1.1 	A bill for an act
1.2 	relating to taxation; changing accelerated sales tax, cigarette and tobacco tax, and 
1.3 	liquor tax liability; creating Surplus Lines Association of Minnesota; changing 
1.4 	the rent percentage for purposes of property tax refund; abolishing political 
1.5 	contribution refund; creating a tax debtor matching system; requiring certain tax 
1.6 	withholding by contractors; changing income apportionment; providing income 
1.7 	tax subtractions for certain retirement pay for service in the armed forces and for 
1.8 	certain compensation for active duty performed in the state; modifying taxation 
1.9 	of foreign operating corporations; providing a regional investment credit; 
1.10 	providing a direct sales tax exemption for small businesses; providing income 
1.11 	tax additions; changing the computation of unrefunded gas tax on all-terrain 
1.12 	vehicles; reducing the general sales and use tax rate; modifying definition of 
1.13 	retail sale and other sales and use tax definitions; modifying job opportunity 
1.14 	building zone duration limits; imposing levy limits; providing tax base 
1.15 	adjustments; providing transition aid for certain local governments; conforming 
1.16 	to certain changes in the Internal Revenue Code; appropriating money; amending 
1.17 	Minnesota Statutes 2006, sections 60A.196; 116J.03, by adding a subdivision; 
1.18 	270A.03, subdivision 7; 270B.085, by adding a subdivision; 275.70, subdivision 
1.19 	5, by adding a subdivision; 275.71, subdivisions 1, 2, 4, 5; 289A.02, subdivision 
1.20 	7; 289A.20, subdivision 4; 289A.50, subdivision 1; 289A.60, subdivision 15; 
1.21 	290.01, subdivisions 6, 6b, 19a, 19c, 19d; 290.06, subdivision 2c, by adding 
1.22 	a subdivision; 290.091, subdivision 2; 290.191, subdivisions 5, 6; 290.92, by 
1.23 	adding a subdivision; 290A.03, subdivisions 11, 13; 291.005, subdivision 
1.24 	1; 296A.18, subdivision 4; 297A.61, subdivision 4, by adding subdivisions; 
1.25 	297A.63, subdivision 1; 297A.67, subdivision 8; 297B.02, subdivision 1; 
1.26 	297F.09, subdivision 10; 297G.09, subdivision 9; 469.312, subdivision 5; 
1.27 	Minnesota Statutes 2007 Supplement, sections 290.01, subdivisions 19, 19b, 31; 
1.28 	290A.03, subdivision 15; 297A.62, subdivision 1; proposing coding for new law 
1.29 	in Minnesota Statutes, chapters 13B; 60A; 116J; repealing Minnesota Statutes 
1.30 	2006, sections 10A.322, subdivision 4; 290.06, subdivision 23; 295.60.
1.31 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.32 	Section 1. [13B.07] TAX DEBTOR DATA MATCHES.
1.33 		Subdivision 1.Definitions. The definitions in this subdivision apply to this section.
2.1 	(a) "Account" means demand deposit account, checking account, negotiable order of 
2.2 	withdrawal account, savings account, time deposit account, money market mutual fund 
2.3 	account, or certificate of deposit account, and any funds or property held by a financial 
2.4 	institution, as defined in paragraph (e).
2.5 	(b) "Account information" means the type of account, the account number, whether 
2.6 	the account is singly or jointly owned, and in the case of jointly owned accounts the name 
2.7 	and address of the nondebtor account owner if available.
2.8 	(c) "Commissioner" means the commissioner of revenue.
2.9 	(d) "Debtor" means a person whose property is subject to a tax lien and a notice of 
2.10 	lien has been filed by the commissioner as provided by section 270C.63, subdivision 2.
2.11 	(e) "Financial institution" means any of the following that do business in this state:
2.12 	(1) federal or state commercial banks and federal or state savings banks, including 
2.13 	savings and loan associations and cooperative banks;
2.14 	(2) federal and state chartered credit unions;
2.15 	(3) benefit associations;
2.16 	(4) life insurance companies;
2.17 	(5) safe deposit companies;
2.18 	(6) money market mutual funds; or
2.19 	(7) a similar entity that holds property or maintains accounts reflecting property 
2.20 	belonging to others.
2.21 	(f) "Person" means a person as defined in section 270C.01, subdivision 6.
2.22 		Subd. 2.Data match system established. The commissioner shall establish a 
2.23 	process for the comparison of account information data held by financial institutions with 
2.24 	the Department of Revenue's database of debtors. The commissioner shall inform the 
2.25 	financial industry of the requirements of this section and the means by which financial 
2.26 	institutions can comply.
2.27 		Subd. 3.Duty to provide data. Within 30 days of a request by the commissioner, 
2.28 	a financial institution shall provide to the commissioner the name, address, and account 
2.29 	information for each debtor who maintains an account at the financial institution. The 
2.30 	commissioner may request from a financial institution the data concerning any debtor 
2.31 	not more than four times a year.
2.32 		Subd. 4.Method to provide data. The commissioner must provide an electronic 
2.33 	list of debtors to the financial institution that includes debtors' name, address, and if an 
2.34 	individual, the last four digits of the Social Security number. The financial institution must 
2.35 	compare that data to the data maintained at the financial institution to identify which of the 
2.36 	listed debtors maintains an account at the financial institution.
3.1 		Subd. 5.Means to provide data. A financial institution must provide the required 
3.2 	data in encrypted form by secure electronic means authorized by the commissioner.
3.3 		Subd. 6.Access to data. (a) With regard to data on debtors provided by the 
3.4 	commissioner to a financial institution under subdivision 4, the financial institution shall 
3.5 	retain the reported information only until the financial institution's database is compared 
3.6 	against the commissioner's database. Data that does not pertain to an account holder at 
3.7 	the financial institution must be immediately destroyed, and no retention or publication 
3.8 	of that data shall be made by the financial institution. None of the data provided by the 
3.9 	commissioner may be used for solicitation or other commercial purposes by the financial 
3.10 	institutions or other commercial entities.
3.11 	(b) All account information provided by a financial institution that pertains to a 
3.12 	debtor listed in the commissioner's database must be incorporated into the commissioner's 
3.13 	database. Access to that data is governed by chapters 13 and 270B. Notwithstanding 
3.14 	section 16D.06, data collected pursuant to this section is available for the collection of 
3.15 	delinquent taxes only and is not available for other debt collection activities undertaken by 
3.16 	the state.
3.17 		Subd. 7.Fees. A financial institution may charge and collect a fee from the 
3.18 	commissioner for providing account information to the commissioner. The commissioner 
3.19 	may pay a financial institution up to $150 each quarter. The commissioner shall develop 
3.20 	procedures for the financial institutions to charge and collect the fee. Payment of the fee 
3.21 	is limited by the amount of the appropriation for this purpose. If the appropriation is 
3.22 	insufficient, or if fund availability in the fourth quarter would allow payments for actual 
3.23 	costs in excess of $150, the commissioner shall prorate the available funds among the 
3.24 	financial institutions that have submitted a claim for the fee. No financial institution shall 
3.25 	charge or collect a fee that exceeds its actual costs of complying with this section.
3.26 		Subd. 8.Failure to respond to request for information. The commissioner shall 
3.27 	send a written notice of noncompliance to a financial institution that fails to respond to a 
3.28 	first written request for information under this section. The notice must be sent by certified 
3.29 	mail and must explain the requirements of this section and advise the financial institution 
3.30 	of the penalty for noncompliance. A financial institution that receives a second notice of 
3.31 	noncompliance is subject to a civil penalty of $1,000 for its failure to comply. A financial 
3.32 	institution that continues to fail to comply with this section is subject to a civil penalty of 
3.33 	$5,000 for the third and each subsequent failure to comply. These penalties are imposed 
3.34 	and collected under section 270C.33, subdivision 4, paragraph (a), clause (5).
4.1 		Subd. 9.Confidentiality. A financial institution furnishing a report to the 
4.2 	commissioner under this section is prohibited from disclosing to a debtor that the name of 
4.3 	the debtor has been received from or furnished to the commissioner.
4.4 		Subd. 10.Immunity. A financial institution that provides or reasonably attempts to 
4.5 	provide information to the commissioner in compliance with this section is not liable to 
4.6 	any person for disclosing the information or for taking any other action in good faith as 
4.7 	authorized by this section.
4.8 		Subd. 11.Civil action for unauthorized disclosure by financial institution. (a) 
4.9 	An account holder may bring a civil action in district court against a financial institution 
4.10 	for unauthorized disclosure of data received from the commissioner under subdivision 4. 
4.11 	A financial institution found to have violated this subdivision shall be liable as provided in 
4.12 	paragraph (b) or (c).
4.13 	(b) Any financial institution that willfully and maliciously discloses data received 
4.14 	from the commissioner under subdivision 4 is liable to that account holder in an amount 
4.15 	equal to the sum of:
4.16 	(1) any actual damages sustained by the account holder as a result of the disclosure; 
4.17 	and
4.18 	(2) in the case of any successful action to enforce any liability under this subdivision, 
4.19 	the costs of the action taken plus reasonable attorney fees as determined by the court.
4.20 	(c) Any financial institution that negligently discloses data received from the 
4.21 	commissioner under subdivision 4 is liable to that account holder in an amount equal to 
4.22 	any actual damages sustained by the account holder as a result of the disclosure.
4.23 	(d) A financial institution shall not be held liable in any action brought under this 
4.24 	subdivision if the financial institution shows, by a preponderance of evidence, that the 
4.25 	disclosure was not intentional and resulted from a bona fide error notwithstanding the 
4.26 	maintenance of procedures reasonably adopted to avoid any error.
4.27 		Subd. 12.Financial institution data match and payment of fees and 
4.28 	administrative costs. $250,000 is appropriated annually from the general fund to the 
4.29 	commissioner of revenue to make payments to financial institutions in exchange for 
4.30 	performing data matches between account information held by financial institutions and 
4.31 	the commissioner's database of tax debtors as authorized by section 13B.07, subdivision 7. 
4.32 	$110,000 is appropriated annually from the general fund to the commissioner of revenue 
4.33 	for the costs of administering the data match system under section 13B.07.

4.34 	EFFECTIVE DATE. This section is effective July 1, 2008.

5.1 	Sec. 2. Minnesota Statutes 2006, section 60A.196, is amended to read:
5.2 	60A.196 DEFINITIONS.
5.3 	Unless the context otherwise requires, the following terms have the meanings given 
5.4 	them for the purposes of sections 60A.195 to 60A.209: 
5.5 	(a) "Surplus lines insurance" means insurance placed with an insurer permitted 
5.6 	to transact the business of insurance in this state only pursuant to sections 60A.195 to 
5.7 	60A.209. 
5.8 	(b) "Eligible surplus lines insurer" means an insurer recognized as eligible to write 
5.9 	insurance business under sections 60A.195 to 60A.209 but not licensed by any other 
5.10 	Minnesota law to transact the business of insurance. 
5.11 	(c) "Ineligible surplus lines insurer" means an insurer not recognized as an eligible 
5.12 	surplus lines insurer pursuant to sections 60A.195 to 60A.209 and not licensed by any 
5.13 	other Minnesota law to transact the business of insurance. "Ineligible surplus lines 
5.14 	insurer" includes a risk retention group as defined under the Liability Risk Retention 
5.15 	Act, Public Law 99-563. 
5.16 	(d) "Surplus lines licensee" or "licensee" means a person licensed under sections 
5.17 	60A.195 to 60A.209 to place insurance with an eligible or ineligible surplus lines insurer. 
5.18 	(e) "Association" means an association registered under section 60A.208. 
5.19 	(f) "Alien insurer" means any insurer which is incorporated or otherwise organized 
5.20 	outside of the United States.
5.21 	(g) "Insurance laws" means chapters 60 to 79 inclusive.
5.22 	(h) "Stamping" means electronically assigning a unique identifying number that is 
5.23 	specific to a submitted policy, contract, or insurance document.

5.24 	EFFECTIVE DATE. This section is effective the day following final enactment 
5.25 	and applies to policies written or renewed on or after that date.

5.26 	Sec. 3. [60A.2085] SURPLUS LINES ASSOCIATION OF MINNESOTA.
5.27 		Subdivision 1.Association created; duties. There is hereby created a nonprofit 
5.28 	association to be known as the Surplus Lines Association of Minnesota. All surplus lines 
5.29 	licensees are members of this association. Section 60A.208, subdivision 5, does not apply 
5.30 	to the provisions of this section. The association shall perform its functions under the 
5.31 	plan of operation established under subdivision 3 and must exercise its powers through a 
5.32 	board of directors established under subdivision 2. The association shall be authorized 
5.33 	and have the duty to:
6.1 	(1) receive, record, and stamp all surplus lines insurance documents that surplus 
6.2 	lines licensees are required to file with the association;
6.3 	(2) prepare and deliver monthly to the commissioners of revenue and commerce a 
6.4 	report regarding surplus lines business. The report must include a list of all the business 
6.5 	procured during the preceding month, in the form the commissioners prescribe;
6.6 	(3) educate its members regarding the surplus lines law of this state including 
6.7 	insurance tax responsibilities and the rules and regulations of the commissioners of 
6.8 	revenue and commerce relative to surplus lines insurance;
6.9 	(4) communicate with organizations of agents, brokers, and admitted insurers with 
6.10 	respect to the proper use of the surplus lines market;
6.11 	(5) employ and retain persons necessary to carry out the duties of the association;
6.12 	(6) borrow money necessary to effect the purposes of the association;
6.13 	(7) enter contracts necessary to effect the purposes of the association;
6.14 	(8) provide other services to its members that are incidental or related to the 
6.15 	purposes of the association; and
6.16 	(9) take other actions reasonably required to implement the provisions of this section.
6.17 		Subd. 2.Board of directors. (a) The commissioner shall appoint an interim board 
6.18 	of five directors within 30 days of enactment of this section. The interim board must:
6.19 	(1) establish a plan of operation within 60 days after the appointment of the interim 
6.20 	board;
6.21 	(2) create a stamping office that is operational no later than December 31, 2008; and 
6.22 	(3) conduct an election for a board of directors by the membership after December 
6.23 	31, 2008, and no later than one year after the appointment of the interim board.
6.24 	(b) Once the responsibilities of the interim board in paragraph (a) are fulfilled, the 
6.25 	association shall function through a board of directors composed of the following:
6.26 	(1) one director appointed by the commissioner of revenue;
6.27 	(2) one director appointed by the commissioner of commerce; and
6.28 	(3) at least five but no more than seven directors elected by the members. The 
6.29 	elected directors must be members of the association.
6.30 	Directors may serve until their successors are appointed or elected and their terms 
6.31 	are completed as outlined in the plan of operation.
6.32 		Subd. 3.Plan of operation. (a) The plan of operation shall provide for the 
6.33 	formation, operation, and governance of the association. The plan of operation must 
6.34 	provide for the election of a board of directors by the members of the association. The 
6.35 	board of directors shall elect officers as provided for in the plan of operation. The plan 
6.36 	of operation shall establish the manner of voting and may weigh each member's vote to 
7.1 	reflect the annual surplus lines insurance premium written by the member. Members 
7.2 	employed by the same or affiliated employers may consolidate their premiums written 
7.3 	and delegate an individual officer or partner to represent the member in the exercise of 
7.4 	association affairs, including service on the board of directors.
7.5 	(b) The plan of operation shall provide for an independent audit once each year of all 
7.6 	the books and records of the association and a report of such independent audit shall be 
7.7 	made to the board of directors, the commissioner of revenue, and the commissioner of 
7.8 	commerce, with a copy made available to each member to review at the association office.
7.9 	(c) The plan of operation and any amendments to the plan of operation shall be 
7.10 	submitted to the commissioner and shall be effective upon approval in writing by the 
7.11 	commissioner. The association and all members shall comply with the plan of operation or 
7.12 	any amendments to it. Failure to comply with the plan of operation or any amendments 
7.13 	shall constitute a violation for which the commissioner may issue an order requiring 
7.14 	discontinuance of the violation.
7.15 	(d) If the interim board of directors fails to submit a suitable plan of operation 
7.16 	within 60 days following the creation of the interim board, or if at any time thereafter the 
7.17 	association fails to submit required amendments to the plan, the commissioner may submit 
7.18 	to the association a plan of operation or amendments to the plan, which the association 
7.19 	must follow. The plan of operation or amendments submitted by the commissioner shall 
7.20 	continue in force until amended by the commissioner or superseded by a plan of operation 
7.21 	or amendment submitted by the association and approved by the commissioner. A plan 
7.22 	of operation or an amendment submitted by the commissioner constitutes an order of 
7.23 	the commissioner.
7.24 		Subd. 4.Reporting requirement. The association shall file with the commissioner:
7.25 	(1) a copy of its plan of operation and any amendments to it;
7.26 	(2) a current list of its members revised at least annually; and
7.27 	(3) the name and address of a member of the board residing in this state upon 
7.28 	whom notices or orders of the commissioner or processes issued at the direction of the 
7.29 	commissioner may be served.
7.30 		Subd. 5.Examination. The commissioner shall, at such times as deemed necessary, 
7.31 	make or cause to be made an examination of the association. The officers, managers, 
7.32 	agents, and employees of the association may be examined at any time, under oath, and 
7.33 	shall exhibit all books, records, accounts, documents, or agreements governing its method 
7.34 	of operation. The commissioner shall furnish a copy of the examination report to the 
7.35 	association. If the commissioner finds the association to be in violation of this section, the 
7.36 	commissioner may issue an order requiring the discontinuance of the violation.
8.1 		Subd. 6.Immunity. There shall be no liability on the part of and no causes of action 
8.2 	of any nature shall arise against the association, its directors, officers, agents, or employees 
8.3 	for any action taken or omitted by them in the performance of their powers and duties 
8.4 	under this section, absent gross negligence or willful misconduct.
8.5 		Subd. 7.Stamping fee. The services performed by the association shall be 
8.6 	funded by a stamping fee assessed for each premium-bearing document submitted to 
8.7 	the association. The stamping fee shall be established by the board of directors of the 
8.8 	association from time to time. The stamping fee shall be paid by the insured to the surplus 
8.9 	lines licensee and remitted electronically to the association by the surplus lines licensee.
8.10 		Subd. 8.Data classification. Unless otherwise classified by statute, a temporary 
8.11 	classification under section 13.06, or federal law, information obtained by the 
8.12 	commissioner from the association is public, except that any data identifying insureds is 
8.13 	private data on individuals or nonpublic data as defined in section 13.02, subdivisions 
8.14 	9 and 12.

