1.1 	A bill for an act
1.2 	relating to taxation; requiring withholding; providing
1.3 	for taxation of certain income; eliminating certain
1.4 	deductions; conforming with certain federal income tax
1.5 	changes; prohibiting state contracts with certain
1.6 	vendors; providing for taxation of cigarettes, liquor,
1.7 	and rented and leased vehicles; modifying certain
1.8 	sales tax exemptions; defining "direct business" for
1.9 	purposes of insurance taxes; modifying the homestead
1.10 	market value credit reimbursement; establishing a tax
1.11 	compliance program; appropriating money; amending
1.12 	Minnesota Statutes 2004, sections 16C.03, by adding a
1.13 	subdivision; 289A.20, subdivision 2; 289A.38, by
1.14 	adding a subdivision; 289A.60, by adding a
1.15 	subdivision; 290.01, subdivisions 19, 19a, 19b, 19c,
1.16 	19d, 31; 290.06, subdivision 2c; 290.067, subdivision
1.17 	2a; 290.091, subdivision 2; 290.10; 290.17,
1.18 	subdivision 2; 290.92, by adding a subdivision;
1.19 	290A.03, subdivisions 3, 15; 297A.61, subdivision 4,
1.20 	by adding a subdivision; 297A.67, subdivision 8, by
1.21 	adding a subdivision; 297A.68, subdivisions 2, 5;
1.22 	297I.01, by adding a subdivision; Laws 2001, First
1.23 	Special Session chapter 5, article 12, section 95;
1.24 	proposing coding for new law in Minnesota Statutes,
1.25 	chapters 289A; 295; 297A; 297F.
1.26 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.27 	ARTICLE 1
1.28 	INCOME AND CORPORATE FRANCHISE TAXES

1.29 	Section 1. Minnesota Statutes 2004, section 289A.20,
1.30 	subdivision 2, is amended to read:
1.31 		Subd. 2.Withholding from wages, entertainer withholding,
1.32 	withholding from payments to out-of-state contractors, and
1.33 	withholding by partnerships and small business corporations.
 1.34 	(a) A tax required to be deducted and withheld during the
1.35 	quarterly period must be paid on or before the last day of the
2.1 	month following the close of the quarterly period, unless an
2.2 	earlier time for payment is provided.  A tax required to be
2.3 	deducted and withheld from compensation of an entertainer and
2.4 	from a payment to an out-of-state contractor must be paid on or
2.5 	before the date the return for such tax must be filed under
2.6 	section 289A.18, subdivision 2.  Taxes required to be deducted
2.7 	and withheld by partnerships and ,S corporations, and trusts 
2.8 	must be paid on or before the date the return must be filed
2.9 	under section 289A.18, subdivision 2a quarterly basis as
2.10 	estimated taxes under section 289A.25 for partnerships and
2.11 	trusts and under section 289A.26 for S corporations.
2.12 	(b) An employer who, during the previous quarter, withheld
2.13 	more than $1,500 of tax under section 290.92, subdivision 2a or
2.14 	3, or 290.923, subdivision 2, must deposit tax withheld under
2.15 	those sections with the commissioner within the time allowed to
2.16 	deposit the employer's federal withheld employment taxes under
2.17 	Code of Federal Regulations, title 26, section 31.6302-1, as
2.18 	amended through December 31, 2001, without regard to the safe
2.19 	harbor or de minimis rules in subparagraph (f) or the one-day
2.20 	rule in subsection (c), clause (3).  Taxpayers must submit a
2.21 	copy of their federal notice of deposit status to the
2.22 	commissioner upon request by the commissioner.
2.23 	(c) The commissioner may prescribe by rule other return
2.24 	periods or deposit requirements.  In prescribing the reporting
2.25 	period, the commissioner may classify payors according to the
2.26 	amount of their tax liability and may adopt an appropriate
2.27 	reporting period for the class that the commissioner judges to
2.28 	be consistent with efficient tax collection.  In no event will
2.29 	the duration of the reporting period be more than one year.
2.30 	(d) If less than the correct amount of tax is paid to the
2.31 	commissioner, proper adjustments with respect to both the tax
2.32 	and the amount to be deducted must be made, without interest, in
2.33 	the manner and at the times the commissioner prescribes.  If the
2.34 	underpayment cannot be adjusted, the amount of the underpayment
2.35 	will be assessed and collected in the manner and at the times
2.36 	the commissioner prescribes.
3.1 	(e) If the aggregate amount of the tax withheld during a
3.2 	fiscal year ending June 30 under section 290.92, subdivision 2a
3.3 	or 3, is equal to or exceeds the amounts established for
3.4 	remitting federal withheld taxes pursuant to the regulations
3.5 	promulgated under section 6302(h) of the Internal Revenue Code,
3.6 	the employer must remit each required deposit for wages paid in
3.7 	the subsequent calendar year by electronic means.
3.8 	(f) A third-party bulk filer as defined in section 290.92,
3.9 	subdivision 30, paragraph (a), clause (2), who remits
3.10 	withholding deposits must remit all deposits by electronic means
3.11 	as provided in paragraph (e), regardless of the aggregate amount
3.12 	of tax withheld during a fiscal year for all of the employers.
3.13 	
EFFECTIVE DATE. This section is effective for tax years
3.14 	beginning after December 31, 2005.

3.15 	Sec. 2. Minnesota Statutes 2004, section 290.01,
3.16 	subdivision 19a, is amended to read:
3.17 		Subd. 19a.Additions to federal taxable income.  For
3.18 	individuals, estates, and trusts, there shall be added to
3.19 	federal taxable income:
3.20 	(1)(i) interest income on obligations of any state other
3.21 	than Minnesota or a political or governmental subdivision,
3.22 	municipality, or governmental agency or instrumentality of any
3.23 	state other than Minnesota exempt from federal income taxes
3.24 	under the Internal Revenue Code or any other federal statute;
3.25 	and
3.26 	(ii) exempt-interest dividends as defined in section
3.27 	852(b)(5) of the Internal Revenue Code, except the portion of
3.28 	the exempt-interest dividends derived from interest income on
3.29 	obligations of the state of Minnesota or its political or
3.30 	governmental subdivisions, municipalities, governmental agencies
3.31 	or instrumentalities, but only if the portion of the
3.32 	exempt-interest dividends from such Minnesota sources paid to
3.33 	all shareholders represents 95 percent or more of the
3.34 	exempt-interest dividends that are paid by the regulated
3.35 	investment company as defined in section 851(a) of the Internal
3.36 	Revenue Code, or the fund of the regulated investment company as
4.1 	defined in section 851(g) of the Internal Revenue Code, making
4.2 	the payment; and
4.3 	(iii) for the purposes of items (i) and (ii), interest on
4.4 	obligations of an Indian tribal government described in section
4.5 	7871(c) of the Internal Revenue Code shall be treated as
4.6 	interest income on obligations of the state in which the tribe
4.7 	is located;
4.8 	(2) the amount of income taxes paid or accrued within the
4.9 	taxable year under this chapter and income taxes paid to any
4.10 	other state or to any province or territory of Canada, to the
4.11 	extent allowed as a deduction under section 63(d) of the
4.12 	Internal Revenue Code, but the addition may not be more than the
4.13 	amount by which the itemized deductions as allowed under section
4.14 	63(d) of the Internal Revenue Code exceeds the amount of the
4.15 	standard deduction as defined in section 63(c) of the Internal
4.16 	Revenue Code.  For the purpose of this paragraph, the
4.17 	disallowance of itemized deductions under section 68 of the
4.18 	Internal Revenue Code of 1986, income tax is the last itemized
4.19 	deduction disallowed;
4.20 	(3) the capital gain amount of a lump sum distribution to
4.21 	which the special tax under section 1122(h)(3)(B)(ii) of the Tax
4.22 	Reform Act of 1986, Public Law 99-514, applies;
4.23 	(4) the amount of income taxes paid or accrued within the
4.24 	taxable year under this chapter and income taxes paid to any
4.25 	other state or any province or territory of Canada, to the
4.26 	extent allowed as a deduction in determining federal adjusted
4.27 	gross income.  For the purpose of this paragraph, income taxes
4.28 	do not include the taxes imposed by sections 290.0922,
4.29 	subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
4.30 	(5) the amount of expense, interest, or taxes disallowed
4.31 	pursuant to section 290.10;
4.32 	(6) the amount of a partner's pro rata share of net income
4.33 	which does not flow through to the partner because the
4.34 	partnership elected to pay the tax on the income under section
4.35 	6242(a)(2) of the Internal Revenue Code; and 
4.36 	(7) 80 percent of the depreciation deduction allowed under
5.1 	section 168(k) of the Internal Revenue Code.  For purposes of
5.2 	this clause, if the taxpayer has an activity that in the taxable
5.3 	year generates a deduction for depreciation under section 168(k)
5.4 	and the activity generates a loss for the taxable year that the
5.5 	taxpayer is not allowed to claim for the taxable year, "the
5.6 	depreciation allowed under section 168(k)" for the taxable year
5.7 	is limited to excess of the depreciation claimed by the activity
5.8 	under section 168(k) over the amount of the loss from the
5.9 	activity that is not allowed in the taxable year.  In succeeding
5.10 	taxable years when the losses not allowed in the taxable year
5.11 	are allowed, the depreciation under section 168(k) is allowed;
5.12 	and 
5.13 	(8) the amount of expenses disallowed under section 290.10,
5.14 	subdivision 2.
5.15 	
EFFECTIVE DATE. This section is effective for taxable
5.16 	years beginning after December 31, 2004.

5.17 	Sec. 3. Minnesota Statutes 2004, section 290.01,
5.18 	subdivision 19c, is amended to read:
5.19 		Subd. 19c.Corporations; additions to federal taxable
5.20 	income.  For corporations, there shall be added to federal
5.21 	taxable income:
5.22 	(1) the amount of any deduction taken for federal income
5.23 	tax purposes for income, excise, or franchise taxes based on net
5.24 	income or related minimum taxes, including but not limited to
5.25 	the tax imposed under section 290.0922, paid by the corporation
5.26 	to Minnesota, another state, a political subdivision of another
5.27 	state, the District of Columbia, or any foreign country or
5.28 	possession of the United States;
5.29 	(2) interest not subject to federal tax upon obligations
5.30 	of:  the United States, its possessions, its agencies, or its
5.31 	instrumentalities; the state of Minnesota or any other state,
5.32 	any of its political or governmental subdivisions, any of its
5.33 	municipalities, or any of its governmental agencies or
5.34 	instrumentalities; the District of Columbia; or Indian tribal
5.35 	governments;
5.36 	(3) exempt-interest dividends received as defined in
6.1 	section 852(b)(5) of the Internal Revenue Code;
6.2 	(4) the amount of any net operating loss deduction taken
6.3 	for federal income tax purposes under section 172 or 832(c)(10)
6.4 	of the Internal Revenue Code or operations loss deduction under
6.5 	section 810 of the Internal Revenue Code;
6.6 	(5) the amount of any special deductions taken for federal
6.7 	income tax purposes under sections 241 to 247 of the Internal
6.8 	Revenue Code;
6.9 	(6) losses from the business of mining, as defined in
6.10 	section 290.05, subdivision 1, clause (a), that are not subject
6.11 	to Minnesota income tax;
6.12 	(7) the amount of any capital losses deducted for federal
6.13 	income tax purposes under sections 1211 and 1212 of the Internal
6.14 	Revenue Code;
6.15 	(8) the exempt foreign trade income of a foreign sales
6.16 	corporation under sections 921(a) and 291 of the Internal
6.17 	Revenue Code;
6.18 	(9) the amount of percentage depletion deducted under
6.19 	sections 611 through 614 and 291 of the Internal Revenue Code;
6.20 	(10) for certified pollution control facilities placed in
6.21 	service in a taxable year beginning before December 31, 1986,
6.22 	and for which amortization deductions were elected under section
6.23 	169 of the Internal Revenue Code of 1954, as amended through
6.24 	December 31, 1985, the amount of the amortization deduction
6.25 	allowed in computing federal taxable income for those
6.26 	facilities;
6.27 	(11) the amount of any deemed dividend from a foreign
6.28 	operating corporation determined pursuant to section 290.17,
6.29 	subdivision 4, paragraph (g);
6.30 	(12) the amount of any environmental tax paid under section
6.31 	59(a) of the Internal Revenue Code;
6.32 	(13) the amount of a partner's pro rata share of net income
6.33 	which does not flow through to the partner because the
6.34 	partnership elected to pay the tax on the income under section
6.35 	6242(a)(2) of the Internal Revenue Code;
6.36 	(14) the amount of net income excluded under section 114 of
7.1 	the Internal Revenue Code;
7.2 	(15) any increase in subpart F income, as defined in
7.3 	section 952(a) of the Internal Revenue Code, for the taxable
7.4 	year when subpart F income is calculated without regard to the
7.5 	provisions of section 614 of Public Law 107-147; and 
7.6 	(16) 80 percent of the depreciation deduction allowed under
7.7 	section 168(k) of the Internal Revenue Code.  For purposes of
7.8 	this clause, if the taxpayer has an activity that in the taxable
7.9 	year generates a deduction for depreciation under section 168(k)
7.10 	and the activity generates a loss for the taxable year that the
7.11 	taxpayer is not allowed to claim for the taxable year, "the
7.12 	depreciation allowed under section 168(k)" for the taxable year
7.13 	is limited to excess of the depreciation claimed by the activity
7.14 	under section 168(k) over the amount of the loss from the
7.15 	activity that is not allowed in the taxable year.  In succeeding
7.16 	taxable years when the losses not allowed in the taxable year
7.17 	are allowed, the depreciation under section 168(k) is allowed;
7.18 	and 
7.19 	(17) the amount of expenses disallowed under section
7.20 	290.10, subdivision 2.
7.21 	
EFFECTIVE DATE. This section is effective for taxable
7.22 	years beginning after December 31, 2004.

7.23 	Sec. 4. Minnesota Statutes 2004, section 290.10, is
7.24 	amended to read:
7.25 	290.10 NONDEDUCTIBLE ITEMS.
7.26 		Subdivision 1.Expenses, interest, and taxes. Except as
7.27 	provided in section 290.17, subdivision 4, paragraph (i), in
7.28 	computing the net income of a taxpayer no deduction shall in any
7.29 	case be allowed for expenses, interest and taxes connected with
7.30 	or allocable against the production or receipt of all income not
7.31 	included in the measure of the tax imposed by this chapter,
7.32 	except that for corporations engaged in the business of mining
7.33 	or producing iron ore, the mining of which is subject to the
7.34 	occupation tax imposed by section 298.01, subdivision 4, this
7.35 	shall not prevent the deduction of expenses and other items to
7.36 	the extent that the expenses and other items are allowable under
8.1 	this chapter and are not deductible, capitalizable, retainable
8.2 	in basis, or taken into account by allowance or otherwise in
8.3 	computing the occupation tax and do not exceed the amounts taken
8.4 	for federal income tax purposes for that year.  Occupation taxes
8.5 	imposed under chapter 298, royalty taxes imposed under chapter
8.6 	299, or depletion expenses may not be deducted under this clause.
8.7 		Subd. 2.Fines, penalties, damages, and expenses. (a) No
8.8 	deduction from taxable income for a trade or business expense
8.9 	under section 162(a) of the Internal Revenue Code shall be
8.10 	allowed for any fine, penalty, damages, or expenses paid to:
8.11 	(1) the government of the United States, a state, a
8.12 	territory or possession of the United States, the District of
8.13 	Columbia, or the Commonwealth of Puerto Rico;
8.14 	(2) the government of a foreign country; or 
8.15 	(3) a political subdivision of, or corporation or other
8.16 	entity serving as an agency or instrumentality of, any
8.17 	government described in clause (1) or (2).
8.18 	(b) For purposes of this subdivision, "fine, penalty,
8.19 	damages, or expenses" include, but are not limited to, any
8.20 	amount:
8.21 	(1) paid pursuant to a conviction or a plea of guilty or
8.22 	nolo contendere for any crime in a criminal proceeding;
8.23 	(2) paid as a civil penalty imposed by federal, state, or
8.24 	local law, including tax penalties and interest;
8.25 	(3) paid in settlement of the taxpayer's actual or
8.26 	potential liability for a civil or criminal fine or penalty;
8.27 	(4) forfeited as collateral posted in connection with a
8.28 	proceeding that could result in imposition of a fine or penalty;
8.29 	or 
8.30 	(5) legal fees and related expenses paid or incurred in the
8.31 	prosecution or civil action arising from a violation of the law
8.32 	imposing the fine or civil penalty, court costs assessed against
8.33 	the taxpayer, or stenographic and printing charges, compensatory
8.34 	damages, punitive damages, or restitution.
8.35 	
EFFECTIVE DATE. This section is effective for taxable
8.36 	years beginning after December 31, 2004.

