1.1 	A bill for an act
1.2 	relating to taxation; income; abolishing the
1.3 	alternative minimum tax for individuals and
1.4 	corporations; amending Minnesota Statutes 2004,
1.5 	sections 289A.25, subdivision 5; 290.02; 290.06,
1.6 	subdivisions 30, 31; 290.491; 298.01, subdivisions 3d,
1.7 	4e; 469.316, subdivision 1; 469.317; 469.337;
1.8 	repealing Minnesota Statutes 2004, sections 290.0674,
1.9 	subdivision 3; 290.091; 290.0921; 298.01, subdivisions
1.10 	3c, 4d.
1.11 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.12 	Section 1. Minnesota Statutes 2004, section 289A.25,
1.13 	subdivision 5, is amended to read:
1.14 		Subd. 5.Amount of required installment.  The amount of
1.15 	any installment required to be paid shall be 25 percent of the
1.16 	required annual payment except as provided in clause (3).  The
1.17 	term "required annual payment" means the lesser of
1.18 	(1) 90 percent of the tax shown on the return for the
1.19 	taxable year or 90 percent of the tax for the year if no return
1.20 	is filed, or
1.21 	(2) the total tax liability shown on the return of the
1.22 	taxpayer for the preceding taxable year, if a return showing a
1.23 	liability for the taxes was filed by the taxpayer for the
1.24 	preceding taxable year of 12 months.  If the adjusted gross
1.25 	income shown on the return of the taxpayer for the preceding
1.26 	taxable year exceeds $150,000, this clause shall be applied by
1.27 	substituting "110 percent of the total tax liability" for "the
1.28 	total tax liability"
2.1 	(i) for an individual who is not a Minnesota resident for
2.2 	the entire year, the term "adjusted gross income" means the
2.3 	Minnesota share of that income apportioned to Minnesota under
2.4 	section 290.06, subdivision 2c, paragraph (e), or
2.5 	(ii) for a trust the term "adjusted gross income" means the
2.6 	income assigned to Minnesota under section 290.17; or
2.7 	(3) an amount equal to the applicable percentage of the tax
2.8 	for the taxable year computed by placing on an annualized basis
2.9 	the taxable income and alternative minimum taxable income for
2.10 	the months in the taxable year ending before the month in which
2.11 	the installment is required to be paid.  The applicable
2.12 	percentage of the tax is 22.5 percent in the case of the first
2.13 	installment, 45 percent for the second installment, 67.5 percent
2.14 	for the third installment, and 90 percent for the fourth
2.15 	installment.  For purposes of this clause, the taxable income
2.16 	and alternative minimum taxable income shall be placed on an
2.17 	annualized basis by
2.18 	(i) multiplying by 12 (or in the case of a taxable year of
2.19 	less than 12 months, the number of months in the taxable year)
2.20 	the taxable income and alternative minimum taxable income 
2.21 	computed for the months in the taxable year ending before the
2.22 	month in which the installment is required to be paid; and
2.23 	(ii) dividing the resulting amount by the number of months
2.24 	in the taxable year ending before the month in which the
2.25 	installment date falls.
2.26 	A reduction in an installment under clause (3) must be
2.27 	recaptured by increasing the amount of the next required
2.28 	installment by the amount of the reduction.

2.29 	Sec. 2. Minnesota Statutes 2004, section 290.02, is
2.30 	amended to read:
2.31 	290.02 FRANCHISE TAX ON CORPORATIONS MEASURED BY NET
2.32 	INCOME.
2.33 	An annual franchise tax on the exercise of the corporate
2.34 	franchise to engage in contacts with this state that produce
2.35 	gross income attributable to sources within this state is
2.36 	imposed upon every corporation that so exercises its franchise
3.1 	during the taxable year.
3.2 	Contacts within this state do not include transportation in
3.3 	interstate or foreign commerce, or both, by means of ships
3.4 	navigating within or through waters that are made international
3.5 	for navigation purposes by any treaty or agreement to which the
3.6 	United States is a party.
3.7 	The tax so imposed is measured by the corporations' taxable
3.8 	income and alternative minimum taxable income for the taxable
3.9 	year for which the tax is imposed, and computed in the manner
3.10 	and at the rates provided in this chapter.

3.11 	Sec. 3. Minnesota Statutes 2004, section 290.06,
3.12 	subdivision 30, is amended to read:
3.13 		Subd. 30.Biotechnology and health science industry zone
3.14 	job credit.  A taxpayer that is a qualified business, as defined
3.15 	in section 469.330, subdivision 11, is allowed a credit as
3.16 	determined under section 469.338 against the franchise tax
3.17 	imposed under section 290.06, subdivision 1, or the alternative
3.18 	minimum tax imposed under section 290.0921.