8.15 	EFFECTIVE DATE. This section is effective the day following final enactment 
8.16 	and applies to policies written or renewed on or after that date.

8.17 	Sec. 4. [60A.2086] LICENSEE'S DUTY TO SUBMIT DOCUMENTS; PENALTY.
8.18 		Subdivision 1.Submission of documents to the Surplus Lines Association 
8.19 	of Minnesota; certification. (a) A surplus lines licensee shall submit every insurance 
8.20 	policy or contract issued under the licensee's license to the Surplus Lines Association of 
8.21 	Minnesota for recording and stamping. The submission and stamping must be effected 
8.22 	through electronic means. The submission must include:
8.23 	(1) the name of the insured;
8.24 	(2) a description and location of the insured property or risk;
8.25 	(3) the amount insured;
8.26 	(4) the gross premiums charged or returned;
8.27 	(5) the name of the surplus lines insurer from whom coverage has been procured;
8.28 	(6) the kind or kinds of insurance procured; and
8.29 	(7) the amount of premium subject to tax.
8.30 	(b) The submission of insurance policies or contracts to the Surplus Lines 
8.31 	Association of Minnesota constitutes a certification by the surplus lines licensee, or by the 
8.32 	insurance producer who presented the risk to the surplus lines licensee for placement as a 
8.33 	surplus lines risk, that the insurance policies or contracts were procured in accordance 
8.34 	with sections 60A.195 to 60A.209.
9.1 		Subd. 2.Stamping requirement; penalty. (a) It shall be unlawful for an insurance 
9.2 	agent, broker, or surplus lines licensee to deliver in this state any surplus lines insurance 
9.3 	policy or contract unless the insurance document is stamped by the association. A 
9.4 	licensee's failure to comply with the requirements of this subdivision shall not affect the 
9.5 	validity of the coverage.
9.6 	(b) Any insurance agent, broker, or surplus lines licensee who delivers in this state 
9.7 	any insurance policy or contract that has not been stamped by the association shall be 
9.8 	subject to a penalty payable to the commissioner as follows:
9.9 	(1) $50 for delivery of the first unstamped policy;
9.10 	(2) $250 for delivery of a second unstamped policy; and
9.11 	(3) $1,000 per policy for delivery of any additional unstamped policies.

9.12 	EFFECTIVE DATE. This section is effective January 1, 2009, and applies to 
9.13 	policies written or renewed after December 31, 2008.

9.14 	Sec. 5. Minnesota Statutes 2006, section 116J.03, is amended by adding a subdivision 
9.15 	to read:
9.16 		Subd. 4.Targeted rural opportunity community. "Targeted rural opportunity 
9.17 	community" means a city or township in a county that either lost population from 1980 
9.18 	to 2000 according to the decennial census or had an unemployment rate higher than the 
9.19 	Minnesota state annual average in 2006 according to local area unemployment statistics 
9.20 	published by the Department of Employment and Economic Development.

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

9.22 	Sec. 6. [116J.8746] REGIONAL EMERGING BUSINESS INVESTMENT TAX 
9.23 	CREDIT.
9.24 		Subdivision 1.Definitions. For the purposes of this section, the following terms 
9.25 	have the meanings given:
9.26 	(1) "Qualifying small business" means a business that:
9.27 	(i) for a business with five or more employees, pays wages and benefits, measured 
9.28 	on a full-time equivalent basis, to 75 percent or more of its employees in excess of the first 
9.29 	five employees, equal to 110 percent of the federal poverty level for a family of four;
9.30 	(ii) is engaged in, or is committed to engage in, biotechnology, technology, 
9.31 	manufacturing, agriculture, processing or assembling products, conducting research and 
9.32 	development, or developing a new product or business process;
10.1 	(iii) is not engaged in real estate development, insurance, banking, lobbying, political 
10.2 	consulting, wholesale or retail trade, leisure, hospitality, construction, or professional 
10.3 	services provided by attorneys, accountants, business consultants, physicians, or health 
10.4 	care consultants;
10.5 	(iv) has its headquarters in Minnesota;
10.6 	(v) employs at least 51 percent of the business's employees in Minnesota;
10.7 	(vi) has less than 100 employees;
10.8 	(vii) has less than $2,000,000 in annual gross sales receipts for the previous year;
10.9 	(viii) is not a subsidiary or an affiliate of a business which employs more than 100 
10.10 	employees or has total gross sales receipts for the previous year of more than $2,000,000, 
10.11 	computed by aggregating all of the employees and gross sales receipts of the business 
10.12 	entities affiliated with the business;
10.13 	(ix) has not previously received more than $2,000,000 in private equity investments; 
10.14 	and
10.15 	(x) has not previously received more than $1,000,000 in investments that have 
10.16 	qualified for and received tax credits under this section; and
10.17 	(2) "regional investment fund" means a pooled investment fund that:
10.18 	(i) invests in qualifying small businesses located in the region of the state that is the 
10.19 	focus of the fund;
10.20 	(ii) is organized as a limited liability company or other pass-through entity; and
10.21 	(iii) has no fewer than five separate investors, each not owning more than 25 percent 
10.22 	of the outstanding ownership interests in the fund. For purposes of determining the number 
10.23 	of investors and the ownership interest of an investor under this clause, the ownership 
10.24 	interests of an investor include those of the investor's spouse, children, and siblings, and 
10.25 	any of the investor's corporations, partnerships, and trusts in which the investor has a 
10.26 	controlling equity interest or in which the investor exercises management control.
10.27 		Subd. 2.Credit allowed. A taxpayer is allowed a credit against the tax imposed 
10.28 	under chapter 290 for qualifying investment made in the year by a qualifying regional 
10.29 	investment fund. The credit equals 25 percent of the taxpayer's investment made in the 
10.30 	fund, but not to exceed the lesser of:
10.31 	(1) the liability for tax under chapter 290, including the applicable alternative 
10.32 	minimum tax, but excluding the minimum fee under section 290.0922; and 
10.33 	(2) the amount of the certificate provided to the taxpayer by the fund under 
10.34 	subdivision 4.
11.1 		Subd. 3.Qualifying regional investment fund requirements. (a) To be certified as 
11.2 	a qualifying regional investment fund for purposes of this section, a regional investment 
11.3 	fund must:
11.4 	(1) have a minimum of two-thirds of the regional investment fund's members, 
11.5 	shareholders, or partners be residents of the region that is the focus of the fund; and
11.6 	(2) allocate at least 60 percent of the funds it invests, or plans to invest, to qualified 
11.7 	small businesses within the region. 
11.8 	(b) Investments from other regional investment funds into the qualified small 
11.9 	business shall count toward the allocation in paragraph (a), clause (2). 
11.10 	(c) Investments in the fund may consist of equity investments or notes that pay 
11.11 	interest or other fixed amounts, or any combination of both, as the fund's governing body 
11.12 	determines appropriate. 
11.13 		Subd. 4.Certification of funds. (a) Regional investment funds may apply to the 
11.14 	commissioner of employment and economic development for certification as a qualified 
11.15 	regional investment fund. The application must be in the form and made under the 
11.16 	procedures specified by the commissioner. 
11.17 	(b) The commissioner may certify up to 20 funds. Certifications shall be awarded 
11.18 	in the order of qualifying applications received. Of the 20 funds, the commissioner may 
11.19 	certify no more than three funds that seek business investment opportunities that may 
11.20 	qualify for and receive tax credits under this section in more than 15 Minnesota counties, 
11.21 	no more than five funds that seek business investment opportunities that may qualify for 
11.22 	and receive tax credits under this section in the metropolitan area, as defined in section 
11.23 	473.121, subdivision 2, and no more than three funds that seek business investment 
11.24 	opportunities that may qualify for and receive tax credits under this subdivision in the 
11.25 	same region of the state.
11.26 	(c) The commissioner may provide certificates entitling investors in a certified fund 
11.27 	to credits under this provision of up to $600,000 for each fund upon receipt of a report 
11.28 	from the fund showing evidence of compliance with the agreement under subdivision 5, 
11.29 	including investment in a qualifying small business. The commissioner may not issue a 
11.30 	total amount of certificates for all funds of more than $3,000,000 in fiscal year 2009. If 
11.31 	less than $3,000,000 of certificates are issued, the remaining funds may be carried over 
11.32 	to the following two fiscal years. Certificates may only be issued for investments made 
11.33 	by qualified funds in qualifying small businesses located in the region in which the fund 
11.34 	operates.
11.35 		Subd. 5.Fund requirements. The commissioner of employment and economic 
11.36 	development shall enter into an agreement with each of the qualifying regional investment 
12.1 	funds certified under subdivision 4. Each agreement must include a provision requiring 
12.2 	the qualifying regional investment fund to report on the employment figures, wages, 
12.3 	and benefits paid by the businesses in which investments are made, or are planned to 
12.4 	be made, and a provision stating the specific manner in which the regional investment 
12.5 	fund agrees to satisfy the requirement to allocate at least 60 percent of its investments to 
12.6 	qualified small businesses within the region. The commissioner shall define "region" 
12.7 	for the purposes of this section.
12.8 		Subd. 6.Limitations. The taxpayer must claim the credit in the same tax year 
12.9 	for which the fund receives the tax credit certificate under subdivision 4. The credit is 
12.10 	allowed only for investments made in qualifying regional investment funds after the 
12.11 	fund is certified by the commissioner of employment and economic development under 
12.12 	subdivision 4.
12.13 		Subd. 7.Statement of credit share. Each fund must provide to each investor 
12.14 	a statement indicating the investor's share of the credit certified to the fund under 
12.15 	subdivision 4, based on the investor's pro rata investment in the fund at the time of the 
12.16 	investment in the qualified small business.
12.17 		Subd. 8.Carryover. If the amount of the credit under this section for any taxable 
12.18 	year exceeds the amount reached under subdivision 2, clause (1), the excess is a credit 
12.19 	carryover to each of the ten succeeding taxable years. The entire amount of the excess 
12.20 	unused credit for the taxable year must be carried first to the earliest of the taxable years 
12.21 	to which the credit may be carried. The amount of the unused credit that may be added 
12.22 	under this paragraph may not exceed the taxpayer's liability for tax, less the credit for 
12.23 	the taxable year.
12.24 		Subd. 9.False applications. (a) A taxpayer who has received a credit under this act 
12.25 	for an investment in a regional investment fund forfeits any unused credit if:
12.26 	(1) the regional investment fund does not meet the conditions of subdivision 3; or
12.27 	(2) the small business invested in by the fund does not meet the conditions in 
12.28 	subdivision 1.
12.29 	(b) Any credits taken on a tax return shall be returned to the commissioner of 
12.30 	revenue as an underpayment of tax, if:
12.31 	(1) the regional investment fund does not meet the conditions of subdivision 3; or
12.32 	(2) the small business invested in by the fund does not meet the conditions in 
12.33 	subdivision 1.

12.34 	EFFECTIVE DATE. This section is effective July 1, 2008, for taxable years 
12.35 	beginning after December 31, 2007, and only applies to investments made after the fund 
12.36 	has been certified by the commissioner of employment and economic development.

13.1 	Sec. 7. Minnesota Statutes 2006, section 270A.03, subdivision 7, is amended to read:
13.2 		Subd. 7.Refund. "Refund" means an individual income tax refund or political 
13.3 	contribution refund, pursuant to chapter 290, or a property tax credit or refund, pursuant to 
13.4 	chapter 290A, or a sustainable forest tax payment to a claimant under chapter 290C.
13.5 	For purposes of this chapter, lottery prizes, as set forth in section 349A.08, 
13.6 	subdivision 8, and amounts granted to persons by the legislature on the recommendation 
13.7 	of the joint senate-house of representatives Subcommittee on Claims shall be treated 
13.8 	as refunds. 
13.9 	In the case of a joint property tax refund payable to spouses under chapter 290A, 
13.10 	the refund shall be considered as belonging to each spouse in the proportion of the total 
13.11 	refund that equals each spouse's proportion of the total income determined under section 
13.12 	290A.03, subdivision 3. In the case of a joint income tax refund under chapter 289A, the 
13.13 	refund shall be considered as belonging to each spouse in the proportion of the total 
13.14 	refund that equals each spouse's proportion of the total taxable income determined under 
13.15 	section 290.01, subdivision 29. The commissioner shall remit the entire refund to the 
13.16 	claimant agency, which shall, upon the request of the spouse who does not owe the debt, 
13.17 	determine the amount of the refund belonging to that spouse and refund the amount to 
13.18 	that spouse. For court fines, fees, and surcharges and court-ordered restitution under 
13.19 	section 611A.04, subdivision 2, the notice provided by the commissioner of revenue under 
13.20 	section 270A.07, subdivision 2, paragraph (b), serves as the appropriate legal notice 
13.21 	to the spouse who does not owe the debt. 

13.22 	EFFECTIVE DATE. This section is effective for political contribution refund 
13.23 	claims based on contributions that are made after June 30, 2008.

13.24 	Sec. 8. Minnesota Statutes 2006, section 270B.085, is amended by adding a 
13.25 	subdivision to read:
13.26 		Subd. 4.Data matching program for collection of tax debts. The commissioner 
13.27 	may disclose the name, last known address, and Social Security number of taxpayers who 
13.28 	owe delinquent state taxes for the purpose of administering the tax debt data matching 
13.29 	program with financial institutions under section 13B.07.