9.1 	Sec. 5. Minnesota Statutes 2004, section 290.17,
9.2 	subdivision 2, is amended to read:
9.3 		Subd. 2.Income not derived from conduct of a trade or
9.4 	business.  The income of a taxpayer subject to the allocation
9.5 	rules that is not derived from the conduct of a trade or
9.6 	business must be assigned in accordance with paragraphs (a) to
9.7 	(f):
9.8 	(a)(1) Subject to paragraphs (a)(2),and (a)(3), and
9.9 	(a)(4),income from wages as defined in section 3401(a) and (f)
9.10 	of the Internal Revenue Code is assigned to this state if, and
9.11 	to the extent that, the work of the employee is performed within
9.12 	it; all other income from such sources is treated as income from
9.13 	sources without this state.
9.14 	Severance pay shall be considered income from labor or
9.15 	personal or professional services.
9.16 	(2) In the case of an individual who is a nonresident of
9.17 	Minnesota and who is an athlete or entertainer, income from
9.18 	compensation for labor or personal services performed within
9.19 	this state shall be determined in the following manner:
9.20 	(i) The amount of income to be assigned to Minnesota for an
9.21 	individual who is a nonresident salaried athletic team employee
9.22 	shall be determined by using a fraction in which the denominator
9.23 	contains the total number of days in which the individual is
9.24 	under a duty to perform for the employer, and the numerator is
9.25 	the total number of those days spent in Minnesota.  For purposes
9.26 	of this paragraph, off-season training activities, unless
9.27 	conducted at the team's facilities as part of a team imposed
9.28 	program, are not included in the total number of duty days.
9.29 	Bonuses earned as a result of play during the regular season or
9.30 	for participation in championship, play-off, or all-star games
9.31 	must be allocated under the formula.  Signing bonuses are not
9.32 	subject to allocation under the formula if they are not
9.33 	conditional on playing any games for the team, are payable
9.34 	separately from any other compensation, and are nonrefundable;
9.35 	and
9.36 	(ii) The amount of income to be assigned to Minnesota for
10.1 	an individual who is a nonresident, and who is an athlete or
10.2 	entertainer not listed in clause (i), for that person's athletic
10.3 	or entertainment performance in Minnesota shall be determined by
10.4 	assigning to this state all income from performances or athletic
10.5 	contests in this state.
10.6 	(3) For purposes of this section, amounts received by a
10.7 	nonresident as "retirement income" as defined in section (b)(1)
10.8 	of the State Income Taxation of Pension Income Act, Public Law
10.9 	104-95, are not considered income derived from carrying on a
10.10 	trade or business or from wages or other compensation for work
10.11 	an employee performed in Minnesota, and are not taxable under
10.12 	this chapter.
10.13 	(4) Wages, otherwise assigned to this state under clause
10.14 	(1) and not qualifying under clause (3), are not taxable under
10.15 	this chapter if the following conditions are met:
10.16 	(i) the recipient was not a resident of this state for any
10.17 	part of the taxable year in which the wages were received; and 
10.18 	(ii) the wages are for work performed while the recipient
10.19 	was a resident of this state.
10.20 	(b) Income or gains from tangible property located in this
10.21 	state that is not employed in the business of the recipient of
10.22 	the income or gains must be assigned to this state.
10.23 	(c) Income or gains from intangible personal property not
10.24 	employed in the business of the recipient of the income or gains
10.25 	must be assigned to this state if the recipient of the income or
10.26 	gains is a resident of this state or is a resident trust or
10.27 	estate.
10.28 	Gain on the sale of a partnership interest is allocable to
10.29 	this state in the ratio of the original cost of partnership
10.30 	tangible property in this state to the original cost of
10.31 	partnership tangible property everywhere, determined at the time
10.32 	of the sale.  If more than 50 percent of the value of the
10.33 	partnership's assets consists of intangibles, gain or loss from
10.34 	the sale of the partnership interest is allocated to this state
10.35 	in accordance with the sales factor of the partnership for its
10.36 	first full tax period immediately preceding the tax period of
11.1 	the partnership during which the partnership interest was sold.
11.2 	Gain on the sale of goodwill or income from a covenant not
11.3 	to compete that is connected with a business operating all or
11.4 	partially in Minnesota is allocated to this state to the extent
11.5 	that the income from the business in the year preceding the year
11.6 	of sale was assignable to Minnesota under subdivision 3.
11.7 	When an employer pays an employee for a covenant not to
11.8 	compete, the income allocated to this state is in the ratio of
11.9 	the employee's service in Minnesota in the calendar year
11.10 	preceding leaving the employment of the employer over the total
11.11 	services performed by the employee for the employer in that year.
11.12 	(d) Income from winnings on a bet made by an individual
11.13 	while in Minnesota is assigned to this state.  In this
11.14 	paragraph, "bet" has the meaning given in section 609.75,
11.15 	subdivision 2, as limited by section 609.75, subdivision 3,
11.16 	clauses (1), (2), and (3).
11.17 	(e) All items of gross income not covered in paragraphs (a)
11.18 	to (d) and not part of the taxpayer's income from a trade or
11.19 	business shall be assigned to the taxpayer's domicile.
11.20 	(f) For the purposes of this section, working as an
11.21 	employee shall not be considered to be conducting a trade or
11.22 	business.
11.23 	
EFFECTIVE DATE. This section is effective for tax years
11.24 	beginning after December 31, 2005.

11.25 	Sec. 6. Minnesota Statutes 2004, section 290.92, is
11.26 	amended by adding a subdivision to read:
11.27 		Subd. 31.Payments to persons who are not employees;
11.28 	withholding. Any person engaged in a trade or business who in
11.29 	the course of such trade or business makes payments to an
11.30 	individual, who is not an employee of the person, for work
11.31 	described in industry code numbers 23 through 238990 of the
11.32 	North American Industry Classification System, shall deduct from
11.33 	the payment and withhold two percent of the amount as Minnesota
11.34 	withholding tax when the amount paid to that individual by the
11.35 	same person during the calendar year exceeds $600.  For purposes
11.36 	of this section, a payment to any person that is subject to
12.1 	withholding under this subdivision must be treated as if the
12.2 	payment was a wage paid by an employer to an employee.  Every
12.3 	individual who is to receive a payment that is subject to
12.4 	withholding under this subdivision shall furnish the contracting
12.5 	person with a statement, containing the name, address, and
12.6 	Social Security account number of the person receiving the
12.7 	payment.
12.8 	
EFFECTIVE DATE. This section is effective for payments
12.9 	made after July 31, 2005.

12.10 	ARTICLE 2
12.11 	FEDERAL UPDATE

12.12 	Section 1. Minnesota Statutes 2004, section 290.01,
12.13 	subdivision 19, is amended to read:
12.14 		Subd. 19.Net income.  The term "net income" means the
12.15 	federal taxable income, as defined in section 63 of the Internal
12.16 	Revenue Code of 1986, as amended through the date named in this
12.17 	subdivision, incorporating any elections made by the taxpayer in
12.18 	accordance with the Internal Revenue Code in determining federal
12.19 	taxable income for federal income tax purposes, and with the
12.20 	modifications provided in subdivisions 19a to 19f.
12.21 	In the case of a regulated investment company or a fund
12.22 	thereof, as defined in section 851(a) or 851(g) of the Internal
12.23 	Revenue Code, federal taxable income means investment company
12.24 	taxable income as defined in section 852(b)(2) of the Internal
12.25 	Revenue Code, except that:
12.26 	(1) the exclusion of net capital gain provided in section
12.27 	852(b)(2)(A) of the Internal Revenue Code does not apply;
12.28 	(2) the deduction for dividends paid under section
12.29 	852(b)(2)(D) of the Internal Revenue Code must be applied by
12.30 	allowing a deduction for capital gain dividends and
12.31 	exempt-interest dividends as defined in sections 852(b)(3)(C)
12.32 	and 852(b)(5) of the Internal Revenue Code; and
12.33 	(3) the deduction for dividends paid must also be applied
12.34 	in the amount of any undistributed capital gains which the
12.35 	regulated investment company elects to have treated as provided
12.36 	in section 852(b)(3)(D) of the Internal Revenue Code.
13.1 	The net income of a real estate investment trust as defined
13.2 	and limited by section 856(a), (b), and (c) of the Internal
13.3 	Revenue Code means the real estate investment trust taxable
13.4 	income as defined in section 857(b)(2) of the Internal Revenue
13.5 	Code.
13.6 	The net income of a designated settlement fund as defined
13.7 	in section 468B(d) of the Internal Revenue Code means the gross
13.8 	income as defined in section 468B(b) of the Internal Revenue
13.9 	Code.
13.10 	The provisions of sections 1113(a), 1117, 1206(a), 1313(a),
13.11 	1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612,
13.12 	1616, 1617, 1704(l), and 1704(m) of the Small Business Job
13.13 	Protection Act, Public Law 104-188, the provisions of Public Law
13.14 	104-117, the provisions of sections 313(a) and (b)(1), 602(a),
13.15 	913(b), 941, 961, 971, 1001(a) and (b), 1002, 1003, 1012, 1013,
13.16 	1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 1131(b)
13.17 	and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and
13.18 	1604(d)(1) of the Taxpayer Relief Act of 1997, Public Law
13.19 	105-34, the provisions of section 6010 of the Internal Revenue
13.20 	Service Restructuring and Reform Act of 1998, Public Law
13.21 	105-206, the provisions of section 4003 of the Omnibus
13.22 	Consolidated and Emergency Supplemental Appropriations Act,
13.23 	1999, Public Law 105-277, and the provisions of section 318 of
13.24 	the Consolidated Appropriation Act of 2001, Public Law 106-554,
13.25 	shall become effective at the time they become effective for
13.26 	federal purposes.
13.27 	The Internal Revenue Code of 1986, as amended through
13.28 	December 31, 1996, shall be in effect for taxable years
13.29 	beginning after December 31, 1996.
13.30 	The provisions of sections 202(a) and (b), 221(a), 225,
13.31 	312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and
13.32 	(c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306,
13.33 	1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528,
13.34 	1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e)
13.35 	of the Taxpayer Relief Act of 1997, Public Law 105-34, the
13.36 	provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002,
14.1 	and 7003 of the Internal Revenue Service Restructuring and
14.2 	Reform Act of 1998, Public Law 105-206, the provisions of
14.3 	section 3001 of the Omnibus Consolidated and Emergency
14.4 	Supplemental Appropriations Act, 1999, Public Law 105-277, the
14.5 	provisions of section 3001 of the Miscellaneous Trade and
14.6 	Technical Corrections Act of 1999, Public Law 106-36, and the
14.7 	provisions of section 316 of the Consolidated Appropriation Act
14.8 	of 2001, Public Law 106-554, shall become effective at the time
14.9 	they become effective for federal purposes.
14.10 	The Internal Revenue Code of 1986, as amended through
14.11 	December 31, 1997, shall be in effect for taxable years
14.12 	beginning after December 31, 1997.
14.13 	The provisions of sections 5002, 6009, 6011, and 7001 of
14.14 	the Internal Revenue Service Restructuring and Reform Act of
14.15 	1998, Public Law 105-206, the provisions of section 9010 of the
14.16 	Transportation Equity Act for the 21st Century, Public Law
14.17 	105-178, the provisions of sections 1004, 4002, and 5301 of the
14.18 	Omnibus Consolidation and Emergency Supplemental Appropriations
14.19 	Act, 1999, Public Law 105-277, the provision of section 303 of
14.20 	the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law
14.21 	105-369, the provisions of sections 532, 534, 536, 537, and 538
14.22 	of the Ticket to Work and Work Incentives Improvement Act of
14.23 	1999, Public Law 106-170, the provisions of the Installment Tax
14.24 	Correction Act of 2000, Public Law 106-573, and the provisions
14.25 	of section 309 of the Consolidated Appropriation Act of 2001,
14.26 	Public Law 106-554, shall become effective at the time they
14.27 	become effective for federal purposes.
14.28 	The Internal Revenue Code of 1986, as amended through
14.29 	December 31, 1998, shall be in effect for taxable years
14.30 	beginning after December 31, 1998.
14.31 	The provisions of the FSC Repeal and Extraterritorial
14.32 	Income Exclusion Act of 2000, Public Law 106-519, and the
14.33 	provision of section 412 of the Job Creation and Worker
14.34 	Assistance Act of 2002, Public Law 107-147, shall become
14.35 	effective at the time it became effective for federal purposes.
14.36 	The Internal Revenue Code of 1986, as amended through
15.1 	December 31, 1999, shall be in effect for taxable years
15.2 	beginning after December 31, 1999.  The provisions of sections
15.3 	306 and 401 of the Consolidated Appropriation Act of 2001,
15.4 	Public Law 106-554, and the provision of section 632(b)(2)(A) of
15.5 	the Economic Growth and Tax Relief Reconciliation Act of 2001,
15.6 	Public Law 107-16, and provisions of sections 101 and 402 of the
15.7 	Job Creation and Worker Assistance Act of 2002, Public Law
15.8 	107-147, shall become effective at the same time it became
15.9 	effective for federal purposes.
15.10 	The Internal Revenue Code of 1986, as amended through
15.11 	December 31, 2000, shall be in effect for taxable years
15.12 	beginning after December 31, 2000.  The provisions of sections
15.13 	659a and 671 of the Economic Growth and Tax Relief
15.14 	Reconciliation Act of 2001, Public Law 107-16, the provisions of
15.15 	sections 104, 105, and 111 of the Victims of Terrorism Tax
15.16 	Relief Act of 2001, Public Law 107-134, and the provisions of
15.17 	sections 201, 403, 413, and 606 of the Job Creation and Worker
15.18 	Assistance Act of 2002, Public Law 107-147, shall become
15.19 	effective at the same time it became effective for federal
15.20 	purposes.
15.21 	The Internal Revenue Code of 1986, as amended through March
15.22 	15, 2002, shall be in effect for taxable years beginning after
15.23 	December 31, 2001.
15.24 	The provisions of sections 101 and 102 of the Victims of
15.25 	Terrorism Tax Relief Act of 2001, Public Law 107-134, shall
15.26 	become effective at the same time it becomes effective for
15.27 	federal purposes.
15.28 	The Internal Revenue Code of 1986, as amended through June
15.29 	15, 2003, shall be in effect for taxable years beginning after
15.30 	December 31, 2002, provided that the provisions of the American
15.31 	Jobs Creation Act of 2004, Public Law 108-435, are effective at
15.32 	the same time they became effective for federal income tax
15.33 	purposes.  The provisions of section 201 of the Jobs and Growth
15.34 	Tax Relief and Reconciliation Act of 2003, H.R. 2, if it is
15.35 	enacted into law, are effective at the same time it became
15.36 	effective for federal purposes.
16.1 	Except as otherwise provided, references to the Internal
16.2 	Revenue Code in subdivisions 19a to 19g mean the code in effect
16.3 	for purposes of determining net income for the applicable year.