3.19 	Sec. 4. Minnesota Statutes 2004, section 290.06,
3.20 	subdivision 31, is amended to read:
3.21 		Subd. 31.Biotechnology and health science industry zone
3.22 	research and development credit.  A taxpayer that is a qualified
3.23 	business, as defined in section 469.330, subdivision 11, is
3.24 	allowed a credit as determined under section 469.339 against the
3.25 	franchise tax imposed under section 290.06, subdivision 1, or
3.26 	the alternative minimum tax imposed under section 290.0921.

3.27 	Sec. 5. Minnesota Statutes 2004, section 290.491, is
3.28 	amended to read:
3.29 	290.491 TAX ON GAIN; DISCHARGE IN BANKRUPTCY.
3.30 	(a) Any tax due under this chapter on a gain realized on a
3.31 	forced sale pursuant to foreclosure of a mortgage or other
3.32 	security interest in agricultural production property, other
3.33 	real property, or equipment, used in a farm business that was
3.34 	owned and operated by the taxpayer shall be a dischargeable debt
3.35 	in a bankruptcy proceeding under United States Code, title 11,
3.36 	section 727.
4.1 	(b) Income realized on a sale or exchange of agricultural
4.2 	production property, other real property, or equipment, used in
4.3 	a farm business that was owned and operated by the taxpayer
4.4 	shall be exempt from taxation under this chapter, if the
4.5 	taxpayer was insolvent at the time of the sale and the proceeds
4.6 	of the sale were used solely to discharge indebtedness secured
4.7 	by a mortgage, lien, or other security interest on the property
4.8 	sold.  For purposes of this section, "insolvent" means insolvent
4.9 	as defined in section 108(d)(3) of the Internal Revenue Code.
4.10 	This paragraph applies only to the extent that the gain is
4.11 	includable in federal taxable income or in the computation of
4.12 	the alternative minimum taxable income under section 290.091 for
4.13 	purposes of the alternative minimum tax.  The amount of the
4.14 	exemption is limited to the excess of the taxpayer's (1)
4.15 	liabilities over (2) the total assets and any exclusion claimed
4.16 	under section 108 of the Internal Revenue Code determined
4.17 	immediately before application of this paragraph.
4.18 	(c) For purposes of this section, any tax due under this
4.19 	chapter specifically includes, but is not limited to, tax
4.20 	imposed under sections 290.02 and 290.03 on income derived from
4.21 	a sale or exchange, whether constituting gain, discharge of
4.22 	indebtedness or recapture of depreciation deductions, or the
4.23 	alternative minimum tax imposed under section 290.091.

4.24 	Sec. 6. Minnesota Statutes 2004, section 298.01,
4.25 	subdivision 3d, is amended to read:
4.26 		Subd. 3d.Alternative minimum tax credit.  A credit is
4.27 	allowed against qualified regular tax for qualified alternative
4.28 	minimum tax previously paid prior to the repeal of the alternate
4.29 	minimum tax.  The amount of the credit allowed under this
4.30 	subdivision is determined under Minnesota Statutes 2004,section
4.31 	290.0921, subdivision 8.  For purposes of calculating this
4.32 	credit, the following terms have the meanings given:
4.33 	(a) "Qualified alternative minimum tax" means the amount
4.34 	determined under subdivision 3 and Minnesota Statutes 2004,
4.35 	section 290.0921, subdivision 1.
4.36 	(b) "Qualified regular tax" means the tax imposed under
5.1 	subdivision 3 and section 290.06, subdivision 1.

5.2 	Sec. 7. Minnesota Statutes 2004, section 298.01,
5.3 	subdivision 4e, is amended to read:
5.4 		Subd. 4e.Alternative minimum tax credit.  A credit is
5.5 	allowed against qualified regular tax for qualified alternative
5.6 	minimum tax previously paid prior to the repeal of the
5.7 	alternative minimum tax.  The amount of the credit allowed under
5.8 	this paragraph is determined under Minnesota Statutes 2004,
5.9 	section 290.0921, subdivision 8.  For purposes of calculating
5.10 	this credit, the following terms have the meanings given:
5.11 	(1) "Qualified alternative minimum tax" means the amount
5.12 	determined under subdivision 4d and Minnesota Statutes 2004,
5.13 	section 290.0921, subdivision 1.
5.14 	(2) "Qualified regular tax" means the tax imposed under
5.15 	subdivision 4 and section 290.06, subdivision 1.

