1.1A bill for an act1.2relating to financing and operation of state and local government; making changes 1.3to individual income, corporate franchise, property, sales and use, estate, mineral, 1.4local, and other taxes and tax-related provisions; changing property tax aids and 1.5credits; modifying education aids and levies; making changes to additions and 1.6subtractions from federal taxable income; providing for federal conformity; 1.7changing tax rates for estates; modifying income tax credits; modifying estate tax 1.8provisions; repealing the gift tax; modifying the definition of sale and purchase; 1.9modifying sales tax exemptions; modifying tax increment financing rules; 1.10modifying the distribution of taconite production taxes; modifying and providing 1.11provisions for public finance; report; appropriating money;amending Minnesota 1.12Statutes 2012, sections 16A.152, subdivisions 1b, 2, 8; 37.31, subdivision 1.138; 116J.8737, subdivisions 5, 7, 9, 12; 276A.01, by adding a subdivision; 1.14276A.06, subdivisions 3, 5, 8; 289A.02, subdivision 7; 289A.08, subdivision 1.157; 289A.18, subdivision 3; 290.01, subdivision 19a, by adding a subdivision; 1.16290.067, subdivisions 1, 2a, by adding a subdivision; 290.0671, subdivisions 1.171, 7; 290.0675, subdivision 1; 291.03, by adding a subdivision; 297A.68, by 1.18adding a subdivision; 298.225, subdivision 1; 298.28, subdivisions 3, 5, 7, 9a, by 1.19adding a subdivision; 473.39, by adding a subdivision; Minnesota Statutes 2013 1.20Supplement, sections 116J.8737, subdivisions 1, 2; 126C.10, subdivisions 1, 2e; 1.21126C.13, subdivision 4; 126C.17, subdivision 1; 273.117; 289A.10, subdivision 1.221; 290.01, subdivisions 19, 19b, 31; 290.06, subdivision 2c; 290.091, subdivision 1.232; 290A.03, subdivision 15; 291.005, subdivision 1; 291.03, subdivision 1; 1.24297A.61, subdivision 3; 297A.68, subdivision 5; 298.17; 298.28, subdivision 10; 1.25Laws 2003, chapter 127, article 12, section 28; Laws 2006, chapter 259, article 1.2610, section 13, subdivision 4; Laws 2008, chapter 366, article 5, section 36, 1.27subdivision 3; Laws 2013, chapter 143, article 8, section 26; proposing coding for 1.28new law in Minnesota Statutes, chapter 291; repealing Minnesota Statutes 2012, 1.29sections 291.03, subdivision 1b; 291.41; 291.42; 291.43; 291.44; 291.45; 291.46; 1.30291.47; Minnesota Statutes 2013 Supplement, sections 291.03, subdivision 1c; 1.31292.16; 292.17; 292.18; 292.19; 292.20; 292.21; 297A.61, subdivision 57.1.32BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:2.1ARTICLE 12.2INCOME AND CORPORATE FRANCHISE TAX2.3    Section 1. Minnesota Statutes 2013 Supplement, section 116J.8737, subdivision 1, 2.4is amended to read:2.5    Subdivision 1. Definitions. (a) For the purposes of this section, the following terms 2.6have the meanings given.2.7(b) "Qualified small business" means a business that has been certified by the 2.8commissioner under subdivision 2.2.9(c) "Qualified investor" means an investor who has been certified by the 2.10commissioner under subdivision 3.2.11(d) "Qualified fund" means a pooled angel investment network fund that has been 2.12certified by the commissioner under subdivision 4.2.13(e) "Qualified investment" means a cash investment in a qualified small business 2.14of a minimum of:2.15(1) $10,000 in a calendar year by a qualified investor; or2.16(2) $30,000 in a calendar year by a qualified fund.2.17A qualified investment must be made in exchange for common stock, a partnership 2.18or membership interest, preferred stock, debt with mandatory conversion to equity, or an 2.19equivalent ownership interest as determined by the commissioner.2.20(f) "Family" means a family member within the meaning of the Internal Revenue 2.21Code, section 267(c)(4).2.22(g) "Pass-through entity" means a corporation that for the applicable taxable year is 2.23treated as an S corporation or a general partnership, limited partnership, limited liability 2.24partnership, trust, or limited liability company and which for the applicable taxable year is 2.25not taxed as a corporation under chapter 290.2.26(h) "Intern" means a student of an accredited institution of higher education, or a 2.27former student who has graduated in the past six months from an accredited institution 2.28of higher education, who is employed by a qualified small business in a nonpermanent 2.29position for a duration of nine months or less that provides training and experience in the 2.30primary business activity of the business.2.31(i) "Liquidation event" means a conversion of qualified investment for cash, cash 2.32and other consideration, or any other form of equity or debt interest.2.33(j) "Qualified greater Minnesota business" means a qualified small business that 2.34is also certified by the commissioner as a qualified greater Minnesota business under 2.35subdivision 2, paragraph (h).3.1(k) "Minority group member" means a United States citizen who is Asian, Pacific 3.2Islander, Black, Hispanic, or Native American.3.3(l) "Minority-owned business" means a business for which one or more minority 3.4group members:3.5(1) own at least 50 percent of the business, or, in the case of a publicly owned 3.6business, own at least 51 percent of the stock; and3.7(2) manage the business and control the daily business operations.3.8(m) "Women" means persons of the female gender.3.9(n) "Women-owned business" means a business for which one or more women:3.10(1) own at least 50 percent of the business, or, in the case of a publicly owned 3.11business, own at least 51 percent of the stock; and3.12(2) manage the business and control the daily business operations.3.13(o) "Officer" means a person elected or appointed by the board of directors to 3.14manage the daily operations of the qualified small business;3.15(p) "Principal" means a person having authority to act on behalf of the qualified 3.16small business.3.17EFFECTIVE DATE.This section is effective for taxable years beginning after 3.18December 31, 2014.3.19    Sec. 2. Minnesota Statutes 2013 Supplement, section 116J.8737, subdivision 2, is 3.20amended to read:3.21    Subd. 2. Certification of qualified small businesses. (a) Businesses may apply 3.22to the commissioner for certification as a qualified small business or qualified greater 3.23Minnesota small business for a calendar year. The application must be in the form 3.24and be made under the procedures specified by the commissioner, accompanied by an 3.25application fee of $150. Application fees are deposited in the small business investment 3.26tax credit administration account in the special revenue fund. The application for 3.27certification for 2010 must be made available on the department's Web site by August 1, 3.282010. Applications for subsequent years' certification must be made available on the 3.29department's Web site by November 1 of the preceding year.3.30(b) Within 30 days of receiving an application for certification under this subdivision, 3.31the commissioner must either certify the business as satisfying the conditions required 3.32of a qualified small business,or qualified greater Minnesota small business, request 3.33additional information from the business, or reject the application for certification. If 3.34the commissioner requests additional information from the business, the commissioner 3.35must either certify the business or reject the application within 30 days of receiving the 4.1additional information. If the commissioner neither certifies the business nor rejects 4.2the application within 30 days of receiving the original application or within 30 days of 4.3receiving the additional information requested, whichever is later, then the application is 4.4deemed rejected, and the commissioner must refund the $150 application fee. A business 4.5that applies for certification and is rejected may reapply.4.6(c) To receive certification as a qualified small business, a business must satisfy 4.7all of the following conditions:4.8(1) the business has its headquarters in Minnesota;4.9(2) at least 51 percent of the business's employees are employed in Minnesota, and 4.1051 percent of the business's total payroll is paid or incurred in the state;4.11(3) the business is engaged in, or is committed to engage in, innovation in Minnesota 4.12in one of the following as its primary business activity:4.13(i) using proprietary technology to add value to a product, process, or service in a 4.14qualified high-technology field;4.15(ii) researching or developing a proprietary product, process, or service in a qualified 4.16high-technology field; or4.17(iii) researching, developing, or producing a new proprietary technology for use in 4.18the fields of agriculture, tourism, forestry, mining, manufacturing, or transportation;4.19(4) other than the activities specifically listed in clause (3), the business is not 4.20engaged in real estate development, insurance, banking, lending, lobbying, political 4.21consulting, information technology consulting, wholesale or retail trade, leisure, 4.22hospitality, transportation, construction, ethanol production from corn, or professional 4.23services provided by attorneys, accountants, business consultants, physicians, or health 4.24care consultants;4.25(5) the business has fewer than 25 employees;4.26(6) the business must pay its employees annual wages of at least 175 percent of the 4.27federal poverty guideline for the year for a family of four and must pay its interns annual 4.28wages of at least 175 percent of the federal minimum wage used for federally covered 4.29employers, except that this requirement must be reduced proportionately for employees 4.30and interns who work less than full-time, and does not apply to an executive, officer, or 4.31member of the board of the business, or to any employee who owns, controls, or holds 4.32power to vote more than 20 percent of the outstanding securities of the business;4.33(7) the business has (i) not been in operation for more than ten years, or (ii) not 4.34been in operation for more than 20 years if the business is engaged in the research, 4.35development, or production of medical devices or pharmaceuticals for which United 5.1States Food and Drug Administration approval is required for use in the treatment or 5.2diagnosis of a disease or condition;5.3(8) the business has not previously received private equity investments of more 5.4than $4,000,000;5.5    (9) the business is not an entity disqualified under section 
         80A.50, paragraph (b), 5.6clause (3); and5.7(10) the business has not issued securities that are traded on a public exchange.5.8(d) In applying the limit under paragraph (c), clause (5), the employees in all members 5.9of the unitary business, as defined in section 
         290.17, subdivision 4, must be included.5.10(e) In order for a qualified investment in a business to be eligible for tax credits:5.11(1) the business must have applied for and received certification for the calendar 5.12year in which the investment was made prior to the date on which the qualified investment 5.13was made;5.14(2) the business must not have issued securities that are traded on a public exchange;5.15(3) the business must not issue securities that are traded on a public exchange within 5.16180 days after the date on which the qualified investment was made; and5.17(4) the business must not have a liquidation event within 180 days after the date on 5.18which the qualified investment was made.5.19(f) The commissioner must maintain a list of qualified small businesses and qualified 5.20greater Minnesota businesses certified under this subdivision for the calendar year and 5.21make the list accessible to the public on the department's Web site.5.22(g) For purposes of this subdivision, the following terms have the meanings given:5.23(1) "qualified high-technology field" includes aerospace, agricultural processing, 5.24renewable energy, energy efficiency and conservation, environmental engineering, food 5.25technology, cellulosic ethanol, information technology, materials science technology, 5.26nanotechnology, telecommunications, biotechnology, medical device products, 5.27pharmaceuticals, diagnostics, biologicals, chemistry, veterinary science, and similar 5.28fields; and5.29(2) "proprietary technology" means the technical innovations that are unique and 5.30legally owned or licensed by a business and includes, without limitation, those innovations 5.31that are patented, patent pending, a subject of trade secrets, or copyrighted.; and5.32(3) "greater Minnesota" means the area of Minnesota located outside of the 5.33metropolitan area as defined in section 473.121, subdivision 2.5.34(h) To receive certification as a qualified greater Minnesota business, a business must 5.35satisfy all of the requirements of paragraph (c) and must satisfy the following conditions:5.36(1) the business has its headquarters in greater Minnesota; and6.1(2) at least 51 percent of the business's employees are employed in greater Minnesota, 6.2and 51 percent of the business's total payroll is paid or incurred in greater Minnesota.6.3EFFECTIVE DATE.This section is effective for taxable years beginning after 6.4December 31, 2014.6.5    Sec. 3. Minnesota Statutes 2012, section 116J.8737, subdivision 5, is amended to read:6.6    Subd. 5. Credit allowed. (a) (1) A qualified investor or qualified fund is eligible 6.7for a credit equal to 25 percent of the qualified investment in a qualified small business. 6.8Investments made by a pass-through entity qualify for a credit only if the entity is a 6.9qualified fund. The commissioner must not allocate more than $11,000,000 $15,000,0006.10 $15,000,000 in credits to qualified investors or qualified funds for taxable years 6.11beginning after December 31, 2009 2013, and before January 1, 2011, and must not 6.12allocate more than $12,000,000 in credits per year for taxable years beginning after 6.13December 31, 2010, and before January 1, 20152017; and 6.14(2) for taxable years beginning after December 31, 2014, and before January 1, 6.152017, $7,500,000 must be allocated to credits for qualifying investments in qualified 6.16greater Minnesota businesses and minority- or women-owned qualified small businesses 6.17in Minnesota. Any portion of a taxable year's credits that is reserved for qualifying 6.18investments in greater Minnesota businesses and minority- or women-owned qualified 6.19small businesses in Minnesota that is not allocated by September 30 of the taxable year is 6.20available for allocation to other credit applications beginning on October 1. Any portion 6.21of a taxable year's credits that is not allocated by the commissioner does not cancel and 6.22may be carried forward to subsequent taxable years until all credits have been allocated.6.23(b) The commissioner may not allocate more than a total maximum amount in credits 6.24for a taxable year to a qualified investor for the investor's cumulative qualified investments 6.25as an individual qualified investor and as an investor in a qualified fund; for married 6.26couples filing joint returns the maximum is $250,000, and for all other filers the maximum 6.27is $125,000. The commissioner may not allocate more than a total of $1,000,000 in credits 6.28over all taxable years for qualified investments in any one qualified small business.6.29(c) The commissioner may not allocate a credit to a qualified investor either as an 6.30individual qualified investor or as an investor in a qualified fund if the investor receives 6.31more than 50 percent of the investor's gross annual income from the qualified small business 6.32in which the qualified investment is proposed, at the time the investment is proposed:6.33(1) the investor is an officer or principal of the qualified small business; or7.1(2) the investor, either individually or in combination with one or more members of 7.2the investor's family, owns, controls, or holds the power to vote 20 percent or more of 7.3the outstanding securities of the qualified small business. 7.4A member of the family of an individual disqualified by this paragraph is not eligible for a 7.5credit under this section. For a married couple filing a joint return, the limitations in this 7.6paragraph apply collectively to the investor and spouse. For purposes of determining the 7.7ownership interest of an investor under this paragraph, the rules under section 267(c) and 7.8267(e) of the Internal Revenue Code apply.7.9(d) Applications for tax credits for 2010 must be made available on the department's 7.10Web site by September 1, 2010, and the department must begin accepting applications 7.11by September 1, 2010. Applications for subsequent years must be made available by 7.12November 1 of the preceding year.7.13(e) Qualified investors and qualified funds must apply to the commissioner for tax 7.14credits. Tax credits must be allocated to qualified investors or qualified funds in the order 7.15that the tax credit request applications are filed with the department. The commissioner 7.16must approve or reject tax credit request applications within 15 days of receiving the 7.17application. The commissioner must allocate credits to approved applications if credits 7.18remain available. The investment specified in the application must be made within 60 days 7.19of the allocation of the credits. If the investment is not made within 60 days, the credit 7.20allocation is canceled and available for reallocation. A qualified investor or qualified fund 7.21that fails to invest as specified in the application, within 60 days of allocation of the 7.22credits, must notify the commissioner of the failure to invest within five business days of 7.23the expiration of the 60-day investment period. Credit applications that were approved but 7.24that did not receive an allocation of credits at the time of approval because the aggregate 7.25limit of credits for the year was exhausted remain eligible for allocation of credits if 7.26additional credits become available due to cancellations under this paragraph or due to 7.27termination of the time period for credits reserved for investment in qualified greater 7.28Minnesota businesses and minority- and women-owned small businesses under paragraph 7.29(a). Approved credit applications that do not receive credit allocations in the tax year must 7.30be resubmitted to be eligible for credit allocations in the following tax year.7.31(f) All tax credit request applications filed with the department on the same day must 7.32be treated as having been filed contemporaneously. If two or more qualified investors or 7.33qualified funds file tax credit request applications on the same day, and the aggregate 7.34amount of credit allocation claims exceeds the aggregate limit of credits under this section 7.35or the lesser amount of credits that remain unallocated on that day, then the credits must 7.36be allocated among the qualified investors or qualified funds who filed on that day on a 8.1pro rata basis with respect to the amounts claimed. The pro rata allocation for any one 8.2qualified investor or qualified fund is the product obtained by multiplying a fraction, 8.3the numerator of which is the amount of the credit allocation claim filed on behalf of 8.4a qualified investor and the denominator of which is the total of all credit allocation 8.5claims filed on behalf of all applicants on that day, by the amount of credits that remain 8.6unallocated on that day for the taxable year.8.7(g) A qualified investor or qualified fund, or a qualified small business acting on their 8.8behalf, must notify the commissioner when an investment for which credits were allocated 8.9has been made, and the taxable year in which the investment was made. A qualified fund 8.10must also provide the commissioner with a statement indicating the amount invested by 8.11each investor in the qualified fund based on each investor's share of the assets of the 8.12qualified fund at the time of the qualified investment. After receiving notification that the 8.13investment was made, the commissioner must issue credit certificates for the taxable year 8.14in which the investment was made to the qualified investor or, for an investment made by 8.15a qualified fund, to each qualified investor who is an investor in the fund. The certificate 8.16must state that the credit is subject to revocation if the qualified investor or qualified 8.17fund does not hold the investment in the qualified small business for at least three years, 8.18consisting of the calendar year in which the investment was made and the two following 8.19years. The three-year holding period does not apply if:8.20(1) the investment by the qualified investor or qualified fund becomes worthless 8.21before the end of the three-year period;8.22(2) 80 percent or more of the assets of the qualified small business is sold before 8.23the end of the three-year period;8.24(3) the qualified small business is sold before the end of the three-year period; or8.25(4) the qualified small business's common stock begins trading on a public exchange 8.26before the end of the three-year period.; or8.27    (5) the qualified investor dies before the end of the three-year period.8.28(h) The commissioner must notify the commissioner of revenue of credit certificates 8.29issued under this section.8.30EFFECTIVE DATE.Changes to paragraph (a) are effective for taxable years 8.31beginning after December 31, 2013. The remainder of the changes are effective for taxable 8.32years beginning after December 31, 2014.8.33    Sec. 4. Minnesota Statutes 2012, section 116J.8737, subdivision 7, is amended to read:8.34    Subd. 7. Revocation of credits. (a) If the commissioner determines that a 8.35qualified investor or qualified fund did not meet the three-year holding period required in 9.1subdivision 5, paragraph (g), any credit allocated and certified to the investor or fund is 9.2revoked and must be repaid by the investor.9.3(b) If the commissioner determines that a business did not meet the employment 9.4and payroll requirements in subdivision 2, paragraph (c), clause (2), or paragraph (h), as 9.5applicable, in any of the five calendar years following the year in which an investment in the 9.6business that qualified for a tax credit under this section was made, the business must repay 9.7the following percentage of the credits allowed for qualified investments in the business:

9.8Year following the year in whichPercentage of credit required9.9the investment was made:to be repaid:9.10First100%9.11Second80%9.12Third60%9.13Fourth40%9.14Fifth20%9.15Sixth and later0

9.16(c) The commissioner must notify the commissioner of revenue of every credit 9.17revoked and subject to full or partial repayment under this section.9.18(d) For the repayment of credits allowed under this section and section 
         290.0692, 9.19a qualified small business, qualified investor, or investor in a qualified fund must file an 9.20amended return with the commissioner of revenue and pay any amounts required to be 9.21repaid within 30 days after becoming subject to repayment under this section.9.22EFFECTIVE DATE.This section is effective for taxable years beginning after 9.23December 31, 2014.9.24    Sec. 5. Minnesota Statutes 2012, section 116J.8737, subdivision 9, is amended to read:9.25    Subd. 9. Report to legislature. Beginning in 2011, the commissioner must 9.26annually report by March 15 to the chairs and ranking minority members of the legislative 9.27committees having jurisdiction over taxes and economic development in the senate and 9.28the house of representatives, in compliance with sections 
         3.195 and 
         3.197, on the tax 9.29credits issued under this section. The report must include:9.30(1) the number and amount of the credits issued;9.31(2) the recipients of the credits;9.32(3) for each qualified small business or qualified greater Minnesota business, its 9.33location, line of business, and if it received an investment resulting in certification of 9.34tax credits;9.35(4) the total amount of investment in each qualified small business resulting in 9.36certification of tax credits;10.1(5) for each qualified small business that received investments resulting in tax 10.2credits, the total amount of additional investment that did not qualify for the tax credit;10.3(6) the number and amount of credits revoked under subdivision 7;10.4(7) the number and amount of credits that are no longer subject to the three-year 10.5holding period because of the exceptions under subdivision 5, paragraph (g), clauses 10.6(1) to (4); and10.7(8) any other information relevant to evaluating the effect of these credits.10.8EFFECTIVE DATE.This section is effective for reports required to be filed after 10.9December 31, 2014.10.10    Sec. 6. Minnesota Statutes 2012, section 116J.8737, subdivision 12, is amended to read:10.11    Subd. 12. Sunset. This section expires for taxable years beginning after December 10.1231, 2014 2016, except that reporting requirements under subdivision 6 and revocation 10.13of credits under subdivision 7 remain in effect through 2016 2018 for qualified 10.14investors and qualified funds, and through 2018 2020 for qualified small businesses, 10.15reporting requirements under subdivision 9 remain in effect through 2019 2021, and the 10.16appropriation in subdivision 11 remains in effect through 2018 2020.10.17EFFECTIVE DATE.This section is effective the day following final enactment.10.18    Sec. 7. Minnesota Statutes 2012, section 289A.02, subdivision 7, is amended to read:10.19    Subd. 7. Internal Revenue Code. Unless specifically defined otherwise, "Internal 10.20Revenue Code" means the Internal Revenue Code of 1986, as amended through April 14, 10.212011 December 20, 2013.10.22EFFECTIVE DATE.This section is effective retroactively for taxable years 10.23beginning after December 31, 2012.10.24    Sec. 8. Minnesota Statutes 2012, section 289A.08, subdivision 7, is amended to read:10.25    Subd. 7. Composite income tax returns for nonresident partners, shareholders, 10.26and beneficiaries. (a) The commissioner may allow a partnership with nonresident 10.27partners to file a composite return and to pay the tax on behalf of nonresident partners who 10.28have no other Minnesota source income. This composite return must include the names, 10.29addresses, Social Security numbers, income allocation, and tax liability for the nonresident 10.30partners electing to be covered by the composite return.10.31(b) The computation of a partner's tax liability must be determined by multiplying 10.32the income allocated to that partner by the highest rate used to determine the tax liability 11.1for individuals under section 
         290.06, subdivision 2c. Nonbusiness deductions, standard 11.2deductions, or personal exemptions are not allowed.11.3(c) The partnership must submit a request to use this composite return filing method 11.4for nonresident partners. The requesting partnership must file a composite return in the 11.5form prescribed by the commissioner of revenue. The filing of a composite return is 11.6considered a request to use the composite return filing method.11.7(d) The electing partner must not have any Minnesota source income other than the 11.8income from the partnership and other electing partnerships. If it is determined that the 11.9electing partner has other Minnesota source income, the inclusion of the income and tax 11.10liability for that partner under this provision will not constitute a return to satisfy the 11.11requirements of subdivision 1. The tax paid for the individual as part of the composite return 11.12is allowed as a payment of the tax by the individual on the date on which the composite 11.13return payment was made. If the electing nonresident partner has no other Minnesota 11.14source income, filing of the composite return is a return for purposes of subdivision 1.11.15(e) This subdivision does not negate the requirement that an individual pay estimated 11.16tax if the individual's liability would exceed the requirements set forth in section 
         289A.25. 11.17The individual's liability to pay estimated tax is, however, satisfied when the partnership 11.18pays composite estimated tax in the manner prescribed in section 
         289A.25.11.19(f) If an electing partner's share of the partnership's gross income from Minnesota 11.20sources is less than the filing requirements for a nonresident under this subdivision, the tax 11.21liability is zero. However, a statement showing the partner's share of gross income must 11.22be included as part of the composite return.11.23(g) The election provided in this subdivision is only available to a partner who has 11.24no other Minnesota source income and who is either (1) a full-year nonresident individual 11.25or (2) a trust or estate that does not claim a deduction under either section 651 or 661 of 11.26the Internal Revenue Code.11.27(h) A corporation defined in section 
         290.9725 and its nonresident shareholders may 11.28make an election under this paragraph. The provisions covering the partnership apply to 11.29the corporation and the provisions applying to the partner apply to the shareholder.11.30(i) Estates and trusts distributing current income only and the nonresident individual 11.31beneficiaries of the estates or trusts may make an election under this paragraph. The 11.32provisions covering the partnership apply to the estate or trust. The provisions applying to 11.33the partner apply to the beneficiary.11.34(j) For the purposes of this subdivision, "income" means the partner's share of 11.35federal adjusted gross income from the partnership modified by the additions provided in 11.36section 
         290.01, subdivision 19a, clauses (6) to (10) (9), and the subtractions provided in: 12.1(i) section 
         290.01, subdivision 19b, clause (8), to the extent the amount is assignable or 12.2allocable to Minnesota under section 
         290.17; and (ii) section 
         290.01, subdivision 19b, 12.3clause (13). The subtraction allowed under section 
         290.01, subdivision 19b, clause (8), is 12.4only allowed on the composite tax computation to the extent the electing partner would 12.5have been allowed the subtraction.12.6EFFECTIVE DATE.This section is effective retroactively for taxable years 12.7beginning after December 31, 2012.12.8    Sec. 9. Minnesota Statutes 2013 Supplement, section 290.01, subdivision 19, is 12.9amended to read:12.10    Subd. 19. Net income. The term "net income" means the federal taxable income, 12.11as defined in section 63 of the Internal Revenue Code of 1986, as amended through the 12.12date named in this subdivision, incorporating the federal effective dates of changes to the 12.13Internal Revenue Code and any elections made by the taxpayer in accordance with the 12.14Internal Revenue Code in determining federal taxable income for federal income tax 12.15purposes, and with the modifications provided in subdivisions 19a to 19f.12.16    In the case of a regulated investment company or a fund thereof, as defined in section 12.17851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment 12.18company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, 12.19except that:12.20    (1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal 12.21Revenue Code does not apply;12.22    (2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal 12.23Revenue Code must be applied by allowing a deduction for capital gain dividends and 12.24exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal 12.25Revenue Code; and12.26    (3) the deduction for dividends paid must also be applied in the amount of any 12.27undistributed capital gains which the regulated investment company elects to have treated 12.28as provided in section 852(b)(3)(D) of the Internal Revenue Code.12.29    The net income of a real estate investment trust as defined and limited by section 12.30856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust 12.31taxable income as defined in section 857(b)(2) of the Internal Revenue Code.12.32    The net income of a designated settlement fund as defined in section 468B(d) of 12.33the Internal Revenue Code means the gross income as defined in section 468B(b) of the 12.34Internal Revenue Code.13.1    The Internal Revenue Code of 1986, as amended through April 14, 2011 December 13.220, 2013, shall be in effect for taxable years beginning after December 31, 1996, and 13.3before January 1, 2012, and for taxable years beginning after December 31, 2012. The 13.4Internal Revenue Code of 1986, as amended through January 3, 2013, is in effect for 13.5taxable years beginning after December 31, 2011, and before January 1, 2013.13.6The provisions of sections 315 and 331 of the American Taxpayer Relief Act of 13.72012, Public Law 112-240, extension of increased expensing limitations and treatment 13.8of certain real property as section 179 property and extension and modification of bonus 13.9depreciation, are effective at the same time they become effective for federal purposes.13.10    Except as otherwise provided, references to the Internal Revenue Code in 13.11subdivisions 19 to 19f mean the code in effect for purposes of determining net income for 13.12the applicable year.13.13EFFECTIVE DATE.This section is effective the day following final enactment, 13.14except the changes incorporated by federal changes are effective retroactively at the same 13.15time as the changes were effective for federal purposes.13.16    Sec. 10. Minnesota Statutes 2012, section 290.01, subdivision 19a, is amended to read:13.17    Subd. 19a. Additions to federal taxable income. For individuals, estates, and 13.18trusts, there shall be added to federal taxable income:13.19    (1)(i) interest income on obligations of any state other than Minnesota or a political 13.20or governmental subdivision, municipality, or governmental agency or instrumentality 13.21of any state other than Minnesota exempt from federal income taxes under the Internal 13.22Revenue Code or any other federal statute; and13.23    (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue 13.24Code, except:13.25(A) the portion of the exempt-interest dividends exempt from state taxation under 13.26the laws of the United States; and13.27(B) the portion of the exempt-interest dividends derived from interest income 13.28on obligations of the state of Minnesota or its political or governmental subdivisions, 13.29municipalities, governmental agencies or instrumentalities, but only if the portion of the 13.30exempt-interest dividends from such Minnesota sources paid to all shareholders represents 13.3195 percent or more of the exempt-interest dividends, including any dividends exempt 13.32under subitem (A), that are paid by the regulated investment company as defined in section 13.33851(a) of the Internal Revenue Code, or the fund of the regulated investment company as 13.34defined in section 851(g) of the Internal Revenue Code, making the payment; and14.1    (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal 14.2government described in section 7871(c) of the Internal Revenue Code shall be treated as 14.3interest income on obligations of the state in which the tribe is located;14.4    (2) the amount of income, sales and use, motor vehicle sales, or excise taxes paid or 14.5accrued within the taxable year under this chapter and the amount of taxes based on net 14.6income paid, sales and use, motor vehicle sales, or excise taxes paid to any other state or 14.7to any province or territory of Canada, to the extent allowed as a deduction under section 14.863(d) of the Internal Revenue Code, but the addition may not be more than the amount by 14.9which the itemized deductions as allowed under section 63(d) of the Internal Revenue 14.10Code state itemized deduction exceeds the amount of the standard deduction as defined 14.11in section 63(c) of the Internal Revenue Code, disregarding the amounts allowed under 14.12sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code, minus any addition that 14.13would have been required under clause (21) (17) if the taxpayer had claimed the standard 14.14deduction. For the purpose of this paragraph, the disallowance of itemizeddeductions 14.15under section 68 of the Internal Revenue Code of 1986 clause, income, sales and use, motor 14.16vehicle sales, or excise taxes are the last itemized deductions disallowed under clause (15);14.17    (3) the capital gain amount of a lump-sum distribution to which the special tax under 14.18section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;14.19    (4) the amount of income taxes paid or accrued within the taxable year under this 14.20chapter and taxes based on net income paid to any other state or any province or territory 14.21of Canada, to the extent allowed as a deduction in determining federal adjusted gross 14.22income. For the purpose of this paragraph, income taxes do not include the taxes imposed 14.23by sections 
         290.0922, subdivision 1, paragraph (b), 
         290.9727, 
         290.9728, and 
         290.9729;14.24    (5) the amount of expense, interest, or taxes disallowed pursuant to section 
         290.10 14.25other than expenses or interest used in computing net interest income for the subtraction 14.26allowed under subdivision 19b, clause (1);14.27    (6) the amount of a partner's pro rata share of net income which does not flow 14.28through to the partner because the partnership elected to pay the tax on the income under 14.29section 6242(a)(2) of the Internal Revenue Code;14.30    (7) 80 percent of the depreciation deduction allowed under section 168(k) of the 14.31Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that 14.32in the taxable year generates a deduction for depreciation under section 168(k) and the 14.33activity generates a loss for the taxable year that the taxpayer is not allowed to claim for 14.34the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is 14.35limited to excess of the depreciation claimed by the activity under section 168(k) over the 14.36amount of the loss from the activity that is not allowed in the taxable year. In succeeding 15.1taxable years when the losses not allowed in the taxable year are allowed, the depreciation 15.2under section 168(k) is allowed;15.3    (8) 80 percent of the amount by which the deduction allowed by section 179 of the 15.4Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 15.5Revenue Code of 1986, as amended through December 31, 2003;15.6    (9) to the extent deducted in computing federal taxable income, the amount of the 15.7deduction allowable under section 199 of the Internal Revenue Code;15.8    (10) for taxable years beginning before January 1, 2013, the exclusion allowed under 15.9section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;15.10(11) the amount of expenses disallowed under section 290.10, subdivision 2;15.11    (12) (11) for taxable years beginning before January 1, 2010, the amount deducted 15.12for qualified tuition and related expenses under section 222 of the Internal Revenue Code, 15.13to the extent deducted from gross income;15.14    (13) (12) for taxable years beginning before January 1, 2010, the amount deducted 15.15for certain expenses of elementary and secondary school teachers under section 15.1662(a)(2)(D) of the Internal Revenue Code, to the extent deducted from gross income;15.17(14) the additional standard deduction for property taxes payable that is allowable 15.18under section 63(c)(1)(C) of the Internal Revenue Code;15.19(15) the additional standard deduction for qualified motor vehicle sales taxes 15.20allowable under section 63(c)(1)(E) of the Internal Revenue Code;15.21(16) (13) discharge of indebtedness income resulting from reacquisition of business 15.22indebtedness and deferred under section 108(i) of the Internal Revenue Code;15.23(17) the amount of unemployment compensation exempt from tax under section 15.2485(c) of the Internal Revenue Code;15.25(18) (14) changes to federal taxable income attributable to a net operating loss that 15.26the taxpayer elected to carry back for more than two years for federal purposes but for 15.27which the losses can be carried back for only two years under section 
         290.095, subdivision 15.2811