13.30 	EFFECTIVE DATE. This section is effective July 1, 2008.

13.31 	Sec. 9. Minnesota Statutes 2006, section 275.70, subdivision 5, is amended to read:
13.32 		Subd. 5.Special levies. "Special levies" means those portions of ad valorem taxes 
13.33 	levied by a local governmental unit for the following purposes or in the following manner:
14.1 	(1) to pay the costs of the principal and interest on bonded indebtedness or to 
14.2 	reimburse for the amount of liquor store revenues used to pay the principal and interest 
14.3 	due on municipal liquor store bonds in the year preceding the year for which the levy 
14.4 	limit is calculated;
14.5 	(2) to pay the costs of principal and interest on certificates of indebtedness issued for 
14.6 	any corporate purpose except for the following:
14.7 	(i) tax anticipation or aid anticipation certificates of indebtedness;
14.8 	(ii) certificates of indebtedness issued under sections 298.28 and 298.282;
14.9 	(iii) certificates of indebtedness used to fund current expenses or to pay the costs of 
14.10 	extraordinary expenditures that result from a public emergency; or
14.11 	(iv) certificates of indebtedness used to fund an insufficiency in tax receipts or 
14.12 	an insufficiency in other revenue sources;
14.13 	(3) to provide for the bonded indebtedness portion of payments made to another 
14.14 	political subdivision of the state of Minnesota;
14.15 	(4) to fund payments made to the Minnesota State Armory Building Commission 
14.16 	under section 193.145, subdivision 2, to retire the principal and interest on armory 
14.17 	construction bonds;
14.18 	(5) property taxes approved by voters which are levied against the referendum 
14.19 	market value as provided under section 275.61;
14.20 	(6) to fund matching requirements needed to qualify for federal or state grants or 
14.21 	programs to the extent that either (i) the matching requirement exceeds the matching 
14.22 	requirement in calendar year 2001 2008, or (ii) it is a new matching requirement that 
14.23 	did not exist prior to 2002 2009;
14.24 	(7) to pay the expenses reasonably and necessarily incurred in preparing for or 
14.25 	repairing the effects of natural disaster including the occurrence or threat of widespread 
14.26 	or severe damage, injury, or loss of life or property resulting from natural causes, in 
14.27 	accordance with standards formulated by the Emergency Services Division of the state 
14.28 	Department of Public Safety, as allowed by the commissioner of revenue under section 
14.29 	275.74, subdivision 2;
14.30 	(8) pay amounts required to correct an error in the levy certified to the county 
14.31 	auditor by a city or county in a levy year, but only to the extent that when added to the 
14.32 	preceding year's levy it is not in excess of an applicable statutory, special law or charter 
14.33 	limitation, or the limitation imposed on the governmental subdivision by sections 275.70
14.34 	to 275.74 in the preceding levy year;
14.35 	(9) to pay an abatement under section 469.1815;
15.1 	(10) to pay any costs attributable to increases in the employer contribution rates 
15.2 	under chapter 353 that are effective after June 30, 2001 2008;
15.3 	(11) to pay the operating or maintenance costs of a county jail as authorized in 
15.4 	section 641.01 or 641.262, or of a correctional facility as defined in section 241.021, 
15.5 	subdivision 1, paragraph (f), to the extent that the county can demonstrate to the 
15.6 	commissioner of revenue that the amount has been included in the county budget as 
15.7 	a direct result of a rule, minimum requirement, minimum standard, or directive of the 
15.8 	Department of Corrections, or to pay the operating or maintenance costs of a regional jail 
15.9 	as authorized in section 641.262. For purposes of this clause, a district court order is 
15.10 	not a rule, minimum requirement, minimum standard, or directive of the Department of 
15.11 	Corrections. If the county utilizes this special levy, except to pay operating or maintenance 
15.12 	costs of a new regional jail facility under sections 641.262 to 641.264 which will not 
15.13 	replace an existing jail facility, any amount levied by the county in the previous levy year 
15.14 	for the purposes specified under this clause and included in the county's previous year's 
15.15 	levy limitation computed under section 275.71, shall be deducted from the levy limit 
15.16 	base under section 275.71, subdivision 2, when determining the county's current year 
15.17 	levy limitation. The county shall provide the necessary information to the commissioner 
15.18 	of revenue for making this determination;
15.19 	(12) to pay for operation of a lake improvement district, as authorized under section 
15.20 	103B.555. If the county utilizes this special levy, any amount levied by the county in the 
15.21 	previous levy year for the purposes specified under this clause and included in the county's 
15.22 	previous year's levy limitation computed under section 275.71 shall be deducted from 
15.23 	the levy limit base under section 275.71, subdivision 2, when determining the county's 
15.24 	current year levy limitation. The county shall provide the necessary information to the 
15.25 	commissioner of revenue for making this determination;
15.26 	(13) to repay a state or federal loan used to fund the direct or indirect required 
15.27 	spending by the local government due to a state or federal transportation project or other 
15.28 	state or federal capital project. This authority may only be used if the project is not a 
15.29 	local government initiative;
15.30 	(14) to pay for court administration costs as required under section 273.1398, 
15.31 	subdivision 4b, less the (i) county's share of transferred fines and fees collected by the 
15.32 	district courts in the county for in the prior calendar year 2001 and (ii) the aid amount 
15.33 	certified to be paid to the county in 2004 under section 273.1398, subdivision 4c; however, 
15.34 	for taxes levied to pay for these costs in the year in which the court financing is transferred 
15.35 	to the state, the amount under this clause is limited to the amount of aid the county is 
15.36 	certified to receive under section 273.1398, subdivision 4a;
16.1 	(15) to fund a police or firefighters relief association as required under section 69.77
16.2 	to the extent that the required amount exceeds the amount levied for this purpose in 2001
16.3 	the prior year;
16.4 	(16) for purposes of a storm sewer improvement district under section 444.20; and
16.5 	(17) to pay for the maintenance and support of a city or county society for the 
16.6 	prevention of cruelty to animals under section 343.11. If the city or county uses this 
16.7 	special levy, any amount levied by the city or county in the previous levy year for the 
16.8 	purposes specified in this clause and included in the city's or county's previous year's levy 
16.9 	limit computed under section 275.71, must be deducted from the levy limit base under 
16.10 	section 275.71, subdivision 2, in determining the city's or county's current year levy limit.

16.11 	EFFECTIVE DATE. This section is effective for taxes payable in 2009 and 
16.12 	thereafter.

16.13 	Sec. 10. Minnesota Statutes 2006, section 275.70, is amended by adding a subdivision 
16.14 	to read:
16.15 		Subd. 7.Levy year. A reference in sections 275.70 to 275.74 to a "levy year," or a 
16.16 	year in which taxes are levied, refers to the year in which property tax levies are certified 
16.17 	under section 275.07 for taxes payable in the following year.

16.18 	EFFECTIVE DATE. This section is effective for taxes payable in 2009 and 
16.19 	thereafter.

16.20 	Sec. 11. Minnesota Statutes 2006, section 275.71, subdivision 1, is amended to read:
16.21 		Subdivision 1.Limit on levies. Notwithstanding any other provision of law or 
16.22 	municipal charter to the contrary which authorize ad valorem taxes in excess of the limits 
16.23 	established by sections 275.70 to 275.74, the provisions of this section sections 275.70 
16.24 	to 275.74 apply to local governmental units for all purposes other than those for which 
16.25 	special levies and special assessments are made. 

16.26 	EFFECTIVE DATE. This section is effective for taxes payable in 2009 and 
16.27 	thereafter.

16.28 	Sec. 12. Minnesota Statutes 2006, section 275.71, subdivision 2, is amended to read:
16.29 		Subd. 2.Levy limit base. The levy limit base for a local governmental unit for 
16.30 	taxes levied in 2003 2008 and thereafter is equal to its adjusted levy limit base in the 
16.31 	previous year, the amount it levied in the prior year subject to any adjustments under 
16.32 	section 275.72, plus any aid amounts received in 2003 under section 273.138 or 273.166, 
17.1 	minus the difference between its levy limit under subdivision 5 for taxes levied in 2002 
17.2 	and the amount it actually levied under that subdivision in that year, and certified property 
17.3 	tax replacement aid payable in 2003 under section 174.242 less the amounts it levied in 
17.4 	the prior year as special levies. For taxes levied in 2008 only, the amount of the reduction 
17.5 	for special levies may include amounts that could have been levied as special levies. 

17.6 	EFFECTIVE DATE. This section is effective for taxes payable in 2009 and 
17.7 	thereafter.

17.8 	Sec. 13. Minnesota Statutes 2006, section 275.71, subdivision 4, is amended to read:
17.9 		Subd. 4.Adjusted levy limit base. (a) For taxes levied in 2003 2008 and thereafter, 
17.10 	the adjusted levy limit base for a local government unit is equal to the levy limit base 
17.11 	computed under subdivisions subdivision 2 and 3 or section 275.72, reduced by 40 percent 
17.12 	of the difference between (1) the sum of 2003 certified aid payments, under sections 
17.13 	273.138, 273.1398 except for amounts certified under subdivision 4a, paragraph (b), 
17.14 	273.166, 477A.011 to 477A.03, 477A.06, and 477A.07, before any reduction under Laws 
17.15 	2003, First Special Session chapter 21, articles 5 and 6, and (2) the sum of the aids paid 
17.16 	in 2004 under those same sections, after any reductions in 2004 under Laws 2003, First 
17.17 	Special Session chapter 21, articles 5 and 6.
17.18 	(b) For taxes levied in 2003 only, the adjusted levy limit base is increased by 60 
17.19 	percent of the difference between a jurisdiction's market value credit in 2003 before any 
17.20 	reductions under Laws 2003, First Special Session chapter 21, articles 5 and 6, and its 
17.21 	market value credit in 2004 after reductions in Laws 2003, First Special Session chapter 
17.22 	21, articles 5 and 6. for that government unit for the same levy year, multiplied by the 
17.23 	sum of 100 percent plus:
17.24 	(1) the percentage increase in the number of households, if any, for the most recent 
17.25 	12-month period for which data is available; and
17.26 	(2) the lesser of (i) three percent or (ii) the percentage growth in the implicit price 
17.27 	deflator.

17.28 	EFFECTIVE DATE. This section is effective for taxes payable in 2009 and 
17.29 	thereafter.

17.30 	Sec. 14. Minnesota Statutes 2006, section 275.71, subdivision 5, is amended to read:
17.31 		Subd. 5.Property tax levy limit. For taxes levied in 2003 2008 and thereafter, the 
17.32 	property tax levy limit for a local governmental unit is equal to its adjusted levy limit base 
17.33 	determined under subdivision 4 plus any additional levy authorized under section 275.73, 
18.1 	which is levied against net tax capacity, reduced by the sum of (i) the total amount of aids 
18.2 	and reimbursements that the local governmental unit is certified to receive under sections 
18.3 	477A.011 to 477A.014, except for the increases in city aid bases in calendar year 2002 
18.4 	under section 477A.011, subdivision 36, paragraphs (l), (n), and (o), (ii) homestead and 
18.5 	agricultural aids it is certified to receive under section 273.1398, (iii) taconite aids under 
18.6 	sections 298.28 and 298.282 including any aid which was required to be placed in a 
18.7 	special fund for expenditure in the next succeeding year, (iv) temporary court aid under 
18.8 	section 273.1398, subdivision 4a, and (v) estimated payments to the local governmental 
18.9 	unit under section 272.029, adjusted for any error in estimation in the preceding year. 

18.10 	EFFECTIVE DATE. This section is effective for taxes payable in 2009 and 
18.11 	thereafter.

18.12 	Sec. 15. Minnesota Statutes 2006, section 289A.02, subdivision 7, is amended to read:
18.13 		Subd. 7.Internal Revenue Code. Unless specifically defined otherwise, "Internal 
18.14 	Revenue Code" means the Internal Revenue Code of 1986, as amended through May 18, 
18.15 	2006 February 13, 2008.

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

18.17 	Sec. 16. Minnesota Statutes 2006, section 289A.20, subdivision 4, is amended to read:
18.18 		Subd. 4.Sales and use tax. (a) The taxes imposed by chapter 297A are due and 
18.19 	payable to the commissioner monthly on or before the 20th day of the month following the 
18.20 	month in which the taxable event occurred, or following another reporting period as the 
18.21 	commissioner prescribes or as allowed under section 289A.18, subdivision 4, paragraph 
18.22 	(f) or (g), except that use taxes due on an annual use tax return as provided under section 
18.23 	289A.11, subdivision 1, are payable by April 15 following the close of the calendar year.
18.24 	(b) A vendor having a liability of $120,000 or more during a fiscal year ending June 
18.25 	30 must remit the June liability for the next year in the following manner:
18.26 	(1) Two business days before June 30 of the year, the vendor must remit 78 85
18.27 	percent of the estimated June liability to the commissioner.
18.28 	(2) On or before August 20 of the year, the vendor must pay any additional amount 
18.29 	of tax not remitted in June.
18.30 	(c) A vendor having a liability of:
18.31 	(1) $20,000 or more in the fiscal year ending June 30, 2005; or
18.32 	(2) $10,000 or more in the fiscal year ending June 30, 2006, and fiscal years 
18.33 	thereafter,
19.1 	must remit all liabilities on returns due for periods beginning in the subsequent calendar 
19.2 	year by electronic means on or before the 20th day of the month following the month in 
19.3 	which the taxable event occurred, or on or before the 20th day of the month following the 
19.4 	month in which the sale is reported under section 289A.18, subdivision 4, except for 78 85
19.5 	percent of the estimated June liability, which is due two business days before June 30. The 
19.6 	remaining amount of the June liability is due on August 20.

19.7 	EFFECTIVE DATE. This section is effective for sales tax payments in June 2009 
19.8 	and thereafter.

19.9 	Sec. 17. Minnesota Statutes 2006, section 289A.50, subdivision 1, is amended to read:
19.10 		Subdivision 1.General right to refund. (a) Subject to the requirements of this 
19.11 	section and section 289A.40, a taxpayer who has paid a tax in excess of the taxes lawfully 
19.12 	due and who files a written claim for refund will be refunded or credited the overpayment 
19.13 	of the tax determined by the commissioner to be erroneously paid.
19.14 	(b) The claim must specify the name of the taxpayer, the date when and the period 
19.15 	for which the tax was paid, the kind of tax paid, the amount of the tax that the taxpayer 
19.16 	claims was erroneously paid, the grounds on which a refund is claimed, and other 
19.17 	information relative to the payment and in the form required by the commissioner. An 
19.18 	income tax, estate tax, or corporate franchise tax return, or amended return claiming an 
19.19 	overpayment constitutes a claim for refund.
19.20 	(c) When, in the course of an examination, and within the time for requesting a 
19.21 	refund, the commissioner determines that there has been an overpayment of tax, the 
19.22 	commissioner shall refund or credit the overpayment to the taxpayer and no demand 
19.23 	is necessary. If the overpayment exceeds $1, the amount of the overpayment must 
19.24 	be refunded to the taxpayer. If the amount of the overpayment is less than $1, the 
19.25 	commissioner is not required to refund. In these situations, the commissioner does not 
19.26 	have to make written findings or serve notice by mail to the taxpayer.
19.27 	(d) If the amount allowable as a credit for withholding, estimated taxes, or dependent 
19.28 	care exceeds the tax against which the credit is allowable, the amount of the excess is 
19.29 	considered an overpayment. The refund allowed by section 290.06, subdivision 23, is also 
19.30 	considered an overpayment. The requirements of section 270C.33 do not apply to the 
19.31 	refunding of such an overpayment shown on the original return filed by a taxpayer.
19.32 	(e) If the entertainment tax withheld at the source exceeds by $1 or more the taxes, 
19.33 	penalties, and interest reported in the return of the entertainment entity or imposed by 
19.34 	section 290.9201, the excess must be refunded to the entertainment entity. If the excess is 
19.35 	less than $1, the commissioner need not refund that amount.
20.1 	(f) If the surety deposit required for a construction contract exceeds the liability of 
20.2 	the out-of-state contractor, the commissioner shall refund the difference to the contractor.
20.3 	(g) An action of the commissioner in refunding the amount of the overpayment does 
20.4 	not constitute a determination of the correctness of the return of the taxpayer.
20.5 	(h) There is appropriated from the general fund to the commissioner of revenue the 
20.6 	amount necessary to pay refunds allowed under this section.

20.7 	EFFECTIVE DATE. This section is effective for political contribution refund 
20.8 	claims based on contributions made after June 30, 2008.

20.9 	Sec. 18. Minnesota Statutes 2006, section 289A.60, subdivision 15, is amended to read:
20.10 		Subd. 15.Accelerated payment of June sales tax liability; penalty for 
20.11 	underpayment. For payments made after December 31, 2006 2008, if a vendor is 
20.12 	required by law to submit an estimation of June sales tax liabilities and 78 85 percent 
20.13 	payment by a certain date, the vendor shall pay a penalty equal to ten percent of the 
20.14 	amount of actual June liability required to be paid in June less the amount remitted in 
20.15 	June. The penalty must not be imposed, however, if the amount remitted in June equals 
20.16 	the lesser of 78 85 percent of the preceding May's liability or 78 85 percent of the average 
20.17 	monthly liability for the previous calendar year.

20.18 	EFFECTIVE DATE. This section is effective for sales tax payments in June 2009 
20.19 	and thereafter.

20.20 	Sec. 19. Minnesota Statutes 2006, section 290.01, subdivision 6, is amended to read:
20.21 		Subd. 6.Taxpayer. The term "taxpayer" means any person or corporation subject to 
20.22 	a tax imposed by this chapter. For purposes of section 290.06, subdivision 23, the term 
20.23 	"taxpayer" means an individual eligible to vote in Minnesota under section 201.014.

20.24 	EFFECTIVE DATE. This section is effective for political contribution refund 
20.25 	claims based on contributions made after June 30, 2008.

20.26 	Sec. 20. Minnesota Statutes 2006, section 290.01, subdivision 6b, is amended to read:
20.27 		Subd. 6b.Foreign operating corporation. The term "foreign operating 
20.28 	corporation," when applied to a corporation, means a domestic corporation with the 
20.29 	following characteristics:
20.30 	(1) it is part of a unitary business at least one member of which is taxable in this state;
20.31 	(2) it is not a foreign sales corporation under section 922 of the Internal Revenue 
20.32 	Code, as amended through December 31, 1999, for the taxable year;
21.1 	(3) either (i) the average of the percentages of its property and payrolls, including 
21.2 	the pro rata share of its unitary partnerships' property and payrolls, assigned to locations 
21.3 	outside the United States, where the United States includes the District of Columbia and 
21.4 	excludes the commonwealth of Puerto Rico and possessions of the United States, as 
21.5 	determined under section 290.191 or 290.20, is 80 percent or more; or (ii) it has in effect a 
21.6 	valid election under section 936 of the Internal Revenue Code; or (ii) at least 80 percent 
21.7 	of the gross income from all sources of the corporation in the tax year is active foreign 
21.8 	business income; and
21.9 	(4) it has $1,000,000 of payroll and $2,000,000 of property, as determined under 
21.10 	section 290.191 or 290.20, that are located outside the United States. If the domestic 
21.11 	corporation does not have payroll as determined under section 290.191 or 290.20, but it 
21.12 	or its partnerships have paid $1,000,000 for work, performed directly for the domestic 
21.13 	corporation or the partnerships, outside the United States, then paragraph (3)(i) shall not 
21.14 	require payrolls to be included in the average calculation for purposes of this subdivision, 
21.15 	active foreign business income means gross income that is (i) derived from sources 
21.16 	without the United States, as defined in subtitle A, chapter 1, subchapter N, part 1, of the 
21.17 	Internal Revenue Code; and (ii) attributable to the active conduct of a trade or business in 
21.18 	a foreign country.