5.16 	Sec. 8. Minnesota Statutes 2004, section 469.316,
5.17 	subdivision 1, is amended to read:
5.18 		Subdivision 1.Application.  An individual operating a
5.19 	trade or business in a job opportunity building zone, and an
5.20 	individual making a qualifying investment in a qualified
5.21 	business operating in a job opportunity building zone qualifies
5.22 	for the exemptions from taxes imposed under chapter 290, as
5.23 	provided in this section.  The exemptions provided under this
5.24 	section apply only to the extent that the income otherwise would
5.25 	be taxable under chapter 290.  Subtractions under this section
5.26 	from federal taxable income, alternative minimum taxable income,
5.27 	or any other base subject to tax are limited to the amount that
5.28 	otherwise would be included in the tax base absent the exemption
5.29 	under this section.  This section applies only to taxable years
5.30 	beginning during the duration of the job opportunity building
5.31 	zone.

5.32 	Sec. 9. Minnesota Statutes 2004, section 469.317, is
5.33 	amended to read:
5.34 	469.317 CORPORATE FRANCHISE TAX EXEMPTION.
5.35 	(a) A qualified business is exempt from taxation under
5.36 	section 290.02, the alternative minimum tax under section
6.1 	290.0921,and the minimum fee under section 290.0922, on the
6.2 	portion of its income attributable to operations within the
6.3 	zone.  This exemption is determined as follows:
6.4 	(1) for purposes of the tax imposed under section 290.02,
6.5 	by multiplying its taxable net income by its zone percentage and
6.6 	subtracting the result in determining taxable income; and 
6.7 	(2) for purposes of the alternative minimum tax under
6.8 	section 290.0921, by multiplying its alternative minimum taxable
6.9 	income by its zone percentage and reducing alternative minimum
6.10 	taxable income by this amount; and 
6.11 	(3) for purposes of the minimum fee under section 290.0922,
6.12 	by excluding property and payroll in the zone from the
6.13 	computations of the fee or by exempting the entity under section
6.14 	290.0922, subdivision 2, clause (7).
6.15 	(b) No subtraction is allowed under this section in excess
6.16 	of 20 percent of the sum of the corporation's job opportunity
6.17 	building zone payroll and the adjusted basis of the property at
6.18 	the time that the property is first used in the job opportunity
6.19 	building zone by the corporation.
6.20 	(c) This section applies only to taxable years beginning
6.21 	during the duration of the job opportunity building zone.

6.22 	Sec. 10. Minnesota Statutes 2004, section 469.337, is
6.23 	amended to read:
6.24 	469.337 CORPORATE FRANCHISE TAX EXEMPTION.
6.25 	(a) A qualified business is exempt from taxation under
6.26 	section 290.02, the alternative minimum tax under section
6.27 	290.0921,and the minimum fee under section 290.0922, on the
6.28 	portion of its income attributable to operations of a qualified
6.29 	business within the biotechnology and health sciences industry
6.30 	zone.  This exemption is determined as follows:
6.31 	(1) for purposes of the tax imposed under section 290.02,
6.32 	by multiplying its taxable net income by its zone percentage and
6.33 	subtracting the result in determining taxable income; and 
6.34 	(2) for purposes of the alternative minimum tax under
6.35 	section 290.0921, by multiplying its alternative minimum taxable
6.36 	income by its zone percentage and reducing alternative minimum
7.1 	taxable income by this amount; and 
7.2 	(3) for purposes of the minimum fee under section 290.0922,
7.3 	by excluding property and payroll in the zone from the
7.4 	computations of the fee.
7.5 	(b) No subtraction is allowed under this section in excess
7.6 	of 20 percent of the sum of the corporation's biotechnology and
7.7 	health sciences industry zone payroll and the adjusted basis of
7.8 	the property at the time that the property is first used in the
7.9 	biotechnology and health sciences industry zone by the
7.10 	corporation.
7.11 	(c) No reduction in tax is allowed in excess of the amount
7.12 	allocated under section 469.335.

7.13 	Sec. 11. REPEALER.
 7.14 	Minnesota Statutes 2004, sections 290.0674, subdivision 3;
7.15 	290.091; 290.0921; and 298.01, subdivisions 3c and 4d, are
7.16 	repealed.

7.17 	Sec. 12. EFFECTIVE DATE.
 7.18 	Sections 1 to 11 are effective for taxable years after
7.19 	December 31, 2005.