-206, the provisions of section 9010 of the 
  7.25  Transportation Equity Act for the 21st Century, Public Law 
  7.26  105-178, the provisions of sections 1004, 4002, and 5301 of the 
  7.27  Omnibus Consolidation and Emergency Supplemental Appropriations 
  7.28  Act, 1999, Public Law 105-277, the provision of section 303 of 
  7.29  the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law 
  7.30  105-369, the provisions of sections 532, 534, 536, 537, and 538 
  7.31  of the Ticket to Work and Work Incentives Improvement Act of 
  7.32  1999, Public Law 106-170, the provisions of the Installment Tax 
  7.33  Correction Act of 2000, Public Law 106-573, and the provisions 
  7.34  of section 309 of the Consolidated Appropriation Act of 2001, 
  7.35  Public Law 106-554, shall become effective at the time they 
  7.36  become effective for federal purposes. 
  8.1      The Internal Revenue Code of 1986, as amended through 
  8.2   December 31, 1998, shall be in effect for taxable years 
  8.3   beginning after December 31, 1998.  
  8.4      The provisions of the FSC Repeal and Extraterritorial 
  8.5   Income Exclusion Act of 2000, Public Law 106-519, and the 
  8.6   provision of section 412 of the Job Creation and Worker 
  8.7   Assistance Act of 2002, Public Law 107-147, shall become 
  8.8   effective at the time it became effective for federal purposes. 
  8.9      The Internal Revenue Code of 1986, as amended through 
  8.10  December 31, 1999, shall be in effect for taxable years 
  8.11  beginning after December 31, 1999.  The provisions of sections 
  8.12  306 and 401 of the Consolidated Appropriation Act of 2001, 
  8.13  Public Law 106-554, and the provision of section 632(b)(2)(A) of 
  8.14  the Economic Growth and Tax Relief Reconciliation Act of 2001, 
  8.15  Public Law 107-16, and provisions of sections 101 and 402 of the 
  8.16  Job Creation and Worker Assistance Act of 2002, Public Law 
  8.17  107-147, shall become effective at the same time it became 
  8.18  effective for federal purposes. 
  8.19     The Internal Revenue Code of 1986, as amended through 
  8.20  December 31, 2000, shall be in effect for taxable years 
  8.21  beginning after December 31, 2000.  The provisions of sections 
  8.22  659a and 671 of the Economic Growth and Tax Relief 
  8.23  Reconciliation Act of 2001, Public Law 107-16, the provisions of 
  8.24  sections 104, 105, and 111 of the Victims of Terrorism Tax 
  8.25  Relief Act of 2001, Public Law 107-134, and the provisions of 
  8.26  sections 201, 403, 413, and 606 of the Job Creation and Worker 
  8.27  Assistance Act of 2002, Public Law 107-147, shall become 
  8.28  effective at the same time it became effective for federal 
  8.29  purposes. 
  8.30     The Internal Revenue Code of 1986, as amended through March 
  8.31  15, 2002, shall be in effect for taxable years beginning after 
  8.32  December 31, 2001. 
  8.33     The provisions of sections 101 and 102 of the Victims of 
  8.34  Terrorism Tax Relief Act of 2001, Public Law 107-134, shall 
  8.35  become effective at the same time it becomes effective for 
  8.36  federal purposes. 
  9.1      The Internal Revenue Code of 1986, as amended through June 
  9.2   15, 2003, shall be in effect for taxable years beginning after 
  9.3   December 31, 2002.  The provisions of section 201 of the Jobs 
  9.4   and Growth Tax Relief and Reconciliation Act of 2003, H.R. 2, if 
  9.5   it is enacted into law, are effective at the same time it became 
  9.6   effective for federal purposes. 
  9.7      Except as otherwise provided, references to the Internal 
  9.8   Revenue Code in subdivisions 19a 19 to 19g 19f mean the code in 
  9.9   effect for purposes of determining net income for the applicable 
  9.10  year. 
  9.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  9.12  following final enactment. 
