SF 5052

Introduction - 94th Legislature (2025 - 2026)

Posted on 04/10/2026 09:28 a.m.

A bill for an act
relating to taxation; modifying individual income, corporate franchise, sales and
use, and gross receipts taxes and other various taxes and tax-related provisions;
providing appointments; providing for certain federal conformity; modifying
pass-through entity tax provisions; modifying the sustainable aviation fuel credit;
modifying the dependent care credit; modifying the historic structure rehabilitation
credit; imposing a gross receipts tax on firearms; lowering the statewide sales and
use tax rate and expanding the base; imposing a social media tax and dedicating
receipts; making changes to the cannabis gross receipts tax; creating a commission
on artificial intelligence; providing for appointments; requiring reports;
appropriating money; amending Minnesota Statutes 2024, sections 41A.30,
subdivisions 1, 2, 7; 270C.726, subdivisions 2, 3; 289A.02, subdivision 7; 289A.08,
subdivision 7a; 289A.12, subdivisions 4, 12, by adding a subdivision; 289A.60,
subdivision 8; 290.01, subdivisions 19, 31; 290.0122, subdivision 4; 290.0131,
subdivision 9, by adding subdivisions; 290.0132, by adding subdivisions; 290.0133,
subdivision 11, by adding subdivisions; 290.0134, by adding subdivisions; 290.033;
290.06, subdivision 40; 290.067; 290.0921, subdivision 3; 290.21, subdivision 10;
290.92, subdivision 26; 290A.03, subdivision 15; 291.005, subdivision 1; 295.81,
subdivisions 1, 3, 4, 6, 9; 297A.61, subdivision 3; 297A.62, subdivision 1; 297F.25,
subdivision 1; Minnesota Statutes 2025 Supplement, sections 41A.30, subdivision
5; 290.06, subdivisions 2c, 23a; 290.091, subdivision 2; proposing coding for new
law in Minnesota Statutes, chapters 116J; 290; 295.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1

FEDERAL UPDATE

Section 1.

Minnesota Statutes 2024, section 289A.02, subdivision 7, is amended to read:

Subd. 7.

Internal Revenue Code.

Unless specifically defined otherwise, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through deleted text begin May 1,
2023 deleted text end new text begin March 1, 2026 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment, except
the changes incorporated by federal changes are effective retroactively at the same time the
changes were effective for federal purposes.
new text end

Sec. 2.

Minnesota Statutes 2024, section 289A.12, subdivision 4, is amended to read:

Subd. 4.

Returns by persons, corporations, cooperatives, governmental entities, or
school districts.

(a) The commissioner may by notice and demand require to the extent
required by section 6041 of the Internal Revenue Code, a person, corporation, or cooperative,
the state of Minnesota and its political subdivisions, and a city, county, and school district
in Minnesota, making payments in the regular course of a trade or business during the
taxable year to any person or corporation of $600 or more on account of rents or royalties,
or of $10 or more on account of interest, or $10 or more on account of dividends or patronage
dividends, or $600 or more on account of either wages, salaries, commissions, fees, prizes,
awards, pensions, annuities, or any other fixed or determinable gains, profits or income, not
otherwise reportable under section 289A.09, subdivision 2, or on account of earnings of
$10 or more distributed to its members by savings associations or credit unions chartered
under the laws of this state or the United States, (1) to file with the commissioner a return
deleted text begin (except in cases where a valid agreement to participate in the combined federal and state
information reporting system has been entered into, and the return is filed only with the
commissioner of internal revenue under the applicable filing and informational reporting
requirements of the Internal Revenue Code) deleted text end with respect to the payments in excess of the
amounts named, giving the names and addresses of the persons to whom the payments were
made, the amounts paid to each, and (2) to make a return with respect to the total number
of payments and total amount of payments, for each category of income named, which were
in excess of the amounts named. This subdivision does not apply to the payment of interest
or dividends to a person who was a nonresident of Minnesota for the entire year.

(b) For payments for which a return is covered by paragraph (a), regardless of whether
the commissioner has required filing under paragraph (a), the payor must file a copy of the
return with the commissioner if:

(1) the return is for a payment made to a Minnesota resident, to a recipient with a
Minnesota address, or for activity occurring in the state of Minnesota; and

(2) the payment is for wages, salaries, or other compensation for services provided. The
commissioner may require this information to be filed in electronic or another form that the
commissioner determines is appropriate deleted text begin , notwithstanding the provisions of paragraph (c) deleted text end .

deleted text begin (c) A person, corporation, or cooperative required to file returns under this subdivision
must file the returns on magnetic media if magnetic media was used to satisfy the federal
reporting requirement under section 6011(e) of the Internal Revenue Code, unless the person
establishes to the satisfaction of the commissioner that compliance with this requirement
would be an undue hardship.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for payments made after
December 31, 2025.
new text end

Sec. 3.

Minnesota Statutes 2024, section 289A.12, subdivision 12, is amended to read:

Subd. 12.

Statements to payees.

A person who can be required to file a return with the
commissioner under subdivisions 4 to 10 new text begin and 19 new text end must furnish to a person whose name is
set forth in the return a written statement showing the name and address of the person making
the return, and the aggregate amount of payments to the person shown on the return.

This written statement must be given to the person on or before January 31 of the year
following the calendar year for which the return was made.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for payments made after
December 31, 2025.
new text end

Sec. 4.

Minnesota Statutes 2024, section 289A.12, is amended by adding a subdivision to
read:

new text begin Subd. 19. new text end

new text begin Returns relating to payments made in settlement of payment card and
third-party network transactions, nonemployee income, and miscellaneous income. new text end

new text begin (a)
A person that is required or would be required to file a return relating to payments made in
settlement of payment card and third-party network transactions, nonemployee income, or
miscellaneous income pursuant to section 6041(a) or 6050W of the Internal Revenue Code,
is required to file a return with the commissioner under subdivision 4, except:
new text end

new text begin (1) the threshold must be $600 instead of $2,000 under section 6041(a) of the Internal
Revenue Code; and
new text end

new text begin (2) section 6050W(e)(2) of the Internal Revenue Code does not apply.
new text end

new text begin (b) The return must be filed with the commissioner on or before January 31 of the year
following the calendar year for which the payments were made.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for payments made after
December 31, 2025.
new text end

Sec. 5.

Minnesota Statutes 2024, section 289A.60, subdivision 8, is amended to read:

Subd. 8.

Penalties; failure to file informational return; incorrect taxpayer
identification number.

(a) In the case of a failure to file an informational return required
by section 289A.12 with the commissioner on the date prescribed (determined with regard
to any extension of time for filing), the person failing to file the return shall pay a penalty
of $50 for each failure or in the case of a partnership, S corporation, or fiduciary return, $50
for each partner, shareholder, or beneficiary; but the total amount imposed on the delinquent
person for all failures during any calendar year must not exceed $25,000. If a failure to file
a return is due to intentional disregard of the filing requirement, then the penalty imposed
under the preceding sentence must not be less than an amount equal to:

(1) in the case of a return not described in clause (2) or (3), ten percent of the aggregate
amount of the items required to be reported;

(2) in the case of a return required to be filed under section 289A.12, subdivision 5, five
percent of the gross proceeds required to be reported; deleted text begin and
deleted text end

(3) in the case of a return required to be filed under section 289A.12, subdivision 9,
relating to direct sales, $100 for each failure; however, the total amount imposed on the
delinquent person for intentional failures during a calendar year must not exceed $50,000.
The penalty must be collected in the same manner as a delinquent income tax deleted text begin . deleted text end new text begin ;
new text end

new text begin (4) in the case of a statement required to be provided to a payee under section 289A.12,
subdivision 12, $50 for each failure; however, the total amount imposed on the delinquent
person for failures during a calendar year must not exceed $50,000; and
new text end

new text begin (5) in the case of a return required to be filed under section 289A.12, subdivision 19,
$50 for each failure; however, the total amount imposed on the delinquent person for failures
during a calendar year must not exceed $50,000.
new text end

(b) If a partnership or S corporation files a partnership or S corporation return with an
incorrect tax identification number used for a partner or shareholder after being notified by
the commissioner that the identification number is incorrect, the partnership or S corporation
must pay a penalty of $50 for each such incorrect number.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for payments made after
December 31, 2025.
new text end

Sec. 6.

Minnesota Statutes 2024, section 290.01, subdivision 19, is amended to read:

Subd. 19.

Net income.

(a) For a trust or estate taxable under section 290.03, and a
corporation taxable under section 290.02, the term "net income" means the federal taxable
income, as defined in section 63 of the Internal Revenue Code of 1986, as amended through
the date named in this subdivision, incorporating the federal effective dates of changes to
the Internal Revenue Code and any elections made by the taxpayer in accordance with the
Internal Revenue Code in determining federal taxable income for federal income tax
purposes, and with the modifications provided in sections 290.0131 to 290.0136.

(b) For an individual, the term "net income" means federal adjusted gross income with
the modifications provided in sections 290.0131, 290.0132, and 290.0135 to 290.0137.

(c) In the case of a regulated investment company or a fund thereof, as defined in section
851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
except that:

(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
Revenue Code does not apply;

(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal Revenue
Code must be applied by allowing a deduction for capital gain dividends and exempt-interest
dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal Revenue Code;
and

(3) the deduction for dividends paid must also be applied in the amount of any
undistributed capital gains which the regulated investment company elects to have treated
as provided in section 852(b)(3)(D) of the Internal Revenue Code.

(d) The net income of a real estate investment trust as defined and limited by section
856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
taxable income as defined in section 857(b)(2) of the Internal Revenue Code.

(e) The net income of a designated settlement fund as defined in section 468B(d) of the
Internal Revenue Code means the gross income as defined in section 468B(b) of the Internal
Revenue Code.

(f) The Internal Revenue Code of 1986, as amended through deleted text begin May 1, 2023 deleted text end new text begin March 1,
2026 new text end , applies for taxable years beginning after December 31, 1996.

(g) Except as otherwise provided, references to the Internal Revenue Code in this
subdivision and sections 290.0131 to 290.0136 mean the code in effect for purposes of
determining net income for the applicable year.

(h) In the case of a partnership electing to file a composite return under section 289A.08,
subdivision 7, "net income" means the partner's share of federal adjusted gross income from
the partnership modified by the additions provided in section 290.0131, subdivisions 8 to
10, 16, and 17, and the subtractions provided in: (1) section 290.0132, subdivisions 9, 27,
and 28, to the extent the amount is assignable or allocable to Minnesota under section 290.17;
and (2) section 290.0132, subdivision 14. The subtraction allowed under section 290.0132,
subdivision 9, is only allowed on the composite tax computation to the extent the electing
partner would have been allowed the subtraction.