         , paragraph (c);15.29(19) (15) to the extent included in the computation of federal taxable income in 15.30taxable years beginning after December 31, 2010, the amount of disallowed itemized 15.31deductions, but the amount of disallowed itemized deductions plus the addition required 15.32under clause (2) may not be more than the amount by which the itemized deductions as 15.33allowed under section 63(d) of the Internal Revenue Code exceeds the amount of the 15.34standard deduction as defined in section 63(c) of the Internal Revenue Code, disregarding 15.35the amounts allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue 16.1Code, and reduced by any addition that would have been required under clause (21) (17) if 16.2the taxpayer had claimed the standard deduction:16.3(i) the amount of disallowed itemized deductions is equal to the lesser of:16.4(A) three percent of the excess of the taxpayer's federal adjusted gross income 16.5over the applicable amount; or16.6(B) 80 percent of the amount of the itemized deductions otherwise allowable to the 16.7taxpayer under the Internal Revenue Code for the taxable year;16.8(ii) the term "applicable amount" means $100,000, or $50,000 in the case of a 16.9married individual filing a separate return. Each dollar amount shall be increased by 16.10an amount equal to:16.11(A) such dollar amount, multiplied by16.12(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal 16.13Revenue Code for the calendar year in which the taxable year begins, by substituting 16.14"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof;16.15(iii) the term "itemized deductions" does not include:16.16(A) the deduction for medical expenses under section 213 of the Internal Revenue 16.17Code;16.18(B) any deduction for investment interest as defined in section 163(d) of the Internal 16.19Revenue Code; and16.20(C) the deduction under section 165(a) of the Internal Revenue Code for casualty or 16.21theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue 16.22Code or for losses described in section 165(d) of the Internal Revenue Code;16.23(20) (16) to the extent included in federal taxable income in taxable years beginning 16.24after December 31, 2010, the amount of disallowed personal exemptions for taxpayers 16.25with federal adjusted gross income over the threshold amount:16.26(i) the disallowed personal exemption amount is equal to the dollar amount of the 16.27personal exemptions claimed by the taxpayer in the computation of federal taxable income 16.28multiplied by the applicable percentage;16.29(ii) "applicable percentage" means two percentage points for each $2,500 (or 16.30fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable 16.31year exceeds the threshold amount. In the case of a married individual filing a separate 16.32return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In 16.33no event shall the applicable percentage exceed 100 percent;16.34(iii) the term "threshold amount" means:16.35(A) $150,000 in the case of a joint return or a surviving spouse;16.36(B) $125,000 in the case of a head of a household;17.1(C) $100,000 in the case of an individual who is not married and who is not a 17.2surviving spouse or head of a household; and17.3(D) $75,000 in the case of a married individual filing a separate return; and17.4(iv) the thresholds shall be increased by an amount equal to:17.5(A) such dollar amount, multiplied by17.6(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal 17.7Revenue Code for the calendar year in which the taxable year begins, by substituting 17.8"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; and17.9(21) (17) to the extent deducted in the computation of federal taxable income, for 17.10taxable years beginning after December 31, 2010, and before January 1, 2013 2014, the 17.11difference between the standard deduction allowed under section 63(c) of the Internal 17.12Revenue Code and the standard deduction allowed for 2011 and, 2012, and 2013 under the 17.13Internal Revenue Code as amended through December 1, 2010.17.14EFFECTIVE DATE.This section is effective retroactively for taxable years 17.15beginning after December 31, 2012.17.16    Sec. 11. Minnesota Statutes 2013 Supplement, section 290.01, subdivision 19b, 17.17is amended to read:17.18    Subd. 19b. Subtractions from federal taxable income. For individuals, estates, 17.19and trusts, there shall be subtracted from federal taxable income:17.20    (1) net interest income on obligations of any authority, commission, or 17.21instrumentality of the United States to the extent includable in taxable income for federal 17.22income tax purposes but exempt from state income tax under the laws of the United States;17.23    (2) if included in federal taxable income, the amount of any overpayment of income 17.24tax to Minnesota or to any other state, for any previous taxable year, whether the amount 17.25is received as a refund or as a credit to another taxable year's income tax liability;17.26    (3) the amount paid to others, less the amount used to claim the credit allowed under 17.27section 
         290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten 17.28to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and 17.29transportation of each qualifying child in attending an elementary or secondary school 17.30situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a 17.31resident of this state may legally fulfill the state's compulsory attendance laws, which 17.32is not operated for profit, and which adheres to the provisions of the Civil Rights Act 17.33of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or 17.34tuition as defined in section 
         290.0674, subdivision 1, clause (1). As used in this clause, 17.35"textbooks" includes books and other instructional materials and equipment purchased 18.1or leased for use in elementary and secondary schools in teaching only those subjects 18.2legally and commonly taught in public elementary and secondary schools in this state. 18.3Equipment expenses qualifying for deduction includes expenses as defined and limited in 18.4section 
         290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional 18.5books and materials used in the teaching of religious tenets, doctrines, or worship, the 18.6purpose of which is to instill such tenets, doctrines, or worship, nor does it include books 18.7or materials for, or transportation to, extracurricular activities including sporting events, 18.8musical or dramatic events, speech activities, driver's education, or similar programs. No 18.9deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or 18.10the qualifying child's vehicle to provide such transportation for a qualifying child. For 18.11purposes of the subtraction provided by this clause, "qualifying child" has the meaning 18.12given in section 32(c)(3) of the Internal Revenue Code;18.13    (4) income as provided under section 
         290.0802;18.14    (5) to the extent included in federal adjusted gross income, income realized on 18.15disposition of property exempt from tax under section 
         290.491;18.16    (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E) 18.17of the Internal Revenue Code in determining federal taxable income by an individual 18.18who does not itemize deductions for federal income tax purposes for the taxable year, an 18.19amount equal to 50 percent of the excess of charitable contributions over $500 allowable 18.20as a deduction for the taxable year under section 170(a) of the Internal Revenue Code, 18.21under the provisions of Public Law 109-1 and Public Law 111-126;18.22    (7) for individuals who are allowed a federal foreign tax credit for taxes that do not 18.23qualify for a credit under section 
         290.06, subdivision 22, an amount equal to the carryover 18.24of subnational foreign taxes for the taxable year, but not to exceed the total subnational 18.25foreign taxes reported in claiming the foreign tax credit. For purposes of this clause, 18.26"federal foreign tax credit" means the credit allowed under section 27 of the Internal 18.27Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed 18.28under section 904(c) of the Internal Revenue Code minus national level foreign taxes to 18.29the extent they exceed the federal foreign tax credit;18.30    (8) in each of the five tax years immediately following the tax year in which an 18.31addition is required under subdivision 19a, clause (7), or 19c, clause (12), in the case of a 18.32shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the 18.33delayed depreciation. For purposes of this clause, "delayed depreciation" means the amount 18.34of the addition made by the taxpayer under subdivision 19a, clause (7), or subdivision 19c, 18.35clause (12), in the case of a shareholder of an S corporation, minus the positive value of 19.1any net operating loss under section 172 of the Internal Revenue Code generated for the 19.2tax year of the addition. The resulting delayed depreciation cannot be less than zero;19.3    (9) job opportunity building zone income as provided under section 
         469.316;19.4    (10) to the extent included in federal taxable income, the amount of compensation 19.5paid to members of the Minnesota National Guard or other reserve components of the 19.6United States military for active service, excluding compensation for services performed 19.7under the Active Guard Reserve (AGR) program. For purposes of this clause, "active 19.8service" means (i) state active service as defined in section 
         190.05, subdivision 5a, clause 19.9(1); or (ii) federally funded state active service as defined in section 
         190.05, subdivision 19.105b
         , but "active service" excludes service performed in accordance with section 
         190.08, 19.11subdivision 3
         ;19.12    (11) to the extent included in federal taxable income, the amount of compensation 19.13paid to Minnesota residents who are members of the armed forces of the United States 19.14or United Nations for active duty performed under United States Code, title 10; or the 19.15authority of the United Nations;19.16    (12) an amount, not to exceed $10,000, equal to qualified expenses related to a 19.17qualified donor's donation, while living, of one or more of the qualified donor's organs 19.18to another person for human organ transplantation. For purposes of this clause, "organ" 19.19means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow; 19.20"human organ transplantation" means the medical procedure by which transfer of a human 19.21organ is made from the body of one person to the body of another person; "qualified 19.22expenses" means unreimbursed expenses for both the individual and the qualified donor 19.23for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses 19.24may be subtracted under this clause only once; and "qualified donor" means the individual 19.25or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An 19.26individual may claim the subtraction in this clause for each instance of organ donation for 19.27transplantation during the taxable year in which the qualified expenses occur;19.28    (13) in each of the five tax years immediately following the tax year in which an 19.29addition is required under subdivision 19a, clause (8), or 19c, clause (13), in the case of a 19.30shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the 19.31addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (13), in the 19.32case of a shareholder of a corporation that is an S corporation, minus the positive value of 19.33any net operating loss under section 172 of the Internal Revenue Code generated for the 19.34tax year of the addition. If the net operating loss exceeds the addition for the tax year, a 19.35subtraction is not allowed under this clause;20.1    (14) to the extent included in the federal taxable income of a nonresident of 20.2Minnesota, compensation paid to a service member as defined in United States Code, title 20.310, section 101(a)(5), for military service as defined in the Servicemembers Civil Relief 20.4Act, Public Law 108-189, section 101(2);20.5    (15) to the extent included in federal taxable income, the amount of national service 20.6educational awards received from the National Service Trust under United States Code, 20.7title 42, sections 12601 to 12604, for service in an approved Americorps National Service 20.8program;20.9(16) to the extent included in federal taxable income, discharge of indebtedness 20.10income resulting from reacquisition of business indebtedness included in federal taxable 20.11income under section 108(i) of the Internal Revenue Code. This subtraction applies only 20.12to the extent that the income was included in net income in a prior year as a result of the 20.13addition under section 
         290.01, subdivision 19a, clause (16) (13);20.14(17) the amount of the net operating loss allowed under section 
         290.095, subdivision 20.1511
         , paragraph (c); and20.16(18) the amount of expenses not allowed for federal income tax purposes due 20.17to claiming the railroad track maintenance credit under section 45G(a) of the Internal 20.18Revenue Code.;20.19(19) the amount of the limitation on itemized deductions under section 68(b) of 20.20the Internal Revenue Code; and20.21(20) the amount of the phaseout of personal exemptions under section 151(d) of the 20.22Internal Revenue Code.20.23EFFECTIVE DATE.This section is effective retroactively for taxable years 20.24beginning after December 31, 2012.20.25    Sec. 12. Minnesota Statutes 2012, section 290.01, is amended by adding a subdivision 20.26to read:20.27    Subd. 29a.State itemized deduction."State itemized deduction" means 20.28federal itemized deductions, as defined in section 63(d) of the Internal Revenue Code, 20.29disregarding any limitation under section 68 of the Internal Revenue Code, and reduced 20.30by the amount of the addition required under subdivision 19a, clause (15).20.31EFFECTIVE DATE.This section is effective retroactively for taxable years 20.32beginning after December 31, 2012.21.1    Sec. 13. Minnesota Statutes 2013 Supplement, section 290.01, subdivision 31, is 21.2amended to read:21.3    Subd. 31. Internal Revenue Code. Unless specifically defined otherwise, for 21.4taxable years beginning before January 1, 2012, and after December 31, 2012, "Internal 21.5Revenue Code" means the Internal Revenue Code of 1986, as amended through April 14, 21.62011; and for taxable years beginning after December 31, 2011, and before January 1, 21.72013, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended 21.8through January 3 December 20, 2013. Internal Revenue Code also includes any 21.9uncodified provision in federal law that relates to provisions of the Internal Revenue 21.10Code that are incorporated into Minnesota law. When used in this chapter, the reference 21.11to "subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code" is to the 21.12Internal Revenue Code as amended through March 18, 2010.21.13EFFECTIVE DATE.This section is effective the day following final enactment, 21.14except the changes incorporated by federal changes are effective retroactively at the same 21.15time the changes were effective for federal purposes.21.16    Sec. 14. Minnesota Statutes 2013 Supplement, section 290.06, subdivision 2c, is 21.17amended to read:21.18    Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income 21.19taxes imposed by this chapter upon married individuals filing joint returns and surviving 21.20spouses as defined in section 2(a) of the Internal Revenue Code must be computed by 21.21applying to their taxable net income the following schedule of rates:21.22    (1) On the first $35,480, 5.35 percent;21.23    (2) On all over $35,480, but not over $140,960, 7.05 percent;21.24    (3) On all over $140,960, but not over $250,000, 7.85 percent;21.25(4) On all over $250,000, 9.85 percent.21.26    Married individuals filing separate returns, estates, and trusts must compute their 21.27income tax by applying the above rates to their taxable income, except that the income 21.28brackets will be one-half of the above amounts.21.29    (b) The income taxes imposed by this chapter upon unmarried individuals must be 21.30computed by applying to taxable net income the following schedule of rates:21.31    (1) On the first $24,270, 5.35 percent;21.32    (2) On all over $24,270, but not over $79,730, 7.05 percent;21.33    (3) On all over $79,730, but not over $150,000, 7.85 percent;21.34(4) On all over $150,000, 9.85 percent.22.1    (c) The income taxes imposed by this chapter upon unmarried individuals qualifying 22.2as a head of household as defined in section 2(b) of the Internal Revenue Code must be 22.3computed by applying to taxable net income the following schedule of rates:22.4    (1) On the first $29,880, 5.35 percent;22.5    (2) On all over $29,880, but not over $120,070, 7.05 percent;22.6    (3) On all over $120,070, but not over $200,000, 7.85 percent;22.7(4) On all over $200,000, 9.85 percent.22.8    (d) In lieu of a tax computed according to the rates set forth in this subdivision, the 22.9tax of any individual taxpayer whose taxable net income for the taxable year is less than 22.10an amount determined by the commissioner must be computed in accordance with tables 22.11prepared and issued by the commissioner of revenue based on income brackets of not 22.12more than $100. The amount of tax for each bracket shall be computed at the rates set 22.13forth in this subdivision, provided that the commissioner may disregard a fractional part of 22.14a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.22.15    (e) An individual who is not a Minnesota resident for the entire year must compute 22.16the individual's Minnesota income tax as provided in this subdivision. After the 22.17application of the nonrefundable credits provided in this chapter, the tax liability must 22.18then be multiplied by a fraction in which:22.19    (1) the numerator is the individual's Minnesota source federal adjusted gross income 22.20as defined in section 62 of the Internal Revenue Code and increased by the additions 22.21required under section 
         290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), 22.22(13), and (16) to (18) and (11) to (14), and reduced by the Minnesota assignable portion of 22.23the subtraction for United States government interest under section 
         290.01, subdivision 22.2419b
         , clause (1), and the subtractions under section 
         290.01, subdivision 19b, clauses (8), 22.25(9), (13), (14), (16), and (17), after applying the allocation and assignability provisions of 22.26section 
         290.081, clause (a), or 
         290.17; and22.27    (2) the denominator is the individual's federal adjusted gross income as defined in 22.28section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in 22.29section 
         290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), (13), and (16) to 22.30(18) and (11) to (14), and reduced by the amounts specified in section 
         290.01, subdivision 22.3119b
         , clauses (1), (8), (9), (13), (14), (16), and (17).22.32EFFECTIVE DATE.This section is effective retroactively for taxable years 22.33beginning after December 31, 2012.22.34    Sec. 15. Minnesota Statutes 2012, section 290.067, subdivision 1, is amended to read:23.1    Subdivision 1. Amount of credit. (a) A taxpayer may take as a credit against the 23.2tax due from the taxpayer and a spouse, if any, under this chapter an amount equal to the 23.3dependent care credit for which the taxpayer is eligible pursuant to the provisions of 23.4section 21 of the Internal Revenue Code subject to the limitations provided in subdivision 23.52 except that in determining whether the child qualified as a dependent, income received 23.6as a Minnesota family investment program grant or allowance to or on behalf of the child 23.7must not be taken into account in determining whether the child received more than half 23.8of the child's support from the taxpayer, and the provisions of section 32(b)(1)(D) of 23.9the Internal Revenue Code do not apply.23.10(b) If a child who has not attained the age of six years at the close of the taxable year 23.11is cared for at a licensed family day care home operated by the child's parent, the taxpayer 23.12is deemed to have paid employment-related expenses. If the child is 16 months old or 23.13younger at the close of the taxable year, the amount of expenses deemed to have been paid 23.14equals the maximum limit for one qualified individual under section 21(c) and (d) of the 23.15Internal Revenue Code. If the child is older than 16 months of age but has not attained the 23.16age of six years at the close of the taxable year, the amount of expenses deemed to have 23.17been paid equals the amount the licensee would charge for the care of a child of the same 23.18age for the same number of hours of care.23.19(c) If a married couple:23.20(1) has a child who has not attained the age of one year at the close of the taxable year;23.21(2) files a joint tax return for the taxable year; and23.22(3) does not participate in a dependent care assistance program as defined in section 23.23129 of the Internal Revenue Code, in lieu of the actual employment related expenses paid 23.24for that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of 23.25(i) the combined earned income of the couple or (ii) the amount of the maximum limit for 23.26one qualified individual under section 21(c) and (d) of the Internal Revenue Code will 23.27be deemed to be the employment related expense paid for that child. The earned income 23.28limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed 23.29amount. These deemed amounts apply regardless of whether any employment-related 23.30expenses have been paid.23.31(d) If the taxpayer is not required and does not file a federal individual income tax 23.32return for the tax year, no credit is allowed for any amount paid to any person unless:23.33(1) the name, address, and taxpayer identification number of the person are included 23.34on the return claiming the credit; or24.1(2) if the person is an organization described in section 501(c)(3) of the Internal 24.2Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code, 24.3the name and address of the person are included on the return claiming the credit.24.4In the case of a failure to provide the information required under the preceding sentence, 24.5the preceding sentence does not apply if it is shown that the taxpayer exercised due 24.6diligence in attempting to provide the information required.24.7(e) In the case of a nonresident, part-year resident, or a person who has earned 24.8income not subject to tax under this chapter including earned income excluded pursuant to 24.9section 