21.19 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
21.20 	December 31, 2007.

21.21 	Sec. 21. Minnesota Statutes 2007 Supplement, section 290.01, subdivision 19, is 
21.22 	amended to read:
21.23 		Subd. 19.Net income. The term "net income" means the federal taxable income, 
21.24 	as defined in section 63 of the Internal Revenue Code of 1986, as amended through the 
21.25 	date named in this subdivision, incorporating the federal effective dates of changes to the 
21.26 	Internal Revenue Code and any elections made by the taxpayer in accordance with the 
21.27 	Internal Revenue Code in determining federal taxable income for federal income tax 
21.28 	purposes, and with the modifications provided in subdivisions 19a to 19f.
21.29 	In the case of a regulated investment company or a fund thereof, as defined in section 
21.30 	851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment 
21.31 	company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, 
21.32 	except that:
21.33 	(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal 
21.34 	Revenue Code does not apply;
22.1 	(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal 
22.2 	Revenue Code must be applied by allowing a deduction for capital gain dividends and 
22.3 	exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal 
22.4 	Revenue Code; and
22.5 	(3) the deduction for dividends paid must also be applied in the amount of any 
22.6 	undistributed capital gains which the regulated investment company elects to have treated 
22.7 	as provided in section 852(b)(3)(D) of the Internal Revenue Code.
22.8 	The net income of a real estate investment trust as defined and limited by section 
22.9 	856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust 
22.10 	taxable income as defined in section 857(b)(2) of the Internal Revenue Code.
22.11 	The net income of a designated settlement fund as defined in section 468B(d) of 
22.12 	the Internal Revenue Code means the gross income as defined in section 468B(b) of the 
22.13 	Internal Revenue Code.
22.14 	The Internal Revenue Code of 1986, as amended through May 18, 2006 February 
22.15 	13, 2008, shall be in effect for taxable years beginning after December 31, 1996, and 
22.16 	before January 1, 2006, and for taxable years beginning after December 31, 2006. The 
22.17 	Internal Revenue Code of 1986, as amended through December 31, 2006, is in effect for 
22.18 	taxable years beginning after December 31, 2005, and before January 1, 2007.
22.19 	Except as otherwise provided, references to the Internal Revenue Code in 
22.20 	subdivisions 19 to 19f mean the code in effect for purposes of determining net income for 
22.21 	the applicable year.

22.22 	EFFECTIVE DATE. This section is effective the day following final enactment 
22.23 	except the changes incorporated by federal changes are effective at the same time as the 
22.24 	changes were effective for federal purposes.

22.25 	Sec. 22. Minnesota Statutes 2006, section 290.01, subdivision 19a, is amended to read:
22.26 		Subd. 19a.Additions to federal taxable income. For individuals, estates, and 
22.27 	trusts, there shall be added to federal taxable income:
22.28 	(1)(i) interest income on obligations of any state other than Minnesota or a political 
22.29 	or governmental subdivision, municipality, or governmental agency or instrumentality 
22.30 	of any state other than Minnesota exempt from federal income taxes under the Internal 
22.31 	Revenue Code or any other federal statute; and
22.32 	(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue 
22.33 	Code, except the portion of the exempt-interest dividends derived from interest income 
22.34 	on obligations of the state of Minnesota or its political or governmental subdivisions, 
22.35 	municipalities, governmental agencies or instrumentalities, but only if the portion of the 
23.1 	exempt-interest dividends from such Minnesota sources paid to all shareholders represents 
23.2 	95 percent or more of the exempt-interest dividends that are paid by the regulated 
23.3 	investment company as defined in section 851(a) of the Internal Revenue Code, or the 
23.4 	fund of the regulated investment company as defined in section 851(g) of the Internal 
23.5 	Revenue Code, making the payment; and
23.6 	(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal 
23.7 	government described in section 7871(c) of the Internal Revenue Code shall be treated as 
23.8 	interest income on obligations of the state in which the tribe is located;
23.9 	(2) the amount of income or sales and use taxes paid or accrued within the taxable 
23.10 	year under this chapter and the amount of taxes based on net income paid or sales and use 
23.11 	taxes paid to any other state or to any province or territory of Canada, to the extent allowed 
23.12 	as a deduction under section 63(d) of the Internal Revenue Code, but the addition may not 
23.13 	be more than the amount by which the itemized deductions as allowed under section 63(d) 
23.14 	of the Internal Revenue Code exceeds the amount of the standard deduction as defined 
23.15 	in section 63(c) of the Internal Revenue Code. For the purpose of this paragraph, the 
23.16 	disallowance of itemized deductions under section 68 of the Internal Revenue Code of 
23.17 	1986, income or sales and use tax is the last itemized deduction disallowed;
23.18 	(3) the capital gain amount of a lump sum distribution to which the special tax under 
23.19 	section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
23.20 	(4) the amount of income taxes paid or accrued within the taxable year under this 
23.21 	chapter and taxes based on net income paid to any other state or any province or territory 
23.22 	of Canada, to the extent allowed as a deduction in determining federal adjusted gross 
23.23 	income. For the purpose of this paragraph, income taxes do not include the taxes imposed 
23.24 	by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
23.25 	(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
23.26 	other than expenses or interest used in computing net interest income for the subtraction 
23.27 	allowed under subdivision 19b, clause (1);
23.28 	(6) the amount of a partner's pro rata share of net income which does not flow 
23.29 	through to the partner because the partnership elected to pay the tax on the income under 
23.30 	section 6242(a)(2) of the Internal Revenue Code;
23.31 	(7) 80 percent of the depreciation deduction allowed under section 168(k) of the 
23.32 	Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that 
23.33 	in the taxable year generates a deduction for depreciation under section 168(k) and the 
23.34 	activity generates a loss for the taxable year that the taxpayer is not allowed to claim for 
23.35 	the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is 
23.36 	limited to excess of the depreciation claimed by the activity under section 168(k) over the 
24.1 	amount of the loss from the activity that is not allowed in the taxable year. In succeeding 
24.2 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
24.3 	under section 168(k) is allowed;
24.4 	(8) 80 percent of the amount by which the deduction allowed by section 179 of the 
24.5 	Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 
24.6 	Revenue Code of 1986, as amended through December 31, 2003;
24.7 	(9) to the extent deducted in computing federal taxable income, the amount of the 
24.8 	deduction allowable under section 199 of the Internal Revenue Code; and
24.9 	(10) the exclusion allowed under section 139A of the Internal Revenue Code for 
24.10 	federal subsidies for prescription drug plans.;
24.11 	(11) the amount deducted for qualified tuition and related expenses under section 
24.12 	222 of the Internal Revenue Code, to the extent deducted from gross income; and
24.13 	(12) the amount deducted for certain expenses of elementary and secondary school 
24.14 	teachers under section 62(a)(2)(D) of the Internal Revenue Code, to the extent deducted 
24.15 	from gross income.

24.16 	EFFECTIVE DATE. This section is retroactively effective for taxable years 
24.17 	beginning after December 31, 2006.

24.18 	Sec. 23. Minnesota Statutes 2007 Supplement, section 290.01, subdivision 19b, 
24.19 	is amended to read:
24.20 		Subd. 19b.Subtractions from federal taxable income. For individuals, estates, 
24.21 	and trusts, there shall be subtracted from federal taxable income:
24.22 	(1) net interest income on obligations of any authority, commission, or 
24.23 	instrumentality of the United States to the extent includable in taxable income for federal 
24.24 	income tax purposes but exempt from state income tax under the laws of the United States;
24.25 	(2) if included in federal taxable income, the amount of any overpayment of income 
24.26 	tax to Minnesota or to any other state, for any previous taxable year, whether the amount 
24.27 	is received as a refund or as a credit to another taxable year's income tax liability;
24.28 	(3) the amount paid to others, less the amount used to claim the credit allowed under 
24.29 	section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten 
24.30 	to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and 
24.31 	transportation of each qualifying child in attending an elementary or secondary school 
24.32 	situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a 
24.33 	resident of this state may legally fulfill the state's compulsory attendance laws, which 
24.34 	is not operated for profit, and which adheres to the provisions of the Civil Rights Act 
24.35 	of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or 
25.1 	tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause, 
25.2 	"textbooks" includes books and other instructional materials and equipment purchased 
25.3 	or leased for use in elementary and secondary schools in teaching only those subjects 
25.4 	legally and commonly taught in public elementary and secondary schools in this state. 
25.5 	Equipment expenses qualifying for deduction includes expenses as defined and limited in 
25.6 	section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional 
25.7 	books and materials used in the teaching of religious tenets, doctrines, or worship, the 
25.8 	purpose of which is to instill such tenets, doctrines, or worship, nor does it include books 
25.9 	or materials for, or transportation to, extracurricular activities including sporting events, 
25.10 	musical or dramatic events, speech activities, driver's education, or similar programs. For 
25.11 	purposes of the subtraction provided by this clause, "qualifying child" has the meaning 
25.12 	given in section 32(c)(3) of the Internal Revenue Code;
25.13 	(4) income as provided under section 290.0802;
25.14 	(5) to the extent included in federal adjusted gross income, income realized on 
25.15 	disposition of property exempt from tax under section 290.491;
25.16 	(6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E) 
25.17 	of the Internal Revenue Code in determining federal taxable income by an individual 
25.18 	who does not itemize deductions for federal income tax purposes for the taxable year, an 
25.19 	amount equal to 50 percent of the excess of charitable contributions over $500 allowable 
25.20 	as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and 
25.21 	under the provisions of Public Law 109-1;
25.22 	(7) for taxable years beginning before January 1, 2008, the amount of the federal 
25.23 	small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code 
25.24 	which is included in gross income under section 87 of the Internal Revenue Code;
25.25 	(8) for individuals who are allowed a federal foreign tax credit for taxes that do not 
25.26 	qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover 
25.27 	of subnational foreign taxes for the taxable year, but not to exceed the total subnational 
25.28 	foreign taxes reported in claiming the foreign tax credit. For purposes of this clause, 
25.29 	"federal foreign tax credit" means the credit allowed under section 27 of the Internal 
25.30 	Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed 
25.31 	under section 904(c) of the Internal Revenue Code minus national level foreign taxes to 
25.32 	the extent they exceed the federal foreign tax credit;
25.33 	(9) in each of the five tax years immediately following the tax year in which an 
25.34 	addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case 
25.35 	of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth 
25.36 	of the delayed depreciation. For purposes of this clause, "delayed depreciation" means 
26.1 	the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or 
26.2 	subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the 
26.3 	positive value of any net operating loss under section 172 of the Internal Revenue Code 
26.4 	generated for the tax year of the addition. The resulting delayed depreciation cannot be 
26.5 	less than zero;
26.6 	(10) job opportunity building zone income as provided under section 469.316;
26.7 	(11) to the extent included in federal taxable income, the amount of compensation 
26.8 	paid to members of the Minnesota National Guard or other reserve components of the 
26.9 	United States military for active service performed in Minnesota, excluding compensation 
26.10 	for services performed under the Active Guard Reserve (AGR) program. For purposes of 
26.11 	this clause, "active service" means (i) state active service as defined in section 190.05, 
26.12 	subdivision 5a, clause (1); or (ii) federally funded state active service as defined in 
26.13 	section 190.05, subdivision 5b; or (iii) federal active service as defined in section 190.05, 
26.14 	subdivision 5c, but "active service" excludes services performed exclusively for purposes 
26.15 	of basic combat training, advanced individual training, annual training, and periodic 
26.16 	inactive duty training; special training periodically made available to reserve members; 
26.17 	and service performed in accordance with section 190.08, subdivision 3;
26.18 	(12) the amount of compensation paid to Minnesota residents who are members 
26.19 	of the armed forces of the United States or United Nations for active duty performed 
26.20 	outside Minnesota;
26.21 	(13) (12) an amount, not to exceed $10,000, equal to qualified expenses related to a 
26.22 	qualified donor's donation, while living, of one or more of the qualified donor's organs 
26.23 	to another person for human organ transplantation. For purposes of this clause, "organ" 
26.24 	means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow; 
26.25 	"human organ transplantation" means the medical procedure by which transfer of a human 
26.26 	organ is made from the body of one person to the body of another person; "qualified 
26.27 	expenses" means unreimbursed expenses for both the individual and the qualified donor 
26.28 	for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses 
26.29 	may be subtracted under this clause only once; and "qualified donor" means the individual 
26.30 	or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An 
26.31 	individual may claim the subtraction in this clause for each instance of organ donation for 
26.32 	transplantation during the taxable year in which the qualified expenses occur;
26.33 	(14) (13) in each of the five tax years immediately following the tax year in which an 
26.34 	addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a 
26.35 	shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the 
26.36 	addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the 
27.1 	case of a shareholder of a corporation that is an S corporation, minus the positive value of 
27.2 	any net operating loss under section 172 of the Internal Revenue Code generated for the 
27.3 	tax year of the addition. If the net operating loss exceeds the addition for the tax year, a 
27.4 	subtraction is not allowed under this clause;
27.5 	(15) (14) to the extent included in federal taxable income, compensation paid to a 
27.6 	nonresident who is a service member as defined in United States Code, title 10, section 
27.7 	101(a)(5), for military service as defined in the Service Member Civil Relief Act, Public 
27.8 	Law 108-189, section 101(2); and
27.9 	(16) (15) international economic development zone income as provided under 
27.10 	section 469.325.; and
27.11 	(16) to the extent included in federal taxable income, a percentage of compensation 
27.12 	received from a pension or other retirement pay from the government for service in the 
27.13 	armed forces of the United States. For taxable years beginning after December 31, 2008, 
27.14 	and before January 1, 2010, the percentage is 25 percent up to a maximum subtraction 
27.15 	of $7,500; for taxable years beginning after December 31, 2009, and before January 1, 
27.16 	2011, the percentage is 50 percent up to a maximum subtraction of $15,000; for taxable 
27.17 	years beginning after December 31, 2010, and before January 1, 2012, the percentage is 
27.18 	75 percent up to a maximum subtraction of $22,500; and for taxable years beginning 
27.19 	after December 31, 2011, the percentage is 100 percent up to a maximum subtraction of 
27.20 	$30,000.

27.21 	EFFECTIVE DATE. This section is effective for tax years beginning after 
27.22 	December 31, 2008, except the change in clause (11) to the extent it applies to training 
27.23 	conducted outside of Minnesota is retroactive to taxable years beginning after December 
27.24 	31, 2004.