  9.13     Sec. 3.  Minnesota Statutes 2004, section 290.01, 
  9.14  subdivision 19b, is amended to read: 
  9.15     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  9.16  individuals, estates, and trusts, there shall be subtracted from 
  9.17  federal taxable income: 
  9.18     (1) interest income on obligations of any authority, 
  9.19  commission, or instrumentality of the United States to the 
  9.20  extent includable in taxable income for federal income tax 
  9.21  purposes but exempt from state income tax under the laws of the 
  9.22  United States; 
  9.23     (2) if included in federal taxable income, the amount of 
  9.24  any overpayment of income tax to Minnesota or to any other 
  9.25  state, for any previous taxable year, whether the amount is 
  9.26  received as a refund or as a credit to another taxable year's 
  9.27  income tax liability; 
  9.28     (3) the amount paid to others, less the amount used to 
  9.29  claim the credit allowed under section 290.0674, not to exceed 
  9.30  $1,625 for each qualifying child in grades kindergarten to 6 and 
  9.31  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
  9.32  textbooks, and transportation of each qualifying child in 
  9.33  attending an elementary or secondary school situated in 
  9.34  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
  9.35  wherein a resident of this state may legally fulfill the state's 
  9.36  compulsory attendance laws, which is not operated for profit, 
 10.1   and which adheres to the provisions of the Civil Rights Act of 
 10.2   1964 and chapter 363A.  For the purposes of this clause, 
 10.3   "tuition" includes fees or tuition as defined in section 
 10.4   290.0674, subdivision 1, clause (1).  As used in this clause, 
 10.5   "textbooks" includes books and other instructional materials and 
 10.6   equipment purchased or leased for use in elementary and 
 10.7   secondary schools in teaching only those subjects legally and 
 10.8   commonly taught in public elementary and secondary schools in 
 10.9   this state.  Equipment expenses qualifying for deduction 
 10.10  includes expenses as defined and limited in section 290.0674, 
 10.11  subdivision 1, clause (3).  "Textbooks" does not include 
 10.12  instructional books and materials used in the teaching of 
 10.13  religious tenets, doctrines, or worship, the purpose of which is 
 10.14  to instill such tenets, doctrines, or worship, nor does it 
 10.15  include books or materials for, or transportation to, 
 10.16  extracurricular activities including sporting events, musical or 
 10.17  dramatic events, speech activities, driver's education, or 
 10.18  similar programs.  For purposes of the subtraction provided by 
 10.19  this clause, "qualifying child" has the meaning given in section 
 10.20  32(c)(3) of the Internal Revenue Code; 
 10.21     (4) income as provided under section 290.0802; 
 10.22     (5) to the extent included in federal adjusted gross 
 10.23  income, income realized on disposition of property exempt from 
 10.24  tax under section 290.491; 
 10.25     (6) to the extent included in federal taxable income, 
 10.26  postservice benefits for youth community service under section 
 10.27  124D.42 for volunteer service under United States Code, title 
 10.28  42, sections 12601 to 12604; 
 10.29     (7) to the extent not deducted in determining federal 
 10.30  taxable income by an individual who does not itemize deductions 
 10.31  for federal income tax purposes for the taxable year, an amount 
 10.32  equal to 50 percent of the excess of charitable contributions 
 10.33  allowable as a deduction for the taxable year under section 
 10.34  170(a) of the Internal Revenue Code over $500; 
 10.35     (8) for taxable years beginning before January 1, 2008, the 
 10.36  amount of the federal small ethanol producer credit allowed 
 11.1   under section 40(a)(3) of the Internal Revenue Code which is 
 11.2   included in gross income under section 87 of the Internal 
 11.3   Revenue Code; 
 11.4      (9) for individuals who are allowed a federal foreign tax 
 11.5   credit for taxes that do not qualify for a credit under section 
 11.6   290.06, subdivision 22, an amount equal to the carryover of 
 11.7   subnational foreign taxes for the taxable year, but not to 
 11.8   exceed the total subnational foreign taxes reported in claiming 
 11.9   the foreign tax credit.  For purposes of this clause, "federal 
 11.10  foreign tax credit" means the credit allowed under section 27 of 
 11.11  the Internal Revenue Code, and "carryover of subnational foreign 
 11.12  taxes" equals the carryover allowed under section 904(c) of the 
 11.13  Internal Revenue Code minus national level foreign taxes to the 
 11.14  extent they exceed the federal foreign tax credit; 