16.4 	Sec. 2. Minnesota Statutes 2004, section 290.01,
16.5 	subdivision 19a, is amended to read:
16.6 		Subd. 19a.Additions to federal taxable income.  For
16.7 	individuals, estates, and trusts, there shall be added to
16.8 	federal taxable income:
16.9 	(1)(i) interest income on obligations of any state other
16.10 	than Minnesota or a political or governmental subdivision,
16.11 	municipality, or governmental agency or instrumentality of any
16.12 	state other than Minnesota exempt from federal income taxes
16.13 	under the Internal Revenue Code or any other federal statute;
16.14 	and
16.15 	(ii) exempt-interest dividends as defined in section
16.16 	852(b)(5) of the Internal Revenue Code, except the portion of
16.17 	the exempt-interest dividends derived from interest income on
16.18 	obligations of the state of Minnesota or its political or
16.19 	governmental subdivisions, municipalities, governmental agencies
16.20 	or instrumentalities, but only if the portion of the
16.21 	exempt-interest dividends from such Minnesota sources paid to
16.22 	all shareholders represents 95 percent or more of the
16.23 	exempt-interest dividends that are paid by the regulated
16.24 	investment company as defined in section 851(a) of the Internal
16.25 	Revenue Code, or the fund of the regulated investment company as
16.26 	defined in section 851(g) of the Internal Revenue Code, making
16.27 	the payment; and
16.28 	(iii) for the purposes of items (i) and (ii), interest on
16.29 	obligations of an Indian tribal government described in section
16.30 	7871(c) of the Internal Revenue Code shall be treated as
16.31 	interest income on obligations of the state in which the tribe
16.32 	is located;
16.33 	(2) the amount of income or sales and use taxes paid or
16.34 	accrued within the taxable year under this chapter and income or
16.35 	sales and use taxes paid to any other state or to any province
16.36 	or territory of Canada, to the extent allowed as a deduction
17.1 	under section 63(d) of the Internal Revenue Code of 1986, as
17.2 	amended through June 15, 2003, but the addition may not be more
17.3 	than the amount by which the itemized deductions as allowed
17.4 	under section 63(d) of the Internal Revenue Code exceeds the
17.5 	amount of the standard deduction as defined in section 63(c) of
17.6 	the Internal Revenue Code.  For the purpose of this paragraph,
17.7 	the disallowance of itemized deductions under section 68 of the
17.8 	Internal Revenue Code of 1986, income or sales and use tax is
17.9 	the last itemized deduction disallowed;
17.10 	(3) the capital gain amount of a lump sum distribution to
17.11 	which the special tax under section 1122(h)(3)(B)(ii) of the Tax
17.12 	Reform Act of 1986, Public Law 99-514, applies;
17.13 	(4) the amount of income taxes paid or accrued within the
17.14 	taxable year under this chapter and income taxes paid to any
17.15 	other state or any province or territory of Canada, to the
17.16 	extent allowed as a deduction in determining federal adjusted
17.17 	gross income.  For the purpose of this paragraph, income taxes
17.18 	do not include the taxes imposed by sections 290.0922,
17.19 	subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
17.20 	(5) the amount of expense, interest, or taxes disallowed
17.21 	pursuant to section 290.10;
17.22 	(6) the amount of a partner's pro rata share of net income
17.23 	which does not flow through to the partner because the
17.24 	partnership elected to pay the tax on the income under section
17.25 	6242(a)(2) of the Internal Revenue Code; and 
17.26 	(7) 80 percent of the depreciation deduction allowed under
17.27 	section 168(k) of the Internal Revenue Code.  For purposes of
17.28 	this clause, if the taxpayer has an activity that in the taxable
17.29 	year generates a deduction for depreciation under section 168(k)
17.30 	and the activity generates a loss for the taxable year that the
17.31 	taxpayer is not allowed to claim for the taxable year, "the
17.32 	depreciation allowed under section 168(k)" for the taxable year
17.33 	is limited to excess of the depreciation claimed by the activity
17.34 	under section 168(k) over the amount of the loss from the
17.35 	activity that is not allowed in the taxable year.  In succeeding
17.36 	taxable years when the losses not allowed in the taxable year
18.1 	are allowed, the depreciation under section 168(k) is allowed;
18.2 	(8) 80 percent of the amount by which the deduction allowed
18.3 	by section 179 of the Internal Revenue Code exceeds the
18.4 	deduction allowable by section 179 of the Internal Revenue Code
18.5 	of 1986, as amended through December 31, 2003; and 
18.6 	(9) to the extent deducted in computing federal taxable
18.7 	income, the amount of the deduction allowable under section 199
18.8 	of the Internal Revenue Code.
18.9 	
EFFECTIVE DATE. This section is effective for tax years
18.10 	beginning after December 31, 2004, except the changes in clause
18.11 	(2) are effective for tax years beginning after December 31,
18.12 	2003.

18.13 	Sec. 3. Minnesota Statutes 2004, section 290.01,
18.14 	subdivision 19b, is amended to read:
18.15 		Subd. 19b.Subtractions from federal taxable income.  For
18.16 	individuals, estates, and trusts, there shall be subtracted from
18.17 	federal taxable income:
18.18 	(1) interest income on obligations of any authority,
18.19 	commission, or instrumentality of the United States to the
18.20 	extent includable in taxable income for federal income tax
18.21 	purposes but exempt from state income tax under the laws of the
18.22 	United States;
18.23 	(2) if included in federal taxable income, the amount of
18.24 	any overpayment of income tax to Minnesota or to any other
18.25 	state, for any previous taxable year, whether the amount is
18.26 	received as a refund or as a credit to another taxable year's
18.27 	income tax liability;
18.28 	(3) the amount paid to others, less the amount used to
18.29 	claim the credit allowed under section 290.0674, not to exceed
18.30 	$1,625 for each qualifying child in grades kindergarten to 6 and
18.31 	$2,500 for each qualifying child in grades 7 to 12, for tuition,
18.32 	textbooks, and transportation of each qualifying child in
18.33 	attending an elementary or secondary school situated in
18.34 	Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin,
18.35 	wherein a resident of this state may legally fulfill the state's
18.36 	compulsory attendance laws, which is not operated for profit,
19.1 	and which adheres to the provisions of the Civil Rights Act of
19.2 	1964 and chapter 363A.  For the purposes of this clause,
19.3 	"tuition" includes fees or tuition as defined in section
19.4 	290.0674, subdivision 1, clause (1).  As used in this clause,
19.5 	"textbooks" includes books and other instructional materials and
19.6 	equipment purchased or leased for use in elementary and
19.7 	secondary schools in teaching only those subjects legally and
19.8 	commonly taught in public elementary and secondary schools in
19.9 	this state.  Equipment expenses qualifying for deduction
19.10 	includes expenses as defined and limited in section 290.0674,
19.11 	subdivision 1, clause (3).  "Textbooks" does not include
19.12 	instructional books and materials used in the teaching of
19.13 	religious tenets, doctrines, or worship, the purpose of which is
19.14 	to instill such tenets, doctrines, or worship, nor does it
19.15 	include books or materials for, or transportation to,
19.16 	extracurricular activities including sporting events, musical or
19.17 	dramatic events, speech activities, driver's education, or
19.18 	similar programs.  For purposes of the subtraction provided by
19.19 	this clause, "qualifying child" has the meaning given in section
19.20 	32(c)(3) of the Internal Revenue Code;
19.21 	(4) income as provided under section 290.0802;
19.22 	(5) to the extent included in federal adjusted gross
19.23 	income, income realized on disposition of property exempt from
19.24 	tax under section 290.491;
19.25 	(6) to the extent included in federal taxable income,
19.26 	postservice benefits for youth community service under section
19.27 	124D.42 for volunteer service under United States Code, title
19.28 	42, sections 12601 to 12604;
19.29 	(7) to the extent not deducted in determining federal
19.30 	taxable income by an individual who does not itemize deductions
19.31 	for federal income tax purposes for the taxable year, an amount
19.32 	equal to 50 percent of the excess of charitable contributions
19.33 	allowable as a deduction for the taxable year under section
19.34 	170(a) of the Internal Revenue Code over $500;
19.35 	(8) for taxable years beginning before January 1, 2008, the
19.36 	amount of the federal small ethanol producer credit allowed
20.1 	under section 40(a)(3) of the Internal Revenue Code which is
20.2 	included in gross income under section 87 of the Internal
20.3 	Revenue Code;
20.4 	(9) for individuals who are allowed a federal foreign tax
20.5 	credit for taxes that do not qualify for a credit under section
20.6 	290.06, subdivision 22, an amount equal to the carryover of
20.7 	subnational foreign taxes for the taxable year, but not to
20.8 	exceed the total subnational foreign taxes reported in claiming
20.9 	the foreign tax credit.  For purposes of this clause, "federal
20.10 	foreign tax credit" means the credit allowed under section 27 of
20.11 	the Internal Revenue Code, and "carryover of subnational foreign
20.12 	taxes" equals the carryover allowed under section 904(c) of the
20.13 	Internal Revenue Code minus national level foreign taxes to the
20.14 	extent they exceed the federal foreign tax credit;
20.15 	(10) in each of the five tax years immediately following
20.16 	the tax year in which an addition is required under subdivision
20.17 	19a, clause (7), an amount equal to one-fifth of the delayed
20.18 	depreciation.  For purposes of this clause, "delayed
20.19 	depreciation" means the amount of the addition made by the
20.20 	taxpayer under subdivision 19a, clause (7), minus the positive
20.21 	value of any net operating loss under section 172 of the
20.22 	Internal Revenue Code generated for the tax year of the
20.23 	addition.  The resulting delayed depreciation cannot be less
20.24 	than zero; and 
20.25 	(11) job opportunity building zone income as provided under
20.26 	section 469.316; and 
20.27 	(12) in each of the five tax years immediately following
20.28 	the tax year in which an addition is required under subdivision
20.29 	19a, clause (8), or 19c, clause (17), in the case of a
20.30 	shareholder of a corporation that is an S corporation, an amount
20.31 	equal to one-fifth of the addition made by the taxpayer under
20.32 	subdivision 19a, clause (8), or 19c, clause (17), in the case of
20.33 	a shareholder of a corporation that is an S corporation, minus
20.34 	the positive value of any net operating loss under section 172
20.35 	of the Internal Revenue Code generated for the tax year of the
20.36 	addition.  If the net operating loss exceeds the addition for
21.1 	the tax year, a subtraction is not allowed under this clause.
21.2 	
EFFECTIVE DATE. This section is effective for tax years
21.3 	beginning after December 31, 2004.

21.4 	Sec. 4. Minnesota Statutes 2004, section 290.01,
21.5 	subdivision 19c, is amended to read:
21.6 		Subd. 19c.Corporations; additions to federal taxable
21.7 	income.  For corporations, there shall be added to federal
21.8 	taxable income:
21.9 	(1) the amount of any deduction taken for federal income
21.10 	tax purposes for income, excise, or franchise taxes based on net
21.11 	income or related minimum taxes, including but not limited to
21.12 	the tax imposed under section 290.0922, paid by the corporation
21.13 	to Minnesota, another state, a political subdivision of another
21.14 	state, the District of Columbia, or any foreign country or
21.15 	possession of the United States;
21.16 	(2) interest not subject to federal tax upon obligations
21.17 	of:  the United States, its possessions, its agencies, or its
21.18 	instrumentalities; the state of Minnesota or any other state,
21.19 	any of its political or governmental subdivisions, any of its
21.20 	municipalities, or any of its governmental agencies or
21.21 	instrumentalities; the District of Columbia; or Indian tribal
21.22 	governments;
21.23 	(3) exempt-interest dividends received as defined in
21.24 	section 852(b)(5) of the Internal Revenue Code;
21.25 	(4) the amount of any net operating loss deduction taken
21.26 	for federal income tax purposes under section 172 or 832(c)(10)
21.27 	of the Internal Revenue Code or operations loss deduction under
21.28 	section 810 of the Internal Revenue Code;
21.29 	(5) the amount of any special deductions taken for federal
21.30 	income tax purposes under sections 241 to 247 of the Internal
21.31 	Revenue Code;
21.32 	(6) losses from the business of mining, as defined in
21.33 	section 290.05, subdivision 1, clause (a), that are not subject
21.34 	to Minnesota income tax;
21.35 	(7) the amount of any capital losses deducted for federal
21.36 	income tax purposes under sections 1211 and 1212 of the Internal
22.1 	Revenue Code;
22.2 	(8) the exempt foreign trade income of a foreign sales
22.3 	corporation under sections 921(a) and 291 of the Internal
22.4 	Revenue Code;
22.5 	(9) the amount of percentage depletion deducted under
22.6 	sections 611 through 614 and 291 of the Internal Revenue Code;
22.7 	(10) for certified pollution control facilities placed in
22.8 	service in a taxable year beginning before December 31, 1986,
22.9 	and for which amortization deductions were elected under section
22.10 	169 of the Internal Revenue Code of 1954, as amended through
22.11 	December 31, 1985, the amount of the amortization deduction
22.12 	allowed in computing federal taxable income for those
22.13 	facilities;
22.14 	(11) the amount of any deemed dividend from a foreign
22.15 	operating corporation determined pursuant to section 290.17,
22.16 	subdivision 4, paragraph (g);
22.17 	(12) the amount of any environmental tax paid under section
22.18 	59(a) of the Internal Revenue Code;
22.19 	(13) the amount of a partner's pro rata share of net income
22.20 	which does not flow through to the partner because the
22.21 	partnership elected to pay the tax on the income under section
22.22 	6242(a)(2) of the Internal Revenue Code;
22.23 	(14) the amount of net income excluded under section 114 of
22.24 	the Internal Revenue Code;
22.25 	(15) any increase in subpart F income, as defined in
22.26 	section 952(a) of the Internal Revenue Code, for the taxable
22.27 	year when subpart F income is calculated without regard to the
22.28 	provisions of section 614 of Public Law 107-147; and 
22.29 	(16) 80 percent of the depreciation deduction allowed under
22.30 	section 168(k) of the Internal Revenue Code.  For purposes of
22.31 	this clause, if the taxpayer has an activity that in the taxable
22.32 	year generates a deduction for depreciation under section 168(k)
22.33 	and the activity generates a loss for the taxable year that the
22.34 	taxpayer is not allowed to claim for the taxable year, "the
22.35 	depreciation allowed under section 168(k)" for the taxable year
22.36 	is limited to excess of the depreciation claimed by the activity
23.1 	under section 168(k) over the amount of the loss from the
23.2 	activity that is not allowed in the taxable year.  In succeeding
23.3 	taxable years when the losses not allowed in the taxable year
23.4 	are allowed, the depreciation under section 168(k) is allowed;
23.5 	(17) 80 percent of the amount by which the deduction
23.6 	allowed by section 179 of the Internal Revenue Code exceeds the
23.7 	deduction allowable by section 179 of the Internal Revenue Code
23.8 	of 1986, as amended through December 31, 2003; and 
23.9 	(18) to the extent deducted in computing federal taxable
23.10 	income, the amount of the deduction allowable under section 199
23.11 	of the Internal Revenue Code.
23.12 	
EFFECTIVE DATE. This section is effective for tax years
23.13 	beginning after December 31, 2004.