(i) In the case of a qualifying entity electing to pay the pass-through entity tax under
section 289A.08, subdivision 7a, "net income" means the qualifying owner's share of federal
adjusted gross income from the qualifying entity modified by the additions provided in
section 290.0131, subdivisions 5, 8 to 10, 16, and 17, and the subtractions provided in: (1)
section 290.0132, subdivisions 3, 9, 27, and 28, to the extent the amount is assignable or
allocable to Minnesota under section 290.17; and (2) section 290.0132, subdivision 14. The
subtraction allowed under section 290.0132, subdivision 9, is only allowed on the
pass-through entity tax computation to the extent the qualifying owners would have been
allowed the subtraction. The income of both a resident and nonresident qualifying owner
is allocated and assigned to this state as provided for nonresident partners and shareholders
under sections 290.17, 290.191, and 290.20.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment, except
the changes incorporated by federal changes are effective retroactively at the same time the
changes were effective for federal purposes.
new text end

Sec. 7.

Minnesota Statutes 2024, section 290.01, subdivision 19, is amended to read:

Subd. 19.

Net income.

(a) For a trust or estate taxable under section 290.03, and a
corporation taxable under section 290.02, the term "net income" means the federal taxable
income, as defined in section 63 of the Internal Revenue Code of 1986, as amended through
the date named in this subdivision, incorporating the federal effective dates of changes to
the Internal Revenue Code and any elections made by the taxpayer in accordance with the
Internal Revenue Code in determining federal taxable income for federal income tax
purposes, and with the modifications provided in sections 290.0131 to 290.0136.

(b) For an individual, the term "net income" means federal adjusted gross income with
the modifications provided in sections 290.0131, 290.0132, and 290.0135 to 290.0137.

(c) In the case of a regulated investment company or a fund thereof, as defined in section
851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
except that:

(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
Revenue Code does not apply;

(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal Revenue
Code must be applied by allowing a deduction for capital gain dividends and exempt-interest
dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal Revenue Code;
and

(3) the deduction for dividends paid must also be applied in the amount of any
undistributed capital gains which the regulated investment company elects to have treated
as provided in section 852(b)(3)(D) of the Internal Revenue Code.

(d) The net income of a real estate investment trust as defined and limited by section
856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
taxable income as defined in section 857(b)(2) of the Internal Revenue Code.

(e) The net income of a designated settlement fund as defined in section 468B(d) of the
Internal Revenue Code means the gross income as defined in section 468B(b) of the Internal
Revenue Code.

(f) The Internal Revenue Code of 1986, as amended through May 1, 2023, applies for
taxable years beginning after December 31, 1996.

(g) Except as otherwise provided, references to the Internal Revenue Code in this
subdivision and sections 290.0131 to 290.0136 mean the code in effect for purposes of
determining net income for the applicable year.

(h) In the case of a partnership electing to file a composite return under section 289A.08,
subdivision 7, "net income" means the partner's share of federal adjusted gross income from
the partnership modified by the additions provided in section 290.0131, subdivisions 8 to
10, 16, deleted text begin and deleted text end 17, new text begin 21, and 22, new text end and the subtractions provided in: (1) section 290.0132,
subdivisions 9, 27, deleted text begin and deleted text end 28, new text begin 40, 41, and 42, new text end to the extent the amount is assignable or allocable
to Minnesota under section 290.17; and (2) section 290.0132, subdivision 14. The subtraction
allowed under section 290.0132, subdivision 9, is only allowed on the composite tax
computation to the extent the electing partner would have been allowed the subtraction.

(i) In the case of a qualifying entity electing to pay the pass-through entity tax under
section 289A.08, subdivision 7a, "net income" means the qualifying owner's share of federal
adjusted gross income from the qualifying entity modified by the additions provided in
section 290.0131, subdivisions 5, 8 to 10, 16, deleted text begin and deleted text end 17, new text begin 21, and 22, new text end and the subtractions
provided in: (1) section 290.0132, subdivisions 3, 9, 27, deleted text begin and deleted text end 28, new text begin 40, 41, and 42, new text end to the extent
the amount is assignable or allocable to Minnesota under section 290.17; and (2) section
290.0132, subdivision 14. The subtraction allowed under section 290.0132, subdivision 9,
is only allowed on the pass-through entity tax computation to the extent the qualifying
owners would have been allowed the subtraction. The income of both a resident and
nonresident qualifying owner is allocated and assigned to this state as provided for
nonresident partners and shareholders under sections 290.17, 290.191, and 290.20.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2024, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 8.

Minnesota Statutes 2024, section 290.01, subdivision 31, is amended to read:

Subd. 31.

Internal Revenue Code.

Unless specifically defined otherwise, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through deleted text begin May 1,
2023 deleted text end new text begin March 1, 2026 new text end . Internal Revenue Code also includes any uncodified provision in
federal law that relates to provisions of the Internal Revenue Code that are incorporated
into Minnesota law.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment, except
the changes incorporated by federal changes are effective retroactively at the same time the
changes were effective for federal purposes.
new text end

Sec. 9.

Minnesota Statutes 2024, section 290.0122, subdivision 4, is amended to read:

Subd. 4.

Charitable contributions.

(a) A taxpayer is allowed a deduction for charitable
contributions. The deduction equals the amount of the charitable contribution deduction
allowable to the taxpayer under section 170 of the Internal Revenue Code, including the
denial of the deduction under section 408(d)(8), except that the provisions of section
170(b)(1)(G) apply regardless of the taxable year. new text begin A charitable contribution under this
subdivision is allowed as a deduction to the extent that the aggregate of the contributions
exceeds 0.5 percent of the taxpayer's contribution base, as defined in section 170(b)(1)(H),
for the taxable year, and to the extent that the aggregate of cash contributions does not
exceed the excess of 60 percent of the taxpayer's contribution base for the taxable year over
the aggregate amount of contributions taken into account under section 170(b)(1)(A) for
such taxable year.
new text end

(b) For taxable years beginning after December 31, 2017, the determination of carryover
amounts must be made by applying the rules under section 170 of the Internal Revenue
Code based on the charitable contribution deductions claimed and allowable under this
section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2025, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 10.

Minnesota Statutes 2024, section 290.0131, subdivision 9, is amended to read:

Subd. 9.

Bonus depreciation.

(a) 80 percent of the depreciation deduction allowed under
section 168(k) new text begin , (l), (m), and (n) new text end of the Internal Revenue Code is an addition.

(b) For the purposes of this subdivision, if the taxpayer has an activity that in the taxable
year generates a deduction for depreciation under section 168(k) new text begin , (l), (m), and (n) new text end of the
Internal Revenue Code and the activity generates a loss for the taxable year that the taxpayer
is not allowed to claim for the taxable year, "the depreciation deduction allowed under
section 168(k) new text begin , (l), (m), and (n) new text end " for the taxable year is limited to excess of the depreciation
claimed by the activity under section 168(k) new text begin , (l), (m), and (n) new text end over the amount of the loss
from the activity that is not allowed in the taxable year. In succeeding taxable years when
the losses not allowed in the taxable year are allowed, the depreciation under section 168(k) new text begin ,
(l), (m), and (n) new text end is allowed.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2024, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 11.

Minnesota Statutes 2024, section 290.0131, is amended by adding a subdivision
to read:

new text begin Subd. 21. new text end

new text begin Domestic research and experimental expenditures. new text end

new text begin (a) 80 percent of the
amount immediately deducted and allowed under section 174A(a) of the Internal Revenue
Code is an addition.
new text end

new text begin (b) Any amount deducted under the transitional rules in Public Law 119-21, section
70302(f) is an addition.
new text end

new text begin (c) If a taxpayer generates a deduction under section 174A, but is not allowed to take
the deduction federally for that taxable year, then 80 percent of the amount in the taxable
year the deduction is allowed is an addition.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2024, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 12.

Minnesota Statutes 2024, section 290.0131, is amended by adding a subdivision
to read:

new text begin Subd. 22. new text end

new text begin Opportunity zones. new text end

new text begin For amounts invested in or property acquired after
December 31, 2026, the amount deferred or excluded pursuant to an election under section
1400Z-2(a) of the Internal Revenue Code is an addition. The addition must be in the year
the gain would have been realized on the sale or exchange absent the treatment under section
1400Z-2(a) of the Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2025, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 13.

Minnesota Statutes 2024, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 40. new text end

new text begin Delayed domestic research and experimental expenditures. new text end

new text begin (a) In each of
the four taxable years immediately following the taxable year in which an addition is required
under section 290.0131, subdivision 21, paragraph (a) or (c), or 290.0133, subdivision 16,
paragraph (a) or (c), for a shareholder of a corporation that is an S corporation, an amount
equal to one-fourth of the addition is a subtraction.
new text end

new text begin (b) For the amounts added under section 290.0131, subdivision 21, paragraph (b), an
amount equal to the amount that would have been deducted under section 174 of the Internal
Revenue Code, as amended through May 1, 2023, but for the election under Public Law
119-21, section 70302(f), is a subtraction.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2024, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 14.

Minnesota Statutes 2024, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 41. new text end

new text begin Opportunity zones. new text end

new text begin (a) If a taxpayer has an addition for property under section
290.0131, subdivision 22, the gain realized under section 1400Z-2(b) of the Internal Revenue
Code for the same property is a subtraction. The subtraction must not exceed the amount
added back for such property.
new text end

new text begin (b) If a taxpayer has a gain realized under section 1400Z-2(b) for property as to which
the gain was previously realized and then adjusted under section 290.993, then the gain
realized under section 1400Z-2(b) is a subtraction. The subtraction is limited to the amount
previously realized under Minnesota law. The subtraction must be made in the tax period
beginning after December 31, 2025, and before January 1, 2027.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2025, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 15.

Minnesota Statutes 2024, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 42. new text end

new text begin Net CFC tested income. new text end

new text begin The amount calculated under section 290.034,
paragraph (a), is a subtraction. The subtraction must not exceed the amount of net CFC
tested income calculated under section 290.034 for the taxable year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2025.
new text end

Sec. 16.

Minnesota Statutes 2024, section 290.0133, subdivision 11, is amended to read:

Subd. 11.

Bonus depreciation.