27.25 	Sec. 24. Minnesota Statutes 2006, section 290.01, subdivision 19c, is amended to read:
27.26 		Subd. 19c.Corporations; additions to federal taxable income. For corporations, 
27.27 	there shall be added to federal taxable income:
27.28 	(1) the amount of any deduction taken for federal income tax purposes for income, 
27.29 	excise, or franchise taxes based on net income or related minimum taxes, including but not 
27.30 	limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota, 
27.31 	another state, a political subdivision of another state, the District of Columbia, or any 
27.32 	foreign country or possession of the United States;
27.33 	(2) interest not subject to federal tax upon obligations of: the United States, its 
27.34 	possessions, its agencies, or its instrumentalities; the state of Minnesota or any other 
27.35 	state, any of its political or governmental subdivisions, any of its municipalities, or any 
28.1 	of its governmental agencies or instrumentalities; the District of Columbia; or Indian 
28.2 	tribal governments;
28.3 	(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal 
28.4 	Revenue Code;
28.5 	(4) the amount of any net operating loss deduction taken for federal income tax 
28.6 	purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss 
28.7 	deduction under section 810 of the Internal Revenue Code;
28.8 	(5) the amount of any special deductions taken for federal income tax purposes 
28.9 	under sections 241 to 247 and 965 of the Internal Revenue Code;
28.10 	(6) losses from the business of mining, as defined in section 290.05, subdivision 1, 
28.11 	clause (a), that are not subject to Minnesota income tax;
28.12 	(7) the amount of any capital losses deducted for federal income tax purposes under 
28.13 	sections 1211 and 1212 of the Internal Revenue Code;
28.14 	(8) the exempt foreign trade income of a foreign sales corporation under sections 
28.15 	921(a) and 291 of the Internal Revenue Code;
28.16 	(9) the amount of percentage depletion deducted under sections 611 through 614 and 
28.17 	291 of the Internal Revenue Code;
28.18 	(10) for certified pollution control facilities placed in service in a taxable year 
28.19 	beginning before December 31, 1986, and for which amortization deductions were elected 
28.20 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
28.21 	31, 1985, the amount of the amortization deduction allowed in computing federal taxable 
28.22 	income for those facilities;
28.23 	(11) the amount of any deemed dividend from a foreign operating corporation 
28.24 	determined pursuant to section 290.17, subdivision 4, paragraph (g). The deemed dividend 
28.25 	shall be reduced by the amount of the addition to income required by clauses (19), (20), 
28.26 	(21), and (22);
28.27 	(12) the amount of a partner's pro rata share of net income which does not flow 
28.28 	through to the partner because the partnership elected to pay the tax on the income under 
28.29 	section 6242(a)(2) of the Internal Revenue Code;
28.30 	(13) the amount of net income excluded under section 114 of the Internal Revenue 
28.31 	Code;
28.32 	(14) any increase in subpart F income, as defined in section 952(a) of the Internal 
28.33 	Revenue Code, for the taxable year when subpart F income is calculated without regard 
28.34 	to the provisions of section 103 of Public Law 109-222;
28.35 	(15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A) 
28.36 	and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer 
29.1 	has an activity that in the taxable year generates a deduction for depreciation under 
29.2 	section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year 
29.3 	that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed 
29.4 	under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the 
29.5 	depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the 
29.6 	amount of the loss from the activity that is not allowed in the taxable year. In succeeding 
29.7 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
29.8 	under section 168(k)(1)(A) and (k)(4)(A) is allowed;
29.9 	(16) 80 percent of the amount by which the deduction allowed by section 179 of the 
29.10 	Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 
29.11 	Revenue Code of 1986, as amended through December 31, 2003;
29.12 	(17) to the extent deducted in computing federal taxable income, the amount of the 
29.13 	deduction allowable under section 199 of the Internal Revenue Code; and
29.14 	(18) the exclusion allowed under section 139A of the Internal Revenue Code for 
29.15 	federal subsidies for prescription drug plans;
29.16 	(19) an amount equal to the interest and intangible expenses, losses, and costs paid, 
29.17 	accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit 
29.18 	of a corporation that is a member of the taxpayer's unitary business group that qualifies 
29.19 	as a foreign operating corporation. For purposes of this clause, intangible expenses and 
29.20 	costs include:
29.21 	(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition, 
29.22 	use, maintenance or management, ownership, sale, exchange, or any other disposition of 
29.23 	intangible property;
29.24 	(ii) losses incurred, directly or indirectly, from factoring transactions or discounting 
29.25 	transactions;
29.26 	(iii) royalty, patent, technical, and copyright fees;
29.27 	(iv) licensing fees; and
29.28 	(v) other similar expenses and costs.
29.29 	For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent 
29.30 	applications, trade names, trademarks, service marks, copyrights, mask works, trade 
29.31 	secrets, and similar types of intangible assets.
29.32 	This clause does not apply to any item of interest or intangible expenses or costs paid, 
29.33 	accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect 
29.34 	to such item of income to the extent that the income to the foreign operating corporation 
29.35 	is income from sources without the United States as defined in subtitle A, chapter 1, 
29.36 	subchapter N, part 1, of the Internal Revenue Code;
30.1 	(20) except as already included in the taxpayer's taxable income pursuant to clause 
30.2 	(19), any interest income and income generated from intangible property received or 
30.3 	accrued by a foreign operating corporation that is a member of the taxpayer's unitary 
30.4 	group. For purposes of this clause, income generated from intangible property includes:
30.5 	(i) income related to the direct or indirect acquisition, use, maintenance or 
30.6 	management, ownership, sale, exchange, or any other disposition of intangible property;
30.7 	(ii) income from factoring transactions or discounting transactions;
30.8 	(iii) royalty, patent, technical, and copyright fees;
30.9 	(iv) licensing fees; and
30.10 	(v) other similar income.
30.11 	For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent 
30.12 	applications, trade names, trademarks, service marks, copyrights, mask works, trade 
30.13 	secrets, and similar types of intangible assets. 
30.14 	This clause does not apply to any item of interest or intangible income received or accrued 
30.15 	by a foreign operating corporation with respect to such item of income to the extent that 
30.16 	the income is income from sources without the United States as defined in subtitle A, 
30.17 	chapter 1, subchapter N, part 1, of the Internal Revenue Code;
30.18 	(21) the dividends attributable to the income of a foreign operating corporation that 
30.19 	is a member of the taxpayer's unitary group in an amount that is equal to the dividends 
30.20 	paid deduction of a real estate investment trust under section 561(a) of the Internal 
30.21 	Revenue Code for amounts paid or accrued by the real estate investment trust to the 
30.22 	foreign operating corporation; and
30.23 	(22) the income of a foreign operating corporation that is a member of the taxpayer's 
30.24 	unitary group in an amount that is equal to gains derived from the sale of real or personal 
30.25 	property located in the United States.

30.26 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
30.27 	December 31, 2007.

30.28 	Sec. 25. Minnesota Statutes 2006, section 290.01, subdivision 19d, is amended to read:
30.29 		Subd. 19d.Corporations; modifications decreasing federal taxable income. For 
30.30 	corporations, there shall be subtracted from federal taxable income after the increases 
30.31 	provided in subdivision 19c:
30.32 	(1) the amount of foreign dividend gross-up added to gross income for federal 
30.33 	income tax purposes under section 78 of the Internal Revenue Code;
31.1 	(2) the amount of salary expense not allowed for federal income tax purposes due to 
31.2 	claiming the federal jobs credit under section 51 of the Internal Revenue Code;
31.3 	(3) any dividend (not including any distribution in liquidation) paid within the 
31.4 	taxable year by a national or state bank to the United States, or to any instrumentality of 
31.5 	the United States exempt from federal income taxes, on the preferred stock of the bank 
31.6 	owned by the United States or the instrumentality;
31.7 	(4) amounts disallowed for intangible drilling costs due to differences between 
31.8 	this chapter and the Internal Revenue Code in taxable years beginning before January 
31.9 	1, 1987, as follows:
31.10 	(i) to the extent the disallowed costs are represented by physical property, an amount 
31.11 	equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09, 
31.12 	subdivision 7, subject to the modifications contained in subdivision 19e; and
31.13 	(ii) to the extent the disallowed costs are not represented by physical property, an 
31.14 	amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section 
31.15 	290.09, subdivision 8;
31.16 	(5) the deduction for capital losses pursuant to sections 1211 and 1212 of the 
31.17 	Internal Revenue Code, except that:
31.18 	(i) for capital losses incurred in taxable years beginning after December 31, 1986, 
31.19 	capital loss carrybacks shall not be allowed;
31.20 	(ii) for capital losses incurred in taxable years beginning after December 31, 1986, 
31.21 	a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be 
31.22 	allowed;
31.23 	(iii) for capital losses incurred in taxable years beginning before January 1, 1987, a 
31.24 	capital loss carryback to each of the three taxable years preceding the loss year, subject to 
31.25 	the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
31.26 	(iv) for capital losses incurred in taxable years beginning before January 1, 1987, 
31.27 	a capital loss carryover to each of the five taxable years succeeding the loss year to the 
31.28 	extent such loss was not used in a prior taxable year and subject to the provisions of 
31.29 	Minnesota Statutes 1986, section 290.16, shall be allowed;
31.30 	(6) an amount for interest and expenses relating to income not taxable for federal 
31.31 	income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and 
31.32 	expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or 
31.33 	291 of the Internal Revenue Code in computing federal taxable income;
31.34 	(7) in the case of mines, oil and gas wells, other natural deposits, and timber for 
31.35 	which percentage depletion was disallowed pursuant to subdivision 19c, clause (11), a 
31.36 	reasonable allowance for depletion based on actual cost. In the case of leases the deduction 
32.1 	must be apportioned between the lessor and lessee in accordance with rules prescribed 
32.2 	by the commissioner. In the case of property held in trust, the allowable deduction must 
32.3 	be apportioned between the income beneficiaries and the trustee in accordance with the 
32.4 	pertinent provisions of the trust, or if there is no provision in the instrument, on the basis 
32.5 	of the trust's income allocable to each;
32.6 	(8) for certified pollution control facilities placed in service in a taxable year 
32.7 	beginning before December 31, 1986, and for which amortization deductions were elected 
32.8 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
32.9 	31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes 
32.10 	1986, section 290.09, subdivision 7;
32.11 	(9) amounts included in federal taxable income that are due to refunds of income, 
32.12 	excise, or franchise taxes based on net income or related minimum taxes paid by the 
32.13 	corporation to Minnesota, another state, a political subdivision of another state, the 
32.14 	District of Columbia, or a foreign country or possession of the United States to the extent 
32.15 	that the taxes were added to federal taxable income under section 290.01, subdivision 19c, 
32.16 	clause (1), in a prior taxable year;
32.17 	(10) 80 90 percent of royalties, fees, or other like income accrued or received from a 
32.18 	foreign operating corporation or a foreign corporation which is part of the same unitary 
32.19 	business as the receiving corporation, unless the income resulting from such payments or 
32.20 	accruals is income from sources within the United States as defined in subtitle A, chapter 
32.21 	1, subchapter N, part 1, of the Internal Revenue Code;
32.22 	(11) income or gains from the business of mining as defined in section 290.05, 
32.23 	subdivision 1, clause (a), that are not subject to Minnesota franchise tax;
32.24 	(12) the amount of disability access expenditures in the taxable year which are not 
32.25 	allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
32.26 	(13) the amount of qualified research expenses not allowed for federal income tax 
32.27 	purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that 
32.28 	the amount exceeds the amount of the credit allowed under section 290.068;
32.29 	(14) the amount of salary expenses not allowed for federal income tax purposes due 
32.30 	to claiming the Indian employment credit under section 45A(a) of the Internal Revenue 
32.31 	Code;
32.32 	(15) the amount of any refund of environmental taxes paid under section 59A of the 
32.33 	Internal Revenue Code;
32.34 	(16) for taxable years beginning before January 1, 2008, the amount of the federal 
32.35 	small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code 
32.36 	which is included in gross income under section 87 of the Internal Revenue Code;
33.1 	(17) for a corporation whose foreign sales corporation, as defined in section 922 
33.2 	of the Internal Revenue Code, constituted a foreign operating corporation during any 
33.3 	taxable year ending before January 1, 1995, and a return was filed by August 15, 1996, 
33.4 	claiming the deduction under section 290.21, subdivision 4, for income received from 
33.5 	the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of 
33.6 	income excluded under section 114 of the Internal Revenue Code, provided the income is 
33.7 	not income of a foreign operating company;
33.8 	(18) any decrease in subpart F income, as defined in section 952(a) of the Internal 
33.9 	Revenue Code, for the taxable year when subpart F income is calculated without regard 
33.10 	to the provisions of section 614 of Public Law 107-147;
33.11 	(19) in each of the five tax years immediately following the tax year in which an 
33.12 	addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of 
33.13 	the delayed depreciation. For purposes of this clause, "delayed depreciation" means the 
33.14 	amount of the addition made by the taxpayer under subdivision 19c, clause (15). The 
33.15 	resulting delayed depreciation cannot be less than zero; and
33.16 	(20) in each of the five tax years immediately following the tax year in which an 
33.17 	addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of the 
33.18 	amount of the addition.

33.19 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
33.20 	December 31, 2007.

33.21 	Sec. 26. Minnesota Statutes 2007 Supplement, section 290.01, subdivision 31, is 
33.22 	amended to read:
33.23 		Subd. 31.Internal Revenue Code. Unless specifically defined otherwise, for 
33.24 	taxable years beginning before January 1, 2006, and after December 31, 2006, "Internal 
33.25 	Revenue Code" means the Internal Revenue Code of 1986, as amended through May 18, 
33.26 	2006; and for taxable years beginning after December 31, 2005, and before January 1, 
33.27 	2007, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended 
33.28 	through December 31, 2006 February 13, 2008.

33.29 	EFFECTIVE DATE. This section is effective the day following final enactment 
33.30 	except the changes incorporated by federal changes are effective at the same time as the 
33.31 	changes were effective for federal purposes.

33.32 	Sec. 27. Minnesota Statutes 2006, section 290.06, subdivision 2c, is amended to read:
34.1 		Subd. 2c.Schedules of rates for individuals, estates, and trusts. (a) The income 
34.2 	taxes imposed by this chapter upon married individuals filing joint returns and surviving 
34.3 	spouses as defined in section 2(a) of the Internal Revenue Code must be computed by 
34.4 	applying to their taxable net income the following schedule of rates:
34.5 	(1) On the first $25,680, 5.35 percent;
34.6 	(2) On all over $25,680, but not over $102,030, 7.05 percent;
34.7 	(3) On all over $102,030, 7.85 percent.
34.8 	Married individuals filing separate returns, estates, and trusts must compute their 
34.9 	income tax by applying the above rates to their taxable income, except that the income 
34.10 	brackets will be one-half of the above amounts.
34.11 	(b) The income taxes imposed by this chapter upon unmarried individuals must be 
34.12 	computed by applying to taxable net income the following schedule of rates:
34.13 	(1) On the first $17,570, 5.35 percent;
34.14 	(2) On all over $17,570, but not over $57,710, 7.05 percent;
34.15 	(3) On all over $57,710, 7.85 percent.
34.16 	(c) The income taxes imposed by this chapter upon unmarried individuals qualifying 
34.17 	as a head of household as defined in section 2(b) of the Internal Revenue Code must be 
34.18 	computed by applying to taxable net income the following schedule of rates:
34.19 	(1) On the first $21,630, 5.35 percent;
34.20 	(2) On all over $21,630, but not over $86,910, 7.05 percent;
34.21 	(3) On all over $86,910, 7.85 percent.
34.22 	(d) In lieu of a tax computed according to the rates set forth in this subdivision, the 
34.23 	tax of any individual taxpayer whose taxable net income for the taxable year is less than 
34.24 	an amount determined by the commissioner must be computed in accordance with tables 
34.25 	prepared and issued by the commissioner of revenue based on income brackets of not 
34.26 	more than $100. The amount of tax for each bracket shall be computed at the rates set 
34.27 	forth in this subdivision, provided that the commissioner may disregard a fractional part of 
34.28 	a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
34.29 	(e) An individual who is not a Minnesota resident for the entire year must compute 
34.30 	the individual's Minnesota income tax as provided in this subdivision. After the 
34.31 	application of the nonrefundable credits provided in this chapter, the tax liability must 
34.32 	then be multiplied by a fraction in which:
34.33 	(1) the numerator is the individual's Minnesota source federal adjusted gross income 
34.34 	as defined in section 62 of the Internal Revenue Code and increased by the additions 
34.35 	required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), and (9), (11), 
34.36 	and (12), and reduced by the Minnesota assignable portion of the subtraction for United 
35.1 	States government interest under section 290.01, subdivision 19b, clause (1), and the 
35.2 	subtractions under section 290.01, subdivision 19b, clauses (9), (10), (11), (13), (14), (15), 
35.3 	and (16), after applying the allocation and assignability provisions of section 290.081, 
35.4 	clause (a), or 290.17; and
35.5 	(2) the denominator is the individual's federal adjusted gross income as defined in 
35.6 	section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in 
35.7 	section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), and (9), (11), and (12), and 
35.8 	reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1), (9), (10), 
35.9 	(11), (13), (14), (15), and (16).

35.10 	EFFECTIVE DATE. This section is effective retroactively for taxable years 
35.11 	beginning after December 31, 2006.

35.12 	Sec. 28. Minnesota Statutes 2006, section 290.06, is amended by adding a subdivision 
35.13 	to read:
35.14 		Subd. 34.Regional emerging business investment tax credit. A taxpayer is 
35.15 	allowed a credit as determined under section 116J.8746 against the tax imposed by this 
35.16 	chapter.

35.17 	EFFECTIVE DATE. This section is effective July 1, 2008, for taxable years 
35.18 	beginning after December 31, 2007, and only applies to investments made after the fund 
35.19 	has been certified by the commissioner of employment and economic development.

35.20 	Sec. 29. Minnesota Statutes 2006, section 290.091, subdivision 2, is amended to read:
35.21 		Subd. 2.Definitions. For purposes of the tax imposed by this section, the following 
35.22 	terms have the meanings given:
35.23 	(a) "Alternative minimum taxable income" means the sum of the following for 
35.24 	the taxable year:
35.25 	(1) the taxpayer's federal alternative minimum taxable income as defined in section 
35.26 	55(b)(2) of the Internal Revenue Code;
35.27 	(2) the taxpayer's itemized deductions allowed in computing federal alternative 
35.28 	minimum taxable income, but excluding:
35.29 	(i) the charitable contribution deduction under section 170 of the Internal Revenue 
35.30 	Code:
35.31 	(A) for taxable years beginning before January 1, 2006, to the extent that the 
35.32 	deduction exceeds 1.0 percent of adjusted gross income;
36.1 	(B) for taxable years beginning after December 31, 2005, to the full extent of the 
36.2 	deduction.
36.3 	For purposes of this clause, "adjusted gross income" has the meaning given in 
36.4 	section 62 of the Internal Revenue Code;
36.5 	(ii) the medical expense deduction;
36.6 	(iii) the casualty, theft, and disaster loss deduction; and
36.7 	(iv) the impairment-related work expenses of a disabled person;
36.8 	(3) for depletion allowances computed under section 613A(c) of the Internal 
36.9 	Revenue Code, with respect to each property (as defined in section 614 of the Internal 
36.10 	Revenue Code), to the extent not included in federal alternative minimum taxable income, 
36.11 	the excess of the deduction for depletion allowable under section 611 of the Internal 
36.12 	Revenue Code for the taxable year over the adjusted basis of the property at the end of the 
36.13 	taxable year (determined without regard to the depletion deduction for the taxable year);
36.14 	(4) to the extent not included in federal alternative minimum taxable income, the 
36.15 	amount of the tax preference for intangible drilling cost under section 57(a)(2) of the 
36.16 	Internal Revenue Code determined without regard to subparagraph (E);
36.17 	(5) to the extent not included in federal alternative minimum taxable income, the 
36.18 	amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and
36.19 	(6) the amount of addition required by section 290.01, subdivision 19a, clauses (7), 
36.20 	(8), and (9), (10), (11), and (12);
36.21 	less the sum of the amounts determined under the following:
36.22 	(1) interest income as defined in section 290.01, subdivision 19b, clause (1);
36.23 	(2) an overpayment of state income tax as provided by section 290.01, subdivision 
36.24 	19b, clause (2), to the extent included in federal alternative minimum taxable income;
36.25 	(3) the amount of investment interest paid or accrued within the taxable year on 
36.26 	indebtedness to the extent that the amount does not exceed net investment income, as 
36.27 	defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include 
36.28 	amounts deducted in computing federal adjusted gross income; and
36.29 	(4) amounts subtracted from federal taxable income as provided by section 290.01, 
36.30 	subdivision 19b, clauses (9) to (16).
36.31 	In the case of an estate or trust, alternative minimum taxable income must be 
36.32 	computed as provided in section 59(c) of the Internal Revenue Code.
36.33 	(b) "Investment interest" means investment interest as defined in section 163(d)(3) 
36.34 	of the Internal Revenue Code.
36.35 	(c) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable 
36.36 	income after subtracting the exemption amount determined under subdivision 3.
37.1 	(d) "Regular tax" means the tax that would be imposed under this chapter (without 
37.2 	regard to this section and section 290.032), reduced by the sum of the nonrefundable 
37.3 	credits allowed under this chapter.
37.4 	(e) "Net minimum tax" means the minimum tax imposed by this section.