23.14 	Sec. 5. Minnesota Statutes 2004, section 290.01,
23.15 	subdivision 19d, is amended to read:
23.16 		Subd. 19d.Corporations; modifications decreasing federal
23.17 	taxable income.  For corporations, there shall be subtracted
23.18 	from federal taxable income after the increases provided in
23.19 	subdivision 19c:
23.20 	(1) the amount of foreign dividend gross-up added to gross
23.21 	income for federal income tax purposes under section 78 of the
23.22 	Internal Revenue Code;
23.23 	(2) the amount of salary expense not allowed for federal
23.24 	income tax purposes due to claiming the federal jobs credit
23.25 	under section 51 of the Internal Revenue Code;
23.26 	(3) any dividend (not including any distribution in
23.27 	liquidation) paid within the taxable year by a national or state
23.28 	bank to the United States, or to any instrumentality of the
23.29 	United States exempt from federal income taxes, on the preferred
23.30 	stock of the bank owned by the United States or the
23.31 	instrumentality;
23.32 	(4) amounts disallowed for intangible drilling costs due to
23.33 	differences between this chapter and the Internal Revenue Code
23.34 	in taxable years beginning before January 1, 1987, as follows:
23.35 	(i) to the extent the disallowed costs are represented by
23.36 	physical property, an amount equal to the allowance for
24.1 	depreciation under Minnesota Statutes 1986, section 290.09,
24.2 	subdivision 7, subject to the modifications contained in
24.3 	subdivision 19e; and
24.4 	(ii) to the extent the disallowed costs are not represented
24.5 	by physical property, an amount equal to the allowance for cost
24.6 	depletion under Minnesota Statutes 1986, section 290.09,
24.7 	subdivision 8;
24.8 	(5) the deduction for capital losses pursuant to sections
24.9 	1211 and 1212 of the Internal Revenue Code, except that:
24.10 	(i) for capital losses incurred in taxable years beginning
24.11 	after December 31, 1986, capital loss carrybacks shall not be
24.12 	allowed;
24.13 	(ii) for capital losses incurred in taxable years beginning
24.14 	after December 31, 1986, a capital loss carryover to each of the
24.15 	15 taxable years succeeding the loss year shall be allowed;
24.16 	(iii) for capital losses incurred in taxable years
24.17 	beginning before January 1, 1987, a capital loss carryback to
24.18 	each of the three taxable years preceding the loss year, subject
24.19 	to the provisions of Minnesota Statutes 1986, section 290.16,
24.20 	shall be allowed; and
24.21 	(iv) for capital losses incurred in taxable years beginning
24.22 	before January 1, 1987, a capital loss carryover to each of the
24.23 	five taxable years succeeding the loss year to the extent such
24.24 	loss was not used in a prior taxable year and subject to the
24.25 	provisions of Minnesota Statutes 1986, section 290.16, shall be
24.26 	allowed;
24.27 	(6) an amount for interest and expenses relating to income
24.28 	not taxable for federal income tax purposes, if (i) the income
24.29 	is taxable under this chapter and (ii) the interest and expenses
24.30 	were disallowed as deductions under the provisions of section
24.31 	171(a)(2), 265 or 291 of the Internal Revenue Code in computing
24.32 	federal taxable income;
24.33 	(7) in the case of mines, oil and gas wells, other natural
24.34 	deposits, and timber for which percentage depletion was
24.35 	disallowed pursuant to subdivision 19c, clause (11), a
24.36 	reasonable allowance for depletion based on actual cost.  In the
25.1 	case of leases the deduction must be apportioned between the
25.2 	lessor and lessee in accordance with rules prescribed by the
25.3 	commissioner.  In the case of property held in trust, the
25.4 	allowable deduction must be apportioned between the income
25.5 	beneficiaries and the trustee in accordance with the pertinent
25.6 	provisions of the trust, or if there is no provision in the
25.7 	instrument, on the basis of the trust's income allocable to
25.8 	each;
25.9 	(8) for certified pollution control facilities placed in
25.10 	service in a taxable year beginning before December 31, 1986,
25.11 	and for which amortization deductions were elected under section
25.12 	169 of the Internal Revenue Code of 1954, as amended through
25.13 	December 31, 1985, an amount equal to the allowance for
25.14 	depreciation under Minnesota Statutes 1986, section 290.09,
25.15 	subdivision 7;
25.16 	(9) amounts included in federal taxable income that are due
25.17 	to refunds of income, excise, or franchise taxes based on net
25.18 	income or related minimum taxes paid by the corporation to
25.19 	Minnesota, another state, a political subdivision of another
25.20 	state, the District of Columbia, or a foreign country or
25.21 	possession of the United States to the extent that the taxes
25.22 	were added to federal taxable income under section 290.01,
25.23 	subdivision 19c, clause (1), in a prior taxable year;
25.24 	(10) 80 percent of royalties, fees, or other like income
25.25 	accrued or received from a foreign operating corporation or a
25.26 	foreign corporation which is part of the same unitary business
25.27 	as the receiving corporation;
25.28 	(11) income or gains from the business of mining as defined
25.29 	in section 290.05, subdivision 1, clause (a), that are not
25.30 	subject to Minnesota franchise tax;
25.31 	(12) the amount of handicap access expenditures in the
25.32 	taxable year which are not allowed to be deducted or capitalized
25.33 	under section 44(d)(7) of the Internal Revenue Code;
25.34 	(13) the amount of qualified research expenses not allowed
25.35 	for federal income tax purposes under section 280C(c) of the
25.36 	Internal Revenue Code, but only to the extent that the amount
26.1 	exceeds the amount of the credit allowed under section 290.068;
26.2 	(14) the amount of salary expenses not allowed for federal
26.3 	income tax purposes due to claiming the Indian employment credit
26.4 	under section 45A(a) of the Internal Revenue Code;
26.5 	(15) the amount of any refund of environmental taxes paid
26.6 	under section 59A of the Internal Revenue Code;
26.7 	(16) for taxable years beginning before January 1, 2008,
26.8 	the amount of the federal small ethanol producer credit allowed
26.9 	under section 40(a)(3) of the Internal Revenue Code which is
26.10 	included in gross income under section 87 of the Internal
26.11 	Revenue Code;
26.12 	(17) for a corporation whose foreign sales corporation, as
26.13 	defined in section 922 of the Internal Revenue Code, constituted
26.14 	a foreign operating corporation during any taxable year ending
26.15 	before January 1, 1995, and a return was filed by August 15,
26.16 	1996, claiming the deduction under section 290.21, subdivision
26.17 	4, for income received from the foreign operating corporation,
26.18 	an amount equal to 1.23 multiplied by the amount of income
26.19 	excluded under section 114 of the Internal Revenue Code,
26.20 	provided the income is not income of a foreign operating
26.21 	company;
26.22 	(18) any decrease in subpart F income, as defined in
26.23 	section 952(a) of the Internal Revenue Code, for the taxable
26.24 	year when subpart F income is calculated without regard to the
26.25 	provisions of section 614 of Public Law 107-147; and 
26.26 	(19) in each of the five tax years immediately following
26.27 	the tax year in which an addition is required under subdivision
26.28 	19c, clause (16), an amount equal to one-fifth of the delayed
26.29 	depreciation.  For purposes of this clause, "delayed
26.30 	depreciation" means the amount of the addition made by the
26.31 	taxpayer under subdivision 19c, clause (16).  The resulting
26.32 	delayed depreciation cannot be less than zero; and 
26.33 	(20) in each of the five tax years immediately following
26.34 	the tax year in which an addition is required under subdivision
26.35 	19c, clause (17), an amount equal to one-fifth of the amount of
26.36 	the addition.
27.1 	
EFFECTIVE DATE. This section is effective for tax years
27.2 	beginning after December 31, 2004.

27.3 	Sec. 6. Minnesota Statutes 2004, section 290.01,
27.4 	subdivision 31, is amended to read:
27.5 		Subd. 31.Internal revenue code.  Unless specifically
27.6 	defined otherwise, "Internal Revenue Code" means the Internal
27.7 	Revenue Code of 1986, as amended through June 15, 2003, and as
27.8 	further amended by the American Jobs Creation Act of 2004,
27.9 	Public Law 108-435.
27.10 	
EFFECTIVE DATE. This section is effective the day
27.11 	following final enactment except the changes incorporated by
27.12 	federal changes are effective at the same times as the changes
27.13 	were effective for federal purposes.

27.14 	Sec. 7. Minnesota Statutes 2004, section 290.06,
27.15 	subdivision 2c, is amended to read:
27.16 		Subd. 2c.Schedules of rates for individuals, estates,
27.17 	and trusts.  (a) The income taxes imposed by this chapter upon
27.18 	married individuals filing joint returns and surviving spouses
27.19 	as defined in section 2(a) of the Internal Revenue Code must be
27.20 	computed by applying to their taxable net income the following
27.21 	schedule of rates:
27.22 	(1) On the first $25,680, 5.35 percent;
27.23 	(2) On all over $25,680, but not over $102,030, 7.05
27.24 	percent;
27.25 	(3) On all over $102,030, 7.85 percent.
27.26 	Married individuals filing separate returns, estates, and
27.27 	trusts must compute their income tax by applying the above rates
27.28 	to their taxable income, except that the income brackets will be
27.29 	one-half of the above amounts.
27.30 	(b) The income taxes imposed by this chapter upon unmarried
27.31 	individuals must be computed by applying to taxable net income
27.32 	the following schedule of rates:
27.33 	(1) On the first $17,570, 5.35 percent;
27.34 	(2) On all over $17,570, but not over $57,710, 7.05
27.35 	percent;
27.36 	(3) On all over $57,710, 7.85 percent.
28.1 	(c) The income taxes imposed by this chapter upon unmarried
28.2 	individuals qualifying as a head of household as defined in
28.3 	section 2(b) of the Internal Revenue Code must be computed by
28.4 	applying to taxable net income the following schedule of rates:
28.5 	(1) On the first $21,630, 5.35 percent;
28.6 	(2) On all over $21,630, but not over $86,910, 7.05
28.7 	percent;
28.8 	(3) On all over $86,910, 7.85 percent.
28.9 	(d) In lieu of a tax computed according to the rates set
28.10 	forth in this subdivision, the tax of any individual taxpayer
28.11 	whose taxable net income for the taxable year is less than an
28.12 	amount determined by the commissioner must be computed in
28.13 	accordance with tables prepared and issued by the commissioner
28.14 	of revenue based on income brackets of not more than $100.  The
28.15 	amount of tax for each bracket shall be computed at the rates
28.16 	set forth in this subdivision, provided that the commissioner
28.17 	may disregard a fractional part of a dollar unless it amounts to
28.18 	50 cents or more, in which case it may be increased to $1.
28.19 	(e) An individual who is not a Minnesota resident for the
28.20 	entire year must compute the individual's Minnesota income tax
28.21 	as provided in this subdivision.  After the application of the
28.22 	nonrefundable credits provided in this chapter, the tax
28.23 	liability must then be multiplied by a fraction in which:
28.24 	(1) the numerator is the individual's Minnesota source
28.25 	federal adjusted gross income as defined in section 62 of the
28.26 	Internal Revenue Code and increased by the additions required
28.27 	under section 290.01, subdivision 19a, clauses (1), (5), and 
28.28 	(6), (7), (8), and (9),and reduced by the subtraction under
28.29 	section 290.01, subdivision 19b, clause (11), and the Minnesota
28.30 	assignable portion of the subtraction for United States
28.31 	government interest under section 290.01, subdivision 19b,
28.32 	clause (1), and the subtractions under clauses (10), (11), and
28.33 	(12),after applying the allocation and assignability provisions
28.34 	of section 290.081, clause (a), or 290.17; and
28.35 	(2) the denominator is the individual's federal adjusted
28.36 	gross income as defined in section 62 of the Internal Revenue
29.1 	Code of 1986, increased by the amounts specified in section
29.2 	290.01, subdivision 19a, clauses (1), (5), and (6), (7), (8),
29.3 	and (9),and reduced by the amounts specified in section 290.01,
29.4 	subdivision 19b, clauses (1) and , (10),(11), and (12).
29.5 	
EFFECTIVE DATE. This section is effective for tax years
29.6 	beginning after December 31, 2004.

29.7 	Sec. 8. Minnesota Statutes 2004, section 290.067,
29.8 	subdivision 2a, is amended to read:
29.9 		Subd. 2a.Income.  (a) For purposes of this section,
29.10 	"income" means the sum of the following:
29.11 	(1) federal adjusted gross income as defined in section 62
29.12 	of the Internal Revenue Code; and
29.13 	(2) the sum of the following amounts to the extent not
29.14 	included in clause (1):
29.15 	(i) all nontaxable income;
29.16 	(ii) the amount of a passive activity loss that is not
29.17 	disallowed as a result of section 469, paragraph (i) or (m) of
29.18 	the Internal Revenue Code and the amount of passive activity
29.19 	loss carryover allowed under section 469(b) of the Internal
29.20 	Revenue Code;
29.21 	(iii) an amount equal to the total of any discharge of
29.22 	qualified farm indebtedness of a solvent individual excluded
29.23 	from gross income under section 108(g) of the Internal Revenue
29.24 	Code;
29.25 	(iv) cash public assistance and relief;
29.26 	(v) any pension or annuity (including railroad retirement
29.27 	benefits, all payments received under the federal Social
29.28 	Security Act, supplemental security income, and veterans
29.29 	benefits), which was not exclusively funded by the claimant or
29.30 	spouse, or which was funded exclusively by the claimant or
29.31 	spouse and which funding payments were excluded from federal
29.32 	adjusted gross income in the years when the payments were made;
29.33 	(vi) interest received from the federal or a state
29.34 	government or any instrumentality or political subdivision
29.35 	thereof;
29.36 	(vii) workers' compensation;
30.1 	(viii) nontaxable strike benefits;
30.2 	(ix) the gross amounts of payments received in the nature
30.3 	of disability income or sick pay as a result of accident,
30.4 	sickness, or other disability, whether funded through insurance
30.5 	or otherwise;
30.6 	(x) a lump sum distribution under section 402(e)(3) of the
30.7 	Internal Revenue Code of 1986, as amended through December 31,
30.8 	1995;
30.9 	(xi) contributions made by the claimant to an individual
30.10 	retirement account, including a qualified voluntary employee
30.11 	contribution; simplified employee pension plan; self-employed
30.12 	retirement plan; cash or deferred arrangement plan under section
30.13 	401(k) of the Internal Revenue Code; or deferred compensation
30.14 	plan under section 457 of the Internal Revenue Code; and 
30.15 	(xii) nontaxable scholarship or fellowship grants; and 
30.16 	(xiii) the amount of deduction allowed under section 199 of
30.17 	the Internal Revenue Code.
30.18 	In the case of an individual who files an income tax return
30.19 	on a fiscal year basis, the term "federal adjusted gross income"
30.20 	means federal adjusted gross income reflected in the fiscal year
30.21 	ending in the next calendar year.  Federal adjusted gross income
30.22 	may not be reduced by the amount of a net operating loss
30.23 	carryback or carryforward or a capital loss carryback or
30.24 	carryforward allowed for the year.
30.25 	(b) "Income" does not include:
30.26 	(1) amounts excluded pursuant to the Internal Revenue Code,
30.27 	sections 101(a) and 102;
30.28 	(2) amounts of any pension or annuity that were exclusively
30.29 	funded by the claimant or spouse if the funding payments were
30.30 	not excluded from federal adjusted gross income in the years
30.31 	when the payments were made;
30.32 	(3) surplus food or other relief in kind supplied by a
30.33 	governmental agency;
30.34 	(4) relief granted under chapter 290A;
30.35 	(5) child support payments received under a temporary or
30.36 	final decree of dissolution or legal separation; and
31.1 	(6) restitution payments received by eligible individuals
31.2 	and excludable interest as defined in section 803 of the
31.3 	Economic Growth and Tax Relief Reconciliation Act of 2001,
31.4 	Public Law 107-16.
31.5 	
EFFECTIVE DATE. This section is effective for tax years
31.6 	beginning after December 31, 2003.