80 percent of the depreciation deduction allowed under
section deleted text begin 168(k)(1)(A) and (k)(4)(A) deleted text end new text begin 168(k), (l), (m), and (n) new text end of the Internal Revenue Code
is an addition. For purposes of this subdivision, if the taxpayer has an activity that in the
taxable year generates a deduction for depreciation under section deleted text begin 168(k)(1)(A) and (k)(4)(A) deleted text end new text begin
168(k), (l), (m), and (n) new text end and the activity generates a loss for the taxable year that the taxpayer
is not allowed to claim for the taxable year, "the depreciation allowed under section
deleted text begin 168(k)(1)(A) and (k)(4)(A) deleted text end new text begin 168(k), (l), (m), and (n) new text end " for the taxable year is limited to excess
of the depreciation claimed by the activity under section deleted text begin 168(k)(1)(A) and (k)(4)(A) deleted text end new text begin 168(k),
(l), (m), and (n) new text end over the amount of the loss from the activity that is not allowed in the
taxable year. In succeeding taxable years when the losses not allowed in the taxable year
are allowed, the depreciation under section deleted text begin 168(k)(1)(A) and (k)(4)(A) deleted text end new text begin 168(k), (l), (m), and
(n) new text end is allowed.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2024, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 17.

Minnesota Statutes 2024, section 290.0133, is amended by adding a subdivision
to read:

new text begin Subd. 16. new text end

new text begin Domestic research and experimental expenditures. new text end

new text begin (a) Eighty percent of
the amount immediately expensed, deducted, and allowed under section 174A(a) of the
Internal Revenue Code is an addition.
new text end

new text begin (b) Any amount deducted under the transitional rules in Public Law 119-21, section
70302(f), is an addition.
new text end

new text begin (c) If a taxpayer generates a deduction under section 174A, but is not allowed to take
the deduction federally for that taxable year, then 80 percent of the amount in the taxable
year the deduction is allowed is an addition.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2024, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 18.

Minnesota Statutes 2024, section 290.0133, is amended by adding a subdivision
to read:

new text begin Subd. 17. new text end

new text begin Opportunity zones. new text end

new text begin For amounts invested in or property acquired after
December 31, 2026, the amount deferred or excluded pursuant to an election under section
1400Z-2(a) of the Internal Revenue Code is an addition. The addition must be in the year
the gain would have been realized on the sale or exchange absent the treatment under section
1400Z-2(a) of the Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2025, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 19.

Minnesota Statutes 2024, section 290.0134, is amended by adding a subdivision
to read:

new text begin Subd. 21. new text end

new text begin Delayed research and experimental expenditures. new text end

new text begin (a) In each of the four
taxable years immediately following the taxable year in which an addition is required under
section 290.0133, subdivision 16, paragraph (a) or (c), an amount equal to one-fourth of
the addition is a subtraction.
new text end

new text begin (b) For the amounts added under section 290.0133, subdivision 16, paragraph (b), an
amount equal to the amount that would have been deducted under section 174 of the Internal
Revenue Code, as amended through May 1, 2023, but for the election under Public Law
119-21, section 70302(f), is a subtraction.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2024, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 20.

Minnesota Statutes 2024, section 290.0134, is amended by adding a subdivision
to read:

new text begin Subd. 22. new text end

new text begin Opportunity zones. new text end

new text begin (a) If a taxpayer has an addition for property under section
290.0133, subdivision 17, the gain realized under section 1400Z-2(b) for the same property
is a subtraction. The subtraction must not exceed the amount added back for such property.
new text end

new text begin (b) If a taxpayer has a gain realized under section 1400Z-2(b) for property as to which
the gain was previously realized and then adjusted under section 290.993, then the gain
realized under section 1400Z-2(b) is a subtraction. The subtraction is limited to the amount
previously realized under Minnesota law. The subtraction must be made in the tax period
beginning after December 31, 2025, and before January 1, 2027.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2025, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 21.

Minnesota Statutes 2024, section 290.0134, is amended by adding a subdivision
to read:

new text begin Subd. 23. new text end

new text begin Net CFC tested income. new text end

new text begin The amount calculated under section 290.034,
paragraph (a), is a subtraction. The subtraction must not exceed the amount of net CFC
tested income calculated under section 290.034 for the taxable year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2025.
new text end

Sec. 22.

Minnesota Statutes 2024, section 290.033, is amended to read:

290.033 NET INVESTMENT INCOME TAX.

(a) For purposes of this section, "net investment income" has the meaning given in
section 1411(c) of the Internal Revenue Code, deleted text begin excluding the net gain attributable to the
disposition of property classified as class 2a under section 273.13, subdivision 23. deleted text end new text begin except:
new text end

new text begin (1) the net gain attributable to the disposition of property that is classified as class 2a
under section 273.13, subdivision 23, must be excluded;
new text end

new text begin (2) for amounts invested in or property acquired after December 31, 2026, the amount
deferred or excluded pursuant to an election under section 1400Z-2(a) of the Internal Revenue
Code must be added to net investment income. The addition must be made in the year the
gain would have been realized on the sale or exchange absent the treatment under section
1400Z-2(a) of the Internal Revenue Code; and
new text end

new text begin (3) if a taxpayer has an addition under clause (2) or a gain that was deferred under section
1400Z-2(a) of the Internal Revenue Code, and the amount was previously realized under
section 290.993, the gain realized under section 1400Z-2(b) is a subtraction. The subtraction
is limited to the amount previously realized under Minnesota law. The subtraction must be
made in the tax period beginning after December 31, 2025, and before January 1, 2027.
new text end

(b) In addition to the tax computed under section 290.06, subdivision 2c, a tax is imposed
on the net investment income of individuals, estates, and trusts in excess of $1,000,000 at
a rate of one percent.

(c) For an individual who is not a Minnesota resident for the entire taxable year, the tax
under this subdivision must be calculated as if the individual is a Minnesota resident for the
entire year, and that amount must be multiplied by a fraction in which:

(1) the numerator is net investment income allocable under section 290.17 to Minnesota;
and

(2) the denominator is the total amount of net investment income for the taxable year.

(d) For an estate or trust, the tax on net investment income must be computed by
multiplying the net investment income tax liability by a fraction, the numerator of which is
the amount of the estate or trust's net investment income allocated to the state pursuant to
the provisions of sections 290.17, 290.191, and 290.20, and the denominator of which is
the taxpayer's total net investment income.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2025, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 23.

new text begin [290.034] NET CFC TESTED INCOME.
new text end

new text begin (a) The amount of net CFC tested income for Minnesota purposes is calculated as follows:
new text end

new text begin (1) any amounts included in federal taxable income pursuant to section 951A of the
Internal Revenue Code; minus
new text end

new text begin (2) the amount calculated under section 951A(b)(2)(A) of the Internal Revenue Code,
as amended through May 1, 2023. The calculation excludes section 951A(b)(2)(B). Any
internal references to the calculation refer to the Internal Revenue Code as amended through
May 1, 2023.
new text end

new text begin (b) The result of the calculation under paragraph (a) must not be less than zero.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2025.
new text end

Sec. 24.

Minnesota Statutes 2025 Supplement, section 290.06, subdivision 2c, is amended
to read:

Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

(a) The income taxes
imposed by this chapter upon married individuals filing joint returns and surviving spouses
as defined in section 2(a) of the Internal Revenue Code must be computed by applying to
their taxable net income the following schedule of rates:

(1) On the first $38,770, 5.35 percent;

(2) On all over $38,770, but not over $154,020, 6.8 percent;

(3) On all over $154,020, but not over $269,010, 7.85 percent;

(4) On all over $269,010, 9.85 percent.

Married individuals filing separate returns, estates, and trusts must compute their income
tax by applying the above rates to their taxable income, except that the income brackets
will be one-half of the above amounts after the adjustment required in subdivision 2d.

(b) The income taxes imposed by this chapter upon unmarried individuals must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $26,520, 5.35 percent;

(2) On all over $26,520, but not over $87,110, 6.8 percent;

(3) On all over $87,110, but not over $161,720, 7.85 percent;

(4) On all over $161,720, 9.85 percent.

(c) The income taxes imposed by this chapter upon unmarried individuals qualifying as
a head of household as defined in section 2(b) of the Internal Revenue Code must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $32,650, 5.35 percent;

(2) On all over $32,650, but not over $131,190, 6.8 percent;

(3) On all over $131,190, but not over $214,980, 7.85 percent;

(4) On all over $214,980, 9.85 percent.

(d) In lieu of a tax computed according to the rates set forth in this subdivision, the tax
of any individual taxpayer whose taxable net income for the taxable year is less than an
amount determined by the commissioner must be computed in accordance with tables
prepared and issued by the commissioner of revenue based on income brackets of not more
than $100. The amount of tax for each bracket shall be computed at the rates set forth in
this subdivision, provided that the commissioner may disregard a fractional part of a dollar
unless it amounts to 50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the entire year must compute the
individual's Minnesota income tax as provided in this subdivision. After the application of
the nonrefundable credits provided in this chapter, the tax liability must then be multiplied
by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income as
defined in section 62 of the Internal Revenue Code and increased by:

(i) the additions required under sections 290.0131, subdivisions 2, 6, 8 to 10, 16, 17, 19,
deleted text begin and deleted text end 20, new text begin 21, and 22, new text end and 290.0137, paragraph (a); and reduced by

(ii) the Minnesota assignable portion of the subtraction for United States government
interest under section 290.0132, subdivision 2, the subtractions under sections 290.0132,
subdivisions 9, 14, 15, 18, 27, 31, deleted text begin and deleted text end 32, new text begin 40, 41, and 42, new text end and 290.0137, paragraph (c), after
applying the allocation and assignability provisions of section 290.081, clause (a), or 290.17;
and

(2) the denominator is the individual's federal adjusted gross income as defined in section
62 of the Internal Revenue Code, increased by:

(i) the additions required under sections 290.0131, subdivisions 2, 6, 8 to 10, 16, 17, 19,
deleted text begin and deleted text end 20, new text begin 21, and 22, new text end and 290.0137, paragraph (a); and reduced by

(ii) the subtractions under sections 290.0132, subdivisions 2, 9, 14, 15, 18, 27, 31, deleted text begin and deleted text end
32, new text begin 40, 41, and 42, new text end and 290.0137, paragraph (c).

(f) If an individual who is not a Minnesota resident for the entire year is a qualifying
owner of a qualifying entity that elects to pay tax as provided in section 289A.08, subdivision
7a, paragraph (b), the individual must compute the individual's Minnesota income tax as
provided in paragraph (e), and also must include, to the extent attributed to the electing
qualifying entity:

(1) in paragraph (e), clause (1), item (i), and paragraph (e), clause (2), item (i), the
addition under section 290.0131, subdivision 5; and

(2) in paragraph (e), clause (1), item (ii), and paragraph (e), clause (2), item (ii), the
subtraction under section 290.0132, subdivision 3.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2024, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 25.