         290.01, subdivision 19b, clause (9), the credit determined under section 21 of the 24.10Internal Revenue Code must be allocated based on the ratio by which the earned income 24.11of the claimant and the claimant's spouse from Minnesota sources bears to the total earned 24.12income of the claimant and the claimant's spouse.24.13(f) For residents of Minnesota, the subtractions for military pay under section 24.14290.01, subdivision 19b
         , clauses (10) and (11), are not considered "earned income not 24.15subject to tax under this chapter."24.16(g) For residents of Minnesota, the exclusion of combat pay under section 112 of 24.17the Internal Revenue Code is not considered "earned income not subject to tax under 24.18this chapter."24.19EFFECTIVE DATE.This section is effective retroactively for taxable years 24.20beginning after December 31, 2012.24.21    Sec. 16. Minnesota Statutes 2012, section 290.067, subdivision 2a, is amended to read:24.22    Subd. 2a. Income. (a) For purposes of this section, "income" means the sum of 24.23the following:24.24(1) federal adjusted gross income as defined in section 62 of the Internal Revenue 24.25Code; and24.26(2) the sum of the following amounts to the extent not included in clause (1):24.27(i) all nontaxable income;24.28(ii) the amount of a passive activity loss that is not disallowed as a result of section 24.29469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity 24.30loss carryover allowed under section 469(b) of the Internal Revenue Code;24.31(iii) an amount equal to the total of any discharge of qualified farm indebtedness 24.32of a solvent individual excluded from gross income under section 108(g) of the Internal 24.33Revenue Code;24.34(iv) cash public assistance and relief;25.1(v) any pension or annuity (including railroad retirement benefits, all payments 25.2received under the federal Social Security Act, supplemental security income, and veterans 25.3benefits), which was not exclusively funded by the claimant or spouse, or which was 25.4funded exclusively by the claimant or spouse and which funding payments were excluded 25.5from federal adjusted gross income in the years when the payments were made;25.6(vi) interest received from the federal or a state government or any instrumentality 25.7or political subdivision thereof;25.8(vii) workers' compensation;25.9(viii) nontaxable strike benefits;25.10(ix) the gross amounts of payments received in the nature of disability income or 25.11sick pay as a result of accident, sickness, or other disability, whether funded through 25.12insurance or otherwise;25.13(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 25.141986, as amended through December 31, 1995;25.15(xi) contributions made by the claimant to an individual retirement account, 25.16including a qualified voluntary employee contribution; simplified employee pension plan; 25.17self-employed retirement plan; cash or deferred arrangement plan under section 401(k) 25.18of the Internal Revenue Code; or deferred compensation plan under section 457 of the 25.19Internal Revenue Code;25.20(xii) nontaxable scholarship or fellowship grants;25.21(xiii) the amount of deduction allowed under section 199 of the Internal Revenue 25.22Code;25.23(xiv) the amount of deduction allowed under section 220 or 223 of the Internal 25.24Revenue Code;25.25(xv) the amount of deducted for tuition expenses required to be added to income 25.26under section 290.01, subdivision 19a, clause (12) under section 222 of the Internal 25.27Revenue Code; and25.28(xvi) the amount deducted for certain expenses of elementary and secondary school 25.29teachers under section 62(a)(2)(D) of the Internal Revenue Code; and.25.30(xvii) unemployment compensation.25.31In the case of an individual who files an income tax return on a fiscal year basis, the 25.32term "federal adjusted gross income" means federal adjusted gross income reflected in the 25.33fiscal year ending in the next calendar year. Federal adjusted gross income may not be 25.34reduced by the amount of a net operating loss carryback or carryforward or a capital loss 25.35carryback or carryforward allowed for the year.25.36(b) "Income" does not include:26.1(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;26.2(2) amounts of any pension or annuity that were exclusively funded by the claimant 26.3or spouse if the funding payments were not excluded from federal adjusted gross income 26.4in the years when the payments were made;26.5(3) surplus food or other relief in kind supplied by a governmental agency;26.6(4) relief granted under chapter 290A;26.7(5) child support payments received under a temporary or final decree of dissolution 26.8or legal separation; and26.9(6) restitution payments received by eligible individuals and excludable interest as 26.10defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 26.112001, Public Law 107-16.26.12EFFECTIVE DATE.This section is effective retroactively for taxable years 26.13beginning after December 31, 2012.26.14    Sec. 17. Minnesota Statutes 2012, section 290.067, is amended by adding a subdivision 26.15to read:26.16    Subd. 2c.Dependent care credit; temporary definition.For taxable years 26.17beginning after December 31, 2012, and before January 1, 2014, for purposes of this 26.18section, "section 21 of the Internal Revenue Code" means section 21 of the Internal 26.19Revenue Code as amended through June 1, 2001.26.20EFFECTIVE DATE.This section is effective retroactively for taxable years 26.21beginning after December 31, 2012.26.22    Sec. 18. Minnesota Statutes 2012, section 290.0671, subdivision 1, is amended to read:26.23    Subdivision 1. Credit allowed. (a) An individual is allowed a credit against the tax 26.24imposed by this chapter equal to a percentage of earned income. To receive a credit, a 26.25taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code.26.26(b) For individuals with no qualifying children, the credit equals 1.9125 2.10 percent 26.27of the first $4,620 $6,180 of earned income. The credit is reduced by 1.9125 2.01 percent 26.28of earned income or adjusted gross income, whichever is greater, in excess of $5,77026.29 $8,130, but in no case is the credit less than zero.26.30(c) For individuals with one qualifying child, the credit equals 8.5 9.35 percent of 26.31the first $6,920 $11,120 of earned income and 8.5 percent of earned income over $12,080 26.32but less than $13,450. The credit is reduced by 5.73 6.02 percent of earned income or 27.1adjusted gross income, whichever is greater, in excess of $15,080 $21,190, but in no 27.2case is the credit less than zero.27.3(d) For individuals with two or more qualifying children, the credit equals ten 1127.4 percent of the first $9,720 $18,240 of earned income and 20 percent of earned income 27.5over $14,860 but less than $16,800. The credit is reduced by 10.3 10.82 percent of earned 27.6income or adjusted gross income, whichever is greater, in excess of $17,890 $25,130, 27.7but in no case is the credit less than zero.27.8(e) For a nonresident or part-year resident, the credit must be allocated based on the 27.9percentage calculated under section 
         290.06, subdivision 2c, paragraph (e).27.10(f) For a person who was a resident for the entire tax year and has earned income 27.11not subject to tax under this chapter, including income excluded under section 
         290.01, 27.12subdivision 19b
         , clause (9), the credit must be allocated based on the ratio of federal 27.13adjusted gross income reduced by the earned income not subject to tax under this chapter 27.14over federal adjusted gross income. For purposes of this paragraph, the subtractions 27.15for military pay under section 
         290.01, subdivision 19b, clauses (10) and (11), are not 27.16considered "earned income not subject to tax under this chapter."27.17For the purposes of this paragraph, the exclusion of combat pay under section 112 27.18of the Internal Revenue Code is not considered "earned income not subject to tax under 27.19this chapter."27.20(g) For tax years beginning after December 31, 2007, and before December 31, 2010, 27.21and for tax years beginning after December 31, 2017, the $5,770 $8,130 in paragraph 27.22(b), the $15,080 $21,190 in paragraph (c), and the $17,890 $25,130 in paragraph (d), 27.23after being adjusted for inflation under subdivision 7, are each increased by $3,000 for 27.24married taxpayers filing joint returns. For tax years beginning after December 31, 2008, 27.25the commissioner shall annually adjust the $3,000 by the percentage determined pursuant 27.26to the provisions of section 1(f) of the Internal Revenue Code, except that in section 27.271(f)(3)(B), the word "2007" shall be substituted for the word "1992." For 2009, the 27.28commissioner shall then determine the percent change from the 12 months ending on 27.29August 31, 2007, to the 12 months ending on August 31, 2008, and in each subsequent 27.30year, from the 12 months ending on August 31, 2007, to the 12 months ending on August 27.3131 of the year preceding the taxable year. The earned income thresholds as adjusted 27.32for inflation must be rounded to the nearest $10. If the amount ends in $5, the amount 27.33is rounded up to the nearest $10. The determination of the commissioner under this 27.34subdivision is not a rule under the Administrative Procedure Act.27.35(h) For tax years beginning after December 31, 2010, and before January 1, 2012,(1) 27.36For tax years beginning after December 31, 2012, and before January 1, 2014, the $5,770 28.1in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph (d), after 28.2being adjusted for inflation under subdivision 7, are increased by $5,340 for married 28.3taxpayers filing joint returns; and (2) for tax years beginning after December 31, 2013, 28.4and before January 1, 2018, the $5,770 $8,130 in paragraph (b), the $15,080 $21,19028.5 in paragraph (c), and the $17,890 $25,130 in paragraph (d), after being adjusted for 28.6inflation under subdivision 7, are each increased by $5,000 for married taxpayers filing 28.7joint returns. For tax years beginning after December 31, 2010, and before January 28.81, 2012, and for tax years beginning after December 31, 2013, and before January 1, 28.92018, the commissioner shall annually adjust the $5,000 by the percentage determined 28.10pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in 28.11section 1(f)(3)(B), the word "2008" shall be substituted for the word "1992." For 2011, 28.12the commissioner shall then determine the percent change from the 12 months ending on 28.13August 31, 2008, to the 12 months ending on August 31, 2010, and in each subsequent 28.14year, from the 12 months ending on August 31, 2008, to the 12 months ending on August 28.1531 of the year preceding the taxable year. The earned income thresholds as adjusted 28.16for inflation must be rounded to the nearest $10. If the amount ends in $5, the amount 28.17is rounded up to the nearest $10. The determination of the commissioner under this 28.18subdivision is not a rule under the Administrative Procedure Act.28.19(i) The commissioner shall construct tables showing the amount of the credit at 28.20various income levels and make them available to taxpayers. The tables shall follow 28.21the schedule contained in this subdivision, except that the commissioner may graduate 28.22the transition between income brackets.28.23EFFECTIVE DATE.This section is effective for taxable years beginning after 28.24December 31, 2013, except that the changes in paragraph (h), clause (1), are effective 28.25retroactively for taxable years beginning after December 31, 2012, and before January 28.261, 2014.28.27    Sec. 19. Minnesota Statutes 2012, section 290.0671, subdivision 7, is amended to read:28.28    Subd. 7. Inflation adjustment. The earned income amounts used to calculate 28.29the credit and the income thresholds at which the maximum credit begins to be reduced 28.30in subdivision 1 must be adjusted for inflation. The commissioner shall adjust by the 28.31percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue 28.32Code, except that in section 1(f)(3)(B) the word "1999" "2013" shall be substituted for 28.33the word "1992." For 2001 2015, the commissioner shall then determine the percent 28.34change from the 12 months ending on August 31, 1999 2013, to the 12 months ending 28.35on August 31, 2000 2014, and in each subsequent year, from the 12 months ending on 29.1August 31, 1999 2013, to the 12 months ending on August 31 of the year preceding the 29.2taxable year. The earned income thresholds as adjusted for inflation must be rounded to 29.3the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest 29.4$10 amount. The determination of the commissioner under this subdivision is not a rule 29.5under the Administrative Procedure Act.29.6EFFECTIVE DATE.This section is effective for taxable years beginning after 29.7December 31, 2014.29.8    Sec. 20. Minnesota Statutes 2012, section 290.0675, subdivision 1, is amended to read:29.9    Subdivision 1. Definitions. (a) For purposes of this section the following terms 29.10have the meanings given.29.11(b) "Earned income" means the sum of the following, to the extent included in 29.12Minnesota taxable income:29.13(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;29.14(2) income received from a retirement pension, profit-sharing, stock bonus, or 29.15annuity plan; and29.16(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue 29.17Code.29.18(c) "Taxable income" means net income as defined in section 
         290.01, subdivision 19.29.19(d) "Earned income of lesser-earning spouse" means the earned income of the spouse 29.20with the lesser amount of earned income as defined in paragraph (b) for the taxable year 29.21minus the sum of (i) the amount for one exemption under section 151(d) of the Internal 29.22Revenue Code and (ii) one-half the amount of the standard deduction under section 29.2363(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition required 29.24under section 
         290.01, subdivision 19a, clause (21) (17), and one-half of the addition that 29.25would have been required under section 
         290.01, subdivision 19a, clause (21) (17), if the 29.26taxpayer had claimed the standard deduction.29.27EFFECTIVE DATE.This section is effective retroactively for taxable years 29.28beginning after December 31, 2012.29.29    Sec. 21. Minnesota Statutes 2013 Supplement, section 290.091, subdivision 2, is 29.30amended to read:29.31    Subd. 2. Definitions. For purposes of the tax imposed by this section, the following 29.32terms have the meanings given:30.1    (a) "Alternative minimum taxable income" means the sum of the following for 30.2the taxable year:30.3    (1) the taxpayer's federal alternative minimum taxable income as defined in section 30.455(b)(2) of the Internal Revenue Code;30.5    (2) the taxpayer's itemized deductions allowed in computing federal alternative 30.6minimum taxable income, but excluding:30.7    (i) the charitable contribution deduction under section 170 of the Internal Revenue 30.8Code;30.9    (ii) the medical expense deduction;30.10    (iii) the casualty, theft, and disaster loss deduction; and30.11    (iv) the impairment-related work expenses of a disabled person;30.12    (3) for depletion allowances computed under section 613A(c) of the Internal 30.13Revenue Code, with respect to each property (as defined in section 614 of the Internal 30.14Revenue Code), to the extent not included in federal alternative minimum taxable income, 30.15the excess of the deduction for depletion allowable under section 611 of the Internal 30.16Revenue Code for the taxable year over the adjusted basis of the property at the end of the 30.17taxable year (determined without regard to the depletion deduction for the taxable year);30.18    (4) to the extent not included in federal alternative minimum taxable income, the 30.19amount of the tax preference for intangible drilling cost under section 57(a)(2) of the 30.20Internal Revenue Code determined without regard to subparagraph (E);30.21    (5) to the extent not included in federal alternative minimum taxable income, the 30.22amount of interest income as provided by section 
         290.01, subdivision 19a, clause (1); and30.23    (6) the amount of addition required by section 
         290.01, subdivision 19a, clauses (7) 30.24to (9), (12), (13), and (16) to (18) and (11) to (14);30.25    less the sum of the amounts determined under the following:30.26    (1) interest income as defined in section 
         290.01, subdivision 19b, clause (1);30.27    (2) an overpayment of state income tax as provided by section 
         290.01, subdivision 30.2819b
         , clause (2), to the extent included in federal alternative minimum taxable income;30.29    (3) the amount of investment interest paid or accrued within the taxable year on 30.30indebtedness to the extent that the amount does not exceed net investment income, as 30.31defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include 30.32amounts deducted in computing federal adjusted gross income;30.33    (4) amounts subtracted from federal taxable income as provided by section 
         290.01, 30.34subdivision 19b
         , clauses (6), (8) to (14), and (16); and30.35(5) the amount of the net operating loss allowed under section 
         290.095, subdivision 30.3611
         , paragraph (c).31.1    In the case of an estate or trust, alternative minimum taxable income must be 31.2computed as provided in section 59(c) of the Internal Revenue Code.31.3    (b) "Investment interest" means investment interest as defined in section 163(d)(3) 31.4of the Internal Revenue Code.31.5    (c) "Net minimum tax" means the minimum tax imposed by this section.31.6    (d) "Regular tax" means the tax that would be imposed under this chapter (without 31.7regard to this section and section 290.032), reduced by the sum of the nonrefundable 31.8credits allowed under this chapter.31.9    (e) "Tentative minimum tax" equals 