31.7 	Sec. 9. Minnesota Statutes 2004, section 290.091,
31.8 	subdivision 2, is amended to read:
31.9 		Subd. 2.Definitions.  For purposes of the tax imposed by
31.10 	this section, the following terms have the meanings given:
31.11 	(a) "Alternative minimum taxable income" means the sum of
31.12 	the following for the taxable year:
31.13 	(1) the taxpayer's federal alternative minimum taxable
31.14 	income as defined in section 55(b)(2) of the Internal Revenue
31.15 	Code;
31.16 	(2) the taxpayer's itemized deductions allowed in computing
31.17 	federal alternative minimum taxable income, but excluding:
31.18 	(i) the charitable contribution deduction under section 170
31.19 	of the Internal Revenue Code to the extent that the deduction
31.20 	exceeds 1.0 percent of adjusted gross income, as defined in
31.21 	section 62 of the Internal Revenue Code;
31.22 	(ii) the medical expense deduction;
31.23 	(iii) the casualty, theft, and disaster loss deduction; and
31.24 	(iv) the impairment-related work expenses of a disabled
31.25 	person;
31.26 	(3) for depletion allowances computed under section 613A(c)
31.27 	of the Internal Revenue Code, with respect to each property (as
31.28 	defined in section 614 of the Internal Revenue Code), to the
31.29 	extent not included in federal alternative minimum taxable
31.30 	income, the excess of the deduction for depletion allowable
31.31 	under section 611 of the Internal Revenue Code for the taxable
31.32 	year over the adjusted basis of the property at the end of the
31.33 	taxable year (determined without regard to the depletion
31.34 	deduction for the taxable year);
31.35 	(4) to the extent not included in federal alternative
31.36 	minimum taxable income, the amount of the tax preference for
32.1 	intangible drilling cost under section 57(a)(2) of the Internal
32.2 	Revenue Code determined without regard to subparagraph (E);
32.3 	(5) to the extent not included in federal alternative
32.4 	minimum taxable income, the amount of interest income as
32.5 	provided by section 290.01, subdivision 19a, clause (1); and
32.6 	(6) the amount of addition required by section 290.01,
32.7 	subdivision 19a, clause clauses (7), (8), and (9);
32.8 	less the sum of the amounts determined under the following:
32.9 	(1) interest income as defined in section 290.01,
32.10 	subdivision 19b, clause (1);
32.11 	(2) an overpayment of state income tax as provided by
32.12 	section 290.01, subdivision 19b, clause (2), to the extent
32.13 	included in federal alternative minimum taxable income;
32.14 	(3) the amount of investment interest paid or accrued
32.15 	within the taxable year on indebtedness to the extent that the
32.16 	amount does not exceed net investment income, as defined in
32.17 	section 163(d)(4) of the Internal Revenue Code.  Interest does
32.18 	not include amounts deducted in computing federal adjusted gross
32.19 	income; and
32.20 	(4) amounts subtracted from federal taxable income as
32.21 	provided by section 290.01, subdivision 19b, clauses (10) and ,
32.22 	(11), and (12).
32.23 	In the case of an estate or trust, alternative minimum
32.24 	taxable income must be computed as provided in section 59(c) of
32.25 	the Internal Revenue Code.
32.26 	(b) "Investment interest" means investment interest as
32.27 	defined in section 163(d)(3) of the Internal Revenue Code.
32.28 	(c) "Tentative minimum tax" equals 6.4 percent of
32.29 	alternative minimum taxable income after subtracting the
32.30 	exemption amount determined under subdivision 3.
32.31 	(d) "Regular tax" means the tax that would be imposed under
32.32 	this chapter (without regard to this section and section
32.33 	290.032), reduced by the sum of the nonrefundable credits
32.34 	allowed under this chapter.
32.35 	(e) "Net minimum tax" means the minimum tax imposed by this
32.36 	section.
33.1 	
EFFECTIVE DATE. This section is effective for tax years
33.2 	beginning after December 31, 2004.

33.3 	Sec. 10. Minnesota Statutes 2004, section 290A.03,
33.4 	subdivision 3, is amended to read:
33.5 		Subd. 3.Income.  (1) "Income" means the sum of the
33.6 	following:
33.7 	(a) federal adjusted gross income as defined in the
33.8 	Internal Revenue Code; and
33.9 	(b) the sum of the following amounts to the extent not
33.10 	included in clause (a):
33.11 	(i) all nontaxable income;
33.12 	(ii) the amount of a passive activity loss that is not
33.13 	disallowed as a result of section 469, paragraph (i) or (m) of
33.14 	the Internal Revenue Code and the amount of passive activity
33.15 	loss carryover allowed under section 469(b) of the Internal
33.16 	Revenue Code;
33.17 	(iii) an amount equal to the total of any discharge of
33.18 	qualified farm indebtedness of a solvent individual excluded
33.19 	from gross income under section 108(g) of the Internal Revenue
33.20 	Code;
33.21 	(iv) cash public assistance and relief;
33.22 	(v) any pension or annuity (including railroad retirement
33.23 	benefits, all payments received under the federal Social
33.24 	Security Act, supplemental security income, and veterans
33.25 	benefits), which was not exclusively funded by the claimant or
33.26 	spouse, or which was funded exclusively by the claimant or
33.27 	spouse and which funding payments were excluded from federal
33.28 	adjusted gross income in the years when the payments were made;
33.29 	(vi) interest received from the federal or a state
33.30 	government or any instrumentality or political subdivision
33.31 	thereof;
33.32 	(vii) workers' compensation;
33.33 	(viii) nontaxable strike benefits;
33.34 	(ix) the gross amounts of payments received in the nature
33.35 	of disability income or sick pay as a result of accident,
33.36 	sickness, or other disability, whether funded through insurance
34.1 	or otherwise;
34.2 	(x) a lump sum distribution under section 402(e)(3) of the
34.3 	Internal Revenue Code of 1986, as amended through December 31,
34.4 	1995;
34.5 	(xi) contributions made by the claimant to an individual
34.6 	retirement account, including a qualified voluntary employee
34.7 	contribution; simplified employee pension plan; self-employed
34.8 	retirement plan; cash or deferred arrangement plan under section
34.9 	401(k) of the Internal Revenue Code; or deferred compensation
34.10 	plan under section 457 of the Internal Revenue Code; and 
34.11 	(xii) nontaxable scholarship or fellowship grants; and 
34.12 	(xiii) the amount of deduction allowed under section 199 of
34.13 	the Internal Revenue Code.
34.14 	In the case of an individual who files an income tax return
34.15 	on a fiscal year basis, the term "federal adjusted gross income"
34.16 	shall mean federal adjusted gross income reflected in the fiscal
34.17 	year ending in the calendar year.  Federal adjusted gross income
34.18 	shall not be reduced by the amount of a net operating loss
34.19 	carryback or carryforward or a capital loss carryback or
34.20 	carryforward allowed for the year.
34.21 	(2) "Income" does not include:
34.22 	(a) amounts excluded pursuant to the Internal Revenue Code,
34.23 	sections 101(a) and 102;
34.24 	(b) amounts of any pension or annuity which was exclusively
34.25 	funded by the claimant or spouse and which funding payments were
34.26 	not excluded from federal adjusted gross income in the years
34.27 	when the payments were made;
34.28 	(c) surplus food or other relief in kind supplied by a
34.29 	governmental agency;
34.30 	(d) relief granted under this chapter;
34.31 	(e) child support payments received under a temporary or
34.32 	final decree of dissolution or legal separation; or
34.33 	(f) restitution payments received by eligible individuals
34.34 	and excludable interest as defined in section 803 of the
34.35 	Economic Growth and Tax Relief Reconciliation Act of 2001,
34.36 	Public Law 107-16.
35.1 	(3) The sum of the following amounts may be subtracted from
35.2 	income:
35.3 	(a) for the claimant's first dependent, the exemption
35.4 	amount multiplied by 1.4;
35.5 	(b) for the claimant's second dependent, the exemption
35.6 	amount multiplied by 1.3;
35.7 	(c) for the claimant's third dependent, the exemption
35.8 	amount multiplied by 1.2;
35.9 	(d) for the claimant's fourth dependent, the exemption
35.10 	amount multiplied by 1.1;
35.11 	(e) for the claimant's fifth dependent, the exemption
35.12 	amount; and
35.13 	(f) if the claimant or claimant's spouse was disabled or
35.14 	attained the age of 65 on or before December 31 of the year for
35.15 	which the taxes were levied or rent paid, the exemption amount.
35.16 	For purposes of this subdivision, the "exemption amount"
35.17 	means the exemption amount under section 151(d) of the Internal
35.18 	Revenue Code for the taxable year for which the income is
35.19 	reported.
35.20 	
EFFECTIVE DATE. This section is effective for property
35.21 	tax refunds based on household income for 2004 and thereafter.

35.22 	Sec. 11. Minnesota Statutes 2004, section 290A.03,
35.23 	subdivision 15, is amended to read:
35.24 		Subd. 15.Internal revenue code.  "Internal Revenue Code"
35.25 	means the Internal Revenue Code of 1986, as amended through June
35.26 	15, 2003, and as further amended by the American Jobs Creation
35.27 	Act of 2004, Public Law 108-435.
35.28 	
EFFECTIVE DATE. This section is effective for property
35.29 	tax refunds based on property taxes payable on or after December
35.30 	31, 2004, and rent paid on or after December 31, 2003.

35.31 	ARTICLE 3
35.32 	SALES, USE, AND SPECIAL TAXES

35.33 	Section 1. Minnesota Statutes 2004, section 16C.03, is
35.34 	amended by adding a subdivision to read:
35.35 		Subd. 18.Contracts with foreign vendors. (a) The
35.36 	commissioner and other agencies to which this section applies
36.1 	and the legislative branch of government shall, subject to
36.2 	paragraph (d), cancel a contract for goods or services from a
36.3 	vendor or an affiliate of a vendor or suspend or debar a vendor
36.4 	or an affiliate of a vendor from future contracts upon
36.5 	notification from the commissioner of revenue that the vendor or
36.6 	an affiliate of the vendor has not registered to collect the
36.7 	sales and use tax imposed under chapter 297A on its sales in
36.8 	Minnesota or to a destination in Minnesota.  This subdivision
36.9 	shall not apply to state colleges and universities, the courts,
36.10 	and any agency in the judicial branch of government.  For
36.11 	purposes of this subdivision, the term "affiliate" means any
36.12 	person or entity that is controlled by, or is under common
36.13 	control of, a vendor through stock ownership or other
36.14 	affiliation.
36.15 	(b) Beginning January 1, 2006, each vendor or affiliate of
36.16 	a vendor selling goods or services, subject to tax under chapter
36.17 	297A, to an agency or the legislature must provide its Minnesota
36.18 	sales and use tax business identification number, upon request,
36.19 	to show that the vendor is registered to collect Minnesota sales
36.20 	or use tax.
36.21 	(c) The commissioner of revenue shall periodically provide
36.22 	to the commissioner and the legislative branch a list of vendors
36.23 	who have not registered to collect Minnesota sales and use tax
36.24 	and who are subject to being suspended or debarred as vendors or
36.25 	having their contracts canceled.
36.26 	(d) The provisions of this subdivision may be waived by the
36.27 	commissioner or the legislative branch when the vendor is the
36.28 	single source of such goods or services, in the event of an
36.29 	emergency, or when it is in the best interests of the state as
36.30 	determined by the commissioner in consultation with the
36.31 	commissioner of revenue.  Such consultation is not a disclosure
36.32 	violation under chapter 270B.
36.33 	
EFFECTIVE DATE. This section is effective for all
36.34 	contracts entered into after December 31, 2005.

36.35 	Sec. 2. [295.75] LIQUOR GROSS RECEIPTS TAX.
36.36 		Subdivision 1.Definitions. (a) For purposes of this
37.1 	section, the following terms have the meanings given.
37.2 	(b) "Commissioner" means the commissioner of revenue.
37.3 	(c) "Gross receipts" means the total amount received, in
37.4 	money or by barter or exchange, for all liquor sales at retail
37.5 	as measured by the sales price, but does not include any taxes
37.6 	imposed directly on the consumer that are separately stated on
37.7 	the invoice, bill of sale, or similar document given to the
37.8 	purchaser.
37.9 	(d) "Liquor" means:
37.10 	(1) intoxicating liquor, as defined in section 340A.101,
37.11 	subdivision 14;
37.12 	(2) beverage containing intoxicating liquor; and 
37.13 	(3) 3.2 percent malt liquor, as defined in section
37.14 	340A.101, subdivision 19, when sold at an on-sale or off-sale
37.15 	municipal liquor store or other establishment licensed to sell
37.16 	any type of intoxicating liquor.
37.17 	(e) "Liquor retailer" means a retailer that sells liquor.
37.18 	(f) "Retail sale" has the meaning given in section 297A.61,
37.19 	subdivision 4.
37.20 		Subd. 2.Gross receipts tax imposed. A tax is imposed on
37.21 	each liquor retailer equal to 2.5 percent of gross receipts from
37.22 	retail sales in Minnesota of liquor.
37.23 		Subd. 3.Use tax imposed; credit for taxes paid. (a) A
37.24 	person that receives liquor for use or storage in Minnesota,
37.25 	other than from a liquor retailer that paid the tax under
37.26 	subdivision 2, is subject to tax at the rate imposed under
37.27 	subdivision 2.  Liability for the tax is incurred when the
37.28 	person has possession of the liquor in Minnesota.  The tax must
37.29 	be remitted to the commissioner in the same manner prescribed
37.30 	for the taxes imposed under chapter 297A.
37.31 	(b) A person that has paid taxes to another jurisdiction on
37.32 	the same transaction and is subject to tax under this section is
37.33 	entitled to a credit for the tax legally due and paid to another
37.34 	jurisdiction to the extent of the lesser of (1) the tax actually
37.35 	paid to the other jurisdiction, or (2) the amount of tax imposed
37.36 	by Minnesota on the transaction subject to tax in the other
38.1 	jurisdiction.
38.2 		Subd. 4.Tax collection required. A liquor retailer with
38.3 	nexus in Minnesota, who is not subject to tax under subdivision
38.4 	2, is required to collect the tax imposed under subdivision 3
38.5 	from the purchaser of the liquor and give the purchaser a
38.6 	receipt for the tax paid.  The tax collected must be remitted to
38.7 	the commissioner in the same manner prescribed for the taxes
38.8 	imposed under chapter 297A.
38.9 		Subd. 5.Taxes paid to another jurisdiction; credit. A
38.10 	liquor retailer that has paid taxes to another jurisdiction
38.11 	measured by gross receipts and is subject to tax under this
38.12 	section on the same gross receipts is entitled to a credit for
38.13 	the tax legally due and paid to another jurisdiction to the
38.14 	extent of the lesser of (1) the tax actually paid to the other
38.15 	jurisdiction, or (2) the amount of tax imposed by Minnesota on
38.16 	the gross receipts subject to tax in the other taxing
38.17 	jurisdictions.
38.18 		Subd. 6.Exemptions. All of the exemptions applicable to
38.19 	the taxes imposed under chapter 297A are applicable to the taxes
38.20 	imposed under this section.
38.21 		Subd. 7.Sourcing of sales. All of the provisions of
38.22 	section 297A.668 apply to the taxes imposed by this section.
38.23 		Subd. 8.Payment; reporting. A liquor retailer shall
38.24 	report the tax on a return prescribed by the commissioner of
38.25 	revenue, and shall remit the tax with the return.  The return
38.26 	and the tax must be filed and paid using the filing cycle and
38.27 	due dates provided for taxes imposed under chapter 297A.
38.28 		Subd. 9.Administration. Unless specifically provided
38.29 	otherwise by this section, the audit, assessment, refund,
38.30 	penalty, interest, enforcement, collection remedies, appeal, and
38.31 	administrative provisions of chapters 270 and 289A that are
38.32 	applicable to taxes imposed under chapter 297A apply to taxes
38.33 	imposed under this section.
38.34 		Subd. 10.Interest on overpayments. Interest must be
38.35 	paid on an overpayment refunded or credited to the taxpayer from
38.36 	the date of payment of the tax until the date the refund is paid
39.1 	or credited.  For purposes of this subdivision, the date of
39.2 	payment is the due date of the return or the date of actual
39.3 	payment of the tax, whichever is later.
39.4 		Subd. 11.Deposit of revenues. The commissioner shall
39.5 	deposit all revenues, including penalties and interest, derived
39.6 	from the tax imposed by this section in the general fund.
39.7 	
EFFECTIVE DATE. This section is effective for sales and
39.8 	purchases occurring on or after January 1, 2006.