Minnesota Statutes 2025 Supplement, section 290.091, subdivision 2, is amended
to read:

Subd. 2.

Definitions.

For purposes of the tax imposed by this section, the following
terms have the meanings given.

(a) "Alternative minimum taxable income" means the sum of the following for the taxable
year:

(1) the taxpayer's federal alternative minimum taxable income as defined in section
55(b)(1)(D) of the Internal Revenue Code;

(2) the taxpayer's itemized deductions allowed in computing federal alternative minimum
taxable income, but excluding:

(i) the charitable contribution deduction under section 170 of the Internal Revenue Code;

(ii) the medical expense deduction;

(iii) the casualty, theft, and disaster loss deduction; and

(iv) the impairment-related work expenses of a person with a disability;

(3) for depletion allowances computed under section 613A(c) of the Internal Revenue
Code, with respect to each property (as defined in section 614 of the Internal Revenue Code),
to the extent not included in federal alternative minimum taxable income, the excess of the
deduction for depletion allowable under section 611 of the Internal Revenue Code for the
taxable year over the adjusted basis of the property at the end of the taxable year (determined
without regard to the depletion deduction for the taxable year);

(4) to the extent not included in federal alternative minimum taxable income, the amount
of the tax preference for intangible drilling cost under section 57(a)(2) of the Internal Revenue
Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative minimum taxable income, the amount
of interest income as provided by section 290.0131, subdivision 2;

(6) the amount of addition required by section 290.0131, subdivisions 9, 10, deleted text begin and deleted text end 16 new text begin , 21,
and 22 new text end ;

(7) the deduction allowed under section 199A of the Internal Revenue Code, to the extent
not included in the addition required under clause (6); and

(8) to the extent not included in federal alternative minimum taxable income, the amount
of foreign-derived intangible income deducted under section 250 of the Internal Revenue
Code;

less the sum of the amounts determined under the following:

(i) interest income as defined in section 290.0132, subdivision 2;

(ii) an overpayment of state income tax as provided by section 290.0132, subdivision
3, to the extent included in federal alternative minimum taxable income;

(iii) the amount of investment interest paid or accrued within the taxable year on
indebtedness to the extent that the amount does not exceed net investment income, as defined
in section 163(d)(4) of the Internal Revenue Code. Interest does not include amounts deducted
in computing federal adjusted gross income;

(iv) amounts subtracted from federal taxable or adjusted gross income as provided by
section 290.0132, subdivisions 7, 9 to 15, 17, 21, 24, 26 to 29, 31, and 34 to deleted text begin 39 deleted text end new text begin 42 new text end ;

(v) the amount of the net operating loss allowed under section 290.095, subdivision 11,
paragraph (c); and

(vi) the amount allowable as a Minnesota itemized deduction under section 290.0122,
subdivision 7.

In the case of an estate or trust, alternative minimum taxable income must be computed
as provided in section 59(c) of the Internal Revenue Code, except alternative minimum
taxable income must be increased by the addition in section 290.0131, subdivision 16.

(b) "Investment interest" means investment interest as defined in section 163(d)(3) of
the Internal Revenue Code.

(c) "Net minimum tax" means the minimum tax imposed by this section.

(d) "Regular tax" means the tax that would be imposed under this chapter (without regard
to this section, section 290.033, and section 290.032), reduced by the sum of the
nonrefundable credits allowed under this chapter.

(e) "Tentative minimum tax" equals 6.75 percent of alternative minimum taxable income
after subtracting the exemption amount determined under subdivision 3.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2024, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 26.

Minnesota Statutes 2024, section 290.0921, subdivision 3, is amended to read:

Subd. 3.

Alternative minimum taxable income.

"Alternative minimum taxable income"
is Minnesota net income as defined in section 290.01, subdivision 19, and includes the
adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e), (f), and (h) of
the Internal Revenue Code. If a corporation files a separate company Minnesota tax return,
the minimum tax must be computed on a separate company basis. If a corporation is part
of a tax group filing a unitary return, the minimum tax must be computed on a unitary basis.
The following adjustments must be made.

(1) The portion of the depreciation deduction allowed for federal income tax purposes
under section 168(k) of the Internal Revenue Code that is required as an addition under
section 290.0133, subdivision 11, is disallowed in determining alternative minimum taxable
income.

(2) The subtraction for depreciation allowed under section 290.0134, subdivision 13, is
allowed as a depreciation deduction in determining alternative minimum taxable income.

(3) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d)
of the Internal Revenue Code does not apply.

(4) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal
Revenue Code does not apply.

(5) The tax preference for depletion under section 57(a)(1) of the Internal Revenue Code
does not apply.

(6) The tax preference for tax exempt interest under section 57(a)(5) of the Internal
Revenue Code does not apply.

(7) The tax preference for charitable contributions of appreciated property under section
57(a)(6) of the Internal Revenue Code does not apply.

(8) For purposes of calculating the adjustment for adjusted current earnings in section
56(g) of the Internal Revenue Code, the term "alternative minimum taxable income" as it
is used in section 56(g) of the Internal Revenue Code, means alternative minimum taxable
income as defined in this subdivision, determined without regard to the adjustment for
adjusted current earnings in section 56(g) of the Internal Revenue Code.

(9) For purposes of determining the amount of adjusted current earnings under section
56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section 56(g)(4)
of the Internal Revenue Code with respect to (i) the amount of foreign dividend gross-up
subtracted as provided in section 290.0134, subdivision 2, or (ii) the amount of refunds of
income, excise, or franchise taxes subtracted as provided in section 290.0134, subdivision
8.

(10) Alternative minimum taxable income excludes the income from operating in a job
opportunity building zone as provided under section 469.317.

Items of tax preference must not be reduced below zero as a result of the modifications
in this subdivision.

(11) The subtraction for disallowed section 280E expenses under section 290.0134,
subdivision 19, is allowed as a deduction in determining alternative minimum taxable
income.

new text begin (12) The subtraction for domestic research and experimental expenditures under section
290.0134, subdivision 21, is allowed as a deduction in determining alternative minimum
taxable income.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2024, except the changes incorporated by federal changes are effective
retroactively at the same time the changes were effective for federal purposes.
new text end

Sec. 27.

Minnesota Statutes 2024, section 290.21, subdivision 10, is amended to read:

Subd. 10.

deleted text begin Global intangible low-taxed deleted text end new text begin Net CFC tested new text end income.

deleted text begin Any amounts deleted text end new text begin The
amount new text end included in taxable income pursuant to section deleted text begin 951A of the Internal Revenue Code,
are deleted text end new text begin 290.034 is new text end dividend income.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2025.
new text end

Sec. 28.

Minnesota Statutes 2024, section 290.92, subdivision 26, is amended to read:

Subd. 26.

Extension of withholding to certain payments where identifying number
not furnished or inaccurate.

(a) If, in the case of any reportable payment, (1) the payee
fails to furnish the payee's Social Security account number to the payor, (2) the payee is
subject to federal backup withholding on the reportable payment under section 3406 of the
Internal Revenue Code, or (3) the commissioner notifies the payor that the Social Security
account number furnished by the payee is incorrect, then the payor shall deduct and withhold
from the payment a tax equal to the amount of the payment multiplied by the highest rate
used in determining the income tax liability of an individual under section 290.06, subdivision
2c.

(b)(1) In the case of any failure described in paragraph (a), clause (1), paragraph (a)
shall apply to any reportable payment made by the payor during the period during which
the Social Security account number has not been furnished.

(2) In any case where there is a notification described in paragraph (a), clause (3),
paragraph (a) shall apply to any reportable payment made by the payor (i) after the close
of the 30th day after the day on which the payor received the notification, and (ii) before
the payee furnishes another Social Security account number.

(3)(i) Unless the payor elects not to have this clause apply with respect to the payee,
paragraph (a), clause (1), shall also apply to any reportable payment made after the close
of the period described in clause (1) or (2), as the case may be, and before the 30th day after
the close of the period.

(ii) If the payor elects the application of this clause with respect to the payee, paragraph
(a) shall also apply to any reportable payment made during the 30-day period described in
clause (2).

(iii) The payor may elect a period shorter than the grace period set forth in item (i) or
(ii), as the case may be.

(c) The provisions of section 3406 of the Internal Revenue Code shall apply and shall
govern when withholding shall be required and the definition of terms new text begin , except the threshold
for reportable payments under sections 6041(a) and 6041A(a) of the Internal Revenue Code
must be $600 instead of $2,000 new text end . The term "reportable payment" shall include only those
payments for personal services. No tax shall be deducted or withheld under this subdivision
with respect to any amount for which withholding is otherwise required under this section.
For purposes of this section, payments which are subject to withholding under this
subdivision shall be treated as if they were wages paid by an employer to an employee and
amounts deducted and withheld under this subdivision shall be treated as if deducted and
withheld under subdivision 2a.

(d) Whenever the commissioner notifies a payor under this subdivision that the Social
Security account number furnished by any payee is incorrect, the commissioner shall at the
same time furnish a copy of the notice to the payor, and the payor shall promptly furnish
the copy to the payee. If the commissioner notifies a payor under this subdivision that the
Social Security account number furnished by any payee is incorrect and the payee
subsequently furnishes another Social Security account number to the payor, the payor shall
promptly notify the commissioner of the other Social Security account number furnished.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for payments made after
December 31, 2025.
new text end

Sec. 29.

Minnesota Statutes 2024, section 290A.03, subdivision 15, is amended to read:

Subd. 15.

Internal Revenue Code.

"Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended through deleted text begin May 1, 2023 deleted text end new text begin March 1, 2026 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment, except
the changes incorporated by federal changes are effective retroactively at the same time the
changes were effective for federal purposes.
new text end

Sec. 30.

Minnesota Statutes 2024, section 291.005, subdivision 1, is amended to read:

Subdivision 1.

Scope.

Unless the context otherwise clearly requires, the following terms
used in this chapter shall have the following meanings:

(1) "Commissioner" means the commissioner of revenue or any person to whom the
commissioner has delegated functions under this chapter.

(2) "Federal gross estate" means the gross estate of a decedent as required to be valued
and otherwise determined for federal estate tax purposes under the Internal Revenue Code,
increased by the value of any property in which the decedent had a qualifying income interest
for life and for which an election was made under section 291.03, subdivision 1d, for
Minnesota estate tax purposes, but was not made for federal estate tax purposes.