         6.75 percent of alternative minimum taxable 31.10income after subtracting the exemption amount determined under subdivision 3.31.11EFFECTIVE DATE.This section is effective retroactively for taxable years 31.12beginning after December 31, 2012.31.13    Sec. 22. Minnesota Statutes 2013 Supplement, section 290A.03, subdivision 15, 31.14is amended to read:31.15    Subd. 15. Internal Revenue Code.For taxable years beginning before January 1, 31.162012, and after December 31, 2012, "Internal Revenue Code" means the Internal Revenue 31.17Code of 1986, as amended through April 14, 2011; and for taxable years beginning after 31.18December 31, 2011, and before January 1, 2013, "Internal Revenue Code" means the 31.19Internal Revenue Code of 1986, as amended through January 3 December 20, 2013.31.20EFFECTIVE DATE.This section is effective retroactively for property tax refunds 31.21based on property taxes payable after December 31, 2013, and rent paid after December 31.2231, 2012.31.23    Sec. 23. INDIVIDUAL INCOME TAX COLLECTION ACTION PROHIBITED.31.24Notwithstanding any law to the contrary, the commissioner shall not increase the 31.25amount due or decrease the refund for an individual income tax return for the taxable 31.26year beginning after December 31, 2012, and before January 1, 2014, to the extent the 31.27amount due was understated or the refund was overstated because the taxpayer calculated 31.28the tax or refund based on the Internal Revenue Code, as amended through April 14, 31.292011, rather than based on the Internal Revenue Code, as amended through December 31.3020, 2013, as provided in this act. 31.31EFFECTIVE DATE.This section is effective the day following final enactment.32.1ARTICLE 232.2SALES AND USE TAXES32.3    Section 1. Minnesota Statutes 2013 Supplement, section 297A.61, subdivision 3, 32.4is amended to read:32.5    Subd. 3. Sale and purchase. (a) "Sale" and "purchase" include, but are not limited 32.6to, each of the transactions listed in this subdivision. In applying the provisions of this 32.7chapter, the terms "tangible personal property" and "retail sale" include the taxable 32.8services listed in paragraph (g), clause (6), items (i) to (vi) and (viii), and the provision 32.9of these taxable services, unless specifically provided otherwise. Services performed by 32.10an employee for an employer are not taxable. Services performed by a partnership or 32.11association for another partnership or association are not taxable if one of the entities owns 32.12or controls more than 80 percent of the voting power of the equity interest in the other 32.13entity. Services performed between members of an affiliated group of corporations are not 32.14taxable. For purposes of the preceding sentence, "affiliated group of corporations" means 32.15those entities that would be classified as members of an affiliated group as defined under 32.16United States Code, title 26, section 1504, disregarding the exclusions in section 1504(b).32.17    (b) Sale and purchase include:32.18    (1) any transfer of title or possession, or both, of tangible personal property, whether 32.19absolutely or conditionally, for a consideration in money or by exchange or barter; and32.20    (2) the leasing of or the granting of a license to use or consume, for a consideration 32.21in money or by exchange or barter, tangible personal property, other than a manufactured 32.22home used for residential purposes for a continuous period of 30 days or more.32.23    (c) Sale and purchase include the production, fabrication, printing, or processing of 32.24tangible personal property for a consideration for consumers who furnish either directly or 32.25indirectly the materials used in the production, fabrication, printing, or processing.32.26    (d) Sale and purchase include the preparing for a consideration of food. 32.27Notwithstanding section 
         297A.67, subdivision 2, taxable food includes, but is not limited 32.28to, the following:32.29    (1) prepared food sold by the retailer;32.30    (2) soft drinks;32.31    (3) candy;32.32    (4) dietary supplements; and32.33    (5) all food sold through vending machines.32.34    (e) A sale and a purchase includes the furnishing for a consideration of electricity, 32.35gas, water, or steam for use or consumption within this state.33.1    (f) A sale and a purchase includes the transfer for a consideration of prewritten 33.2computer software whether delivered electronically, by load and leave, or otherwise.33.3    (g) A sale and a purchase includes the furnishing for a consideration of the following 33.4services:33.5    (1) the privilege of admission to places of amusement, recreational areas, or athletic 33.6events, and the making available of amusement devices, tanning facilities, reducing 33.7salons, steam baths, Turkish baths, health clubs, and spas or athletic facilities;33.8    (2) lodging and related services by a hotel, rooming house, resort, campground, 33.9motel, or trailer camp, including furnishing the guest of the facility with access to 33.10telecommunication services, and the granting of any similar license to use real property in 33.11a specific facility, other than the renting or leasing of it for a continuous period of 30 days 33.12or more under an enforceable written agreement that may not be terminated without prior 33.13notice and including accommodations intermediary services provided in connection with 33.14other services provided under this clause;33.15    (3) nonresidential parking services, whether on a contractual, hourly, or other 33.16periodic basis, except for parking at a meter;33.17    (4) the granting of membership in a club, association, or other organization if:33.18    (i) the club, association, or other organization makes available for the use of its 33.19members sports and athletic facilities, without regard to whether a separate charge is 33.20assessed for use of the facilities; and33.21    (ii) use of the sports and athletic facility is not made available to the general public 33.22on the same basis as it is made available to members.33.23Granting of membership means both onetime initiation fees and periodic membership 33.24dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and 33.25squash courts; basketball and volleyball facilities; running tracks; exercise equipment; 33.26swimming pools; and other similar athletic or sports facilities;33.27    (5) delivery of aggregate materials by a third party, excluding delivery of aggregate 33.28material used in road construction; and delivery of concrete block by a third party if the 33.29delivery would be subject to the sales tax if provided by the seller of the concrete block. 33.30For purposes of this clause, "road construction" means construction of:33.31    (i) public roads;33.32    (ii) cartways; and33.33    (iii) private roads in townships located outside of the seven-county metropolitan area 33.34up to the point of the emergency response location sign; and33.35    (6) services as provided in this clause:34.1    (i) laundry and dry cleaning services including cleaning, pressing, repairing, altering, 34.2and storing clothes, linen services and supply, cleaning and blocking hats, and carpet, 34.3drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not 34.4include services provided by coin operated facilities operated by the customer;34.5    (ii) motor vehicle washing, waxing, and cleaning services, including services 34.6provided by coin operated facilities operated by the customer, and rustproofing, 34.7undercoating, and towing of motor vehicles;34.8    (iii) building and residential cleaning, maintenance, and disinfecting services and 34.9pest control and exterminating services;34.10    (iv) detective, security, burglar, fire alarm, and armored car services; but not 34.11including services performed within the jurisdiction they serve by off-duty licensed peace 34.12officers as defined in section 
         626.84, subdivision 1, or services provided by a nonprofit 34.13organization or any organization at the direction of a county for monitoring and electronic 34.14surveillance of persons placed on in-home detention pursuant to court order or under the 34.15direction of the Minnesota Department of Corrections;34.16    (v) pet grooming services;34.17    (vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting 34.18and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor 34.19plant care; tree, bush, shrub, and stump removal, except when performed as part of a land 34.20clearing contract as defined in section 
         297A.68, subdivision 40; and tree trimming for 34.21public utility lines. Services performed under a construction contract for the installation of 34.22shrubbery, plants, sod, trees, bushes, and similar items are not taxable;34.23    (vii) massages, except when provided by a licensed health care facility or 34.24professional or upon written referral from a licensed health care facility or professional for 34.25treatment of illness, injury, or disease; and34.26    (viii) the furnishing of lodging, board, and care services for animals in kennels and 34.27other similar arrangements, but excluding veterinary and horse boarding services.34.28    (h) A sale and a purchase includes the furnishing for a consideration of tangible 34.29personal property or taxable services by the United States or any of its agencies or 34.30instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political 34.31subdivisions.34.32    (i) A sale and a purchase includes the furnishing for a consideration of 34.33telecommunications services, ancillary services associated with telecommunication 34.34services, and pay television services. Telecommunication services include, but are 34.35not limited to, the following services, as defined in section 
         297A.669: air-to-ground 34.36radiotelephone service, mobile telecommunication service, postpaid calling service, 35.1prepaid calling service, prepaid wireless calling service, and private communication 35.2services. The services in this paragraph are taxed to the extent allowed under federal law.35.3    (j) A sale and a purchase includes the furnishing for a consideration of installation if 35.4the installation charges would be subject to the sales tax if the installation were provided 35.5by the seller of the item being installed.35.6    (k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer 35.7to a customer when (1) the vehicle is rented by the customer for a consideration, or (2) 35.8the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section 35.959B.02, subdivision
          11.35.10    (l) A sale and a purchase includes furnishing for a consideration of specified digital 35.11products or other digital products or granting the right for a consideration to use specified 35.12digital products or other digital products on a temporary or permanent basis and regardless 35.13of whether the purchaser is required to make continued payments for such right. Wherever 35.14the term "tangible personal property" is used in this chapter, other than in subdivisions 10 35.15and 38, the provisions also apply to specified digital products, or other digital products, 35.16unless specifically provided otherwise or the context indicates otherwise.35.17(m) A sale and purchase includes the furnishing for consideration of the following 35.18services:35.19(1) repairing and maintaining electronic and precision equipment, which service can 35.20be deducted as a business expense under the Internal Revenue Code. This includes, but 35.21is not limited to, repair or maintenance of electronic devices, computers and computer 35.22peripherals, monitors, computer terminals, storage devices, and CD-ROM drives; other 35.23office equipment such as photocopying machines, printers, and facsimile machines; 35.24televisions, stereos, sound systems, video or digital recorders and players; two-way radios 35.25and other communications equipment; radar and sonar equipment, scientific instruments, 35.26microscopes, and medical equipment;35.27(2) repairing and maintaining commercial and industrial machinery and equipment. 35.28For purposes of this subdivision, the following items are not commercial or industrial 35.29machinery and equipment: (i) motor vehicles; (ii) furniture and fixtures; (iii) ships; (iv) 35.30railroad stock; and (v) aircraft; and35.31(3) warehousing or storage services for tangible personal property, excluding:35.32(i) agricultural products;35.33(ii) refrigerated storage;35.34(iii) electronic data; and35.35(iv) self-storage services and storage of motor vehicles, recreational vehicles, and 35.36boats, not eligible to be deducted as a business expense under the Internal Revenue Code.36.1EFFECTIVE DATE.This section is effective for sales and purchases made after 36.2March 31, 2014.36.3    Sec. 2. Minnesota Statutes 2013 Supplement, section 297A.68, subdivision 5, is 36.4amended to read:36.5    Subd. 5. Capital equipment. (a) Capital equipment is exempt.36.6"Capital equipment" means machinery and equipment purchased or leased, and used 36.7in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining, 36.8or refining tangible personal property to be sold ultimately at retail if the machinery and 36.9equipment are essential to the integrated production process of manufacturing, fabricating, 36.10mining, or refining. Capital equipment also includes machinery and equipment 36.11used primarily to electronically transmit results retrieved by a customer of an online 36.12computerized data retrieval system.36.13(b) Capital equipment includes, but is not limited to:36.14(1) machinery and equipment used to operate, control, or regulate the production 36.15equipment;36.16(2) machinery and equipment used for research and development, design, quality 36.17control, and testing activities;36.18(3) environmental control devices that are used to maintain conditions such as 36.19temperature, humidity, light, or air pressure when those conditions are essential to and are 36.20part of the production process;36.21(4) materials and supplies used to construct and install machinery or equipment;36.22(5) repair and replacement parts, including accessories, whether purchased as spare 36.23parts, repair parts, or as upgrades or modifications to machinery or equipment;36.24(6) materials used for foundations that support machinery or equipment;36.25(7) materials used to construct and install special purpose buildings used in the 36.26production process;36.27(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed 36.28as part of the delivery process regardless if mounted on a chassis, repair parts for 36.29ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and36.30(9) machinery or equipment used for research, development, design, or production 36.31of computer software.36.32(c) Capital equipment does not include the following:36.33(1) motor vehicles taxed under chapter 297B;36.34(2) machinery or equipment used to receive or store raw materials;37.1(3) building materials, except for materials included in paragraph (b), clauses (6) 37.2and (7);37.3(4) machinery or equipment used for nonproduction purposes, including, but not 37.4limited to, the following: plant security, fire prevention, first aid, and hospital stations; 37.5support operations or administration; pollution control; and plant cleaning, disposal of 37.6scrap and waste, plant communications, space heating, cooling, lighting, or safety;37.7(5) farm machinery and aquaculture production equipment as defined by section 37.8297A.61
         , subdivisions 12 and 13;37.9(6) machinery or equipment purchased and installed by a contractor as part of an 37.10improvement to real property;37.11(7) machinery and equipment used by restaurants in the furnishing, preparing, or 37.12serving of prepared foods as defined in section 
         297A.61, subdivision 31;37.13(8) machinery and equipment used to furnish the services listed in section 
         297A.61, 37.14subdivision 3
         , paragraph (g), clause (6), items (i) to (vi) and (viii);37.15(9) machinery or equipment used in the transportation, transmission, or distribution 37.16of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines, 37.17tanks, mains, or other means of transporting those products. This clause does not apply to 37.18machinery or equipment used to blend petroleum or biodiesel fuel as defined in section 37.19239.77
         ; or37.20(10) any other item that is not essential to the integrated process of manufacturing, 37.21fabricating, mining, or refining.37.22(d) For purposes of this subdivision:37.23(1) "Equipment" means independent devices or tools separate from machinery but 37.24essential to an integrated production process, including computers and computer software, 37.25used in operating, controlling, or regulating machinery and equipment; and any subunit or 37.26assembly comprising a component of any machinery or accessory or attachment parts of 37.27machinery, such as tools, dies, jigs, patterns, and molds.37.28(2) "Fabricating" means to make, build, create, produce, or assemble components or 37.29property to work in a new or different manner.37.30(3) "Integrated production process" means a process or series of operations through 37.31which tangible personal property is manufactured, fabricated, mined, or refined. For 37.32purposes of this clause, (i) manufacturing begins with the removal of raw materials 37.33from inventory and ends when the last process prior to loading for shipment has been 37.34completed; (ii) fabricating begins with the removal from storage or inventory of the 37.35property to be assembled, processed, altered, or modified and ends with the creation 37.36or production of the new or changed product; (iii) mining begins with the removal of 38.1overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and 38.2ends when the last process before stockpiling is completed; and (iv) refining begins with 38.3the removal from inventory or storage of a natural resource and ends with the conversion 38.4of the item to its completed form.38.5(4) "Machinery" means mechanical, electronic, or electrical devices, including 38.6computers and computer software, that are purchased or constructed to be used for the 38.7activities set forth in paragraph (a), beginning with the removal of raw materials from 38.8inventory through completion of the product, including packaging of the product.38.9(5) "Machinery and equipment used for pollution control" means machinery and 38.10equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity 38.11described in paragraph (a).38.12(6) "Manufacturing" means an operation or series of operations where raw materials 38.13are changed in form, composition, or condition by machinery and equipment and which 38.14results in the production of a new article of tangible personal property. For purposes of 38.15this subdivision, "manufacturing" includes the generation of electricity or steam to be 38.16sold at retail.38.17(7) "Mining" means the extraction of minerals, ores, stone, or peat.38.18(8) "Online data retrieval system" means a system whose cumulation of information 38.19is equally available and accessible to all its customers.38.20(9) "Primarily" means machinery and equipment used 50 percent or more of the time 38.21in an activity described in paragraph (a).38.22(10) "Refining" means the process of converting a natural resource to an intermediate 38.23or finished product, including the treatment of water to be sold at retail.38.24(11) This subdivision does not apply to telecommunications equipment as provided 38.25in subdivision 35 35a, and does not apply to wire, cable, fiber, poles, or conduit for 38.26telecommunications services.38.27EFFECTIVE DATE.This section is effective for sales and purchases made after 38.28March 31, 2014.38.29    Sec. 3. Minnesota Statutes 2012, section 297A.68, is amended by adding a subdivision 38.30to read:38.31    Subd. 35a.Telecommunications or pay television services machinery and 38.32equipment.(a) Telecommunications or pay television services machinery and equipment 38.33purchased or leased for use directly by a telecommunications or pay television services 38.34provider primarily in the provision of telecommunications or pay television services 39.1that are ultimately to be sold at retail are exempt, regardless of whether purchased by 39.2the owner, a contractor, or a subcontractor.39.3(b) For purposes of this subdivision, "telecommunications or pay television 39.4machinery and equipment" includes, but is not limited to:39.5(1) machinery, equipment, and fixtures utilized in receiving, initiating, 39.6amplifying, processing, transmitting, retransmitting, recording, switching, or monitoring 39.7telecommunications or pay television services, such as computers, transformers, amplifiers, 39.8routers, bridges, repeaters, multiplexers, and other items performing comparable functions;39.9(2) machinery, equipment, and fixtures used in the transportation of 39.10telecommunications or pay television services, such as radio transmitters and receivers, 39.11satellite equipment, microwave equipment, and other transporting media, but not wire, 39.12cable, fiber, poles, or conduit;39.13(3) ancillary machinery, equipment, and fixtures that regulate, control, protect, or 39.14enable the machinery in clauses (1) and (2) to accomplish its intended function, such as 39.15auxiliary power supply, test equipment, towers, heating, ventilating, and air conditioning 39.16equipment necessary to the operation of the telecommunications or pay television 39.17equipment; and software necessary to the operation of the telecommunications or pay 39.18television equipment; and39.19(4) repair and replacement parts, including accessories, whether purchased as spare 39.20parts, repair parts, or as upgrades or modifications to qualified machinery or equipment.39.21EFFECTIVE DATE.This section is effective for sales and purchases made after 39.22March 31, 2014.39.23    Sec. 4. Laws 2013, chapter 143, article 8, section 26, the effective date, is amended to 39.24read:39.25EFFECTIVE DATE.This section is effective for sales and purchases made after 39.26August 31, 2014 June 30, 2015.39.27EFFECTIVE DATE.This section is effective the day following final enactment.39.28    Sec. 5.  