 11.15     (10) in each of the five tax years immediately following 
 11.16  the tax year in which an addition is required under subdivision 
 11.17  19a, clause (7), an amount equal to one-fifth of the delayed 
 11.18  depreciation.  For purposes of this clause, "delayed 
 11.19  depreciation" means the amount of the addition made by the 
 11.20  taxpayer under subdivision 19a, clause (7), minus the positive 
 11.21  value of any net operating loss under section 172 of the 
 11.22  Internal Revenue Code generated for the tax year of the 
 11.23  addition.  The resulting delayed depreciation cannot be less 
 11.24  than zero; and 
 11.25     (11) job opportunity building zone income as provided under 
 11.26  section 469.316.; 
 11.27     (12) the amount of compensation paid to members of the 
 11.28  Minnesota National Guard or other reserve components of the 
 11.29  United States military for active service performed in 
 11.30  Minnesota, excluding compensation for services performed under 
 11.31  the Active Guard Reserve (AGR) program.  For purposes of this 
 11.32  clause, "active service" means (i) state active service as 
 11.33  defined in section 190.05, subdivision 5a, clause (1); (ii) 
 11.34  federally funded state active service as defined in section 
 11.35  190.05, subdivision 5b; or (iii) federal active service as 
 11.36  defined in section 190.05, subdivision 5c, but "active service" 
 12.1   excludes services performed exclusively for purposes of basic 
 12.2   combat training, advanced individual training, annual training, 
 12.3   and periodic inactive duty training; special training 
 12.4   periodically made available to reserve members; and service 
 12.5   performed in accordance with section 190.08, subdivision 3; and 
 12.6      (13) to the extent included in federal taxable income, 
 12.7   compensation paid to a service member as defined in United 
 12.8   States Code, title 10, section 101(a)(5), for military service 
 12.9   as defined in the Service Members Civil Relief Act, Public Law 
 12.10  108-189, section 101(2), performed by a nonresident.  This 
 12.11  subtraction does not apply to "retirement income" as defined in 
 12.12  section 290.17, subdivision 2, paragraph (a), clause (3). 
 12.13     <b>[EFFECTIVE DATE.]</b> The subtraction allowed in clause (12) is 
 12.14  effective for taxable years beginning after December 31, 2004, 
 12.15  and the subtraction allowed in clause (13) is effective for 
 12.16  taxable years beginning after December 31, 2002. 
 12.17     Sec. 4.  Minnesota Statutes 2004, section 290.01, 
 12.18  subdivision 31, is amended to read: 
 12.19     Subd. 31.  [INTERNAL REVENUE CODE.] Unless specifically 
 12.20  defined otherwise, "Internal Revenue Code" means the Internal 
 12.21  Revenue Code of 1986, as amended through June 15 November 15, 
 12.22  2003. 
 12.23     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 12.24  following final enactment, except the changes incorporated by 
 12.25  federal changes are effective at the same times as the changes 
 12.26  were effective for federal purposes. 
 12.27     Sec. 5.  Minnesota Statutes 2004, section 290.06, 
 12.28  subdivision 2c, is amended to read: 
 12.29     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
 12.30  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
 12.31  married individuals filing joint returns and surviving spouses 
 12.32  as defined in section 2(a) of the Internal Revenue Code must be 
 12.33  computed by applying to their taxable net income the following 
 12.34  schedule of rates: 
 12.35     (1) On the first $25,680, 5.35 percent; 
 12.36     (2) On all over $25,680, but not over $102,030, 7.05 
 13.1   percent; 
 13.2      (3) On all over $102,030, 7.85 percent. 
 13.3      Married individuals filing separate returns, estates, and 
 13.4   trusts must compute their income tax by applying the above rates 
 13.5   to their taxable income, except that the income brackets will be 
 13.6   one-half of the above amounts.  
 13.7      (b) The income taxes imposed by this chapter upon unmarried 
 13.8   individuals must be computed by applying to taxable net income 
 13.9   the following schedule of rates: 
 13.10     (1) On the first $17,570, 5.35 percent; 
 13.11     (2) On all over $17,570, but not over $57,710, 7.05 
 13.12  percent; 
 13.13     (3) On all over $57,710, 7.85 percent. 
 13.14     (c) The income taxes imposed by this chapter upon unmarried 
 13.15  individuals qualifying as a head of household as defined in 
 13.16  section 2(b) of the Internal Revenue Code must be computed by 
 13.17  applying to taxable net income the following schedule of rates: 
 13.18     (1) On the first $21,630, 5.35 percent; 
 13.19     (2) On all over $21,630, but not over $86,910, 7.05 
 13.20  percent; 
 13.21     (3) On all over $86,910, 7.85 percent. 