(3) "Internal Revenue Code" means the United States Internal Revenue Code of 1986,
as amended through deleted text begin May 1, 2023 deleted text end new text begin March 1, 2026 new text end .

(4) "Minnesota gross estate" means the federal gross estate of a decedent after (a)
excluding therefrom any property included in the estate which has its situs outside Minnesota,
and (b) including any property omitted from the federal gross estate which is includable in
the estate, has its situs in Minnesota, and was not disclosed to federal taxing authorities.

(5) "Nonresident decedent" means an individual whose domicile at the time of death
was not in Minnesota.

(6) "Personal representative" means the executor, administrator or other person appointed
by the court to administer and dispose of the property of the decedent. If there is no executor,
administrator or other person appointed, qualified, and acting within this state, then any
person in actual or constructive possession of any property having a situs in this state which
is included in the federal gross estate of the decedent shall be deemed to be a personal
representative to the extent of the property and the Minnesota estate tax due with respect
to the property.

(7) "Resident decedent" means an individual whose domicile at the time of death was
in Minnesota. The provisions of section 290.01, subdivision 7, paragraphs (c) and (d), apply
to determinations of domicile under this chapter.

(8) "Situs of property" means, with respect to:

(i) real property, the state or country in which it is located;

(ii) tangible personal property, the state or country in which it was normally kept or
located at the time of the decedent's death or for a gift of tangible personal property within
three years of death, the state or country in which it was normally kept or located when the
gift was executed;

(iii) a qualified work of art, as defined in section 2503(g)(2) of the Internal Revenue
Code, owned by a nonresident decedent and that is normally kept or located in this state
because it is on loan to an organization, qualifying as exempt from taxation under section
501(c)(3) of the Internal Revenue Code, that is located in Minnesota, the situs of the art is
deemed to be outside of Minnesota, notwithstanding the provisions of item (ii); and

(iv) intangible personal property, the state or country in which the decedent was domiciled
at death or for a gift of intangible personal property within three years of death, the state or
country in which the decedent was domiciled when the gift was executed.

For a nonresident decedent with an ownership interest in a pass-through entity with
assets that include real or tangible personal property, situs of the real or tangible personal
property, including qualified works of art, is determined as if the pass-through entity does
not exist and the real or tangible personal property is personally owned by the decedent. If
the pass-through entity is owned by a person or persons in addition to the decedent, ownership
of the property is attributed to the decedent in proportion to the decedent's capital ownership
share of the pass-through entity.

(9) "Pass-through entity" includes the following:

(i) an entity electing S corporation status under section 1362 of the Internal Revenue
Code;

(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;

(iii) a single-member limited liability company or similar entity, regardless of whether
it is taxed as an association or is disregarded for federal income tax purposes under Code
of Federal Regulations, title 26, section 301.7701-3; or

(iv) a trust to the extent the property is includable in the decedent's federal gross estate;
but excludes

(v) an entity whose ownership interest securities are traded on an exchange regulated
by the Securities and Exchange Commission as a national securities exchange under section
6 of the Securities Exchange Act, United States Code, title 15, section 78f.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment, except
the changes incorporated by federal changes are effective retroactively at the same time the
changes were effective for federal purposes.
new text end

ARTICLE 2

INDIVIDUAL INCOME AND CORPORATE FRANCHISE TAXES

Section 1.

Minnesota Statutes 2024, section 41A.30, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have
the meanings given.

(b) "Aircraft" has the meaning given in section 296A.01, subdivision 3.

(c) "Aviation gasoline" has the meaning given in section 296A.01, subdivision 7.

(d) "Commissioner" means the commissioner of agriculture.

(e) "Jet fuel" has the meaning given in section 296A.01, subdivision 8.

(f) "Qualifying taxpayer" means a taxpayer, as defined in section 290.01, subdivision
6, that is engaged in the business of:

(1) producing sustainable aviation fuel; or

(2) blending sustainable aviation fuel with aviation gasoline or jet fuel.

(g) "Sustainable aviation fuel" means liquid fuel that:

(1) is derived from new text begin : (i) new text end biomass, as defined in section 41A.15, subdivision 2e new text begin , that is
produced in the United States, provided that the agricultural feedstocks are from planted
crops and crop residue harvested from agricultural land cleared or cultivated any time prior
to December 19, 2007, that is either actively managed or fallow; (ii) gaseous carbon oxides;
or (iii) hydrogen that has a carbon intensity not greater than four kilograms of carbon dioxide
equivalent per kilogram of hydrogen produced new text end ;

(2) is not derived from palm fatty acid distillates; and

(3) achieves at least a 50 percent life cycle greenhouse gas emissions reduction in
comparison with petroleum-based aviation gasoline, aviation turbine fuel, and jet fuel as
determined by a test that shows:

(i) that the fuel production pathway achieves at least a 50 percent life cycle greenhouse
gas emissions reduction in comparison with petroleum-based aviation gasoline, aviation
turbine fuel, and jet fuel utilizing the most recent version of Argonne National Laboratory's
Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) model
that accounts for reduced emissions throughout the fuel production process; or

(ii) that the fuel production pathway achieves at least a 50 percent reduction of the
aggregate attributional core life cycle emissions and the positive induced land use change
values under the life cycle methodology for sustainable aviation fuels adopted by the
International Civil Aviation Organization with the agreement of the United States.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2024, for sustainable aviation fuel sold after June 30, 2025.
new text end

Sec. 2.

Minnesota Statutes 2024, section 41A.30, subdivision 2, is amended to read:

Subd. 2.

Tax credit establishment.

(a) A qualifying taxpayer may claim a tax credit
against the tax due under chapter 290 equal to $1.50 for each gallon of sustainable aviation
fuel that is:

(1) produced in Minnesota or blended with aviation or gasoline or jet fuel in Minnesota new text begin ,
provided that carbon oxides sequestered as part of the production process are not used as a
tertiary injectant in the qualified enhanced oil recovery project new text end ; and

(2) sold in Minnesota to a purchaser who certifies that the sustainable aviation fuel is
for use as fuel in an aircraft departing from an airport in Minnesota.

(b) The credit may be claimed only after approval and certification by the commissioner
and is limited to the amount stated on the credit certificate issued under subdivision 3. A
qualifying taxpayer must apply to the commissioner for certification and allocation of a
credit in a form and manner prescribed by the commissioner.

(c) A qualifying taxpayer may claim a credit for blending or producing sustainable
aviation fuel, but not both. If sustainable aviation fuel is blended with aviation gasoline or
jet fuel, the credit is allowed only for the portion of sustainable aviation fuel that is included
in the blended fuel.

(d) If the amount of credit that the taxpayer is eligible to receive under this section
exceeds the liability for tax under chapter 290, the commissioner of revenue must refund
the excess to the taxpayer.

new text begin (e) Subject to the commissioner's certification, a qualifying taxpayer may claim a
supplemental tax credit against the tax due under chapter 290 equal to the rate of $0.02 per
gallon for each additional whole percentage carbon intensity reduction beyond 50 percent,
but capped at $2.00 per gallon.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2024, for sustainable aviation fuel sold after June 30, 2025.
new text end

Sec. 3.

Minnesota Statutes 2025 Supplement, section 41A.30, subdivision 5, is amended
to read:

Subd. 5.

Allocation limits.

(a) Subject to additional rollover allocation as provided in
paragraph (b), for tax credits allowed under subdivision 2, the commissioner must not issue
credit certificates for more than deleted text begin $11,600,000 deleted text end new text begin $24,300,000 new text end in total, allocated as follows:

(1) $7,400,000 for fiscal year 2025; deleted text begin and
deleted text end

(2) $2,100,000 for deleted text begin each of deleted text end fiscal deleted text begin years 2026 and 2027. deleted text end new text begin year 2026;
new text end

new text begin (3) $7,400,000 for fiscal year 2027;
new text end

new text begin (4) $5,300,000 for fiscal year 2028; and
new text end

new text begin (5) $2,100,000 for each fiscal year thereafter.
new text end

(b) Any portion of a fiscal year's credits that is not allocated by the commissioner does
not cancel and may be carried forward to subsequent fiscal years until all credits have been
allocated new text begin until the entire allocation has been made new text end , except that the commissioner must not
issue any credit certificates for fiscal years beginning after June 30, deleted text begin 2030 deleted text end new text begin 2035 new text end , and any
unallocated amounts cancel on that date.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2025.
new text end

Sec. 4.

Minnesota Statutes 2024, section 41A.30, subdivision 7, is amended to read:

Subd. 7.

Expiration.

This section expires for taxable years beginning after December
31, deleted text begin 2030 deleted text end new text begin 2035 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2024, section 289A.08, subdivision 7a, is amended to read:

Subd. 7a.

Pass-through entity tax.

(a) For the purposes of this subdivision, the following
terms have the meanings given:

(1) "income" has the meaning given in section 290.01, subdivision 19, paragraph (i).
The income of a resident qualifying owner of a qualifying entity that is a partnership or
limited liability company taxed as a partnership under the Internal Revenue Code is not
subject to allocation outside this state as provided for resident individuals under section
290.17, subdivision 1, paragraph (a). The income of a nonresident qualifying owner of a
qualifying entity and the income of a resident qualifying owner of a qualifying entity that
is an S corporation, including a qualified subchapter S subsidiary organized under section
1361(b)(3)(B) of the Internal Revenue Code, are allocated and assigned to this state as
provided for nonresident partners and shareholders under sections 290.17, 290.191, and
290.20;

(2) "qualifying entity" means a partnership, limited liability company taxed as a
partnership or S corporation, or S corporation including a qualified subchapter S subsidiary
organized under section 1361(b)(3)(B) of the Internal Revenue Code that has at least one
qualifying owner. Qualifying entity does not include a publicly traded partnership, as defined
in section 7704 of the Internal Revenue Code; and

(3) "qualifying owner" means:

(i) a resident or nonresident individual or estate that is a partner, member, or shareholder
of a qualifying entity;

(ii) a resident or nonresident trust that is a shareholder of a qualifying entity that is an
S corporation; or

(iii) a disregarded entity that has a qualifying owner as its single owner.

(b) For taxable years beginning after December 31, 2020, a qualifying entity may elect
to file a return and pay the pass-through entity tax imposed under paragraph (c). The election:

(1) must be made on or before the due date or extended due date of the qualifying entity's
pass-through entity tax return;

(2) must exclude partners, members, shareholders, or owners who are not qualifying
owners;

(3) may only be made by qualifying owners who collectively hold more than 50 percent
of the ownership interests in the qualifying entity held by qualifying owners;

(4) is binding on all qualifying owners who have an ownership interest in the qualifying
entity; and

(5) once made is irrevocable for the taxable year.

