1.1 	A bill for an act
1.2 	relating to taxation; corporate franchise; modifying
1.3 	the definition of foreign operating corporations;
1.4 	amending Minnesota Statutes 2004, section 290.01,
1.5 	subdivision 6b.
1.6 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.7 	Section 1. Minnesota Statutes 2004, section 290.01,
1.8 	subdivision 6b, is amended to read:
1.9 		Subd. 6b.Foreign operating corporation. (a) The term
1.10 	"foreign operating corporation," when applied to a corporation,
1.11 	means a domestic corporation with the following characteristics:
1.12 	(1) it is part of a unitary business at least one member of
1.13 	which is taxable in this state;
1.14 	(2) it is not a foreign sales corporation under section 922
1.15 	of the Internal Revenue Code, as amended through December 31,
1.16 	1999, for the taxable year; and
1.17 	(3) either (i) the average of the percentages of its
1.18 	property and payrolls assigned to locations inside outside the
1.19 	United States and the District of Columbia, excluding the
1.20 	commonwealth of Puerto Rico and possessions of the United
1.21 	States, as determined under section 290.191 or 290.20and
1.22 	paragraph (b), is 20 80 percent or less more; or (ii) it has
1.23 	in effect a valid election under section 936 of the Internal
1.24 	Revenue Code.
1.25 	(b) For purposes this subdivision, property includes
2.1 	intangible property.  Patents, trademarks, copyrights, trade
2.2 	names, good will, secret processes and formulas, trade brands,
2.3 	franchises, and similar intellectual property are valued at
2.4 	eight times the net annual rentals, fees, royalties, or other
2.5 	payments received or accrued by the corporation for use of the
2.6 	property.  This property is assigned to locations outside the
2.7 	United States, based on the percentage of the rentals, fees,
2.8 	royalties, or other payments that are for use of the property in
2.9 	those locations.  Other intangible property must be assigned to
2.10 	locations inside or outside of the United States under the rules
2.11 	that apply under section 290.191, subdivision 11, regardless of
2.12 	whether the corporation is a financial institution.  Assets
2.13 	described in section 290.191, subdivision 11, paragraph (l), are
2.14 	assigned to the principal location of the issuer for equity
2.15 	interests or of the obligor for debt interests.
2.16 	(c) For purposes of this subdivision, "United States"
2.17 	includes the District of Columbia and excludes the commonwealth
2.18 	of Puerto Rico and possessions of the United States.
2.19 	
EFFECTIVE DATE. This section is effective for taxable
2.20 	years beginning after December 31, 2005.