 13.22     (d) In lieu of a tax computed according to the rates set 
 13.23  forth in this subdivision, the tax of any individual taxpayer 
 13.24  whose taxable net income for the taxable year is less than an 
 13.25  amount determined by the commissioner must be computed in 
 13.26  accordance with tables prepared and issued by the commissioner 
 13.27  of revenue based on income brackets of not more than $100.  The 
 13.28  amount of tax for each bracket shall be computed at the rates 
 13.29  set forth in this subdivision, provided that the commissioner 
 13.30  may disregard a fractional part of a dollar unless it amounts to 
 13.31  50 cents or more, in which case it may be increased to $1. 
 13.32     (e) An individual who is not a Minnesota resident for the 
 13.33  entire year must compute the individual's Minnesota income tax 
 13.34  as provided in this subdivision.  After the application of the 
 13.35  nonrefundable credits provided in this chapter, the tax 
 13.36  liability must then be multiplied by a fraction in which:  
 14.1      (1) the numerator is the individual's Minnesota source 
 14.2   federal adjusted gross income as defined in section 62 of the 
 14.3   Internal Revenue Code and increased by the additions required 
 14.4   under section 290.01, subdivision 19a, clauses (1), (5), and 
 14.5   (6), and reduced by the subtraction under section 290.01, 
 14.6   subdivision 19b, clause (11), and the Minnesota assignable 
 14.7   portion of the subtraction for United States government interest 
 14.8   under section 290.01, subdivision 19b, clause (1), and the 
 14.9   subtraction under clause (13), after applying the allocation and 
 14.10  assignability provisions of section 290.081, clause (a), or 
 14.11  290.17; and 
 14.12     (2) the denominator is the individual's federal adjusted 
 14.13  gross income as defined in section 62 of the Internal Revenue 
 14.14  Code of 1986, increased by the amounts specified in section 
 14.15  290.01, subdivision 19a, clauses (1), (5), and (6), and reduced 
 14.16  by the amounts specified in section 290.01, subdivision 19b, 
 14.17  clauses (1) and, (11), and (13). 
 14.18     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 14.19  years beginning after December 31, 2004. 
 14.20     Sec. 6.  Minnesota Statutes 2004, section 290.091, 
 14.21  subdivision 2, is amended to read: 
 14.22     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
 14.23  this section, the following terms have the meanings given: 
 14.24     (a) "Alternative minimum taxable income" means the sum of 
 14.25  the following for the taxable year: 
 14.26     (1) the taxpayer's federal alternative minimum taxable 
 14.27  income as defined in section 55(b)(2) of the Internal Revenue 
 14.28  Code; 
 14.29     (2) the taxpayer's itemized deductions allowed in computing 
 14.30  federal alternative minimum taxable income, but excluding: 
 14.31     (i) the charitable contribution deduction under section 170 
 14.32  of the Internal Revenue Code to the extent that the deduction 
 14.33  exceeds 1.0 percent of adjusted gross income, as defined in 
 14.34  section 62 of the Internal Revenue Code; 
 14.35     (ii) the medical expense deduction; 
 14.36     (iii) the casualty, theft, and disaster loss deduction; and 
 15.1      (iv) the impairment-related work expenses of a disabled 
 15.2   person; 
 15.3      (3) for depletion allowances computed under section 613A(c) 
 15.4   of the Internal Revenue Code, with respect to each property (as 
 15.5   defined in section 614 of the Internal Revenue Code), to the 
 15.6   extent not included in federal alternative minimum taxable 
 15.7   income, the excess of the deduction for depletion allowable 
 15.8   under section 611 of the Internal Revenue Code for the taxable 
 15.9   year over the adjusted basis of the property at the end of the 
 15.10  taxable year (determined without regard to the depletion 
 15.11  deduction for the taxable year); 
 15.12     (4) to the extent not included in federal alternative 
 15.13  minimum taxable income, the amount of the tax preference for 
 15.14  intangible drilling cost under section 57(a)(2) of the Internal 
 15.15  Revenue Code determined without regard to subparagraph (E); 
 15.16     (5) to the extent not included in federal alternative 
 15.17  minimum taxable income, the amount of interest income as 
 15.18  provided by section 290.01, subdivision 19a, clause (1); and 
 15.19     (6) the amount of addition required by section 290.01, 
 15.20  subdivision 19a, clause (7); 
 15.21     less the sum of the amounts determined under the following: 
 15.22     (1) interest income as defined in section 290.01, 
 15.23  subdivision 19b, clause (1); 
 15.24     (2) an overpayment of state income tax as provided by 
 15.25  section 290.01, subdivision 19b, clause (2), to the extent 
 15.26  included in federal alternative minimum taxable income; 
 15.27     (3) the amount of investment interest paid or accrued 
 15.28  within the taxable year on indebtedness to the extent that the 
 15.29  amount does not exceed net investment income, as defined in 
 15.30  section 163(d)(4) of the Internal Revenue Code.  Interest does 
 15.31  not include amounts deducted in computing federal adjusted gross 
 15.32  income; and 
 15.33     (4) amounts subtracted from federal taxable income as 
 15.34  provided by section 290.01, subdivision 19b, clauses (10) and, 
 15.35  (11), and (12). 