39.9 	Sec. 3. Minnesota Statutes 2004, section 297A.61,
39.10 	subdivision 4, is amended to read:
39.11 		Subd. 4.Retail sale.  (a) A "retail sale" means any
39.12 	sale, lease, or rental for any purpose other than resale,
39.13 	sublease, or subrent.
39.14 	(b) A sale of property used by the owner only by leasing it
39.15 	to others or by holding it in an effort to lease it, and put to
39.16 	no use by the owner other than resale after the lease or effort
39.17 	to lease, is a sale of property for resale.
39.18 	(c) A sale of master computer software that is purchased
39.19 	and used to make copies for sale or lease is a sale of property
39.20 	for resale.
39.21 	(d) A sale of building materials, supplies, and equipment
39.22 	to owners, contractors, subcontractors, or builders for the
39.23 	erection of buildings or the alteration, repair, or improvement
39.24 	of real property is a retail sale in whatever quantity sold,
39.25 	whether the sale is for purposes of resale in the form of real
39.26 	property or otherwise.
39.27 	(e) A sale of carpeting, linoleum, or similar floor
39.28 	covering to a person who provides for installation of the floor
39.29 	covering is a retail sale and not a sale for resale since a sale
39.30 	of floor covering which includes installation is a contract for
39.31 	the improvement of real property.
39.32 	(f) A sale of shrubbery, plants, sod, trees, and similar
39.33 	items to a person who provides for installation of the items is
39.34 	a retail sale and not a sale for resale since a sale of
39.35 	shrubbery, plants, sod, trees, and similar items that includes
39.36 	installation is a contract for the improvement of real property.
40.1 	(g) A sale of tangible personal property that is awarded as
40.2 	prizes is a retail sale and is not considered a sale of property
40.3 	for resale.
40.4 	(h) A sale of tangible personal property utilized or
40.5 	employed in the furnishing or providing of services under
40.6 	subdivision 3, paragraph (g), clause (1), including, but not
40.7 	limited to, property given as promotional items, is a retail
40.8 	sale and is not considered a sale of property for resale.
40.9 	(i) A sale of tangible personal property used in conducting
40.10 	lawful gambling under chapter 349 or the state lottery under
40.11 	chapter 349A, including, but not limited to, property given as
40.12 	promotional items, is a retail sale and is not considered a sale
40.13 	of property for resale.
40.14 	(j) A sale of machines, equipment, or devices that are used
40.15 	to furnish, provide, or dispense goods or services, including,
40.16 	but not limited to, coin-operated devices, is a retail sale and
40.17 	is not considered a sale of property for resale.
40.18 	(k) In the case of a lease, a retail sale occurs (1) when
40.19 	an obligation to make a lease payment becomes due under the
40.20 	terms of the agreement or the trade practices of the lessor or
40.21 	(2) in the case of a lease of a motor vehicle, as defined in
40.22 	section 297B.01, subdivision 5, but excluding vehicles with a
40.23 	manufacturer's gross vehicle weight rating greater than 10,000
40.24 	pounds and rentals of vehicles for not more than 28 days, at the
40.25 	time the lease is executed.
40.26 	(l) In the case of a conditional sales contract, a retail
40.27 	sale occurs upon the transfer of title or possession of the
40.28 	tangible personal property.
40.29 	
EFFECTIVE DATE. This section is effective for leases
40.30 	entered into after September 30, 2005.

40.31 	Sec. 4. Minnesota Statutes 2004, section 297A.61, is
40.32 	amended by adding a subdivision to read:
40.33 		Subd. 37.Event souvenir clothing. "Event souvenir
40.34 	clothing" is clothing that is sold at a state-subsidized
40.35 	facility and that bears a name, image, or logo of the
40.36 	entertainer, athlete, or team that performs at the facility.  As
41.1 	used in this subdivision, a "state-subsidized facility" means
41.2 	the Metrodome financed under section 473.581, the basketball
41.3 	arena that receives payments from the Amateur Sports Commission
41.4 	under section 473.556, subdivision 16, the hockey arena that
41.5 	received a loan of state funds under Laws 1998, chapter 404,
41.6 	section 23, subdivision 6, and the entertainment and convention
41.7 	center that received a grant under Laws 1998, chapter 404,
41.8 	section 23, subdivision 9.
41.9 	
EFFECTIVE DATE. This section is effective for sales after
41.10 	June 30, 2005.

41.11 	Sec. 5. Minnesota Statutes 2004, section 297A.67,
41.12 	subdivision 8, is amended to read:
41.13 		Subd. 8.Clothing.  (a) Clothing is exempt.  For purposes
41.14 	of this subdivision, "clothing" means all human wearing apparel
41.15 	suitable for general use.
41.16 	(b) Clothing includes, but is not limited to, aprons,
41.17 	household and shop; athletic supporters; baby receiving
41.18 	blankets; bathing suits and caps; beach capes and coats; belts
41.19 	and suspenders; boots; coats and jackets; costumes; children and
41.20 	adult diapers, including disposable; ear muffs; footlets; formal
41.21 	wear; garters and garter belts; girdles; gloves and mittens for
41.22 	general use; hats and caps; hosiery; insoles for shoes; lab
41.23 	coats; neckties; overshoes; pantyhose; rainwear; rubber pants;
41.24 	sandals; scarves; shoes and shoe laces; slippers; sneakers;
41.25 	socks and stockings; steel-toed boots; underwear; uniforms,
41.26 	athletic and nonathletic; and wedding apparel.
41.27 	(c) Clothing does not include the following:
41.28 	(1) belt buckles sold separately;
41.29 	(2) costume masks sold separately;
41.30 	(3) patches and emblems sold separately;
41.31 	(4) sewing equipment and supplies, including but not
41.32 	limited to, knitting needles, patterns, pins, scissors, sewing
41.33 	machines, sewing needles, tape measures, and thimbles;
41.34 	(5) sewing materials that become part of clothing,
41.35 	including but not limited to, buttons, fabric, lace, thread,
41.36 	yarn, and zippers;
42.1 	(6) clothing accessories or equipment;
42.2 	(7) sports or recreational equipment; and 
42.3 	(8) protective equipment; and 
42.4 	(9) event souvenir clothing.
42.5 	Clothing also does not include apparel made from fur if a
42.6 	uniform definition of "apparel made from fur" is developed by
42.7 	the member states of the Streamlined Sales and Use Tax Agreement.
42.8 	For purposes of this subdivision, "clothing accessories or
42.9 	equipment" means incidental items worn on the person or in
42.10 	conjunction with clothing.  Clothing accessories and equipment
42.11 	include, but are not limited to, briefcases; cosmetics; hair
42.12 	notions, including barrettes, hair bows, and hairnets; handbags;
42.13 	handkerchiefs; jewelry; nonprescription sunglasses; umbrellas;
42.14 	wallets; watches; and wigs and hairpieces.  "Sports or
42.15 	recreational equipment" means items designed for human use and
42.16 	worn in conjunction with an athletic or recreational activity
42.17 	that are not suitable for general use.  Sports and recreational
42.18 	equipment includes, but is not limited to, ballet and tap shoes;
42.19 	cleated or spiked athletic shoes; gloves, including, but not
42.20 	limited to, baseball, bowling, boxing, hockey, and golf gloves;
42.21 	goggles; hand and elbow guards; life preservers and vests; mouth
42.22 	guards; roller and ice skates; shin guards; shoulder pads; ski
42.23 	boots; waders; and wetsuits and fins.  "Protective equipment"
42.24 	means items for human wear and designed as protection of the
42.25 	wearer against injury or disease or as protection against damage
42.26 	or injury of other persons or property but not suitable for
42.27 	general use.  Protective equipment includes, but is not limited
42.28 	to, breathing masks; clean room apparel and equipment; ear and
42.29 	hearing protectors; face shields; finger guards; hard hats;
42.30 	helmets; paint or dust respirators; protective gloves; safety
42.31 	glasses and goggles; safety belts; tool belts; and welders
42.32 	gloves and masks.
42.33 	
EFFECTIVE DATE. This section is effective for sales after
42.34 	June 30, 2005.

42.35 	Sec. 6. Minnesota Statutes 2004, section 297A.67, is
42.36 	amended by adding a subdivision to read:
43.1 		Subd. 32.Cigarettes. Cigarettes upon which a tax has
43.2 	been imposed under section 297F.25 are exempt.
43.3 	
EFFECTIVE DATE. This section is effective for sales and
43.4 	purchases made after July 31, 2005.

43.5 	Sec. 7. Minnesota Statutes 2004, section 297A.68,
43.6 	subdivision 2, is amended to read:
43.7 		Subd. 2.Materials consumed in industrial production.
 43.8 	(a) Materials stored, used, or consumed in industrial production
43.9 	of personal property intended to be sold ultimately at retail
43.10 	are exempt, whether or not the item so used becomes an
43.11 	ingredient or constituent part of the property produced.
43.12 	Materials that qualify for this exemption include, but are not
43.13 	limited to, the following:
43.14 	(1) chemicals, including chemicals used for cleaning food
43.15 	processing machinery and equipment;
43.16 	(2) materials, including chemicals, fuels, and electricity
43.17 	purchased by persons engaged in industrial production to treat
43.18 	waste generated as a result of the production process;
43.19 	(3) fuels, electricity, gas, and steam used or consumed in
43.20 	the production process, except that electricity, gas, or steam
43.21 	used for space heating, cooling, or lighting is exempt if (i) it
43.22 	is in excess of the average climate control or lighting for the
43.23 	production area, and (ii) it is necessary to produce that
43.24 	particular product;
43.25 	(4) petroleum products and lubricants;
43.26 	(5) packaging materials, including returnable containers
43.27 	used in packaging food and beverage products;
43.28 	(6) accessory tools, equipment, and other items that are
43.29 	separate detachable units with an ordinary useful life of less
43.30 	than 12 months used in producing a direct effect upon the
43.31 	product; and
43.32 	(7) the following materials, tools, and equipment used in
43.33 	metalcasting:  crucibles, thermocouple protection sheaths and
43.34 	tubes, stalk tubes, refractory materials, molten metal filters
43.35 	and filter boxes, degassing lances, and base blocks.
43.36 	(b) This exemption does not include:
44.1 	(1) machinery, equipment, implements, tools, accessories,
44.2 	appliances, contrivances and furniture and fixtures, except
44.3 	those listed in paragraph (a), clause (6); and
44.4 	(2) petroleum and special fuels used in producing or
44.5 	generating power for propelling ready-mixed concrete trucks on
44.6 	the public highways of this state.
44.7 	(c) Industrial production includes, but is not limited to,
44.8 	research, development, design or production of any tangible
44.9 	personal property, manufacturing, processing (other than by
44.10 	restaurants and consumers) of agricultural products (whether
44.11 	vegetable or animal), commercial fishing, refining, smelting,
44.12 	reducing, brewing, distilling, printing, mining, quarrying,
44.13 	lumbering, generating electricity, the production of road
44.14 	building materials, and the research, development, design, or
44.15 	production of computer software.  Industrial production does not
44.16 	include painting, cleaning, repairing or similar processing of
44.17 	property except as part of the original manufacturing process.
44.18 	Industrial production does not include the transportation,
44.19 	transmission, or distribution of petroleum, liquefied gas,
44.20 	natural gas, water, or steam, in, by, or through pipes, lines,
44.21 	tanks, mains, or other means of transporting those products.
44.22 	For purposes of this paragraph, "transportation, transmission,
44.23 	or distribution" does not include blending of petroleum or
44.24 	biodiesel fuel as defined in section 239.77.
44.25 	
EFFECTIVE DATE. This section is effective for sales and
44.26 	purchases made after June 30, 2005.