37.5 	EFFECTIVE DATE. This section is retroactively effective for taxable years 
37.6 	beginning after December 31, 2006.

37.7 	Sec. 30. Minnesota Statutes 2006, section 290.191, subdivision 5, is amended to read:
37.8 		Subd. 5.Determination of sales factor. For purposes of this section, the following 
37.9 	rules apply in determining the sales factor.
37.10 	(a) The sales factor includes all sales, gross earnings, or receipts received in the 
37.11 	ordinary course of the business, except that the following types of income are not included 
37.12 	in the sales factor:
37.13 	(1) interest;
37.14 	(2) dividends;
37.15 	(3) sales of capital assets as defined in section 1221 of the Internal Revenue Code;
37.16 	(4) sales of property used in the trade or business, except sales of leased property of 
37.17 	a type which is regularly sold as well as leased;
37.18 	(5) sales of debt instruments as defined in section 1275(a)(1) of the Internal Revenue 
37.19 	Code or sales of stock; and
37.20 	(6) royalties, fees, or other like income of a type which qualify for a subtraction from 
37.21 	federal taxable income under section 290.01, subdivision 19d(10). 
37.22 	(b) Sales of tangible personal property are made within this state if the property is 
37.23 	received by a purchaser at a point within this state, and the taxpayer is taxable in this state, 
37.24 	regardless of the f.o.b. point, other conditions of the sale, or the ultimate destination 
37.25 	of the property.
37.26 	(c) Tangible personal property delivered to a common or contract carrier or foreign 
37.27 	vessel for delivery to a purchaser in another state or nation is a sale in that state or nation, 
37.28 	regardless of f.o.b. point or other conditions of the sale.
37.29 	(d) Notwithstanding paragraphs (b) and (c), when intoxicating liquor, wine, 
37.30 	fermented malt beverages, cigarettes, or tobacco products are sold to a purchaser who is 
37.31 	licensed by a state or political subdivision to resell this property only within the state of 
37.32 	ultimate destination, the sale is made in that state.
37.33 	(e) Sales made by or through a corporation that is qualified as a domestic 
37.34 	international sales corporation under section 992 of the Internal Revenue Code are not 
37.35 	considered to have been made within this state.
38.1 	(f) Sales, rents, royalties, and other income in connection with real property is 
38.2 	attributed to the state in which the property is located.
38.3 	(g) Receipts from the lease or rental of tangible personal property, including finance 
38.4 	leases and true leases, must be attributed to this state if the property is located in this 
38.5 	state and to other states if the property is not located in this state. Receipts from the 
38.6 	lease or rental of moving property including, but not limited to, motor vehicles, rolling 
38.7 	stock, aircraft, vessels, or mobile equipment are included in the numerator of the receipts 
38.8 	factor to the extent that the property is used in this state. The extent of the use of moving 
38.9 	property is determined as follows:
38.10 	(1) A motor vehicle is used wholly in the state in which it is registered.
38.11 	(2) The extent that rolling stock is used in this state is determined by multiplying 
38.12 	the receipts from the lease or rental of the rolling stock by a fraction, the numerator of 
38.13 	which is the miles traveled within this state by the leased or rented rolling stock and the 
38.14 	denominator of which is the total miles traveled by the leased or rented rolling stock.
38.15 	(3) The extent that an aircraft is used in this state is determined by multiplying the 
38.16 	receipts from the lease or rental of the aircraft by a fraction, the numerator of which is 
38.17 	the number of landings of the aircraft in this state and the denominator of which is the 
38.18 	total number of landings of the aircraft.
38.19 	(4) The extent that a vessel, mobile equipment, or other mobile property is used in 
38.20 	the state is determined by multiplying the receipts from the lease or rental of the property 
38.21 	by a fraction, the numerator of which is the number of days during the taxable year the 
38.22 	property was in this state and the denominator of which is the total days in the taxable year.
38.23 	(h) Royalties and other income not described in paragraph (a), clause (6), received 
38.24 	for the use of or for the privilege of using intangible property, including patents, 
38.25 	know-how, formulas, designs, processes, patterns, copyrights, trade names, service names, 
38.26 	franchises, licenses, contracts, customer lists, or similar items, must be attributed to the 
38.27 	state in which the property is used by the purchaser. If the property is used in more 
38.28 	than one state, the royalties or other income must be apportioned to this state pro rata 
38.29 	according to the portion of use in this state. If the portion of use in this state cannot be 
38.30 	determined, the royalties or other income must be excluded from both the numerator 
38.31 	and the denominator. Intangible property is used in this state if the purchaser uses the 
38.32 	intangible property or the rights therein in the regular course of its business operations in 
38.33 	this state, regardless of the location of the purchaser's customers.
38.34 	(i) Sales of intangible property are made within the state in which the property is 
38.35 	used by the purchaser. If the property is used in more than one state, the sales must be 
38.36 	apportioned to this state pro rata according to the portion of use in this state. If the 
39.1 	portion of use in this state cannot be determined, the sale must be excluded from both the 
39.2 	numerator and the denominator of the sales factor. Intangible property is used in this 
39.3 	state if the purchaser used the intangible property in the regular course of its business 
39.4 	operations in this state.
39.5 	(j) Receipts from the performance of services must be attributed to the state where 
39.6 	the services are received. For the purposes of this section, receipts from the performance 
39.7 	of services provided to a corporation, partnership, or trust may only be attributed to a state 
39.8 	where it has a fixed place of doing business. If the state where the services are received is 
39.9 	not readily determinable or is a state where the corporation, partnership, or trust receiving 
39.10 	the service does not have a fixed place of doing business, the services shall be deemed 
39.11 	to be received at the location of the office of the customer from which the services were 
39.12 	ordered in the regular course of the customer's trade or business. If the ordering office 
39.13 	cannot be determined, the services shall be deemed to be received at the office of the 
39.14 	customer to which the services are billed.
39.15 	(k) For the purposes of this subdivision and subdivision 6, paragraph (l), receipts 
39.16 	from management, distribution, or administrative services performed by a corporation 
39.17 	or trust for a fund of a corporation or trust regulated under United States Code, title 15, 
39.18 	sections 80a-1 through 80a-64, must be attributed to the state where the shareholder of 
39.19 	the fund resides. Under this paragraph, receipts for services attributed to shareholders are 
39.20 	determined on the basis of the ratio of: (1) the average of the outstanding shares in the 
39.21 	fund owned by shareholders residing within Minnesota at the beginning and end of each 
39.22 	year; and (2) the average of the total number of outstanding shares in the fund at the 
39.23 	beginning and end of each year. Residence of the shareholder, in the case of an individual, 
39.24 	is determined by the mailing address furnished by the shareholder to the fund. Residence 
39.25 	of the shareholder, when the shares are held by an insurance company as a depositor for 
39.26 	the insurance company policyholders, is the mailing address of the policyholders. In 
39.27 	the case of an insurance company holding the shares as a depositor for the insurance 
39.28 	company policyholders, if the mailing address of the policyholders cannot be determined 
39.29 	by the taxpayer, the receipts must be excluded from both the numerator and denominator. 
39.30 	Residence of other shareholders is the mailing address of the shareholder.

39.31 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
39.32 	December 31, 2007.

39.33 	Sec. 31. Minnesota Statutes 2006, section 290.191, subdivision 6, is amended to read:
40.1 		Subd. 6.Determination of receipts factor for financial institutions. (a) For 
40.2 	purposes of this section, the rules in this subdivision and subdivisionsubdivisions 5, 
40.3 	paragraph (k), and 8 apply in determining the receipts factor for financial institutions.
40.4 	(b) "Receipts" for this purpose means gross income, including net taxable gain on 
40.5 	disposition of assets, including securities and money market instruments, when derived 
40.6 	from transactions and activities in the regular course of the taxpayer's trade or business.
40.7 	(c) "Money market instruments" means federal funds sold and securities purchased 
40.8 	under agreements to resell, commercial paper, banker's acceptances, and purchased 
40.9 	certificates of deposit and similar instruments to the extent that the instruments are 
40.10 	reflected as assets under generally accepted accounting principles.
40.11 	(d) "Securities" means United States Treasury securities, obligations of United States 
40.12 	government agencies and corporations, obligations of state and political subdivisions, 
40.13 	corporate stock, bonds, and other securities, participations in securities backed by 
40.14 	mortgages held by United States or state government agencies, loan-backed securities and 
40.15 	similar investments to the extent the investments are reflected as assets under generally 
40.16 	accepted accounting principles.
40.17 	(e) Receipts from the lease or rental of real or tangible personal property, including 
40.18 	both finance leases and true leases, must be attributed to this state if the property is 
40.19 	located in this state. Receipts from the lease or rental of tangible personal property that is 
40.20 	characteristically moving property, including, but not limited to, motor vehicles, rolling 
40.21 	stock, aircraft, vessels, or mobile equipment are included in the numerator of the receipts 
40.22 	factor to the extent that the property is used in this state. The extent of the use of moving 
40.23 	property is determined as follows:
40.24 	(1) A motor vehicle is used wholly in the state in which it is registered.
40.25 	(2) The extent that rolling stock is used in this state is determined by multiplying 
40.26 	the receipts from the lease or rental of the rolling stock by a fraction, the numerator of 
40.27 	which is the miles traveled within this state by the leased or rented rolling stock and the 
40.28 	denominator of which is the total miles traveled by the leased or rented rolling stock.
40.29 	(3) The extent that an aircraft is used in this state is determined by multiplying the 
40.30 	receipts from the lease or rental of the aircraft by a fraction, the numerator of which is 
40.31 	the number of landings of the aircraft in this state and the denominator of which is the 
40.32 	total number of landings of the aircraft.
40.33 	(4) The extent that a vessel, mobile equipment, or other mobile property is used in 
40.34 	the state is determined by multiplying the receipts from the lease or rental of property by a 
40.35 	fraction, the numerator of which is the number of days during the taxable year the property 
40.36 	was in this state and the denominator of which is the total days in the taxable year.
41.1 	(f) Interest income and other receipts from assets in the nature of loans that are 
41.2 	secured primarily by real estate or tangible personal property must be attributed to this state 
41.3 	if the security property is located in this state under the principles stated in paragraph (e).
41.4 	(g) Interest income and other receipts from consumer loans not secured by real or 
41.5 	tangible personal property that are made to residents of this state, whether at a place 
41.6 	of business, by traveling loan officer, by mail, by telephone or other electronic means, 
41.7 	must be attributed to this state.
41.8 	(h) Interest income and other receipts from commercial loans and installment 
41.9 	obligations that are unsecured by real or tangible personal property or secured by 
41.10 	intangible property must be attributed to this state if the proceeds of the loan are to be 
41.11 	applied in this state. If it cannot be determined where the funds are to be applied, the 
41.12 	income and receipts are attributed to the state in which the office of the borrower from 
41.13 	which the application would be made in the regular course of business is located. If this 
41.14 	cannot be determined, the transaction is disregarded in the apportionment formula.
41.15 	(i) Interest income and other receipts from a participating financial institution's 
41.16 	portion of participation and syndication loans must be attributed under paragraphs (e) to 
41.17 	(h). A participation loan is an arrangement in which a lender makes a loan to a borrower 
41.18 	and then sells, assigns, or otherwise transfers all or a part of the loan to a purchasing 
41.19 	financial institution. A syndication loan is a loan transaction involving multiple financial 
41.20 	institutions in which all the lenders are named as parties to the loan documentation, are 
41.21 	known to the borrower, and have privity of contract with the borrower.
41.22 	(j) Interest income and other receipts including service charges from financial 
41.23 	institution credit card and travel and entertainment credit card receivables and credit 
41.24 	card holders' fees must be attributed to the state to which the card charges and fees are 
41.25 	regularly billed.
41.26 	(k) Merchant discount income derived from financial institution credit card holder 
41.27 	transactions with a merchant must be attributed to the state in which the merchant is 
41.28 	located. In the case of merchants located within and outside the state, only receipts from 
41.29 	merchant discounts attributable to sales made from locations within the state are attributed 
41.30 	to this state. It is presumed, subject to rebuttal, that the location of a merchant is the 
41.31 	address shown on the invoice submitted by the merchant to the taxpayer.
41.32 	(l) Receipts from the performance of fiduciary and other services must be attributed 
41.33 	to the state in which the services are received. For the purposes of this section, services 
41.34 	provided to a corporation, partnership, or trust must be attributed to a state where it has a 
41.35 	fixed place of doing business. If the state where the services are received is not readily 
41.36 	determinable or is a state where the corporation, partnership, or trust does not have a fixed 
42.1 	place of doing business, the services shall be deemed to be received at the location of the 
42.2 	office of the customer from which the services were ordered in the regular course of the 
42.3 	customer's trade or business. If the ordering office cannot be determined, the services shall 
42.4 	be deemed to be received at the office of the customer to which the services are billed.
42.5 	(m) Receipts from the issuance of travelers checks and money orders must be 
42.6 	attributed to the state in which the checks and money orders are purchased.
42.7 	(n) Receipts from investments of a financial institution in securities and from money 
42.8 	market instruments must be apportioned to this state based on the ratio that total deposits 
42.9 	from this state, its residents, including any business with an office or other place of 
42.10 	business in this state, its political subdivisions, agencies, and instrumentalities bear to the 
42.11 	total deposits from all states, their residents, their political subdivisions, agencies, and 
42.12 	instrumentalities. In the case of an unregulated financial institution subject to this section, 
42.13 	these receipts are apportioned to this state based on the ratio that its gross business income, 
42.14 	excluding such receipts, earned from sources within this state bears to gross business 
42.15 	income, excluding such receipts, earned from sources within all states. For purposes 
42.16 	of this subdivision, deposits made by this state, its residents, its political subdivisions, 
42.17 	agencies, and instrumentalities must be attributed to this state, whether or not the deposits 
42.18 	are accepted or maintained by the taxpayer at locations within this state.
42.19 	(o) A financial institution's interest in property described in section 290.015, 
42.20 	subdivision 3, paragraph (b), is included in the receipts factor in the same manner as assets 
42.21 	in the nature of securities or money market instruments are included in paragraph (n). 

42.22 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
42.23 	December 31, 2007.

42.24 	Sec. 32. Minnesota Statutes 2006, section 290.92, is amended by adding a subdivision 
42.25 	to read:
42.26 		Subd. 31.Payments to persons who are not employees. (a) For purposes of this 
42.27 	subdivision, "contractor" means a person carrying on a trade or business described in 
42.28 	industry code numbers 23 through 238990 of the North American Industry Classification 
42.29 	System.
42.30 	(b) A contractor who makes payments to an individual, carrying on a trade or 
42.31 	business described in paragraph (a) as a sole proprietorship, must deduct and withhold two 
42.32 	percent of the payment as Minnesota withholding tax when the amount the contractor paid 
42.33 	to that individual during the calendar year exceeds $600.
42.34 	(c) A payment subject to withholding under this subdivision must be treated as if 
42.35 	the payment were a wage paid by an employer to an employee. The requirements in the 
43.1 	definitions of "employee" and "employer" in subdivision 1 relating to geographic location 
43.2 	apply in determining whether withholding tax applies under this subdivision, but without 
43.3 	regard to whether the contractor or the individual otherwise satisfy the definition of an 
43.4 	employer or an employee. Each recipient of a payment subject to withholding under this 
43.5 	subdivision must furnish the contractor with a statement of the recipient's name, address, 
43.6 	and Social Security account number.