REPEALER.39.29Minnesota Statutes 2013 Supplement, section 297A.61, subdivision 57, is repealed.39.30EFFECTIVE DATE.This section is effective for sales and purchases made after 39.31March 31, 2014.40.1ARTICLE 340.2ESTATE AND GIFT TAX40.3    Section 1. Minnesota Statutes 2013 Supplement, section 289A.10, subdivision 1, 40.4is amended to read:40.5    Subdivision 1. Return required. In the case of a decedent who has an interest in 40.6property with a situs in Minnesota, the personal representative must submit a Minnesota 40.7estate tax return to the commissioner, on a form prescribed by the commissioner, if:40.8(1) a federal estate tax return is required to be filed; or40.9(2) the sum of the federal gross estate and federal adjusted taxable gifts, as defined in 40.10section 2001(b) of the Internal Revenue Code, made within three years of the date of the 40.11decedent's death exceeds $1,000,000 $1,200,000 for estates of decedents dying in 2014; 40.12$2,000,000 for estates of decedents dying in 2015; $3,000,000 for estates of decedents 40.13dying in 2016; $4,000,000 for estates of decedents dying in 2017; and $5,000,000 for 40.14estates of decedents dying in 2018 and thereafter.40.15The return must contain a computation of the Minnesota estate tax due. The return 40.16must be signed by the personal representative.40.17EFFECTIVE DATE.This section is effective retroactively for estates of decedents 40.18dying after December 31, 2013.40.19    Sec. 2. Minnesota Statutes 2012, section 289A.18, subdivision 3, is amended to read:40.20    Subd. 3. Estate tax returns. An estate tax return must be filed with the 40.21commissioner within nine months after the decedent's death. Except in the case of the 40.22estate of a decedent dying after December 31, 2009, and before December 17, 2010, then 40.23an estate tax return must be filed with the commissioner within nine months after the 40.24decedent's death; within the time provided by section 289A.19, subdivision 4; or before 40.25September 20, 2011; whichever is later.40.26EFFECTIVE DATE.This section is effective the day following final enactment.40.27    Sec. 3. Minnesota Statutes 2013 Supplement, section 291.005, subdivision 1, is 40.28amended to read:40.29    Subdivision 1. Scope. Unless the context otherwise clearly requires, the following 40.30terms used in this chapter shall have the following meanings:40.31    (1) "Commissioner" means the commissioner of revenue or any person to whom the 40.32commissioner has delegated functions under this chapter.41.1    (2) "Federal gross estate" means the gross estate of a decedent as required to be valued 41.2and otherwise determined for federal estate tax purposes under the Internal Revenue Code.41.3    (3) "Internal Revenue Code" means the United States Internal Revenue Code of 41.41986, as amended through January 3, 2013, but without regard to the provisions of section 41.52011, paragraph (f), of the Internal Revenue Code March 1, 2014.41.6    (4) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as 41.7defined by section 2011(b)(3) of the Internal Revenue Code, plus41.8(i) the amount of deduction for state death taxes allowed under section 2058 of the 41.9Internal Revenue Code;41.10(ii) the amount of taxable gifts, as defined in section 292.16, and made by the 41.11decedent within three years of the decedent's date of death; less41.12(iii)(A) the value of qualified small business property under section 291.03, 41.13subdivision 9, and the value of qualified farm property under section 291.03, subdivision 41.1410, or (B) $4,000,000, whichever is less.41.15    (5) (4) "Minnesota gross estate" means the federal gross estate of a decedent after (a) 41.16excluding therefrom any property included therein in the estate which has its situs outside 41.17Minnesota, and (b) including therein any property omitted from the federal gross estate 41.18which is includable therein in the estate, has its situs in Minnesota, and was not disclosed 41.19to federal taxing authorities.41.20    (6) (5) "Nonresident decedent" means an individual whose domicile at the time 41.21of death was not in Minnesota.41.22    (7) (6) "Personal representative" means the executor, administrator or other person 41.23appointed by the court to administer and dispose of the property of the decedent. If there 41.24is no executor, administrator or other person appointed, qualified, and acting within this 41.25state, then any person in actual or constructive possession of any property having a situs in 41.26this state which is included in the federal gross estate of the decedent shall be deemed 41.27to be a personal representative to the extent of the property and the Minnesota estate tax 41.28due with respect to the property.41.29    (8) (7) "Resident decedent" means an individual whose domicile at the time of 41.30death was in Minnesota.41.31    (9) (8) "Situs of property" means, with respect to:41.32    (i) real property, the state or country in which it is located;41.33    (ii) tangible personal property, the state or country in which it was normally kept 41.34or located at the time of the decedent's death or for a gift of tangible personal property 41.35within three years of death, the state or country in which it was normally kept or located 41.36when the gift was executed; and42.1    (iii) intangible personal property, the state or country in which the decedent was 42.2domiciled at death or for a gift of intangible personal property within three years of death, 42.3the state or country in which the decedent was domiciled when the gift was executed.42.4    For a nonresident decedent with an ownership interest in a pass-through entity 42.5with assets that include real or tangible personal property, situs of the real or tangible 42.6personal property is determined as if the pass-through entity does not exist and the real 42.7or tangible personal property is personally owned by the decedent. If the pass-through 42.8entity is owned by a person or persons in addition to the decedent, ownership of the 42.9property is attributed to the decedent in proportion to the decedent's capital ownership 42.10share of the pass-through entity.42.11(10) (9) "Pass-through entity" includes the following:42.12(i) an entity electing S corporation status under section 1362 of the Internal Revenue 42.13Code;42.14(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;42.15(iii) a single-member limited liability company or similar entity, regardless of 42.16whether it is taxed as an association or is disregarded for federal income tax purposes 42.17under Code of Federal Regulations, title 26, section 301.7701-3; or42.18(iv) a trust to the extent the property is includible in the decedent's federal gross 42.19estate. ; but excludes42.20    (v) an entity whose ownership interest securities are traded on an exchange regulated 42.21by the Securities and Exchange Commission as a national securities exchange under 42.22section 6 of the Securities Exchange Act, United States Code, title 15, section 78f.42.23EFFECTIVE DATE.This section is effective retroactively for estates of decedents 42.24dying after December 31, 2013.42.25    Sec. 4. [291.016] MINNESOTA TAXABLE ESTATE.42.26    Subdivision 1.General.For purposes of the tax under this chapter, the Minnesota 42.27taxable estate equals the federal taxable estate as provided under section 2051 of the Internal 42.28Revenue Code, without regard to whether the estate is subject to the federal estate tax:42.29(1) increased by the additions under subdivision 2; and42.30(2) decreased by the subtraction under subdivision 3.42.31    Subd. 2.Additions.The following amounts, to the extent deducted in computing 42.32the federal taxable estate, must be added in computing the Minnesota taxable estate:42.33(1) the amount of the deduction for state death taxes allowed under section 2058 of 42.34the Internal Revenue Code;43.1(2) the amount of the deduction for foreign death taxes allowed under section 43.22053(d) of the Internal Revenue Code; and43.3(3) the aggregate amount of taxable gifts as defined in section 2503 of the Internal 43.4Revenue Code, made by the decedent within three years of the date of death. For purposes 43.5of this clause, the amount of the addition equals the value of the gift under section 2512 of 43.6the Internal Revenue Code and excludes any value of the gift included in the federal estate.43.7    Subd. 3.Subtraction.(a) The value of qualified small business property under 43.8section 291.03, subdivision 9, and the value of qualified farm property under section 43.9291.03, subdivision 10, or the result of $5,000,000 minus the amount for the year of death 43.10listed in paragraph (b), whichever is less, may be subtracted in computing the Minnesota 43.11taxable estate but must not reduce the Minnesota taxable estate to less than zero.43.12(b) $1,200,000 for estates of decedents dying in 2014; $2,000,000 for estates of 43.13decedents dying in 2015; $3,000,000 for estates of decedents dying in 2016; $4,000,000 43.14for estates of decedents dying in 2017; and $5,000,000 for estates of decedents dying in 43.152018 and thereafter.43.16EFFECTIVE DATE.This section is effective retroactively for estates of decedents 43.17dying after December 31, 2013.43.18    Sec. 5. Minnesota Statutes 2013 Supplement, section 291.03, subdivision 1, is 43.19amended to read:43.20    Subdivision 1. Tax amount.(a) The tax imposed shall be an amount equal to the 43.21proportion of the maximum credit for state death taxes computed under section 2011 of 43.22the Internal Revenue Code, but using Minnesota adjusted taxable estate instead of federal 43.23adjusted taxable estate, as the Minnesota gross estate bears to the value of the federal 43.24gross estate. The tax is reduced by:43.25    (1) the gift tax paid by the decedent under section 292.17 on gifts included in the 43.26Minnesota adjusted taxable estate and not subtracted as qualified farm or small business 43.27property; and43.28    (2) any credit allowed under subdivision 1c.43.29    (b) The tax determined under this subdivision must not be greater than the sum of 43.30the following amounts multiplied by a fraction, the numerator of which is the Minnesota 43.31gross estate and the denominator of which is the federal gross estate:43.32    (1) the rates and brackets under section 2001(c) of the Internal Revenue Code 43.33multiplied by the sum of:43.34    (i) the taxable estate, as defined under section 2051 of the Internal Revenue Code; plus44.1    (ii) adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue 44.2Code; less44.3(iii) the lesser of (A) the sum of the value of qualified small business property 44.4under subdivision 9, and the value of qualified farm property under subdivision 10, or 44.5(B) $4,000,000; less44.6    (2) the amount of tax allowed under section 2001(b)(2) of the Internal Revenue 44.7Code; and less44.8    (3) the federal credit allowed under section 2010 of the Internal Revenue Code.44.9    (c) For purposes of this subdivision, "Internal Revenue Code" means the Internal 44.10Revenue Code of 1986, as amended through December 31, 2000.44.11    The tax imposed must be computed by applying to the Minnesota taxable estate the 44.12following schedule of rates and then the resulting amount multiplied by a fraction, not 44.13greater than one, the numerator of which is the value of the Minnesota gross estate plus 44.14the value of gifts under section 291.016, subdivision 2, clause (3), with a Minnesota situs, 44.15and the denominator of which is the federal gross estate plus the value of gifts under 44.16section 291.016, subdivision 2, clause (3):44.17    (a) For estates of decedents dying in 2014:

44.18Amount of Minnesota Taxable EstateRate of Tax44.19Not over $1,200,000None44.20Over $1,200,000, but not over $3,000,000ten percent of the excess over $1,200,00044.2144.22Over $3,000,000, but not over $5,000,000$180,000 plus 14 percent of the excess over $3,000,00044.2344.24Over $5,000,000$460,000 plus 18 percent of the excess over $5,000,000

44.25(b) For estates of decedents dying in 2015:

44.26Amount of Minnesota Taxable EstateRate of Tax44.27Not over $2,000,000None44.28Over $2,000,000, but not over $3,000,000ten percent of the excess over $2,000,00044.2944.30Over $3,000,000, but not over $5,000,000$100,000 plus 14 percent of the excess over $3,000,00044.3144.32Over $5,000,000$380,000 plus 18 percent of the excess over $5,000,000

44.33(c) For estates of decedents dying in 2016:

44.34Amount of Minnesota Taxable EstateRate of Tax44.35Not over $3,000,000None44.36Over $3,000,000, but not over $5,000,00014 percent of the excess over $3,000,00044.3744.38Over $5,000,000$280,000 plus 18 percent of the excess over $5,000,000

44.39(d) For estates of decedents dying in 2017:

45.1Amount of Minnesota Taxable EstateRate of Tax45.2Not over $4,000,000None45.3Over $4,000,000, but not over $5,000,00014 percent of the excess over $4,000,00045.445.5Over $5,000,000$140,000 plus 18 percent of the excess over $5,000,000

45.6(e) For estates of decedents dying in 2018 and thereafter:

45.7Amount of Minnesota Taxable EstateRate of Tax45.8Not over $5,000,000None45.9Over $5,000,000 18 percent of the excess over $5,000,000

45.10EFFECTIVE DATE.This section is effective retroactively for estates of decedents 45.11dying after December 31, 2013.45.12    Sec. 6. Minnesota Statutes 2012, section 291.03, is amended by adding a subdivision 45.13to read:45.14    Subd. 1d.Elections.(a) For the purposes of this section, the value of the Minnesota 45.15taxable estate is determined by taking into account the deduction available under section 45.162056(b) of the Internal Revenue Code. An election under section 2056(b) of the Internal 45.17Revenue Code may be made for Minnesota estate tax purposes regardless of whether the 45.18election is made for federal estate tax purposes. The value of the gross estate includes 45.19the value of any property in which the decedent had a qualifying income interest for life 45.20for which an election was made under this subdivision.45.21(b) Except for an election made under section 2056(b) of the Internal Revenue Code, 45.22no federal election is allowable in computing the tax under this chapter unless the estate is 45.23required to file a federal estate tax return, the election is made on the federal estate tax 45.24return, and the election is allowed under federal law.45.25EFFECTIVE DATE.This section is effective for estates of decedents dying after 45.26December 31, 2013.45.27    Sec. 7. [291.031] CREDITS.45.28(a) The estate of a nonresident decedent that is subject to tax under this chapter on 45.29the value of Minnesota situs property held in a pass-through entity is allowed a credit 45.30against the tax due under this section equal to the lesser of:45.31(1) the amount of estate or inheritance tax paid to another state that is attributable to 45.32the Minnesota situs property held in the pass-through entity; or45.33(2) the amount of tax paid under this section attributable to the Minnesota situs 45.34property held in the pass-through entity.46.1(b) The amount of tax attributable to the Minnesota situs property held in the 46.2pass-through entity must be determined by the increase in the estate or inheritance tax that 46.3results from including the market value of the property in the estate or treating the value 46.4as a taxable inheritance to the recipient of the property.46.5EFFECTIVE DATE.This section is effective retroactively for estates of decedents 46.6dying after December 31, 2013.46.7    Sec. 8.  REPEALER.46.8(a) Minnesota Statutes 2013 Supplement, sections 292.16; 292.17; 292.18; 292.19; 46.9292.20; and 292.21, are repealed.46.10(b) Minnesota Statutes 2012, section 291.03, subdivision 1b, and Minnesota Statutes 46.112013 Supplement, section 291.03, subdivision 1c, are repealed.46.12(c) Minnesota Statutes 2012, sections 291.41; 291.42; 291.43; 291.44; 291.45; 46.13291.46; and 291.47, are repealed.46.14EFFECTIVE DATE.Paragraph (a) is effective retroactively for gifts made after 46.15June 30, 2013. Paragraph (b) is effective retroactively for estates of decedents dying after 46.16December 31, 2013. Paragraph (c) is effective the day following final enactment.46.17ARTICLE 446.18PROPERTY TAX46.19    Section 1. Minnesota Statutes 2013 Supplement, section 126C.10, subdivision 1, is 46.20amended to read:46.21    Subdivision 1. General education revenue. (a) For fiscal years 2013 and 2014, the 46.22general education revenue for each district equals the sum of the district's basic revenue, 46.23extended time revenue, gifted and talented revenue, small schools revenue, basic skills 46.24revenue, secondary sparsity revenue, elementary sparsity revenue, transportation sparsity 46.25revenue, total operating capital revenue, equity revenue, alternative teacher compensation 46.26revenue, and transition revenue.46.27(b) For fiscal year 2015 and later, the general education revenue for each district 46.28equals the sum of the district's basic revenue, extended time revenue, gifted and talented 46.29revenue, declining enrollment revenue, location equity local optional revenue, small 46.30schools revenue, basic skills revenue, secondary sparsity revenue, elementary sparsity 46.31revenue, transportation sparsity revenue, total operating capital revenue, equity revenue, 46.32pension adjustment revenue, and transition revenue.47.1EFFECTIVE DATE.This section is effective for revenue in fiscal year 2016 and 47.2later.47.3    Sec. 2. Minnesota Statutes 2013 Supplement, section 126C.10, subdivision 2e, is 47.4amended to read:47.5    Subd. 2e. Location equity Local optional revenue. (a) For a school district 47.6with any of its area located within the seven-county metropolitan area, location equity47.7 Local optional revenue for a school district equals $424 times the adjusted pupil units of 47.8the district for that school year.47.9(b) For all other school districts with more than 2,000 pupils in adjusted average 47.10daily membership for the fiscal year ending in the year before the levy is certified, location 47.11equity revenue equals $212 times the adjusted pupil units of the district for that year.47.12(c) A district's location equity local optional levy equals its location equity local 47.13optional revenue times the lesser of one or the ratio of its referendum market value per 47.14resident pupil unit to $510,000. The location equity local optional revenue levy must be 47.15spread on referendum market value. A district may levy less than the permitted amount.47.16(d) (c) A district's location equity local optional aid equals its location equity local 47.17optional revenue less its location equity local optional levy, times the ratio of the actual 47.18amount levied to the permitted levy.47.19(e) A school district may elect not to participate in the location equity revenue 47.20program by a board vote taken prior to September 1 of the fiscal year before the fiscal year 47.21for which the decision not to participate becomes effective. The board resolution must 47.22state which fiscal years the district will not participate. A copy of the board resolution 47.23to not participate must be submitted to the commissioner.47.24EFFECTIVE DATE.This section is effective for revenue in fiscal year 2016 and 47.25later.47.26    Sec. 3. Minnesota Statutes 2013 Supplement, section 126C.13, subdivision 4, is 47.27amended to read:47.28    Subd. 4. General education aid. (a) For fiscal years 2013 and 2014 only, a district's 47.29general education aid is the sum of the following amounts:47.30    (1) general education revenue, excluding equity revenue, total operating capital 47.31revenue, alternative teacher compensation revenue, and transition revenue;47.32    (2) operating capital aid under section 
         126C.10, subdivision 13b;47.33    (3) equity aid under section 