44.27 	Sec. 8. Minnesota Statutes 2004, section 297A.68,
44.28 	subdivision 5, is amended to read:
44.29 		Subd. 5.Capital equipment.  (a) Capital equipment is
44.30 	exempt.  The tax must be imposed and collected as if the rate
44.31 	under section 297A.62, subdivision 1, applied, and then refunded
44.32 	in the manner provided in section 297A.75.
44.33 	"Capital equipment" means machinery and equipment purchased
44.34 	or leased, and used in this state by the purchaser or lessee
44.35 	primarily for manufacturing, fabricating, mining, or refining
44.36 	tangible personal property to be sold ultimately at retail if
45.1 	the machinery and equipment are essential to the integrated
45.2 	production process of manufacturing, fabricating, mining, or
45.3 	refining.  Capital equipment also includes machinery and
45.4 	equipment used to electronically transmit results retrieved by a
45.5 	customer of an on-line computerized data retrieval system.
45.6 	(b) Capital equipment includes, but is not limited to:
45.7 	(1) machinery and equipment used to operate, control, or
45.8 	regulate the production equipment;
45.9 	(2) machinery and equipment used for research and
45.10 	development, design, quality control, and testing activities;
45.11 	(3) environmental control devices that are used to maintain
45.12 	conditions such as temperature, humidity, light, or air pressure
45.13 	when those conditions are essential to and are part of the
45.14 	production process;
45.15 	(4) materials and supplies used to construct and install
45.16 	machinery or equipment;
45.17 	(5) repair and replacement parts, including accessories,
45.18 	whether purchased as spare parts, repair parts, or as upgrades
45.19 	or modifications to machinery or equipment;
45.20 	(6) materials used for foundations that support machinery
45.21 	or equipment;
45.22 	(7) materials used to construct and install special purpose
45.23 	buildings used in the production process;
45.24 	(8) ready-mixed concrete equipment in which the ready-mixed
45.25 	concrete is mixed as part of the delivery process regardless if
45.26 	mounted on a chassis and leases of ready-mixed concrete trucks;
45.27 	and
45.28 	(9) machinery or equipment used for research, development,
45.29 	design, or production of computer software.
45.30 	(c) Capital equipment does not include the following:
45.31 	(1) motor vehicles taxed under chapter 297B;
45.32 	(2) machinery or equipment used to receive or store raw
45.33 	materials;
45.34 	(3) building materials, except for materials included in
45.35 	paragraph (b), clauses (6) and (7);
45.36 	(4) machinery or equipment used for nonproduction purposes,
46.1 	including, but not limited to, the following:  plant security,
46.2 	fire prevention, first aid, and hospital stations; support
46.3 	operations or administration; pollution control; and plant
46.4 	cleaning, disposal of scrap and waste, plant communications,
46.5 	space heating, cooling, lighting, or safety;
46.6 	(5) farm machinery and aquaculture production equipment as
46.7 	defined by section 297A.61, subdivisions 12 and 13;
46.8 	(6) machinery or equipment purchased and installed by a
46.9 	contractor as part of an improvement to real property; or 
46.10 	(7) machinery or equipment used in the transportation,
46.11 	transmission, or distribution of petroleum, liquefied gas,
46.12 	natural gas, water, or steam, in, by, or through pipes, lines,
46.13 	tanks, mains, or other means of transporting those products.
46.14 	This clause does not apply to machinery or equipment used to
46.15 	blend petroleum or biodiesel fuel as defined in section 239.77;
46.16 	or 
46.17 	(8) any other item that is not essential to the integrated
46.18 	process of manufacturing, fabricating, mining, or refining.
46.19 	(d) For purposes of this subdivision:
46.20 	(1) "Equipment" means independent devices or tools separate
46.21 	from machinery but essential to an integrated production
46.22 	process, including computers and computer software, used in
46.23 	operating, controlling, or regulating machinery and equipment;
46.24 	and any subunit or assembly comprising a component of any
46.25 	machinery or accessory or attachment parts of machinery, such as
46.26 	tools, dies, jigs, patterns, and molds.
46.27 	(2) "Fabricating" means to make, build, create, produce, or
46.28 	assemble components or property to work in a new or different
46.29 	manner.
46.30 	(3) "Integrated production process" means a process or
46.31 	series of operations through which tangible personal property is
46.32 	manufactured, fabricated, mined, or refined.  For purposes of
46.33 	this clause, (i) manufacturing begins with the removal of raw
46.34 	materials from inventory and ends when the last process prior to
46.35 	loading for shipment has been completed; (ii) fabricating begins
46.36 	with the removal from storage or inventory of the property to be
47.1 	assembled, processed, altered, or modified and ends with the
47.2 	creation or production of the new or changed product; (iii)
47.3 	mining begins with the removal of overburden from the site of
47.4 	the ores, minerals, stone, peat deposit, or surface materials
47.5 	and ends when the last process before stockpiling is completed;
47.6 	and (iv) refining begins with the removal from inventory or
47.7 	storage of a natural resource and ends with the conversion of
47.8 	the item to its completed form.
47.9 	(4) "Machinery" means mechanical, electronic, or electrical
47.10 	devices, including computers and computer software, that are
47.11 	purchased or constructed to be used for the activities set forth
47.12 	in paragraph (a), beginning with the removal of raw materials
47.13 	from inventory through completion of the product, including
47.14 	packaging of the product.
47.15 	(5) "Machinery and equipment used for pollution control"
47.16 	means machinery and equipment used solely to eliminate, prevent,
47.17 	or reduce pollution resulting from an activity described in
47.18 	paragraph (a).
47.19 	(6) "Manufacturing" means an operation or series of
47.20 	operations where raw materials are changed in form, composition,
47.21 	or condition by machinery and equipment and which results in the
47.22 	production of a new article of tangible personal property.  For
47.23 	purposes of this subdivision, "manufacturing" includes the
47.24 	generation of electricity or steam to be sold at retail.
47.25 	(7) "Mining" means the extraction of minerals, ores, stone,
47.26 	or peat.
47.27 	(8) "On-line data retrieval system" means a system whose
47.28 	cumulation of information is equally available and accessible to
47.29 	all its customers.
47.30 	(9) "Primarily" means machinery and equipment used 50
47.31 	percent or more of the time in an activity described in
47.32 	paragraph (a).
47.33 	(10) "Refining" means the process of converting a natural
47.34 	resource to an intermediate or finished product, including the
47.35 	treatment of water to be sold at retail.
47.36 	(11) This subdivision does not apply to telecommunications
48.1 	equipment as provided in subdivision 35, and does not apply to
48.2 	wire, cable, fiber, poles, or conduit for telecommunications
48.3 	services.
48.4 	
EFFECTIVE DATE. This section is effective for sales and
48.5 	purchases made after June 30, 2005.

48.6 	Sec. 9. [297A.825] MOTOR VEHICLE LEASES.
48.7 		Subdivision 1.Motor vehicle lease price; payment. (a)
48.8 	In the case of a lease of a motor vehicle as provided in section
48.9 	297A.61, subdivision 4, paragraph (k), clause (2), the tax is
48.10 	imposed on the total amount to be paid by the lessee under the
48.11 	lease agreement.  The lessor shall collect the tax in full at
48.12 	the time the lease is executed or, if the tax is included in the
48.13 	lease and the lease is assigned, the tax is due from the
48.14 	original lessor at the time the lease is assigned.  The total
48.15 	amount to be paid by the lessee under the lease agreement equals
48.16 	the agreed-upon value of the vehicle less manufacturer's
48.17 	rebates, the stated residual value of the leased vehicle, and
48.18 	the total value allowed for a vehicle owned by the lessee taken
48.19 	in trade by the lessor, plus the price of any taxable goods and
48.20 	services included in the lease and the rent charge as provided
48.21 	by Code of Federal Regulations, title 12, section 213.4,
48.22 	excluding any rent charge related to the capitalization of the
48.23 	tax.
48.24 	(b) If the total amount paid by the lessee for use of the
48.25 	leased vehicle includes amounts that are not calculated at the
48.26 	time the lease is executed, the tax is imposed and must be
48.27 	collected by the lessor at the time the amounts are paid by the
48.28 	lessee.  In the case of a lease which by its terms may be
48.29 	renewed, the sales tax is due and payable on the total amount to
48.30 	be paid during the initial term of the lease, and then for each
48.31 	subsequent renewal period on the total amount to be paid during
48.32 	the renewal period.
48.33 	(c) If a lease is canceled or rescinded on or before 90
48.34 	days of its execution or if a vehicle is returned to the
48.35 	manufacturer under section 325F.665, the lessor may file a claim
48.36 	for a refund of the total tax paid minus the amount of tax due
49.1 	for the period the vehicle is used by the lessee.
49.2 	(d) If a lessee's obligation to make payments on a lease is
49.3 	canceled more than 90 days after its execution, a credit is
49.4 	allowed against sales tax or motor vehicle sales tax due on a
49.5 	subsequent lease or purchase of a motor vehicle if that lease or
49.6 	purchase is consummated within 30 days of the date the prior
49.7 	lease was canceled.  The amount of the credit shall be equal to
49.8 	(1) the sales tax paid at the inception of the lease, multiplied
49.9 	by (2) the ratio of the number of full months remaining in the
49.10 	lease at the time of termination compared to the term of the
49.11 	lease used in calculating sales tax paid at the inception of the
49.12 	lease.
49.13 		Subd. 2.Lease of motor vehicles. When the lease of a
49.14 	motor vehicle as defined in section 297A.61, subdivision 4,
49.15 	paragraph (k), clause (2), originates in another state, the
49.16 	sales tax under subdivision 1 shall be calculated by the lessor
49.17 	on the total amount that is due under the lease agreement after
49.18 	the vehicle is required to be registered in Minnesota.  If the
49.19 	total amount to be paid by the lessee under the lease agreement
49.20 	has already been subjected to tax by another state, a credit for
49.21 	taxes paid in the other state is allowed as provided in section
49.22 	297A.80.
49.23 	
EFFECTIVE DATE. Subdivision 1 of this section is
49.24 	effective for leases entered into after September 30, 2005.
49.25 	Subdivision 2 of this section is effective for vehicles
49.26 	registering in Minnesota after September 30, 2005.

49.27 	Sec. 10. [297F.25] CIGARETTE SALES TAX.
49.28 		Subdivision 1.Imposition. A tax is imposed on
49.29 	distributors on the sale of cigarettes by a cigarette
49.30 	distributor to a retailer or cigarette subjobber for resale in
49.31 	this state.  The tax is equal to 6.5 percent of the weighted
49.32 	average retail price.  The weighted average retail price must be
49.33 	expressed in cents per pack when rounded to the nearest
49.34 	one-tenth of a cent.  The weighted average retail price must be
49.35 	determined annually, with new rates published by May 1, and
49.36 	effective for sales on or after August 1.  The weighted average
50.1 	retail price must be established by surveying cigarette
50.2 	retailers statewide in a manner and time determined by the
50.3 	commissioner.  The determination of the commissioner pursuant to
50.4 	this subdivision is not a "rule" and is not subject to the
50.5 	Administrative Procedure Act contained in chapter 14.  As of
50.6 	August 1, 2005, the tax is 20 cents per pack of 20 cigarettes.
50.7 	For packs of cigarettes with other than 20 cigarettes, the tax
50.8 	must be adjusted proportionally.
50.9 		Subd. 2.Payment. Each taxpayer must remit payments of
50.10 	the taxes to the commissioner on the same dates prescribed under
50.11 	section 297F.09, subdivision 1, for cigarette tax returns,
50.12 	including the accelerated remittance of the June liability.
50.13 		Subd. 3.Return. A taxpayer must file a return with the
50.14 	commissioner on the same dates prescribed under section 297F.09,
50.15 	subdivision 1, for cigarette tax returns.  Notwithstanding any
50.16 	other provisions of this chapter, the tax due on the return is
50.17 	based upon actual stamps purchased during the reporting period.
50.18 		Subd. 4.Form of return. The return must contain the
50.19 	information and be in the form prescribed by the commissioner.
50.20 		Subd. 5.Tax as debt. The tax that is required to be
50.21 	paid by the distributor is a debt from the retailer or cigarette
50.22 	subjobber to the distributor recoverable at law in the same
50.23 	manner as other debts.  A cigarette retailer or subjobber must
50.24 	pay the tax imposed under subdivision 1 to the distributor
50.25 	before the 12th day of the month following the month in which
50.26 	the cigarettes were purchased from the distributor.
50.27 		Subd. 6.Sales tax stamp. Payment of the tax imposed
50.28 	under section 297F.05 and by this section must be evidenced by a
50.29 	dual-purpose single stamp affixed to each package.
50.30 		Subd. 7.Administration. The stamping, audit,
50.31 	assessment, interest, penalty, appeal, refund, and collection
50.32 	provisions applicable to the taxes imposed under this chapter
50.33 	apply to taxes imposed under this section.
50.34 		Subd. 8.Deposit of revenues. Notwithstanding the
50.35 	provisions of section 297F.10, the commissioner shall deposit
50.36 	all revenues, including penalties and interest, derived from the
51.1 	tax imposed by this section, in the general fund.
51.2 	
EFFECTIVE DATE. This section is effective for all sales
51.3 	made on or after August 1, 2005.

51.4 	Sec. 11. Minnesota Statutes 2004, section 297I.01, is
51.5 	amended by adding a subdivision to read:
51.6 		Subd. 6a.Direct business. (a) "Direct business" means
51.7 	all insurance provided by an insurance company or its agents,
51.8 	and specifically includes stop-loss insurance purchased in
51.9 	connection with a self-insurance plan for employee health
51.10 	benefits or for other purposes, but excludes:
51.11 	(1) reinsurance in which an insurance company assumes the
51.12 	liability of another insurance company; and 
51.13 	(2) self-insurance.
51.14 	(b) For purposes of this subdivision, an insurance company
51.15 	includes a nonprofit health service corporation, health
51.16 	maintenance organization, and community integrated service
51.17 	network.
51.18 	
EFFECTIVE DATE. This section is effective for insurance
51.19 	premiums received after December 31, 2005.

51.20 	Sec. 12. Laws 2001, First Special Session chapter 5,
51.21 	article 12, section 95, is amended to read:
51.22 	Sec. 95REPEALER.
 51.23 	(a) Minnesota Statutes 2000, sections 297A.61, subdivision
51.24 	16; 297A.68, subdivision 21; and 297A.71, subdivisions 2 and 16,
51.25 	are repealed effective for sales and purchases occurring after
51.26 	June 30, 2001, except that the repeal of section 297A.61,
51.27 	subdivision 16, paragraph (d), is effective for sales and
51.28 	purchases occurring after July 31, 2001.
51.29 	(b) Minnesota Statutes 2000, sections section 297A.62,
51.30 	subdivision 2, and 297A.64, subdivision 1, are is repealed
51.31 	effective for sales and purchases made after December 31, 2005.
51.32 	(c) Minnesota Statutes 2000, section 297A.71, subdivision
51.33 	15, is repealed effective for sales and purchases made after
51.34 	June 30, 2002.
51.35 	(d) Minnesota Statutes 2000, section 289A.60, subdivision
51.36 	15, is repealed effective for liabilities after January 1, 2003.

52.1 	EFFECTIVE DATE. This section is effective the day
52.2 	following final enactment.

52.3 	Sec. 13. FLOOR STOCKS TAX.
 52.4 		Subdivision 1.Cigarettes. A floor stocks cigarette
52.5 	sales tax is imposed on every person engaged in the business in
52.6 	this state as a distributor, retailer, subjobber, vendor,
52.7 	manufacturer, or manufacturer's representative of cigarettes, on
52.8 	the stamped cigarettes and unaffixed stamps in the person's
52.9 	possession or under the person's control at 12:01 a.m. on August
52.10 	1, 2005.  The tax is imposed at the rate of 20 cents per pack of
52.11 	20 cigarettes.  For packs of cigarettes with other than 20
52.12 	cigarettes, the tax shall be adjusted proportionally.
52.13 	Each distributor, by August 10, 2005, shall file a return
52.14 	with the commissioner, in the form the commissioner prescribes,
52.15 	showing the stamped cigarettes and unaffixed stamps on hand at
52.16 	12:01 a.m. on August 1, 2005, and the amount of tax due on the
52.17 	cigarettes and unaffixed stamps.  The tax imposed by this
52.18 	section is due and payable by September 7, 2005, and after that
52.19 	date bears interest at the rate of one percent a month.
52.20 	Each retailer, subjobber, vendor, manufacturer, or
52.21 	manufacturer's representative, by August 10, 2005, shall file a
52.22 	return with the commissioner, in the form the commissioner
52.23 	prescribes, showing the cigarettes on hand at 12:01 a.m. on
52.24 	August 1, 2005, and the amount of tax due on the cigarettes.
52.25 	The tax imposed by this section is due and payable by September
52.26 	7, 2005, and after that date bears interest at the rate of one
52.27 	percent a month.
52.28 		Subd. 2.Audit and enforcement. The tax imposed by this
52.29 	section is subject to the audit, assessment, penalty, and
52.30 	collection provisions applicable to the taxes imposed under
52.31 	Minnesota Statutes, chapter 297F.  The commissioner may require
52.32 	a distributor to receive and maintain copies of floor stocks tax
52.33 	returns filed by all persons requesting a credit for returned
52.34 	cigarettes.
52.35 		Subd. 3.Deposit of proceeds. The revenue from the tax
52.36 	imposed under this section shall be deposited by the
53.1 	commissioner in the state treasury and credited to the general
53.2 	fund.
53.3 	
EFFECTIVE DATE. This section is effective August 1, 2005.