 15.36     In the case of an estate or trust, alternative minimum 
 16.1   taxable income must be computed as provided in section 59(c) of 
 16.2   the Internal Revenue Code. 
 16.3      (b) "Investment interest" means investment interest as 
 16.4   defined in section 163(d)(3) of the Internal Revenue Code. 
 16.5      (c) "Tentative minimum tax" equals 6.4 percent of 
 16.6   alternative minimum taxable income after subtracting the 
 16.7   exemption amount determined under subdivision 3. 
 16.8      (d) "Regular tax" means the tax that would be imposed under 
 16.9   this chapter (without regard to this section and section 
 16.10  290.032), reduced by the sum of the nonrefundable credits 
 16.11  allowed under this chapter.  
 16.12     (e) "Net minimum tax" means the minimum tax imposed by this 
 16.13  section. 
 16.14     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
 16.15  beginning after December 31, 2004. 
 16.16     Sec. 7.  Minnesota Statutes 2004, section 290A.03, 
 16.17  subdivision 15, is amended to read: 
 16.18     Subd. 15.  [INTERNAL REVENUE CODE.] "Internal Revenue Code" 
 16.19  means the Internal Revenue Code of 1986, as amended through June 
 16.20  November 15, 2003. 
 16.21     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 16.22  following final enactment, except the changes to household 
 16.23  income generated by federal changes to federal adjusted gross 
 16.24  income are effective at the same times the federal changes are 
 16.25  effective. 
 16.26     Sec. 8.  Minnesota Statutes 2004, section 291.005, 
 16.27  subdivision 1, is amended to read: 
 16.28     Subdivision 1.  [SCOPE.] Unless the context otherwise 
 16.29  clearly requires, the following terms used in this chapter shall 
 16.30  have the following meanings: 
 16.31     (1) "Federal gross estate" means the gross estate of a 
 16.32  decedent as valued and otherwise determined for federal estate 
 16.33  tax purposes by federal taxing authorities pursuant to the 
 16.34  provisions of the Internal Revenue Code. 
 16.35     (2) "Minnesota gross estate" means the federal gross estate 
 16.36  of a decedent after (a) excluding therefrom any property 
 17.1   included therein which has its situs outside Minnesota, and (b) 
 17.2   including therein any property omitted from the federal gross 
 17.3   estate which is includable therein, has its situs in Minnesota, 
 17.4   and was not disclosed to federal taxing authorities.  
 17.5      (3) "Personal representative" means the executor, 
 17.6   administrator or other person appointed by the court to 
 17.7   administer and dispose of the property of the decedent.  If 
 17.8   there is no executor, administrator or other person appointed, 
 17.9   qualified, and acting within this state, then any person in 
 17.10  actual or constructive possession of any property having a situs 
 17.11  in this state which is included in the federal gross estate of 
 17.12  the decedent shall be deemed to be a personal representative to 
 17.13  the extent of the property and the Minnesota estate tax due with 
 17.14  respect to the property. 
 17.15     (4) "Resident decedent" means an individual whose domicile 
 17.16  at the time of death was in Minnesota. 
 17.17     (5) "Nonresident decedent" means an individual whose 
 17.18  domicile at the time of death was not in Minnesota. 
 17.19     (6) "Situs of property" means, with respect to real 
 17.20  property, the state or country in which it is located; with 
 17.21  respect to tangible personal property, the state or country in 
 17.22  which it was normally kept or located at the time of the 
 17.23  decedent's death; and with respect to intangible personal 
 17.24  property, the state or country in which the decedent was 
 17.25  domiciled at death. 
 17.26     (7) "Commissioner" means the commissioner of revenue or any 
 17.27  person to whom the commissioner has delegated functions under 
 17.28  this chapter. 
 17.29     (8) "Internal Revenue Code" means the United States 
 17.30  Internal Revenue Code of 1986, as amended through December 31, 
 17.31  2002 November 15, 2003. 
 17.32     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
 17.33  decedents dying after January 31, 2003.