(c) Subject to the election in paragraph (b), a pass-through entity tax is imposed on a
qualifying entity in an amount equal to the sum of the tax liability of each qualifying owner.

(d) The amount of a qualifying owner's tax liability under paragraph (c) is the amount
of the qualifying owner's income multiplied by the highest tax rate for individuals under
section 290.06, subdivision 2c. The computation of a qualifying owner's net investment
income tax liability must be computed under section 290.033. When making this
determination:

(1) nonbusiness deductions, standard deductions, or personal exemptions are not allowed;
and

(2) a credit or deduction is allowed only to the extent allowed to the qualifying owner.

(e) The amount of each credit and deduction used to determine a qualifying owner's tax
liability under paragraph (d) must also be used to determine that qualifying owner's income
tax liability under chapter 290.

(f) This subdivision does not negate the requirement that a qualifying owner pay estimated
tax if the qualifying owner's tax liability would exceed the requirements set forth in section
289A.25. The qualifying owner's liability to pay estimated tax on the qualifying owner's
tax liability as determined under paragraph (d) is, however, satisfied when the qualifying
entity pays estimated tax in the manner prescribed in section 289A.25 for composite estimated
tax.

(g) A qualifying owner's adjusted basis in the interest in the qualifying entity, and the
treatment of distributions, is determined as if the election to pay the pass-through entity tax
under paragraph (b) is not made.

(h) To the extent not inconsistent with this subdivision, for purposes of this chapter, a
pass-through entity tax return must be treated as a composite return and a qualifying entity
filing a pass-through entity tax return must be treated as a partnership filing a composite
return.

(i) The provisions of subdivision 17 apply to the election to pay the pass-through entity
tax under this subdivision.

(j) If a nonresident qualifying owner of a qualifying entity making the election to file
and pay the tax under this subdivision has no other Minnesota source income, filing of the
pass-through entity tax return is a return for purposes of subdivision 1, provided that the
nonresident qualifying owner must not have any Minnesota source income other than the
income from the qualifying entity, other electing qualifying entities, and other partnerships
electing to file a composite return under subdivision 7. If it is determined that the nonresident
qualifying owner has other Minnesota source income, the inclusion of the income and tax
liability for that owner under this provision will not constitute a return to satisfy the
requirements of subdivision 1. The tax paid for the qualifying owner as part of the
pass-through entity tax return is allowed as a payment of the tax by the qualifying owner
on the date on which the pass-through entity tax return payment was made.

(k) Once a credit is claimed by a qualifying owner under section 290.06, subdivision
40, a qualifying entity cannot receive a refund for tax paid under this subdivision for any
amounts claimed under that section by the qualifying owners. Once a credit is claimed under
section 290.06, subdivision 40, any refund must be claimed in conjunction with a return
filed by the qualifying owner.

deleted text begin (l) This subdivision expires at the same time and on the same terms as section
164(b)(6)(B) of the Internal Revenue Code, except that the expiration of this subdivision
does not affect the commissioner's authority to audit or power of examination and assessments
for credits claimed under this section.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively from January 1, 2026.
new text end

Sec. 6.

Minnesota Statutes 2024, section 290.01, subdivision 19, is amended to read:

Subd. 19.

Net income.

(a) For a trust or estate taxable under section 290.03, and a
corporation taxable under section 290.02, the term "net income" means the federal taxable
income, as defined in section 63 of the Internal Revenue Code of 1986, as amended through
the date named in this subdivision, incorporating the federal effective dates of changes to
the Internal Revenue Code and any elections made by the taxpayer in accordance with the
Internal Revenue Code in determining federal taxable income for federal income tax
purposes, and with the modifications provided in sections 290.0131 to 290.0136.

(b) For an individual, the term "net income" means federal adjusted gross income with
the modifications provided in sections 290.0131, 290.0132, and 290.0135 to 290.0137.

(c) In the case of a regulated investment company or a fund thereof, as defined in section
851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
except that:

(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
Revenue Code does not apply;

(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal Revenue
Code must be applied by allowing a deduction for capital gain dividends and exempt-interest
dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal Revenue Code;
and

(3) the deduction for dividends paid must also be applied in the amount of any
undistributed capital gains which the regulated investment company elects to have treated
as provided in section 852(b)(3)(D) of the Internal Revenue Code.

(d) The net income of a real estate investment trust as defined and limited by section
856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
taxable income as defined in section 857(b)(2) of the Internal Revenue Code.

(e) The net income of a designated settlement fund as defined in section 468B(d) of the
Internal Revenue Code means the gross income as defined in section 468B(b) of the Internal
Revenue Code.

(f) The Internal Revenue Code of 1986, as amended through May 1, 2023, applies for
taxable years beginning after December 31, 1996.

(g) Except as otherwise provided, references to the Internal Revenue Code in this
subdivision and sections 290.0131 to 290.0136 mean the code in effect for purposes of
determining net income for the applicable year.

(h) In the case of a partnership electing to file a composite return under section 289A.08,
subdivision 7, "net income" means the partner's share of federal adjusted gross income from
the partnership modified by the additions provided in section 290.0131, subdivisions 8 to
10, 16, and 17, and the subtractions provided in: (1) section 290.0132, subdivisions 9, 27,
and 28, to the extent the amount is assignable or allocable to Minnesota under section 290.17;
and (2) section 290.0132, subdivision 14. The subtraction allowed under section 290.0132,
subdivision 9, is only allowed on the composite tax computation to the extent the electing
partner would have been allowed the subtraction.

(i) In the case of a qualifying entity electing to pay the pass-through entity tax under
section 289A.08, subdivision 7a, "net income" means the qualifying owner's share of federal
adjusted gross income from the qualifying entity modified by the additions provided in
section 290.0131, subdivisions 5, 8 to 10, 16, and 17, and the subtractions provided in: (1)
section 290.0132, subdivisions 3, 9, 27, and 28, to the extent the amount is assignable or
allocable to Minnesota under section 290.17; and (2) section 290.0132, subdivision 14. The
subtraction allowed under section 290.0132, subdivision 9, is only allowed on the
pass-through entity tax computation to the extent the qualifying owners would have been
allowed the subtraction. deleted text begin The income of both a resident and nonresident qualifying owner
is allocated and assigned to this state as provided for nonresident partners and shareholders
under sections 290.17, 290.191, and 290.20.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

Minnesota Statutes 2024, section 290.0131, is amended by adding a subdivision
to read:

new text begin Subd. 21. new text end

new text begin Dependent flexible spending accounts. new text end

new text begin For a taxpayer who claims the credit
under section 290.067 or for a married taxpayer filing a separate return whose spouse claims
the credit under section 290.067, the amount of dependent care assistance that is excluded
from gross income under section 129 of the Internal Revenue Code is an addition.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2025.
new text end

Sec. 8.

Minnesota Statutes 2025 Supplement, section 290.06, subdivision 23a, is amended
to read:

Subd. 23a.

Pass-through entity tax paid to another state.

(a) A credit is allowed against
the tax imposed on a qualifying entity under section 289A.08, subdivision 7a, for
pass-through entity tax paid to another state. The credit under this subdivision is allowed
as a credit for taxes paid to another state under subdivision 22, paragraph (a), and may only
be claimed by a qualifying owner. The credit allowed under this subdivision must be claimed
in a manner prescribed by the commissioner.

deleted text begin (b) This subdivision expires at the same time and on the same terms as section
164(b)(6)(B) of the Internal Revenue Code, except that the expiration of this subdivision
does not affect the commissioner's authority to audit or power of examination and assessments
for credits claimed under this section.
deleted text end

deleted text begin (c) deleted text end new text begin (b) new text end As used in this subdivision, the following terms have the meanings given:

(1) "income" has the meaning provided in section 290.01, subdivision 19, paragraph (i);

(2) "pass-through entity tax" means an entity-level tax imposed on the income of a
partnership, limited liability corporation, or S corporation;

(3) "qualifying entity" has the meaning provided in section 289A.08, subdivision 7a,
paragraph (a); and

(4) "qualifying owner" has the meaning provided in section 289A.08, subdivision 7a,
paragraph (b).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively from January 1, 2026.
new text end

Sec. 9.

Minnesota Statutes 2024, section 290.06, subdivision 40, is amended to read:

Subd. 40.

Pass-through entity tax credit.

(a) A qualifying owner of a qualifying entity
that elects to pay the pass-through entity tax under section 289A.08, subdivision 7a, may
claim a credit against the tax due under this chapter equal to the amount of the owner's tax
liability as calculated under section 289A.08, subdivision 7a, paragraph (d). new text begin The
commissioner may disallow a credit if the tax liability of the qualifying entity has not been
paid.
new text end

(b) If the amount of the credit the taxpayer may claim under this subdivision exceeds
the taxpayer's tax liability under this chapter, the commissioner of revenue shall refund the
excess to the taxpayer. The amount necessary to pay the claim for the refund provided in
this subdivision is appropriated from the general fund to the commissioner of revenue.

(c) For purposes of this subdivision, "qualifying entity," "qualifying owner," and "tax
liability" have the meanings given in section 289A.08, subdivision 7a, paragraphs (a) and
(d).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 10.

Minnesota Statutes 2024, section 290.067, is amended to read:

290.067 DEPENDENT CARE CREDIT.

Subdivision 1.

Amount of credit.