         126C.10, subdivision 30;47.34    (4) alternative teacher compensation aid under section 
         126C.10, subdivision 36;48.1    (5) transition aid under section 
         126C.10, subdivision 33;48.2    (6) shared time aid under section 
         126C.01, subdivision 7;48.3    (7) referendum aid under section 
         126C.17, subdivisions 7 and 7a; and48.4    (8) online learning aid according to section 
         124D.096.48.5(b) For fiscal year 2015 and later, a district's general education aid equals:48.6(1) general education revenue, excluding operating capital revenue, equity revenue, 48.7location equity local optional revenue, and transition revenue, minus the student 48.8achievement levy, multiplied times the ratio of the actual amount of student achievement 48.9levy levied to the permitted student achievement levy; plus48.10(2) equity aid under section 
         126C.10, subdivision 30; plus48.11(3) transition aid under section 
         126C.10, subdivision 33; plus48.12(4) shared time aid under section 
         126C.10, subdivision 7; plus48.13(5) referendum aid under section 
         126C.17, subdivisions 7 and 7a; plus48.14(6) online learning aid under section 
         124D.096; plus48.15(7) location equity local optional aid according to section 
         126C.10, subdivision 48.162d
         , paragraph (d).48.17EFFECTIVE DATE.This section is effective for revenue in fiscal year 2016 and 48.18later.48.19    Sec. 4. Minnesota Statutes 2013 Supplement, section 126C.17, subdivision 1, is 48.20amended to read:48.21    Subdivision 1. Referendum allowance. (a) A district's initial referendum allowance 48.22for fiscal year 2015 equals the result of the following calculations:48.23(1) multiply the referendum allowance the district would have received for fiscal 48.24year 2015 under Minnesota Statutes 2012, section 
         126C.17, subdivision 1, based on 48.25elections held before July 1, 2013, by the resident marginal cost pupil units the district 48.26would have counted for fiscal year 2015 under Minnesota Statutes 2012, section 
         126C.05;48.27(2) add to the result of clause (1) the adjustment the district would have received 48.28under Minnesota Statutes 2012, section 
         127A.47, subdivision 7, paragraphs (a), (b), and 48.29(c), based on elections held before July 1, 2013;48.30(3) divide the result of clause (2) by the district's adjusted pupil units for fiscal 48.31year 2015; and48.32(4) add to the result of clause (3) any additional referendum allowance per adjusted 48.33pupil unit authorized by elections held between July 1, 2013, and December 31, 2013;48.34(5) add to the result in clause (4) any additional referendum allowance resulting from 48.35inflation adjustments approved by the voters prior to January 1, 2014;49.1(6) subtract from the result of clause (5), the sum of a district's actual local optional 49.2levy and local optional aid under section 126C.10, subdivision 2e, divided by the adjusted 49.3pupil units of the district for that school year; and49.4(4) (7) if the result of clause (3) (6) is less than zero, set the allowance to zero.49.5(b) A district's referendum allowance equals the sum of the district's initial 49.6referendum allowance for fiscal year 2015, plus any additional referendum allowance per 49.7adjusted pupil unit authorized after June 30 December 31, 2013, minus (i) the location 49.8equity revenue subtraction, and (ii) any allowances expiring in fiscal year 2016 or later, 49.9provided that the allowance may not be less than zero. For a district with more than one 49.10referendum allowance for fiscal year 2015 under Minnesota Statutes 2012, section 
         126C.17, 49.11the allowance calculated under paragraph (a), clause (3), must be divided into components 49.12such that the same percentage of the district's allowance expires at the same time as the old 49.13allowances would have expired under Minnesota Statutes 2012, section 
         126C.17. For a 49.14district with more than one allowance for fiscal year 2015 that expires in the same year, the 49.15reduction under paragraph (a), clause (6), to offset local optional revenue shall be made 49.16first from any allowances that do not have an inflation adjustment approved by the voters.49.17(c) For purposes of this subdivision, a district's location equity revenue subtraction 49.18equals $424 for a district receiving location equity revenue under section 126C.10, 49.19subdivision 2d, paragraph (a), $212 for a district receiving location equity revenue under 49.20section 126C.10, subdivision 2d, paragraph (b), and zero for all other school districts.49.21EFFECTIVE DATE.This section is effective for revenue for fiscal year 2016 49.22and later.49.23    Sec. 5. Minnesota Statutes 2013 Supplement, section 273.117, is amended to read:49.24273.117 CONSERVATION PROPERTY TAX VALUATION.49.25    The value of real property which is subject to a conservation restriction or easement 49.26shall not be reduced by the assessor if:49.27    (a) the restriction or easement is for a conservation purpose as defined in section 49.2884.64, subdivision 2, and is recorded on the property; and49.29    (b) the property is being used in accordance with the terms of the conservation 49.30restriction or easement.49.31This section does not apply to (1) conservation restrictions or easements covering 49.32riparian buffers along lakes, rivers, and streams that are used for water quantity or quality 49.33control; or (2) easements in a county that has adopted, by referendum, a program to protect 50.1farmland and natural areas since 1999; or (3) conservation restrictions or easements 50.2entered into prior to May 23, 2013.50.3EFFECTIVE DATE.This section is effective the day following final enactment.50.4    Sec. 6. SUPPLEMENTAL COUNTY PROGRAM AID PAYMENTS.50.5(a) Before the money appropriated to county need aid is apportioned among the 50.6counties, as provided in Minnesota Statutes, section 477A.0124, subdivision 3, for aids 50.7payable in 2015 through 2024 only, the total aid paid to Beltrami County shall be increased 50.8by $3,000,000. The increased aid shall be used for out-of-home placement costs.50.9(b) Before the money appropriated to county need aid is apportioned among the 50.10counties, as provided in Minnesota Statutes, section 477A.0124, subdivision 3, for aids 50.11payable in 2015 only, the total aid paid to Mahnomen County shall be increased by 50.12$1,500,000. Of this amount, $750,000 shall be paid from Mahnomen County to the White 50.13Earth Band of Ojibwe for transition costs associated with health and human services.50.14(c) The increased aid under this section shall be paid in the same manner and at the 50.15same time as the regular aid payments under Minnesota Statutes, section 477A.0124.50.16(d) For aids payable in 2015 only, the total aid paid to counties under Minnesota 50.17Statutes, section 477A.03, subdivision 2b, paragraph (a), is $105,295,00050.18(e) For aids payable in 2016 through 2024 only, the total aid paid to counties under 50.19Minnesota Statutes, section 477A.03, subdivision 2b, paragraph (a), is $103,795,000.50.20EFFECTIVE DATE.This section is effective for aids payable in 2015 through 2024.50.21ARTICLE 550.22PUBLIC FINANCE50.23    Section 1. Minnesota Statutes 2012, section 37.31, subdivision 8, is amended to read:50.24    Subd. 8. Expiration. The authority to issue bonds, other than bonds to refund 50.25outstanding bonds, under this section expires July 1, 2015 2025.50.26EFFECTIVE DATE.This section is effective the day following final enactment.50.27    Sec. 2. Minnesota Statutes 2012, section 473.39, is amended by adding a subdivision 50.28to read:50.29    Subd. 1t.Obligations.In addition to other authority in this section, the council may 50.30issue certificates of indebtedness, bonds, or other obligations under this section in an 50.31amount not exceeding $75,300,000 for capital expenditures as prescribed in the council's 51.1transit capital improvement program and for related costs, including the costs of issuance 51.2and sale of the obligations. Of this authorization, after July 1, 2014, the council may 51.3issue certificates of indebtedness, bonds, or other obligations in an amount not exceeding 51.4$37,000,000 and after July 1, 2015, the council may issue certificates of indebtedness, 51.5bonds, or other obligations in an additional amount not exceeding $38,300,000.51.6EFFECTIVE DATE; APPLICATION.This section is effective the day following 51.7final enactment and applies in the counties of Anoka, Carver, Dakota, Hennepin, Ramsey, 51.8Scott, and Washington.51.9    Sec. 3. Laws 2003, chapter 127, article 12, section 28, is amended to read:51.10    Sec. 28. NURSING HOME BONDS AUTHORIZED.51.11    Itasca County may issue bonds under Minnesota Statutes, sections 
         376.55 and 51.12376.56
         , to finance the construction of a 35-bed nursing home facility to replace an existing 51.1335-bed private facility located in the county. The bonds issued under this section must51.14 may be payable solely from revenues and or may not be general obligations of the county.51.15EFFECTIVE DATE; LOCAL APPROVAL.This section is effective the day after 51.16compliance by the governing body of Itasca County and its chief clerical officer with 51.17Minnesota Statutes, section 645.021, subdivisions 2 and 3.51.18    Sec. 4. Laws 2006, chapter 259, article 10, section 13, subdivision 4, is amended to read:51.19    Subd. 4. Expiration. The authority to approve tax increment financing plans to 51.20establish a tax increment financing redevelopment district subject to this section expires 51.21on December 31, 2014 2016.51.22EFFECTIVE DATE.This section is effective upon approval of the governing body 51.23of the city of Detroit Lakes and compliance with Minnesota Statutes, section 645.021, 51.24subdivisions 2 and 3.51.25    Sec. 5. Laws 2008, chapter 366, article 5, section 36, subdivision 3, is amended to read:51.26    Subd. 3. Authorized expenditures. Tax increment from the district may be 51.27expended only to pay principal and interest on bond obligations issued by the city of St. 51.28Paul Housing and Redevelopment Authority in 1996 2009 for the convention center51.29 RiverCentre Arena, including payment of principal and interest on any bonds issued to 51.30repay the bonds or loans. All such expenditures are deemed to be activities within the 51.31district under Minnesota Statutes, section 
         469.1763, subdivisions 2, 3, and 4.52.1EFFECTIVE DATE.This section is effective without local approval under 52.2Minnesota Statutes, section 645.023, subdivision 1, paragraph (a).52.3ARTICLE 652.4MISCELLANEOUS52.5    Section 1. Minnesota Statutes 2012, section 16A.152, subdivision 1b, is amended to 52.6read:52.7    Subd. 1b. Budget reserve increase level.On July 1, 2003, (a) The commissioner 52.8of management and budget shall transfer $300,000,000 to the budget reserve account in 52.9the general fund. On July 1, 2004, the commissioner of management and budget shall 52.10transfer $296,000,000 to the budget reserve account in the general fund. The amounts 52.11necessary for this purpose are appropriated from the general fund calculate the budget 52.12reserve level by multiplying the current biennium's general fund nondedicated revenues 52.13and the most recent budget reserve percentage under subdivision 8.52.14(b) If, on the basis of a November forecast of general fund revenues and 52.15expenditures, the commissioner of management and budget determines that there will be 52.16a positive unrestricted general fund balance at the close of the biennium and that the 52.17provisions of subdivision 2, clauses (1), (2), (3), and (4), are satisfied, the commissioner 52.18shall transfer to the budget reserve account in the general fund the amount necessary to 52.19increase the budget reserve to the budget reserve level determined under paragraph (a). 52.20The amount of the transfer authorized in this paragraph shall not exceed 33 percent of the 52.21positive unrestricted general fund balance determined in the forecast.52.22EFFECTIVE DATE.This section is effective for forecasts issued following final 52.23enactment.52.24    Sec. 2. Minnesota Statutes 2012, section 16A.152, subdivision 2, is amended to read:52.25    Subd. 2. Additional revenues; priority. (a) If on the basis of a forecast of general 52.26fund revenues and expenditures, the commissioner of management and budget determines 52.27that there will be a positive unrestricted budgetary general fund balance at the close of 52.28the biennium, the commissioner of management and budget must allocate money to the 52.29following accounts and purposes in priority order:52.30    (1) the cash flow account established in subdivision 1 until that account reaches 52.31$350,000,000;52.32    (2) the budget reserve account established in subdivision 1a until that account 52.33reaches $653,000,000 $810,992,000;53.1    (3) the amount necessary to increase the aid payment schedule for school district 53.2aids and credits payments in section 
         127A.45 to not more than 90 percent rounded to the 53.3nearest tenth of a percent without exceeding the amount available and with any remaining 53.4funds deposited in the budget reserve; and53.5    (4) the amount necessary to restore all or a portion of the net aid reductions under 53.6section 
         127A.441 and to reduce the property tax revenue recognition shift under section 53.7123B.75, subdivision 5
         , by the same amount; and.53.8(5) to the state airports fund, the amount necessary to restore the amount transferred 53.9from the state airports fund under Laws 2008, chapter 363, article 11, section 3, 53.10subdivision 5.53.11    (b) The amounts necessary to meet the requirements of this section are appropriated 53.12from the general fund within two weeks after the forecast is released or, in the case of 53.13transfers under paragraph (a), clauses (3) and (4), as necessary to meet the appropriations 53.14schedules otherwise established in statute.53.15    (c) The commissioner of management and budget shall certify the total dollar 53.16amount of the reductions under paragraph (a), clauses (3) and (4), to the commissioner of 53.17education. The commissioner of education shall increase the aid payment percentage and 53.18reduce the property tax shift percentage by these amounts and apply those reductions to 53.19the current fiscal year and thereafter.53.20EFFECTIVE DATE.This section is effective for forecasts issued following final 53.21enactment.53.22    Sec. 3. Minnesota Statutes 2012, section 16A.152, subdivision 8, is amended to read:53.23    Subd. 8. Report on budget reserve percentage. (a) The commissioner of 53.24management and budget must periodically review the formula developed as part of the 53.25Budget Trends Study Commission authorized by Laws 2007, chapter 148, article 2, section 53.2681, to estimate the percentage of the preceding biennium's general fund expenditures 53.27and transfers recommended as a budget reserve The commissioner of management and 53.28budget shall develop and annually review a methodology for evaluating the adequacy of 53.29the budget reserve based on the volatility of Minnesota's general fund tax structure. The 53.30review must take into consideration relevant statistical and economic literature. After 53.31completing the review, the commissioner may revise the methodology if necessary. The 53.32commissioner must use the methodology to annually estimate the percentage of the current 53.33biennium's general fund nondedicated revenues recommended as a budget reserve.53.34    (b) The commissioner must annually review the variables and coefficients in the 53.35formula used to model the base of the general fund taxes and the mix of taxes that provide 54.1revenues to the general fund. If the commissioner determines that the variables and 54.2coefficients have changed enough to result in a change in the percentage of the preceding 54.3biennium's general fund expenditures and transfers recommended as a budget reserve, 54.4the commissioner must update the variables and coefficients in the formula to reflect the 54.5current base and mix of general fund taxes By January 15 of each year, the commissioner 54.6shall report the percentage of the current biennium's general fund nondedicated revenue 54.7that is recommended as a budget reserve to the chairs and ranking minority members of 54.8the legislative committees with jurisdiction over the Department of Management and 54.9Budget. The report must also specify:54.10    (1) whether the commissioner revised the recommendation as a result of significant 54.11changes in the mix of general fund taxes or the base of one or more general fund taxes;54.12    (2) whether the commissioner revised the recommendation as a result of a revision 54.13to the methodology; and54.14    (3) any additional appropriate information.54.15    (c) Every ten years, the commissioner must review the methodology underlying the 54.16formula, taking into consideration relevant economic literature from the past ten years, 54.17and determine if the formula remains adequate as a tool for estimating the percentage of 54.18the preceding biennium's general fund expenditures and transfers recommended as a 54.19budget reserve. If the commissioner determines that the methodology underlying the 54.20formula is outdated, the commissioner must revise the formula.54.21    (d) By January 15 of each year, the commissioner must report to the chairs and 54.22ranking minority members of the house of representatives Committee on Ways and Means 54.23and the senate Committee on Finance, in compliance with sections 3.195 and 3.197, 54.24on the percentage of the preceding biennium's general fund expenditures and transfers 54.25recommended as a budget reserve. The report must specify:54.26    (1) if the commissioner updated the variables and coefficients in the formula to 54.27reflect significant changes to either the base of one or more general fund taxes or to the 54.28mix of taxes that provide revenues to the general fund as provided in paragraph (b);54.29    (2) if the commissioner revised the formula after determining the methodology was 54.30outdated as provided in paragraph (c); and54.31    (3) if the percentage of the preceding biennium's general fund expenditures and 54.32transfers recommended as a budget reserve has changed as a result of an update of or a 54.33revision to the formula.54.34EFFECTIVE DATE.This section is effective the day following final enactment.55.1    Sec. 4. Minnesota Statutes 2012, section 276A.01, is amended by adding a subdivision 55.2to read:55.3    Subd. 17.School fund allocation.(a) "School fund allocation" means an amount 55.4up to 25 percent of the areawide levy certified by the Iron Range Resources and 55.5Rehabilitation Board to be used for the purposes of the Iron Range school consolidation 55.6and cooperatively operated school account under section 298.28, subdivision 7a.55.7(b) The allocation under paragraph (a) shall only be made after the Iron Range 55.8Resources and Rehabilitation Board has certified by June 30 that the Iron Range school 55.9consolidation and cooperatively operated account has insufficient funds to make payments 55.10as authorized under section 298.28, subdivision 7a.55.11EFFECTIVE DATE.This section is effective beginning with taxes payable in 2015.55.12    Sec. 5. Minnesota Statutes 2012, section 276A.06, subdivision 3, is amended to read:55.13    Subd. 3. Apportionment of levy. The county auditor shall apportion the levy of 55.14each governmental unit in the county in the manner prescribed by this subdivision. The 55.15auditor shall:55.16(a) by August 20 of 1997 2014 and each subsequent year, determine the areawide 55.17portion of the levy for each governmental unit by multiplying the local tax rate of the 55.18governmental unit for the preceding levy year times the distribution value set forth in 55.19subdivision 2, clause (b), times a fraction, the numerator of which is the difference 55.20between the sum of the areawide levies for all governmental units in the area minus 55.21the school fund allocation and the denominator is the sum of the areawide levy for all 55.22governmental units in the area; and55.23(b) by September 5 of 1997 2014 and each subsequent year, determine the local 55.24portion of the current year's levy by subtracting the resulting amount from clause (a) from 55.25the governmental unit's current year's levy; and55.26(c) for determinations made under paragraph (a) in the case of school districts, 55.27for taxes payable in 2002, exclude the general education tax rate and the portion of the 55.28referendum tax rate attributable to the first $415 per pupil unit from the local tax rate for 55.29the preceding levy year.55.30EFFECTIVE DATE.This section is effective beginning with taxes payable in 2015.55.31    Sec. 6. Minnesota Statutes 2012, section 276A.06, subdivision 5, is amended to read:55.32    Subd. 5. Areawide tax rate. On or before August 25 of 1997 and each subsequent 55.33year, the county auditor shall certify to the administrative auditor that portion of the 56.1levy of each governmental unit determined pursuant to subdivision 3, clause (a). The 56.2administrative auditor shall then determine the areawide tax rate sufficient to yield an 56.3amount equal to the sum of the levies from the areawide net tax capacity plus the school 56.4fund allocation. On or before September 1, the administrative auditor shall certify the 56.5areawide tax rate to each of the county auditors.56.6EFFECTIVE DATE.This section is effective beginning with taxes payable in 2015.56.7    Sec. 7. Minnesota Statutes 2012, section 276A.06, subdivision 8, is amended to read:56.8    Subd. 8. Certification of values; payment. The administrative auditor shall 56.9determine for each county the difference between the total levy on distribution value 56.10pursuant to subdivision 3, clause (a), including the school fund allocation within the 56.11county and the total tax on contribution value pursuant to subdivision 7, within the county. 