43.7 	EFFECTIVE DATE. This section is effective for payments made after December 
43.8 	31, 2008.

43.9 	Sec. 33. Minnesota Statutes 2006, section 290A.03, subdivision 11, is amended to read:
43.10 		Subd. 11.Rent constituting property taxes. "Rent constituting property taxes" 
43.11 	means 19 16 percent of the gross rent actually paid in cash, or its equivalent, or the portion 
43.12 	of rent paid in lieu of property taxes, in any calendar year by a claimant for the right 
43.13 	of occupancy of the claimant's Minnesota homestead in the calendar year, and which 
43.14 	rent constitutes the basis, in the succeeding calendar year of a claim for relief under this 
43.15 	chapter by the claimant.

43.16 	EFFECTIVE DATE. This section is effective for refunds based on rent paid in 
43.17 	2008 and thereafter.

43.18 	Sec. 34. Minnesota Statutes 2006, section 290A.03, subdivision 13, is amended to read:
43.19 		Subd. 13.Property taxes payable. "Property taxes payable" means the property tax 
43.20 	exclusive of special assessments, penalties, and interest payable on a claimant's homestead 
43.21 	after deductions made under sections 273.135, 273.1384, 273.1391, 273.42, subdivision 2, 
43.22 	and any other state paid property tax credits in any calendar year, and after any refund 
43.23 	claimed and allowable under section 290A.04, subdivision 2h, that is first payable in 
43.24 	the year that the property tax is payable. In the case of a claimant who makes ground 
43.25 	lease payments, "property taxes payable" includes the amount of the payments directly 
43.26 	attributable to the property taxes assessed against the parcel on which the house is located. 
43.27 	No apportionment or reduction of the "property taxes payable" shall be required for the 
43.28 	use of a portion of the claimant's homestead for a business purpose if the claimant does not 
43.29 	deduct any business depreciation expenses for the use of a portion of the homestead in the 
43.30 	determination of federal adjusted gross income. For homesteads which are manufactured 
43.31 	homes as defined in section 273.125, subdivision 8, and for homesteads which are park 
43.32 	trailers taxed as manufactured homes under section 168.012, subdivision 9, "property 
43.33 	taxes payable" shall also include 19 16 percent of the gross rent paid in the preceding 
44.1 	year for the site on which the homestead is located. When a homestead is owned by 
44.2 	two or more persons as joint tenants or tenants in common, such tenants shall determine 
44.3 	between them which tenant may claim the property taxes payable on the homestead. If 
44.4 	they are unable to agree, the matter shall be referred to the commissioner of revenue 
44.5 	whose decision shall be final. Property taxes are considered payable in the year prescribed 
44.6 	by law for payment of the taxes. 
44.7 	In the case of a claim relating to "property taxes payable," the claimant must have 
44.8 	owned and occupied the homestead on January 2 of the year in which the tax is payable 
44.9 	and (i) the property must have been classified as homestead property pursuant to section 
44.10 	273.124, on or before December 15 of the assessment year to which the "property taxes 
44.11 	payable" relate; or (ii) the claimant must provide documentation from the local assessor 
44.12 	that application for homestead classification has been made on or before December 15 
44.13 	of the year in which the "property taxes payable" were payable and that the assessor has 
44.14 	approved the application. 

44.15 	EFFECTIVE DATE. This section is effective for refunds based on gross rent 
44.16 	paid in 2008 and thereafter.

44.17 	Sec. 35. Minnesota Statutes 2007 Supplement, section 290A.03, subdivision 15, 
44.18 	is amended to read:
44.19 		Subd. 15.Internal Revenue Code. For taxable years beginning before January 1, 
44.20 	2006, and after December 31, 2006, "Internal Revenue Code" means the Internal Revenue 
44.21 	Code of 1986, as amended through May 18, 2006; and for taxable years beginning after 
44.22 	December 31, 2005, and before January 1, 2007, "Internal Revenue Code" means the 
44.23 	Internal Revenue Code of 1986, as amended through December 31, 2006 February 13, 
44.24 	2008.

44.25 	EFFECTIVE DATE. This section is effective for property tax refunds based on 
44.26 	property taxes payable on or after December 31, 2007, and rent paid on or after December 
44.27 	31, 2006.

44.28 	Sec. 36. Minnesota Statutes 2006, section 291.005, subdivision 1, is amended to read:
44.29 		Subdivision 1.Scope. Unless the context otherwise clearly requires, the following 
44.30 	terms used in this chapter shall have the following meanings:
44.31 	(1) "Federal gross estate" means the gross estate of a decedent as valued and 
44.32 	otherwise determined for federal estate tax purposes by federal taxing authorities pursuant 
44.33 	to the provisions of the Internal Revenue Code.
45.1 	(2) "Minnesota gross estate" means the federal gross estate of a decedent after (a) 
45.2 	excluding therefrom any property included therein which has its situs outside Minnesota, 
45.3 	and (b) including therein any property omitted from the federal gross estate which is 
45.4 	includable therein, has its situs in Minnesota, and was not disclosed to federal taxing 
45.5 	authorities.
45.6 	(3) "Personal representative" means the executor, administrator or other person 
45.7 	appointed by the court to administer and dispose of the property of the decedent. If there 
45.8 	is no executor, administrator or other person appointed, qualified, and acting within this 
45.9 	state, then any person in actual or constructive possession of any property having a situs in 
45.10 	this state which is included in the federal gross estate of the decedent shall be deemed 
45.11 	to be a personal representative to the extent of the property and the Minnesota estate tax 
45.12 	due with respect to the property.
45.13 	(4) "Resident decedent" means an individual whose domicile at the time of death 
45.14 	was in Minnesota.
45.15 	(5) "Nonresident decedent" means an individual whose domicile at the time of 
45.16 	death was not in Minnesota.
45.17 	(6) "Situs of property" means, with respect to real property, the state or country in 
45.18 	which it is located; with respect to tangible personal property, the state or country in which 
45.19 	it was normally kept or located at the time of the decedent's death; and with respect to 
45.20 	intangible personal property, the state or country in which the decedent was domiciled 
45.21 	at death.
45.22 	(7) "Commissioner" means the commissioner of revenue or any person to whom the 
45.23 	commissioner has delegated functions under this chapter.
45.24 	(8) "Internal Revenue Code" means the United States Internal Revenue Code of 
45.25 	1986, as amended through May 18, 2006 February 13, 2008.
45.26 	(9) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as 
45.27 	defined by section 2011(b)(3) of the Internal Revenue Code, increased by the amount of 
45.28 	deduction for state death taxes allowed under section 2058 of the Internal Revenue Code.

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

45.30 	Sec. 37. Minnesota Statutes 2006, section 296A.18, subdivision 4, is amended to read:
45.31 		Subd. 4.All-terrain vehicle. Approximately 0.15 0.27 of one percent of all gasoline 
45.32 	received in or produced or brought into this state, except gasoline used for aviation 
45.33 	purposes, is being used for the operation of all-terrain vehicles in this state, and of the total 
45.34 	revenue derived from the imposition of the gasoline fuel tax, 0.15 0.27 of one percent is 
45.35 	the amount of tax on fuel used in all-terrain vehicles operated in this state.

46.1 	EFFECTIVE DATE. This section is effective for revenue received after June 
46.2 	30, 2008.

46.3 	Sec. 38. Minnesota Statutes 2006, section 297A.61, subdivision 4, is amended to read:
46.4 		Subd. 4.Retail sale. (a) A "retail sale" means any sale, lease, or rental for any 
46.5 	purpose, other than resale, sublease, or subrent of items by the purchaser in the normal 
46.6 	course of business as defined in subdivision 21.
46.7 	(b) A sale of property used by the owner only by leasing it to others or by holding it 
46.8 	in an effort to lease it, and put to no use by the owner other than resale after the lease or 
46.9 	effort to lease, is a sale of property for resale.
46.10 	(c) A sale of master computer software that is purchased and used to make copies for 
46.11 	sale or lease is a sale of property for resale.
46.12 	(d) A sale of building materials, supplies, and equipment to owners, contractors, 
46.13 	subcontractors, or builders for the erection of buildings or the alteration, repair, or 
46.14 	improvement of real property is a retail sale in whatever quantity sold, whether the sale is 
46.15 	for purposes of resale in the form of real property or otherwise.
46.16 	(e) A sale of carpeting, linoleum, or similar floor covering to a person who provides 
46.17 	for installation of the floor covering is a retail sale and not a sale for resale since a sale 
46.18 	of floor covering which includes installation is a contract for the improvement of real 
46.19 	property.
46.20 	(f) A sale of shrubbery, plants, sod, trees, and similar items to a person who provides 
46.21 	for installation of the items is a retail sale and not a sale for resale since a sale of 
46.22 	shrubbery, plants, sod, trees, and similar items that includes installation is a contract for 
46.23 	the improvement of real property.
46.24 	(g) A sale of tangible personal property that is awarded as prizes is a retail sale and 
46.25 	is not considered a sale of property for resale.
46.26 	(h) A sale of tangible personal property utilized or employed in the furnishing or 
46.27 	providing of services under subdivision 3, paragraph (g), clause (1), including, but not 
46.28 	limited to, property given as promotional items, is a retail sale and is not considered a 
46.29 	sale of property for resale.
46.30 	(i) A sale of tangible personal property used in conducting lawful gambling under 
46.31 	chapter 349 or the State Lottery under chapter 349A, including, but not limited to, 
46.32 	property given as promotional items, is a retail sale and is not considered a sale of 
46.33 	property for resale.
47.1 	(j) A sale of machines, equipment, or devices that are used to furnish, provide, or 
47.2 	dispense goods or services, including, but not limited to, coin-operated devices, is a retail 
47.3 	sale and is not considered a sale of property for resale.
47.4 	(k) In the case of a lease, a retail sale occurs (1) when an obligation to make a lease 
47.5 	payment becomes due under the terms of the agreement or the trade practices of the 
47.6 	lessor or (2) in the case of a lease of a motor vehicle, as defined in section 297B.01, 
47.7 	subdivision 5, but excluding vehicles with a manufacturer's gross vehicle weight rating 
47.8 	greater than 10,000 pounds and rentals of vehicles for not more than 28 days, at the time 
47.9 	the lease is executed.
47.10 	(l) In the case of a conditional sales contract, a retail sale occurs upon the transfer of 
47.11 	title or possession of the tangible personal property.
47.12 	(m) A sale of a bundled transaction in which one or more of the products included 
47.13 	in the bundle is a taxable product is a retail sale, except that if one of the products 
47.14 	is a telecommunication service, ancillary service, Internet access, or audio or video 
47.15 	programming service, and the seller has maintained books and records identifying through 
47.16 	reasonable and verifiable standards the portions of the price that are attributable to the 
47.17 	distinct and separately identifiable products, then the products are not considered part of a 
47.18 	bundled transaction. For purposes of this paragraph:
47.19 	(1) the books and records maintained by the seller must be maintained in the regular 
47.20 	course of business, and do not include books and records created and maintained by the 
47.21 	seller primarily for tax purposes; 
47.22 	(2) books and records maintained in the regular course of business include, but are 
47.23 	not limited to, financial statements, general ledgers, invoicing and billing systems and 
47.24 	reports, and reports for regulatory tariffs and other regulatory matters; and
47.25 	(3) books and records are maintained primarily for tax purposes when the books 
47.26 	and records identify taxable and nontaxable portions of the price, but the seller maintains 
47.27 	other books and records that identify different prices attributable to the distinct products 
47.28 	included in the same bundled transaction.

47.29 	EFFECTIVE DATE. This section is effective retroactively for sales and purchases 
47.30 	made after December 31, 2007.

47.31 	Sec. 39. Minnesota Statutes 2006, section 297A.61, is amended by adding a 
47.32 	subdivision to read:
47.33 		Subd. 38.Bundled transaction. (a) "Bundled transaction" means the retail sale 
47.34 	of two or more products when the products are otherwise distinct and identifiable, and 
47.35 	the products are sold for one nonitemized price. As used in this subdivision, "product" 
48.1 	includes tangible personal property, services, intangibles, and digital goods, but does not 
48.2 	include real property or services to real property. A bundled transaction does not include 
48.3 	the sale of any products in which the sales price varies, or is negotiable, based on the 
48.4 	selection by the purchaser of the products included in the transaction.
48.5 	(b) For purposes of this subdivision, "distinct and identifiable" products does not 
48.6 	include:
48.7 	(1) packaging and other materials, such as containers, boxes, sacks, bags, and 
48.8 	bottles, wrapping, labels, tags, and instruction guides, that accompany the retail sale of the 
48.9 	products and are incidental or immaterial to the retail sale. Examples of packaging that are 
48.10 	incidental or immaterial include grocery sacks, shoe boxes, dry cleaning garment bags, 
48.11 	and express delivery envelopes and boxes;
48.12 	(2) a promotional product provided free of charge with the required purchase of 
48.13 	another product. A promotional product is provided free of charge if the sales price of 
48.14 	another product, which is required to be purchased in order to receive the promotional 
48.15 	product, does not vary depending on the inclusion of the promotional product; and 
48.16 	(3) items included in the definition of sales price.
48.17 	(c) For purposes of this subdivision, the term "one nonitemized price" does not 
48.18 	include a price that is separately identified by product on binding sales or other supporting 
48.19 	sales-related documentation made available to the customer in paper or electronic form 
48.20 	including, but not limited to an invoice, bill of sale, receipt, contract, service agreement, 
48.21 	lease agreement, periodic notice of rates and services, rate card, or price list.
48.22 	(d) A transaction that otherwise meets the definition of a bundled transaction is 
48.23 	not a bundled transaction if it is: 
48.24 	(1) the retail sale of tangible personal property and a service and the tangible 
48.25 	personal property is essential to the use of the service, and is provided exclusively in 
48.26 	connection with the service, and the true object of the transaction is the service; 
48.27 	(2) the retail sale of services if one service is provided that is essential to the use or 
48.28 	receipt of a second service and the first service is provided exclusively in connection with 
48.29 	the second service and the true object of the transaction is the second service; 
48.30 	(3) a transaction that includes taxable products and nontaxable products and the 
48.31 	purchase price or sales price of the taxable products is de minimis; or 
48.32 	(4) the retail sale of exempt tangible personal property and taxable tangible personal 
48.33 	property if:
48.34 	(i) the transaction includes food and food ingredients, drugs, durable medical 
48.35 	equipment, mobility enhancing equipment, over-the-counter drugs, prosthetic devices, 
48.36 	or medical supplies; and
49.1 	(ii) the seller's purchase price or sales price of the taxable tangible personal property 
49.2 	is 50 percent or less of the total purchase price or sales price of the bundled tangible 
49.3 	personal property. Sellers must not use a combination of the purchase price and sales 
49.4 	price of the tangible personal property when making the 50 percent determination for 
49.5 	a transaction.
49.6 	(e) For purposes of this subdivision, "purchase price" means the measure subject to 
49.7 	use tax on purchases made by the seller, and "de minimis" means that the seller's purchase 
49.8 	price or sales price of the taxable products is ten percent or less of the total purchase 
49.9 	price or sales price of the bundled products. Sellers shall use either the purchase price 
49.10 	or the sales price of the products to determine if the taxable products are de minimis. 
49.11 	Sellers must not use a combination of the purchase price and sales price of the products 
49.12 	to determine if the taxable products are de minimis. Sellers shall use the full term of a 
49.13 	service contract to determine if the taxable products are de minimis.

49.14 	EFFECTIVE DATE. This section is effective retroactively for sales and purchases 
49.15 	made after December 31, 2007.

49.16 	Sec. 40. Minnesota Statutes 2006, section 297A.61, is amended by adding a 
49.17 	subdivision to read:
49.18 		Subd. 39.Fur clothing. "Fur clothing" means human wearing apparel that is 
49.19 	required by the Federal Fur Products Labeling Act, United States Code, title 15, section 
49.20 	69, to be labeled as a fur product, and the value of the fur components in the product 
49.21 	is more than three times the value of the next most valuable tangible component. For 
49.22 	purposes of this subdivision, "fur" means any animal skin or part of an animal skin with 
49.23 	hair, fleece, or fur fibers attached to it, either in its raw or processed state, but does not 
49.24 	include animal skins that have been converted into leather or suede, or from which the 
49.25 	hair, fleece, or fur fiber has been completely removed in processing the skins.

49.26 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
49.27 	June 30, 2008.

49.28 	Sec. 41. Minnesota Statutes 2007 Supplement, section 297A.62, subdivision 1, is 
49.29 	amended to read:
49.30 		Subdivision 1.Generally. Except as otherwise provided in subdivision 3 or in this 
49.31 	chapter, a sales tax of 6.5 6.375 percent is imposed on the gross receipts from retail sales 
49.32 	as defined in section 297A.61, subdivision 4, made in this state or to a destination in this 
50.1 	state by a person who is required to have or voluntarily obtains a permit under section 
50.2 	297A.83, subdivision 1. 

50.3 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
50.4 	June 30, 2008.