(a) A taxpayer may take as a credit against the tax
due from the taxpayer and a spouse, if any, under this chapter an amount equal to deleted text begin the
dependent care credit for which the taxpayer is eligible pursuant to the provisions of section
21 of the Internal Revenue Code except that in determining whether the child qualified as
a dependent, income received as a Minnesota family investment program grant or allowance
to or on behalf of the child must not be taken into account in determining whether the child
received more than half of the child's support from the taxpayer deleted text end new text begin the taxpayer's eligible
dependent care expenses, as determined under subdivisions 1a and 1b, multiplied by the
taxpayer's credit percentage, as determined under subdivision 1c new text end .

deleted text begin (b) If a child who has not attained the age of six years at the close of the taxable year is
cared for at a licensed family day care home operated by the child's parent, the taxpayer is
deemed to have paid employment-related expenses. If the child is 16 months old or younger
at the close of the taxable year, the amount of expenses deemed to have been paid equals
the maximum limit for one qualifying individual under section 21(c) and (d) of the Internal
Revenue Code. If the child is older than 16 months of age but has not attained the age of
six years at the close of the taxable year, the amount of expenses deemed to have been paid
equals the amount the licensee would charge for the care of a child of the same age for the
same number of hours of care.
deleted text end

deleted text begin (c) If a taxpayer:
deleted text end

deleted text begin (1) has a child who has not attained the age of one year at the close of the taxable year;
and
deleted text end

deleted text begin (2) does not participate in a dependent care assistance program as defined in section 129
of the Internal Revenue Code, in lieu of the actual employment related expenses paid for
that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of (i)
the earned income of the taxpayer or (ii) the amount of the maximum limit for one qualifying
individual under section 21(c) and (d) of the Internal Revenue Code will be deemed to be
the employment related expense paid for that child. The earned income limitation of section
21(d) of the Internal Revenue Code shall not apply to this deemed amount. These deemed
amounts apply regardless of whether any employment-related expenses have been paid.
deleted text end

deleted text begin (d) If the taxpayer is not required and does not file a federal individual income tax return
for the tax year, no credit is allowed for any amount paid to any person unless:
deleted text end

deleted text begin (1) the name, address, and taxpayer identification number of the person are included on
the return claiming the credit; or
deleted text end

deleted text begin (2) if the person is an organization described in section 501(c)(3) of the Internal Revenue
Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name
and address of the person are included on the return claiming the credit.
deleted text end

deleted text begin In the case of a failure to provide the information required under the preceding sentence,
the preceding sentence does not apply if it is shown that the taxpayer exercised due diligence
in attempting to provide the information required.
deleted text end

deleted text begin (e) deleted text end new text begin (b) new text end In the case of a nonresident or part-year resident, the credit determined under new text begin this
new text end section deleted text begin 21 of the Internal Revenue Code deleted text end must be allocated deleted text begin based on the ratio by which the
earned income of the claimant and the claimant's spouse from Minnesota sources bears to
the total earned income of the claimant and the claimant's spouse deleted text end new text begin using the percentage
calculated in section 290.06, subdivision 2c, paragraph (e) new text end .

deleted text begin (f) For residents of Minnesota, the subtractions for military pay under section 290.0132,
subdivisions 11 and 12, are not considered "earned income not subject to tax under this
chapter."
deleted text end

deleted text begin (g) For residents of Minnesota, the exclusion of combat pay under section 112 of the
Internal Revenue Code is not considered "earned income not subject to tax under this
chapter."
deleted text end

deleted text begin (h) For taxpayers with federal adjusted gross income in excess of $52,230, the credit is
equal to the lesser of the credit otherwise calculated under this subdivision, or the amount
equal to $600 minus five percent of federal adjusted gross income in excess of $52,230 for
taxpayers with one qualifying individual, or $1,200 minus five percent of federal adjusted
gross income in excess of $52,230 for taxpayers with two or more qualifying individuals,
but in no case is the credit less than zero.
deleted text end

new text begin (c) For the purposes of this section, the following terms have the meanings given:
new text end

new text begin (1) "employment-related expenses" has the meaning given in section 21(b)(2) of the
Internal Revenue Code;
new text end

new text begin (2) "qualifying individual" has the meaning given in section 21(b)(1) of the Internal
Revenue Code, except that in determining whether the child qualified as a dependent, income
received as a Minnesota family investment program grant or allowance to or on behalf of
the child must not be taken into account in determining whether the child received more
than half of the child's support from the taxpayer; and
new text end

new text begin (3) "young child" means a qualifying individual who had not attained the age of five by
December 31 of the taxable year.
new text end

new text begin Subd. 1a. new text end

new text begin Eligible dependent care expenses. new text end

new text begin (a) A taxpayer's eligible dependent care
expenses equals the amount of employment-related expenses incurred during the taxable
year, subject to the limitations in paragraph (b) and subdivision 1b.
new text end

new text begin (b) Except as provided in subdivision 1b, a taxpayer's eligible dependent care expenses
are limited to:
new text end

new text begin (1) $3,000 if there was one qualifying individual with respect to the taxpayer; or
new text end

new text begin (2) $6,000 if there were two or more qualifying individuals with respect to the taxpayer.
new text end

new text begin Subd. 1b. new text end

new text begin Eligible expenses for taxpayers with young children. new text end

new text begin For taxable years
beginning after December 31, 2025, and before January 1, 2034, for a taxpayer with a young
child, the limit in subdivision 1a, paragraph (b), is increased as follows:
new text end

new text begin (1) for a taxpayer with one young child with respect to the taxpayer, the limit is increased
by $3,000;
new text end

new text begin (2) for a taxpayer with two or more young children with respect to the taxpayer, the limit
is increased by $6,000.
new text end

new text begin Subd. 1c. new text end

new text begin Credit percentage. new text end

new text begin (a) The credit percentage equals 50 percent, subject to
the reductions in paragraphs (b) and (c).
new text end

new text begin (b) A taxpayer's credit percentage is reduced by one percentage point for each $1,000,
or fraction thereof, by which the taxpayer's adjusted gross income exceeds $120,000.
new text end

new text begin (c) For a married taxpayer filing a separate return, the credit percentage must be calculated
under paragraphs (a) and (b), except the adjusted gross income thresholds are one-half the
amounts for other married filers, as adjusted for inflation under subdivision 2b.
new text end

Subd. 2b.

Inflation adjustment.

The commissioner shall annually adjust the dollar
amount of the income threshold at which the deleted text begin maximum deleted text end credit new text begin percentage new text end begins to be
reduced under subdivision deleted text begin 1 deleted text end new text begin 1c new text end as provided in section 270C.22. The statutory year is taxable
year deleted text begin 2019 deleted text end new text begin 2026 new text end .

new text begin Subd. 2c. new text end

new text begin Deemed expenses. new text end

new text begin (a) If a child who has not attained the age of six years at
the close of the taxable year is cared for at a licensed family day care home operated by the
child's parent, the taxpayer is deemed to have paid employment-related expenses. The
amount of expenses deemed to have been paid equals the amount the licensee would charge
for the care of a child of the same age for the same number of hours of care up to the
maximum eligible expenses allowed, as determined under subdivisions 1a and 1b.
new text end

new text begin (b) If a taxpayer, regardless of filing status:
new text end

new text begin (1) has a qualifying individual who has not attained the age of one year at the close of
the taxable year; and
new text end

new text begin (2) used the deemed amount under paragraph (a) in lieu of the actual employment-related
expenses paid for that child, the amount of deemed employment-related expenses equals
the lesser of:
new text end

new text begin (i) the earned income of the taxpayer; or
new text end

new text begin (ii) the amount of the maximum limit for one qualified individual under subdivision 1a,
as increased by subdivision 1b.
new text end

new text begin The earned income limitation of section 21(d) of the Internal Revenue Code shall not apply
to this deemed amount. These deemed amounts apply regardless of whether any
employment-related expenses have been paid.
new text end

Subd. 3.

Credit to be refundable.

If the amount of credit which a claimant would be
eligible to receive pursuant to this subdivision exceeds the claimant's tax liability under this
chapter, the excess amount of the credit shall be refunded to the claimant by the commissioner
of revenue. The amount needed to pay the refunds required by this section is appropriated
to the commissioner from the general fund.

Subd. 4.

Right to file claim.

The right to file a claim under this section shall be personal
to the claimant and shall not survive death, but such right may be exercised on behalf of a
claimant by the claimant's legal guardian or attorney-in-fact. When a claimant dies after
having filed a timely claim the amount thereof shall be disbursed to another member of the
household as determined by the commissioner of revenue. If the claimant was the only
member of a household, the claim may be paid to the claimant's personal representative,
but if neither is appointed and qualified within two years of the filing of the claim, the
amount of the claim shall escheat to the state.

new text begin Subd. 5. new text end

new text begin Employment-related expenses. new text end

new text begin For the purposes of determining
employment-related expenses, the provisions of section 21(d) of the Internal Revenue Code
apply.
new text end

new text begin Subd. 6. new text end

new text begin Special rules. new text end

new text begin For purposes of this section, the special rules of section 21(e)
of the Internal Revenue Code apply, except the special rule in section 21(e)(2) of the Internal
Revenue Code, requiring married couples to file a joint return, does not apply.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2025.
new text end

Sec. 11. new text begin REVIVAL AND REENACTMENT.
new text end

new text begin Minnesota Statutes, sections 289A.08, subdivision 7a, and 290.06, subdivision 23a, are
revived and reenacted retroactively from January 1, 2026.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

ARTICLE 3

SALES AND USE TAXES AND GROSS RECEIPTS TAXES

Section 1.

new text begin [116J.4012] COUNCIL ON ARTIFICIAL INTELLIGENCE READINESS.
new text end

new text begin Subdivision 1. new text end

new text begin Establishment. new text end

new text begin The Council on Artificial Intelligence Readiness is
established to examine and mitigate the impacts of artificial intelligence on the state's
workforce and economic development landscape and to allocate money for these purposes.
new text end

new text begin Subd. 2. new text end

new text begin Membership; appointment. new text end

new text begin (a) The council must consist of the following 11
members:
new text end

new text begin (1) the commissioner of employment and economic development or the commissioner's
designee;
new text end

new text begin (2) the commissioner of information technology or the commissioner's designee;
new text end

new text begin (3) one member of the senate appointed by the senate majority leader;
new text end

new text begin (4) one member of the house of representatives appointed by the speaker of the house;
new text end

new text begin (5) one member appointed by the governor representing an entity with experience
delivering workforce development services;
new text end

new text begin (6) one member appointed by the governor representing an entity with experience in
economic development;
new text end

new text begin (7) one member appointed by the governor representing business or economic
development;
new text end

new text begin (8) one member appointed by the governor from the University of Minnesota; and
new text end

new text begin (9) three members appointed by the governor with expertise in the field of artificial
intelligence.
new text end

new text begin (b) Member compensation and reimbursement for expenses are governed by section
15.059, subdivision 3.
new text end

new text begin Subd. 3. new text end

new text begin Chair; meetings. new text end

new text begin (a) The commissioner of employment and economic
development must convene the first meeting of the council no later than January 31, 2027.
The commissioner of employment and economic development or the commissioner's designee
shall chair the council.
new text end

new text begin (b) The council must meet at least quarterly.
new text end

new text begin (c) Council meetings are subject to the Open Meeting Law under chapter 13D.
new text end

new text begin Subd. 4. new text end

new text begin Administrative support. new text end

new text begin The commissioner of employment and economic
development must provide administrative support and meeting space for the council.
new text end

new text begin Subd. 5. new text end

new text begin Duties. new text end

new text begin At a minimum, the council must:
new text end

new text begin (1) review current information on the adoption and expansion of artificial intelligence
in Minnesota;
new text end