56.12On or before May 16 of each year, the administrative auditor shall certify the differences 56.13so determined and the county's portion of the school fund allocation to each county 56.14auditor. In addition, the administrative auditor shall certify to those county auditors for 56.15whose county the total tax on contribution value exceeds the total levy on distribution 56.16value the settlement the county is to make to the other counties of the excess of the total 56.17tax on contribution value over the total levy on distribution value in the county. On or 56.18before June 15 and November 15 of each year, each county treasurer in a county having a 56.19total tax on contribution value in excess of the total levy on distribution value shall pay 56.20one-half of the excess to the other counties in accordance with the administrative auditor's 56.21certification. On or before June 15 and November 15 of each year, each county treasurer 56.22shall pay to the administrative auditor that county's share of the school fund allocation. On 56.23or before December 1 of each year, the administrative auditor shall pay the school fund 56.24allocation to the Iron Range Resources and Rehabilitation Board for deposit in the Iron 56.25Range school consolidation and cooperatively operated account.56.26EFFECTIVE DATE.This section is effective beginning with taxes payable in 2015.56.27    Sec. 8. Minnesota Statutes 2013 Supplement, section 298.17, is amended to read:56.28298.17 OCCUPATION TAXES TO BE APPORTIONED.56.29(a) All occupation taxes paid by persons, copartnerships, companies, joint stock 56.30companies, corporations, and associations, however or for whatever purpose organized, 56.31engaged in the business of mining or producing iron ore or other ores, when collected 56.32shall be apportioned and distributed in accordance with the Constitution of the state of 56.33Minnesota, article X, section 3, in the manner following: 90 percent shall be deposited 57.1in the state treasury and credited to the general fund of which four-ninths shall be used 57.2for the support of elementary and secondary schools; and ten percent of the proceeds of 57.3the tax imposed by this section shall be deposited in the state treasury and credited to the 57.4general fund for the general support of the university.57.5(b) Of the money apportioned to the general fund by this section: (1) there is 57.6annually appropriated and credited to the mining environmental and regulatory account 57.7in the special revenue fund an amount equal to that which would have been generated 57.8by a 2-1/2 cent tax imposed by section 
         298.24 on each taxable ton produced in the 57.9preceding calendar year. Money in the mining environmental and regulatory account is 57.10appropriated annually to the commissioner of natural resources to fund agency staff to 57.11work on environmental issues and provide regulatory services for ferrous and nonferrous 57.12mining operations in this state. Payment to the mining environmental and regulatory 57.13account shall be made by July 1 annually. The commissioner of natural resources shall 57.14execute an interagency agreement with the Pollution Control Agency to assist with the 57.15provision of environmental regulatory services such as monitoring and permitting required 57.16for ferrous and nonferrous mining operations; and (2) there is annually appropriated and 57.17credited to the Iron Range Resources and Rehabilitation Board account in the special 57.18revenue fund an amount equal to that which would have been generated by a 1.5 cent tax 57.19imposed by section 
         298.24 on each taxable ton produced in the preceding calendar year, to 57.20be expended for the purposes of section 
         298.22; and (3) there is annually appropriated 57.21and credited to the Iron Range Resources and Rehabilitation Board account in the special 57.22revenue fund for transfer to the Iron Range school consolidation and cooperatively 57.23operated school account under section 298.28, subdivision 7a, an amount equal to that 57.24which would have been generated by a six cent tax imposed by section 298.24 on each 57.25taxable ton produced in the preceding calendar year. Payment to the Iron Range Resources 57.26and Rehabilitation Board account shall be made by May 15 annually.57.27(c) The money appropriated pursuant to paragraph (b), clause (2), shall be used (i) 57.28to provide environmental development grants to local governments located within any 57.29county in region 3 as defined in governor's executive order number 60, issued on June 57.3012, 1970, which does not contain a municipality qualifying pursuant to section 
         273.134, 57.31paragraph (b)
         , or (ii) to provide economic development loans or grants to businesses 57.32located within any such county, provided that the county board or an advisory group 57.33appointed by the county board to provide recommendations on economic development 57.34shall make recommendations to the Iron Range Resources and Rehabilitation Board 57.35regarding the loans. Payment to the Iron Range Resources and Rehabilitation Board 57.36account shall be made by May 15 annually.58.1(d) Of the money allocated to Koochiching County, one-third must be paid to the 58.2Koochiching County Economic Development Commission.58.3EFFECTIVE DATE.This section is effective beginning with the 2014 production 58.4year.58.5    Sec. 9. Minnesota Statutes 2012, section 298.225, subdivision 1, is amended to read:58.6    Subdivision 1. Guaranteed distribution. (a) The distribution of the taconite 58.7production tax as provided in section 
         298.28, subdivisions 3 to 5, 6, paragraph (b), 7, and 58.88, shall equal the lesser of the following amounts:58.9(1) the amount distributed pursuant to this section and section 
         298.28, with respect 58.10to 1983 production if the production for the year prior to the distribution year is no less 58.11than 42,000,000 taxable tons. If the production is less than 42,000,000 taxable tons, the 58.12amount of the distributions shall be reduced proportionately at the rate of two percent 58.13for each 1,000,000 tons, or part of 1,000,000 tons by which the production is less than 58.1442,000,000 tons; or58.15(2)(i) for the distributions made pursuant to section 
         298.28, subdivisions 4, 58.16paragraphs (b)
          and (c), and 6, paragraph (c), 31.2 percent of the amount distributed 58.17pursuant to this section and section 
         298.28, with respect to 1983 production;58.18(ii) for the distributions made pursuant to section 
         298.28, subdivision 5, paragraphs 58.19(b) and (d), 75 percent of the amount distributed pursuant to this section and section 58.20298.28
         , with respect to 1983 production provided that the aid guarantee for distributions 58.21under section 298.28, subdivision 5, paragraph (b), shall be reduced by five cents per 58.22taxable ton for production years 2014 and thereafter.58.23(b) The distribution of the taconite production tax as provided in section 
         298.28, 58.24subdivision 2
         , shall equal the following amount:58.25(1) if the production for the year prior to the distribution year is at least 42,000,000 58.26taxable tons, the amount distributed pursuant to this section and section 
         298.28 with 58.27respect to 1999 production; or58.28(2) if the production for the year prior to the distribution year is less than 42,000,000 58.29taxable tons, the amount distributed pursuant to this section and section 
         298.28 with respect 58.30to 1999 production, reduced proportionately at the rate of two percent for each 1,000,000 58.31tons or part of 1,000,000 tons by which the production is less than 42,000,000 tons.58.32EFFECTIVE DATE.This section is effective beginning with the 2015 distribution.58.33    Sec. 10. Minnesota Statutes 2012, section 298.28, subdivision 3, is amended to read:59.1    Subd. 3. Cities; towns. (a) 12.5 cents per taxable ton, less any amount distributed 59.2under subdivision 8, and paragraph (b), must be allocated to the taconite municipal aid 59.3account to be distributed as provided in section 
         298.282.59.4    (b) An amount must be allocated to towns or cities that is annually certified by 59.5the county auditor of a county containing a taconite tax relief area as defined in section 59.6273.134, paragraph (b)
         , within which there is (1) an organized township if, as of January 59.72, 1982, more than 75 percent of the assessed valuation of the township consists of iron 59.8ore or (2) a city if, as of January 2, 1980, more than 75 percent of the assessed valuation 59.9of the city consists of iron ore.59.10    (c) The amount allocated under paragraph (b) will be the portion of a township's or 59.11city's certified levy equal to the proportion of (1) the difference between 50 percent of 59.12January 2, 1982, assessed value in the case of a township and 50 percent of the January 2, 59.131980, assessed value in the case of a city and its current assessed value to (2) the sum of 59.14its current assessed value plus the difference determined in (1), provided that the amount 59.15distributed shall not exceed $55 per capita in the case of a township or $75 per capita in 59.16the case of a city. For purposes of this limitation, population will be determined according 59.17to the 1980 decennial census conducted by the United States Bureau of the Census. If the 59.18current assessed value of the township exceeds 50 percent of the township's January 2, 59.191982, assessed value, or if the current assessed value of the city exceeds 50 percent of the 59.20city's January 2, 1980, assessed value, this paragraph shall not apply. For purposes of this 59.21paragraph, "assessed value," when used in reference to years other than 1980 or 1982, 59.22means the appropriate net tax capacities multiplied by 10.2.59.23    (d) In addition to other distributions under this subdivision, three cents per taxable 59.24ton for distributions in 2009 must be allocated for distribution to towns that are entirely 59.25located within the taconite tax relief area defined in section 
         273.134, paragraph (b). For 59.26distribution in 2010 through 2014 and for distribution in 2018 and subsequent years, the 59.27three-cent amount must be annually increased in the same proportion as the increase 59.28in the implicit price deflator as provided in section 
         298.24, subdivision 1. The amount 59.29available under this paragraph will be distributed to eligible towns on a per capita basis, 59.30provided that no town may receive more than $50,000 in any year under this paragraph. 59.31Any amount of the distribution that exceeds the $50,000 limitation for a town under this 59.32paragraph must be redistributed on a per capita basis among the other eligible towns, to 59.33whose distributions do not exceed $50,000.59.34EFFECTIVE DATE.This section is effective beginning for the 2014 distribution.59.35    Sec. 11. Minnesota Statutes 2012, section 298.28, subdivision 5, is amended to read:60.1    Subd. 5. Counties. (a) 26.05 21.05 cents per taxable ton is allocated to counties to 60.2be distributed, based upon certification by the commissioner of revenue, under paragraphs 60.3(b) to (d).60.4    (b) 15.525 10.525 cents per taxable ton shall be distributed to the county in which 60.5the taconite is mined or quarried or in which the concentrate is produced, less any 60.6amount which is to be distributed pursuant to paragraph (c). The apportionment formula 60.7prescribed in subdivision 2 is the basis for the distribution.60.8    (c) If an electric power plant owned by and providing the primary source of power for 60.9a taxpayer mining and concentrating taconite is located in a county other than the county 60.10in which the mining and the concentrating processes are conducted, one cent per taxable 60.11ton of the tax distributed to the counties pursuant to paragraph (b) and imposed on and 60.12collected from such taxpayer shall be paid to the county in which the power plant is located.60.13    (d) 10.525 cents per taxable ton shall be paid to the county from which the taconite 60.14was mined, quarried or concentrated to be deposited in the county road and bridge fund. 60.15If the mining, quarrying and concentrating, or separate steps in any of those processes 60.16are carried on in more than one county, the commissioner shall follow the apportionment 60.17formula prescribed in subdivision 2.60.18EFFECTIVE DATE.This section is effective beginning with the 2015 distribution.60.19    Sec. 12. Minnesota Statutes 2012, section 298.28, subdivision 7, is amended to read:60.20    Subd. 7. Iron Range Resources and Rehabilitation Board. For the 1998 60.21distribution, 6.5 cents per taxable ton shall be paid to the Iron Range Resources and 60.22Rehabilitation Board for the purposes of section 
         298.22. That amount shall be increased60.23 in for distribution years 1999 through 2014 and for distribution in 2018 and subsequent 60.24years in the same proportion as the increase in the implicit price deflator as provided in 60.25section 
         298.24, subdivision 1. The amount distributed pursuant to this subdivision shall 60.26be expended within or for the benefit of the taconite assistance area defined in section 60.27273.1341
         . No part of the fund provided in this subdivision may be used to provide loans 60.28for the operation of private business unless the loan is approved by the governor.60.29EFFECTIVE DATE.This section is effective beginning for the 2014 distribution.60.30    Sec. 13. Minnesota Statutes 2012, section 298.28, is amended by adding a subdivision 60.31to read:60.32    Subd. 7a.Iron Range school consolidation and cooperatively operated school 60.33account.The following amounts must be allocated to the Iron Range Resources and 61.1Rehabilitation Board to be deposited in the Iron Range school consolidation and 61.2cooperatively operated school account that is hereby created:61.3(1) ten cents per taxable ton of the tax imposed under section 298.24;61.4(2) the amount as determined under section 298.17, paragraph (b), clause (3); and61.5(3) for distributions in 2015 through 2017, an amount equal to two-thirds of the 61.6increased tax proceeds attributable to the increase in the implicit price deflator as provided 61.7in section 298.24, subdivision 1.61.8Expenditures from this account shall be made only to provide disbursements to 61.9assist school districts with the payment of bonds that were issued for qualified school 61.10projects, or for any other disbursement as approved by the Iron Range Resources and 61.11Rehabilitation Board. For purposes of this section, "qualified school projects" means 61.12school projects within the taconite assistance area as defined in section 273.1341, that 61.13were (1) approved, by referendum, after December 7, 2009; and (2) approved by the 61.14commissioner of education pursuant to section 123B.71.61.15No expenditure under this section shall be made unless approved by seven members 61.16of the Iron Range Resources and Rehabilitation Board.61.17EFFECTIVE DATE.This section is effective for production year 2014 and 61.18thereafter.61.19    Sec. 14. Minnesota Statutes 2012, section 298.28, subdivision 9a, is amended to read:61.20    Subd. 9a. Taconite economic development fund. (a) 30.1 25.1 cents per ton for 61.21distributions in 2002 and thereafter must be paid to the taconite economic development 61.22fund. No distribution shall be made under this paragraph in 2004 or any subsequent year 61.23in which total industry production falls below 30 million tons. Distribution shall only be 61.24made to a taconite producer's fund under section 
         298.227 if the producer timely pays its 61.25tax under section 
         298.24 by the dates provided under section 
         298.27, or pursuant to the 61.26due dates provided by an administrative agreement with the commissioner.61.27(b) An amount equal to 50 percent of the tax under section 
         298.24 for concentrate 61.28sold in the form of pellet chips and fines not exceeding 5/16 inch in size and not including 61.29crushed pellets shall be paid to the taconite economic development fund. The amount 61.30paid shall not exceed $700,000 annually for all companies. If the initial amount to be 61.31paid to the fund exceeds this amount, each company's payment shall be prorated so the 61.32total does not exceed $700,000.61.33EFFECTIVE DATE.This section is effective beginning with the 2015 distribution.62.1    Sec. 15. Minnesota Statutes 2013 Supplement, section 298.28, subdivision 10, is 62.2amended to read:62.3    Subd. 10. Increase. (a) Except as provided in paragraph (b), beginning with for62.4 distributions in 2000 through 2014 and for distributions in 2018 and subsequent years, 62.5the amount determined under subdivision 9 shall be increased in the same proportion 62.6as the increase in the implicit price deflator as provided in section 
         298.24, subdivision 62.71
         . Beginning with distributions in 2015 2018, the amount determined under subdivision 62.86, paragraph (a), shall be increased in the same proportion as the increase in the implicit 62.9price deflator as provided in section 
         298.24, subdivision 1.62.10(b) For distributions in 2005 and subsequent years, an amount equal to the increased 62.11tax proceeds attributable to the increase in the implicit price deflator as provided in 62.12section 
         298.24, subdivision 1, for taxes paid in 2005, except for the amount of revenue 62.13increases provided in subdivision 4, paragraph (d), is distributed to the grant and loan fund 62.14established in section 
         298.2961, subdivision 4.62.15(c) For distributions in 2015 through 2017, an amount equal to two-thirds of the 62.16increased tax proceeds attributable to the increase in the implicit price deflator as provided 62.17in section 298.24, subdivision 1, is distributed to the Iron Range school consolidation and 62.18cooperatively operated school account in section 298.28, subdivision 7a, with the remaining 62.19one-third to be distributed to the Douglas J. Johnson Economic Protection Trust Fund.62.20EFFECTIVE DATE.This section is effective beginning for the 2015 distribution.62.21    Sec. 16. BUDGET RESERVE INCREASE.62.22On July 1, 2014, the commissioner of management and budget shall transfer 62.23$150,000,000 to the budget reserve in the general fund.62.24EFFECTIVE DATE.This section is effective July 1, 2014.62.25    Sec. 17. APPROPRIATION.62.26$1,000,000 is appropriated from the general fund to the commissioner of revenue 62.27in fiscal year 2014 for the cost of administering this act. This appropriation does not 62.28cancel but is available until June 30, 2015. This is a onetime appropriation and does not 62.29renew or become part of the base budget.62.30EFFECTIVE DATE.This section is effective the day following final enactment.