50.5 	Sec. 42. Minnesota Statutes 2006, section 297A.63, subdivision 1, is amended to read:
50.6 		Subdivision 1.Use of tangible personal property or taxable services. (a) For the 
50.7 	privilege of using, storing, distributing, or consuming in Minnesota tangible personal 
50.8 	property or taxable services purchased for use, storage, distribution, or consumption in 
50.9 	this state, a use tax is imposed on a person in Minnesota. The tax is imposed on the 
50.10 	purchase price of retail sales of the tangible personal property or taxable services at the 
50.11 	rate of tax imposed under section 297A.62. A person that purchases property from a 
50.12 	Minnesota retailer and returns the tangible personal property to a point within Minnesota, 
50.13 	except in the course of interstate commerce, after it was delivered outside of Minnesota, 
50.14 	is subject to the use tax. 
50.15 	(b) No tax is imposed under paragraph (a) if the tax imposed by section 297A.62
50.16 	was paid on the sales price of the tangible personal property or taxable services. 
50.17 	(c) No tax is imposed under paragraph (a) if the purchase meets the requirements for 
50.18 	exemption under section 297A.67, subdivision 21. 
50.19 	(d) When a transaction otherwise meets the definition of a bundled transaction, but 
50.20 	is not a bundled transaction under section 297A.61, subdivision 38, paragraph (d), and 
50.21 	the seller's purchase price of the taxable product or taxable tangible personal property is 
50.22 	equal to or greater than $100, then use tax is imposed on the purchase price of the taxable 
50.23 	product or taxable personal property. For purposes of this paragraph, "purchase price" 
50.24 	means the measure subject to use tax on purchases made by the seller.

50.25 	EFFECTIVE DATE. This section is effective retroactively for sales and purchases 
50.26 	made after December 31, 2007.

50.27 	Sec. 43. Minnesota Statutes 2006, section 297A.67, subdivision 8, is amended to read:
50.28 		Subd. 8.Clothing. (a) Clothing is exempt. For purposes of this subdivision, 
50.29 	"clothing" means all human wearing apparel suitable for general use.
50.30 	(b) Clothing includes, but is not limited to, aprons, household and shop; athletic 
50.31 	supporters; baby receiving blankets; bathing suits and caps; beach capes and coats; belts 
50.32 	and suspenders; boots; coats and jackets; costumes; children and adult diapers, including 
50.33 	disposable; ear muffs; footlets; formal wear; garters and garter belts; girdles; gloves and 
51.1 	mittens for general use; hats and caps; hosiery; insoles for shoes; lab coats; neckties; 
51.2 	overshoes; pantyhose; rainwear; rubber pants; sandals; scarves; shoes and shoe laces; 
51.3 	slippers; sneakers; socks and stockings; steel-toed boots; underwear; uniforms, athletic 
51.4 	and nonathletic; and wedding apparel.
51.5 	(c) Clothing does not include the following:
51.6 	(1) belt buckles sold separately;
51.7 	(2) costume masks sold separately;
51.8 	(3) patches and emblems sold separately;
51.9 	(4) sewing equipment and supplies, including but not limited to, knitting needles, 
51.10 	patterns, pins, scissors, sewing machines, sewing needles, tape measures, and thimbles;
51.11 	(5) sewing materials that become part of clothing, including but not limited to, 
51.12 	buttons, fabric, lace, thread, yarn, and zippers;
51.13 	(6) clothing accessories or equipment;
51.14 	(7) sports or recreational equipment; and
51.15 	(8) protective equipment.
51.16 	Clothing also does not include apparel made from fur if a uniform definition of "apparel 
51.17 	made from fur" is developed by the member states of the Streamlined Sales and Use Tax 
51.18 	Agreement "fur clothing" as defined in section 297A.61, subdivision 39.
51.19 	For purposes of this subdivision, "clothing accessories or equipment" means 
51.20 	incidental items worn on the person or in conjunction with clothing. Clothing accessories 
51.21 	and equipment include, but are not limited to, briefcases; cosmetics; hair notions, including 
51.22 	barrettes, hair bows, and hairnets; handbags; handkerchiefs; jewelry; nonprescription 
51.23 	sunglasses; umbrellas; wallets; watches; and wigs and hairpieces. "Sports or recreational 
51.24 	equipment" means items designed for human use and worn in conjunction with an athletic 
51.25 	or recreational activity that are not suitable for general use. Sports and recreational 
51.26 	equipment includes, but is not limited to, ballet and tap shoes; cleated or spiked athletic 
51.27 	shoes; gloves, including, but not limited to, baseball, bowling, boxing, hockey, and golf 
51.28 	gloves; goggles; hand and elbow guards; life preservers and vests; mouth guards; roller 
51.29 	and ice skates; shin guards; shoulder pads; ski boots; waders; and wetsuits and fins. 
51.30 	"Protective equipment" means items for human wear and designed as protection of the 
51.31 	wearer against injury or disease or as protection against damage or injury of other persons 
51.32 	or property but not suitable for general use. Protective equipment includes, but is not 
51.33 	limited to, breathing masks; clean room apparel and equipment; ear and hearing protectors; 
51.34 	face shields; finger guards; hard hats; helmets; paint or dust respirators; protective gloves; 
51.35 	safety glasses and goggles; safety belts; tool belts; and welders gloves and masks.

52.1 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
52.2 	June 30, 2008.

52.3 	Sec. 44. Minnesota Statutes 2006, section 297B.02, subdivision 1, is amended to read:
52.4 		Subdivision 1.Rate. There is imposed an excise tax at the rate provided in chapter 
52.5 	297A of 6.5 percent on the purchase price of any motor vehicle purchased or acquired, 
52.6 	either in or outside of the state of Minnesota, which is required to be registered under 
52.7 	the laws of this state.
52.8 	The excise tax is also imposed on the purchase price of motor vehicles purchased 
52.9 	or acquired on Indian reservations when the tribal council has entered into a sales tax on 
52.10 	motor vehicles refund agreement with the state of Minnesota.

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

52.12 	Sec. 45. Minnesota Statutes 2006, section 297F.09, subdivision 10, is amended to read:
52.13 		Subd. 10.Accelerated tax payment; cigarette or tobacco products distributor.
 52.14 	A cigarette or tobacco products distributor having a liability of $120,000 or more during a 
52.15 	fiscal year ending June 30, shall remit the June liability for the next year in the following 
52.16 	manner:
52.17 	(a) Two business days before June 30 of the year, the distributor shall remit the 
52.18 	actual May liability and 78 85 percent of the estimated June liability to the commissioner 
52.19 	and file the return in the form and manner prescribed by the commissioner.
52.20 	(b) On or before August 18 of the year, the distributor shall submit a return showing 
52.21 	the actual June liability and pay any additional amount of tax not remitted in June. A 
52.22 	penalty is imposed equal to ten percent of the amount of June liability required to be paid 
52.23 	in June, less the amount remitted in June. However, the penalty is not imposed if the 
52.24 	amount remitted in June equals the lesser of:
52.25 	(1) 78 85 percent of the actual June liability; or
52.26 	(2) 78 85 percent of the preceding May's liability.

52.27 	EFFECTIVE DATE. This section is effective for tax payments in June 2009 and 
52.28 	thereafter.

52.29 	Sec. 46. Minnesota Statutes 2006, section 297G.09, subdivision 9, is amended to read:
52.30 		Subd. 9.Accelerated tax payment; penalty. A person liable for tax under this 
52.31 	chapter having a liability of $120,000 or more during a fiscal year ending June 30, shall 
52.32 	remit the June liability for the next year in the following manner:
53.1 	(a) Two business days before June 30 of the year, the taxpayer shall remit the actual 
53.2 	May liability and 78 85 percent of the estimated June liability to the commissioner and file 
53.3 	the return in the form and manner prescribed by the commissioner.
53.4 	(b) On or before August 18 of the year, the taxpayer shall submit a return showing 
53.5 	the actual June liability and pay any additional amount of tax not remitted in June. A 
53.6 	penalty is imposed equal to ten percent of the amount of June liability required to be paid 
53.7 	in June less the amount remitted in June. However, the penalty is not imposed if the 
53.8 	amount remitted in June equals the lesser of:
53.9 	(1) 78 85 percent of the actual June liability; or
53.10 	(2) 78 85 percent of the preceding May liability.

53.11 	EFFECTIVE DATE. This section is effective for tax payments in June 2009 and 
53.12 	thereafter.

53.13 	Sec. 47. Minnesota Statutes 2006, section 469.312, subdivision 5, is amended to read:
53.14 		Subd. 5.Duration limit. (a) The maximum duration of a zone is 12 years. The 
53.15 	applicant may request a shorter duration. The commissioner may specify a shorter 
53.16 	duration, regardless of the requested duration.
53.17 	(b) The duration limit under this subdivision and the duration of the zone for 
53.18 	purposes of allowance of tax incentives described in section 469.315 is extended by three 
53.19 	calendar years for each parcel of property that meets the following requirements:
53.20 	(1) the qualified business operates an ethanol plant, as defined in section 41A.09, on 
53.21 	the site that includes the parcel; and 
53.22 	(2) the business subsidy agreement was executed after April 30, 2006.
53.23 	(c) (1) Notwithstanding the 12-year zone limitation, all qualified businesses that sign 
53.24 	a business subsidy agreement, as required under sections 469.310, subdivision 11, and 
53.25 	469.313, before December 31, 2015, are entitled to claim the tax benefits for which they 
53.26 	qualify under section 469.315 for the year in which the business subsidy agreement is 
53.27 	signed and ten additional years.
53.28 	(2) Notwithstanding the 12-year zone limitation, all qualified businesses that sign 
53.29 	a business subsidy agreement, as required under sections 469.310, subdivision 11, and 
53.30 	469.313, before December 31, 2015, and are located in a targeted rural opportunity 
53.31 	community, as defined under section 116J.03, subdivision 4, are entitled to claim the tax 
53.32 	benefits for which they qualify under section 469.315 for the year in which the business 
53.33 	subsidy agreement is signed and 12 additional years.
53.34 	(3) This paragraph does not apply to:
54.1 	(i) any acreage designated as a job opportunity building zone for which any person 
54.2 	has fully executed a business subsidy agreement before this paragraph became effective; or
54.3 	(ii) any trade or business that relocated as defined in section 469.310, subdivision 
54.4 	12, and received benefits under section 469.315 prior to the relocation.

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

54.6 	Sec. 48. FUR TAX PAYMENTS.
 54.7 	(a) Furriers must file the annual return, required by Minnesota Statutes, section 
54.8 	295.60, subdivision 5, which otherwise would be due March 15, 2009, by September 
54.9 	15, 2008.
54.10 	(b) If a furrier is required by Minnesota Statutes, section 295.60, subdivision 3, to 
54.11 	make installments of quarterly estimates, then the furrier shall make the last installment by 
54.12 	July 15, 2008.

54.13 	EFFECTIVE DATE. This section is effective July 1, 2008, for sales and purchases 
54.14 	made prior to July 1, 2008.

54.15 	Sec. 49. TRANSITION AID FOR COUNTIES, CITIES, AND TOWNS.
54.16 		Subdivision 1.Definitions. (a) When used in this section, the following terms have 
54.17 	the meanings indicated in this subdivision.
54.18 	(b) "Local unit" means a county, a home rule charter or statutory city, or a town; 
54.19 	provided that the local unit has not, as of July 1, 2008, entered into an agreement pursuant 
54.20 	to section 469.1813, subdivision 1, clause (2), item (vii). To receive transition aid under 
54.21 	this section, a local unit must not enter into such an agreement for either taxes payable in 
54.22 	2009 or 2010, and must annually certify to the commissioner of revenue that it has not 
54.23 	entered into such an agreement. The certifications must be executed after July 1 in 2008 
54.24 	and 2009 and be received by the commissioner on or before July 13 in 2008 and 2009.
54.25 	(c) "Net tax capacity" means the total net tax capacity of all taxable properties 
54.26 	within the local unit's taxing jurisdiction for taxes payable in 2008. Net tax capacity must 
54.27 	be determined by the commissioner of revenue based on information and data available 
54.28 	to the commissioner as of July 1, 2008.
54.29 	(d) "Adjusted net tax capacity" means the local unit's net tax capacity for taxes 
54.30 	payable in 2008, excluding the phase-in provisions of Minnesota Rules, part 8100.0800. 
54.31 	Adjusted net tax capacity must be determined by the commissioner of revenue based on 
54.32 	information and data available to the commissioner as of July 1, 2008.
55.1 	(e) "Net tax capacity differential" means the positive difference, if any, by which the 
55.2 	local unit's net tax capacity exceeds its adjusted net tax capacity.
55.3 	(f) "Baseline revenue" means the sum of the local unit's: (1) property tax levy 
55.4 	amounts certified under section 275.07 for taxes payable in 2008, including levies 
55.5 	extended against net tax capacity and levies extended against referendum market value; 
55.6 	(2) city aid amounts under section 477A.013 that were certified in 2007 for payment in 
55.7 	2008; and (3) county aid amounts under section 477A.0124 that were certified in 2007 for 
55.8 	payment in 2008. Baseline revenue must be determined by the commissioner of revenue 
55.9 	based on information and data available to the commissioner as of July 1, 2008.
55.10 	(g) "Adjusted revenue" means the local unit's baseline revenue computed as if: 
55.11 	(1) local tax rates did not change; but, (2) the phase-in provisions of Minnesota Rules, 
55.12 	part 8100.0800, were not effective for taxes payable in 2008. Adjusted revenue must be 
55.13 	determined by the commissioner of revenue in cooperation with the commissioner of 
55.14 	education based on information and data available as of July 1, 2008.
55.15 	(h) "Revenue differential" means the positive difference, if any, by which the local 
55.16 	unit's baseline revenue exceeds its adjusted revenue.
55.17 		Subd. 2.Aid eligibility; payment. (a) If the net tax capacity differential of the local 
55.18 	unit exceeds five percent of its net tax capacity, the local unit is eligible for transition aid 
55.19 	computed under paragraphs (b) and (c).
55.20 	(b) Transition aid under this section for an eligible local unit equals the product of: 
55.21 	(1) the positive amount, if any, by which the revenue differential of the local unit exceeds 
55.22 	five percent of its baseline revenues; and (2) 50 percent for aid payable in 2009, and 100 
55.23 	percent for aid payable in 2010.
55.24 	(c) The commissioner of revenue shall compute the amount of transition aid payable 
55.25 	to each local unit under this section. On or before August 1, 2008, the commissioner shall 
55.26 	certify the amount of transition aid computed for payment in 2009 and 2010 for each 
55.27 	recipient local unit. The commissioner shall pay transition aid to local units annually at 
55.28 	the times provided in section 477A.015.
55.29 		Subd. 3.Appropriation. An amount sufficient to pay transition aid under this 
55.30 	section in 2009 and 2010 is appropriated to the commissioner of revenue from the general 
55.31 	fund.

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

55.33 	Sec. 50. TAX BASE ADJUSTMENTS FOR CALCULATION OF SCHOOL 
55.34 	DISTRICT LEVY LIMITATIONS.
 56.1 	(a) For purposes of calculating the aid and levy share of equalized school revenue 
56.2 	under Minnesota Statutes, chapters 122A to 126C for fiscal years 2010 and 2011 only, the 
56.3 	commissioner of revenue shall make an adjustment to the adjusted net tax capacity and 
56.4 	referendum market value of school districts according to paragraphs (b) and (c).
56.5 	(b) Adjusted net tax capacity for calendar years 2007 and 2008 as defined by section 
56.6 	126C.01, subdivision 2, shall be computed by the commissioner of revenue as if the 
56.7 	phase-in provisions of Minnesota Rules, part 8100.0800, were effective one year earlier.
56.8 	(c) Referendum market value for calendar years 2007 and 2008 as defined by section 
56.9 	126C.01, subdivision 3, shall be computed by the commissioner of revenue as if the 
56.10 	phase-in provisions of Minnesota Rules, part 8100.0800, were effective one year earlier.

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

56.12 	Sec. 51. TAX BASE ADJUSTMENTS FOR CALCULATION OF COUNTY 
56.13 	AND CITY AIDS.
 56.14 	For purposes of calculating aid for cities under section 477A.013, and for counties 
56.15 	under section 477A.0124, for payment in 2009 and 2010 only, the commissioner of 
56.16 	revenue shall adjust the adjusted net tax capacity of cities and counties as required in 
56.17 	this paragraph. Adjusted net tax capacity and city net tax capacity for calendar years 
56.18 	2007 and 2008 as defined in sections 477A.011 and 477A.0124 shall be computed by 
56.19 	the commissioner of revenue as if the phase-in provisions of Minnesota Rules, part 
56.20 	8100.0800, were effective one year earlier.

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

56.22 	Sec. 52. PURPOSE AND EFFECT.
 56.23 	It is the intent of the legislature that the provisions of sections 20, 24, and 25 must 
56.24 	not be construed as supplanting any existing Minnesota law.

56.25 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
56.26 	December 31, 2007.

56.27 	Sec. 53.  REPEALER.
 56.28 	Minnesota Statutes 2006, sections 10A.322, subdivision 4; 290.06, subdivision 23; 
56.29 	and 295.60, are repealed.

56.30 	EFFECTIVE DATE. The repeal of Minnesota Statutes 2006, section 10A.322, 
56.31 	subdivision 4, is effective June 30, 2008. The repeal of Minnesota Statutes 2006, section 
57.1 	290.06, subdivision 23, is effective for refund claims based on contributions made after 
57.2 	June 30, 2008. The repeal of Minnesota Statutes, section 295.60, is effective for sales 
57.3 	and purchases made after June 30, 2008.