53.4 	ARTICLE 4
53.5 	TAX SHELTER AND VOLUNTARY COMPLIANCE INITIATIVES

53.6 	Section 1. [289A.121] REGISTRATION OF TAX SHELTERS.
53.7 		Subdivision 1.Definitions. For the purposes of this
53.8 	section, the following terms have the meanings given.
53.9 	(a) "Abusive tax avoidance transaction" means a Minnesota
53.10 	tax shelter or a reportable transaction.
53.11 	(b) "Material advisor" has the meaning given in section
53.12 	111(b)(1) of the Internal Revenue Code, and must be interpreted
53.13 	in accordance with any regulations or rulings adopted or issued
53.14 	by the Internal Revenue Service that govern that section.
53.15 	(c) "Minnesota tax shelter" means a transaction which is
53.16 	not a reportable transaction, which substantially reduces a tax
53.17 	imposed under chapter 290 and has one or more of the following
53.18 	characteristics:
53.19 	(1) it is offered to the taxpayer under conditions of
53.20 	confidentiality, as that term is defined in Treas. Reg. section
53.21 	1.6011-4(3)(ii), and for which the taxpayer has paid a fee;
53.22 	(2) the terms of the transaction offer the taxpayer or a
53.23 	related party the right to a full or partial refund of fees if
53.24 	all or part of the intended tax consequences of the transaction
53.25 	are not realized, or if fees are contingent upon the taxpayer
53.26 	realizing tax benefits;
53.27 	(3) it is a transaction or a series of related transactions
53.28 	that result in a corporation or a partnership with only
53.29 	corporate partners claiming a reduction in net income in excess
53.30 	of $10,000,000 in any combination of tax years;
53.31 	(4) it is a transaction or a series of related transactions
53.32 	that result in an individual, a partnership with one or more
53.33 	noncorporate partners, S corporation, or trust claiming a
53.34 	reduction in net income in excess of $4,000,000 in any
53.35 	combination of taxable years, whether or not any losses flow
53.36 	through to one or more shareholders or beneficiaries; or 
54.1 	(5) it is a transaction or series of related transactions,
54.2 	identified as a Minnesota tax shelter in a rule promulgated by
54.3 	the commissioner of revenue, entered into after the date the
54.4 	rule becomes effective.
54.5 	(d) "Reportable transaction" has the meaning given in
54.6 	Treas. Reg. section 1.6011-4 between February 29, 2000, and
54.7 	January 1, 2006.
54.8 		Subd. 2.Reports by material advisors. (a) On the first
54.9 	day that a material advisor sells a Minnesota tax shelter or
54.10 	reportable transaction, the material advisor must file with the
54.11 	commissioner a copy of any federal tax shelter registration
54.12 	information relating to reportable transactions if that
54.13 	registration is applicable to any person subject to taxation
54.14 	under chapter 290.
54.15 	(b) On or before April 15, 2006, material advisors must
54.16 	report to the commissioner all federal tax shelters used by a
54.17 	person subject to tax under chapter 290 that the material
54.18 	advisor offered for sale between February 28, 2000, and January
54.19 	1, 2006, which were reportable transactions.
54.20 	(c) On or before April 15, 2006, material advisors must
54.21 	report to the commissioner all Minnesota tax shelters that the
54.22 	material advisor offered for sale between February 28, 2000, and
54.23 	January 1, 2006, if the transactions would have had to be
54.24 	disclosed under subdivision 3 had it been in effect at that time.
54.25 	(d) In addition to the requirements set forth in paragraphs
54.26 	(a), (b), and (c), a material advisor must report to the
54.27 	commissioner any transactions entered into on or after April 15,
54.28 	2006, that become listed as reportable transactions or a
54.29 	Minnesota tax shelter.
54.30 		Subd. 3.Maintaining participant lists. Any person
54.31 	organizing or selling Minnesota tax shelters or reportable
54.32 	transactions must maintain a list of participants that are
54.33 	subject to a tax imposed by chapter 290.
54.34 		Subd. 4.Reporting. All persons, including material
54.35 	advisors who organize or sell Minnesota tax shelters or
54.36 	reportable transactions, must provide the following information
55.1 	to the commissioner within 20 days from receiving a written
55.2 	request from the commissioner to provide the information:
55.3 	(1) legal name of the taxpayer;
55.4 	(2) Minnesota tax identification number;
55.5 	(3) federal tax identification number; and 
55.6 	(4) description of the Minnesota tax shelter or reportable
55.7 	transaction.
55.8 		Subd. 5.Disclosure statements by taxpayers. Every
55.9 	person subject to taxation under chapter 290 who has
55.10 	participated in a reportable transaction or a Minnesota tax
55.11 	shelter which resulted in a tax decrease must file a disclosure
55.12 	statement on a form prescribed by the commissioner.  The form
55.13 	must be filed with the tax return.

55.14 	Sec. 2. Minnesota Statutes 2004, section 289A.38, is
55.15 	amended by adding a subdivision to read:
55.16 		Subd. 16.Voluntary compliance
55.17 	initiative. Notwithstanding other limitations in the
55.18 	subdivision, an amount of tax related to a reportable
55.19 	transaction or a Minnesota tax shelter that is not reported in
55.20 	the voluntary compliance initiative described in section 4 may
55.21 	be assessed within eight and one-half years after the date the
55.22 	return is filed.

55.23 	Sec. 3. Minnesota Statutes 2004, section 289A.60, is
55.24 	amended by adding a subdivision to read:
55.25 		Subd. 26.Penalty for failure to report a tax
55.26 	shelter. (a) A penalty of $15,000 is imposed on a person who
55.27 	fails to register a tax shelter as required under section
55.28 	289A.121 on or before the date prescribed.
55.29 	(b) A penalty of $10,000 is imposed on a person who fails
55.30 	to report to the commissioner a Minnesota tax shelter or a
55.31 	reportable transaction within 20 days of the date prescribed
55.32 	under section 289A.121.  For each day after the 20th day that
55.33 	the person organizing or selling the Minnesota tax shelter or
55.34 	reportable transaction failed to make the information required
55.35 	in section 289A.121, subdivision 2, available to the
55.36 	commissioner after the commissioner made a written request for
56.1 	the list, an additional $10,000 penalty is imposed on that
56.2 	person.
56.3 	(c) A penalty is imposed on a person who fails to make a
56.4 	report required by section 289A.121, subdivision 2, on or before
56.5 	the date prescribed.  The penalty is the greater of:
56.6 	(1) $100,000; or 
56.7 	(2) 50 percent of the gross income that the person derived
56.8 	from the activity.
56.9 	(d) A penalty is imposed on a person who intentionally
56.10 	disregards the requirement to maintain and provide information
56.11 	required in section 289A.121.  The penalty is the greater of:
56.12 	(1) $100,000; or 
56.13 	(2) 75 percent of the gross income that the person derived
56.14 	from the activity.
56.15 	(e) A penalty of $15,000 is imposed on a person who fails
56.16 	to provide a list required under section 289A.121, subdivision
56.17 	4, which does not contain all the information required in that
56.18 	section.

56.19 	Sec. 4. TAX SHELTER VOLUNTARY COMPLIANCE INITIATIVE.
 56.20 		Subdivision 1.Commissioner to initiate. The
56.21 	commissioner of revenue shall develop and administer a Minnesota
56.22 	tax shelter voluntary compliance initiative for taxpayers
56.23 	subject to Minnesota Statutes, section 289A.60, subdivision 26,
56.24 	as provided in this chapter.
56.25 		Subd. 2.Term; application. The Minnesota tax shelter
56.26 	voluntary compliance initiative shall be conducted from July 1,
56.27 	2005, to December 31, 2005, pursuant to Minnesota Statutes,
56.28 	section 270.07.  The Minnesota tax shelter voluntary compliance
56.29 	initiative shall apply to tax liabilities and penalties
56.30 	attributable to Minnesota tax shelters and reportable
56.31 	transactions for tax years beginning before January 1, 2005.  An
56.32 	abusive tax avoidance transaction means a Minnesota tax shelter
56.33 	or a reportable transaction as defined in Minnesota Statutes,
56.34 	section 289A.121, subdivision 1.
56.35 		Subd. 3.Implementation. The commissioner of revenue may
56.36 	issue forms and instructions and take other actions necessary,
57.1 	including the use of agreements pursuant to Minnesota Statutes,
57.2 	section 270.67, to implement the Minnesota tax shelter voluntary
57.3 	compliance initiative.
57.4 		Subd. 4.Persons not eligible to participate. (a) Any
57.5 	person is not eligible for participation in the Minnesota tax
57.6 	shelter voluntary compliance initiative, if:
57.7 	(1) the taxpayer was convicted of a crime in connection
57.8 	with an abusive tax avoidance transaction or transactions;
57.9 	(2) a criminal complaint was filed against the taxpayer in
57.10 	connection with an abusive tax avoidance transaction or
57.11 	transactions;
57.12 	(3) the taxpayer is the subject of a criminal investigation
57.13 	in connection with an abusive tax avoidance transaction or
57.14 	transactions; or 
57.15 	(4) the taxpayer was eligible to participate in the
57.16 	Internal Revenue Service's Offshore Voluntary Compliance
57.17 	Initiative, as set forth in Revenue Procedure 2003-11.
57.18 		Subd. 5.Eligible participants. (a) Any person who is
57.19 	not ineligible to participate in the Minnesota tax shelter
57.20 	voluntary compliance initiative under subdivision 4, is eligible
57.21 	to participate in the Minnesota tax shelter voluntary compliance
57.22 	initiative.
57.23 	(b) A person participating in the Minnesota tax shelter
57.24 	voluntary compliance initiative waiving the right to an
57.25 	administrative appeal, a claim for refund, or an action in
57.26 	district court must do both of the following:
57.27 	(1) the participating person must file an amended return
57.28 	for each taxable year for which the taxpayer has filed a tax
57.29 	return using an abusive tax avoidance transaction to underreport
57.30 	the taxpayer's tax liability for that tax year.  Each amended
57.31 	return shall report all income from all sources, without regard
57.32 	to the abusive tax avoidance transaction; and 
57.33 	(2) the participating person must pay taxes and interest
57.34 	due in full, except that the commissioner of revenue may enter
57.35 	into an installment payment agreement pursuant to Minnesota
57.36 	Statutes, section 270.67, prior to taxpayer filing an amended
58.1 	return.
58.2 	(c) The commissioner of revenue shall abate all penalties
58.3 	imposed under Minnesota Statutes, chapter 289A, which could have
58.4 	been assessed in connection with the use of an abusive tax
58.5 	avoidance transaction, for each taxable year for which the
58.6 	taxpayer elects to participate in the Minnesota tax shelter
58.7 	voluntary compliance initiative, to the extent those penalties
58.8 	are a result of underreporting of tax liabilities attributable
58.9 	to the use of abusive tax avoidance transactions, for which a
58.10 	participating person files an amended return in compliance with
58.11 	paragraph (b).
58.12 	(d) No criminal action shall be brought against a taxpayer
58.13 	for the taxable years reported under the Minnesota tax shelter
58.14 	voluntary compliance initiative with respect to the issues for
58.15 	which a taxpayer voluntarily complies under this chapter.
58.16 	(e) A person filing an amended return under this paragraph
58.17 	of the Minnesota tax shelter voluntary compliance initiative may
58.18 	not file a claim for refund, an administrative appeal, or an
58.19 	action in district court in regard to the amount of taxes or
58.20 	interest paid with the amended return.
58.21 	(f) A person participating in the Minnesota tax shelter
58.22 	voluntary compliance initiative not waiving the right to an
58.23 	administrative appeal, a claim for refund, or an action in
58.24 	district court must do both of the following:
58.25 	(1) the participating person must file an amended return
58.26 	for each taxable year for which the taxpayer has filed a tax
58.27 	return using an abusive tax avoidance transaction to underreport
58.28 	the taxpayer's tax liability for that tax year.  Each amended
58.29 	return shall report all income from all sources, without regard
58.30 	to the abusive tax avoidance transactions; and 
58.31 	(2) the participating person must pay taxes and interest
58.32 	due in full, except that the commissioner of revenue may enter
58.33 	into an installment payment agreement pursuant to Minnesota
58.34 	Statutes, section 270.67, prior to taxpayer filing an amended
58.35 	return.
58.36 	(g) The commissioner of revenue shall abate all penalties
59.1 	imposed under Minnesota Statutes, chapter 289A, except for the
59.2 	penalty for intentional disregard of law or rules imposed under
59.3 	Minnesota Statutes, section 289A.60, subdivision 5, which could
59.4 	have been assessed in connection with the use of an abusive tax
59.5 	avoidance transaction, for each taxable year for which the
59.6 	taxpayer elects to participate in the Minnesota tax shelter
59.7 	voluntary compliance initiative, to the extent those penalties
59.8 	are a result of underreporting of tax liabilities attributable
59.9 	to the use of abusive tax avoidance transactions, for which a
59.10 	participating person files an amended return in compliance with
59.11 	paragraph (b).
59.12 	(h) No criminal action shall be brought against a taxpayer
59.13 	for the taxable years reported under the Minnesota tax shelter
59.14 	voluntary compliance initiative with respect to the issues for
59.15 	which a taxpayer voluntarily complies under this chapter.

59.16 	Sec. 5. COMMISSIONER ORDERS AND PENALTIES.
 59.17 	After December 31, 2005, the commissioner of revenue may
59.18 	issue an order of assessment within the time period permitted
59.19 	under Minnesota Statutes, section 289A.38, upon an amended
59.20 	return filed under this chapter for an underreported amount of
59.21 	tax, may impose penalties on an underreported amount of tax on
59.22 	an amended return filed under this chapter, or initiate a
59.23 	criminal action against any person based on any underreported
59.24 	amount of tax on an amended return filed under this chapter.
59.25 	A penalty is imposed upon any person who:
59.26 	(1) is not ineligible to file an amended return pursuant to
59.27 	this chapter;
59.28 	(2) has engaged in abusive tax shelter transactions; and 
59.29 	(3) fails to voluntarily amend their tax returns for each
59.30 	taxable year for which an amended return may be filed and the
59.31 	person underreported income attributable to an abusive tax
59.32 	shelter transaction.
59.33 	The penalty is equal to 200 percent of the underreported tax
59.34 	that is attributable to the abusive tax shelter transaction.

59.35 	ARTICLE 5
59.36 	MISCELLANEOUS

60.1 	Section 1. CITY AID PAYMENTS.
 60.2 	In 2005 and 2006, market value credit reimbursements for
60.3 	each city payable under Minnesota Statutes, section 273.1384,
60.4 	are reduced by the dollar amount of the 2003 reduction in market
60.5 	value credit reimbursements for that city due to Laws 2003,
60.6 	First Special Session chapter 21, article 5, section 12.  No
60.7 	city's market value credit reimbursements are reduced to less
60.8 	than zero under this section.  To the extent sufficient
60.9 	information is available on each payment date, the commissioner
60.10 	shall pay the annual 2005 and 2006 market value credit
60.11 	reimbursement amounts, after reduction under this section, to
60.12 	cities in equal installments on the dates specified in Minnesota
60.13 	Statutes, section 273.1384.

60.14 	EFFECTIVE DATE. This section is effective the day
60.15 	following final enactment.

60.16 	Sec. 2. TAX RELIEF ACCOUNT TRANSFER.
 60.17 	On November 1, 2005, the commissioner of finance shall
60.18 	transfer the balance in the tax relief account under Minnesota
60.19 	Statutes, section 16A.1522, subdivision 4, but not to exceed
60.20 	$39,445,000, to the general fund.