new text begin (2) analyze the impact of artificial intelligence on Minnesota's workforce; and
new text end

new text begin (3) allocate money from the artificial intelligence readiness account for the purposes
provided under section 116J.4013.
new text end

new text begin Subd. 6. new text end

new text begin Use of money. new text end

new text begin The council must consider uses of money in the account to
engage businesses in mitigating the effects of artificial intelligence and adopting and utilizing
artificial intelligence if practical and to de-risk the hiring of workers, and to directly support
businesses with training needs to hire workers impacted by artificial intelligence.
new text end

new text begin Subd. 7. new text end

new text begin Report. new text end

new text begin Beginning February 15, 2028, and each year thereafter, the council
must submit a report to the chairs and ranking minority members of the legislative committees
and divisions with jurisdiction over workforce development and artificial intelligence. Each
report must describe activities under subdivision 5; allocations from the artificial intelligence
readiness account; and recipients, outcomes, and data resulting from the allocations.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

new text begin [116J.4013] ARTIFICIAL INTELLIGENCE READINESS ACCOUNT.
new text end

new text begin Subdivision 1. new text end

new text begin Account creation. new text end

new text begin The artificial intelligence readiness account is
established in the special revenue fund in the state treasury. The account consists of money
appropriated by law and any other money donated, allotted, transferred, or otherwise provided
to the account. Earnings, including the interest, dividends, and any other earnings arising
from assets of the account, are credited to the account. Money remaining in the account at
the end of a fiscal year does not cancel to the general fund but remains in the account until
expended.
new text end

new text begin Subd. 2. new text end

new text begin Appropriation; uses. new text end

new text begin Money in the artificial intelligence readiness account is
appropriated to the commissioner of employment and economic development for allocation
by the Council on Artificial Intelligence Readiness under section 116J.4012, unless otherwise
appropriated in law or statute.
new text end

new text begin Subd. 3. new text end

new text begin Administration. new text end

new text begin (a) The commissioner of employment and economic
development may retain up to three percent of revenues each fiscal year for staffing and
administration of the Council on Artificial Intelligence Readiness under section 116J.4012
and any grants the council awards. The amount is appropriated each fiscal year from the
artificial intelligence readiness account to the commissioner of employment and economic
development for this purpose.
new text end

new text begin (b) The commissioner of revenue is appropriated $849,000 in fiscal year 2027 and
$1,433,000 each fiscal year thereafter from the artificial intelligence readiness account for
administration of the social media consumer data collection tax imposed under section
295.90.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

new text begin [295.85] HANDGUNS, FIREARMS, AND AMMUNITION.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have
the meanings given.
new text end

new text begin (b) "Ammunition" means shells, cartridges, and any articles consisting of a projectile,
explosive, and container that are designed, assembled, and ready for use without further
manufacture in handguns and firearms.
new text end

new text begin (c) "Ammunition retailer" means a retailer that sells ammunition and that is a:
new text end

new text begin (1) retailer maintaining a place of business in this state, as defined in section 297A.66,
subdivision 1, paragraph (a);
new text end

new text begin (2) marketplace provider maintaining a place of business in this state, as defined in
section 297A.66, subdivision 1, paragraph (a);
new text end

new text begin (3) retailer not maintaining a place of business in this state, as defined in section 297A.66,
subdivision 1, paragraph (b); or
new text end

new text begin (4) marketplace provider not maintaining a place of business in this state, as defined in
section 297A.66, subdivision 1, paragraph (b).
new text end

new text begin (d) "Bundled transaction" means the retail sale of two or more products when the products
are otherwise distinct and identifiable and the products are sold for one nonitemized price.
new text end

new text begin (e) "Commissioner" means the commissioner of revenue.
new text end

new text begin (f) "Firearm" means any portable weapon, except a handgun as defined in paragraph (i),
from which a shot, bullet, or other projectile may be discharged by an explosive.
new text end

new text begin (g) "Firearm retailer" means a retailer that sells a handgun or firearm and that is a:
new text end

new text begin (1) retailer maintaining a place of business in this state, as defined in section 297A.66,
subdivision 1, paragraph (a);
new text end

new text begin (2) marketplace provider maintaining a place of business in this state, as defined in
section 297A.66, subdivision 1, paragraph (a);
new text end

new text begin (3) retailer not maintaining a place of business in this state, as defined in section 297A.66,
subdivision 1, paragraph (b); or
new text end

new text begin (4) marketplace provider not maintaining a place of business in this state, as defined in
section 297A.66, subdivision 1, paragraph (b).
new text end

new text begin (h) "Gross receipts" means the total amount received in money or by barter or exchange
for all handgun, firearm, and ammunition sales at retail as measured by the sales price.
Gross receipts include but are not limited to delivery charges and packaging costs. Gross
receipts do not include:
new text end

new text begin (1) any taxes imposed directly on the purchaser that are separately stated on the invoice,
bill of sales, or similar document given to the purchaser; and
new text end

new text begin (2) discounts, including cash, terms, or coupons, that are not reimbursed by a third party
and that are allowed by the seller and taken by a purchaser on a sale.
new text end

new text begin (i) "Handgun" means a pistol, revolver, or any short stock firearm that is designed to be
held and fired by the use of a single hand.
new text end

new text begin (j) "Pistol" means a small projectile firearm that has a short one-hand stock or butt at an
angle to the line of bore and a short barrel or barrels and is designed, made, and intended
to be aimed and fired by the use of a single hand.
new text end

new text begin (k) "Retail sale" has the meaning given in section 297A.61, subdivision 4.
new text end

new text begin (l) "Revolver" means a small projectile firearm of the pistol type that has a breechloading
chambered cylinder so arranged that the cocking of the hammer or movement of the trigger
rotates it and brings the next cartridge in line with the barrel for firing.
new text end

new text begin Subd. 2. new text end

new text begin Gross receipts tax imposed. new text end

new text begin (a) A tax equal to ten percent of gross receipts
from retail sales of handguns in Minnesota is imposed on any firearm retailer that sells
firearms to purchasers. A firearm retailer may collect the tax imposed under this section
from the purchaser. If separately stated on the receipt, invoice, bill of sale, or similar
document given to the purchaser, the tax is excluded from the sales price for purposes of
the tax imposed under chapter 297A.
new text end

new text begin (b) A tax equal to 11 percent of gross receipts from retail sales of firearms and
ammunition in Minnesota is imposed on firearm retailers and ammunition retailers that sell
these products to purchasers. A firearm retailer and ammunition retailer may collect the tax
imposed by this section from the purchaser. If separately stated on the receipt, invoice, bill
of sale, or similar document given to the purchaser, the tax is excluded from the sales price
for purposes of the tax imposed under chapter 297A.
new text end

new text begin (c) If a product subject to the tax imposed under this section is included in a bundled
transaction, the entire sales price of the bundled transaction is subject to the tax imposed
under this section.
new text end

new text begin (d) The tax imposed under this section is in addition to any other tax imposed on the
sale or use of handguns, firearms, or ammunition.
new text end

new text begin Subd. 3. new text end

new text begin Use tax imposed; credit for taxes paid. new text end

new text begin (a) A person who receives a handgun,
firearm, or ammunition for use or storage in Minnesota, other than from a firearm retailer
or ammunition retailer that paid the tax under subdivision 2, is subject to tax at the rate
imposed under subdivision 2. Liability for the tax is incurred when the person has possession
of the handgun, firearm, or ammunition in Minnesota. The tax must be remitted to the
commissioner in the same manner prescribed for taxes imposed under chapter 297A.
new text end

new text begin (b) A person who has paid taxes to another state or any subdivision thereof measured
by gross receipts and is subject to tax under this section on the same gross receipts is entitled
to a credit for the tax legally due and paid to another state or subdivision thereof to the
extent of the lesser of (1) the tax actually paid to the other state or subdivision thereof, or
(2) the amount of tax imposed by Minnesota on the gross receipts subject to tax in the other
state or subdivision thereof.
new text end

new text begin Subd. 4. new text end

new text begin Exemptions. new text end

new text begin (a) The tax imposed in this section does not apply to sales of
handguns, firearms, or ammunition if the handguns, firearms, or ammunition are purchased:
new text end

new text begin (1) for use by peace officers, as defined in section 626.84, subdivision 1, when used in
operation of their employment as a peace officer;
new text end

new text begin (2) for use by members of the Minnesota National Guard when used in operation of their
position as a member of the National Guard; or
new text end

new text begin (3) by the United States and its agencies and instrumentalities.
new text end

new text begin (b) Unless otherwise specified in this section, the exemptions applicable to taxes imposed
under chapter 297A are not applicable to the taxes imposed under this section.
new text end

new text begin Subd. 5. new text end

new text begin Tax collection required. new text end

new text begin A firearm retailer with nexus in Minnesota that is
not subject to the tax under subdivision 2, is required to collect the tax imposed under
subdivision 3 from the purchaser of the handgun, firearm, or ammunition and give the
purchaser a receipt for the tax paid. The tax collected must be remitted to the commissioner
in the same manner prescribed for taxes imposed under chapter 297A.
new text end

new text begin Subd. 6. new text end

new text begin Taxes paid to another state or any subdivision thereof; credit. new text end

new text begin A firearm
retailer that has paid taxes to another state or any subdivision thereof measured by gross
receipts and is subject to tax under this section on the same gross receipts is entitled to a
credit for the tax legally due and paid to another state or any subdivision thereof to the extent
of the lesser of (1) the tax actually paid to the other state or any subdivision thereof, or (2)
the amount of tax imposed by Minnesota on the gross receipts subject to tax in the other
taxing state or any subdivision thereof.
new text end

new text begin Subd. 7. new text end

new text begin Sourcing of sales. new text end

new text begin Section 297A.668 applies to the taxes imposed by this
section.
new text end

new text begin Subd. 8. new text end

new text begin Administration. new text end

new text begin Unless specifically provided otherwise, the audit, assessment,
refund, penalty, interest, enforcement, collection remedy, appeal, and administrative
provisions of chapters 270C and 289A that are applicable to taxes imposed under chapter
297A apply to the tax imposed under this section.
new text end

new text begin Subd. 9. new text end

new text begin Returns; payment of tax. new text end

new text begin (a) A firearm retailer and ammunition retailer must
report the tax on a return prescribed by the commissioner and must remit the tax in a form
and manner prescribed by the commissioner. The return and the tax must be filed and paid
using the filing cycle and due dates provided for taxes imposed under chapter 297A.
new text end

new text begin (b) Interest must be paid on an overpayment refunded or credited to the taxpayer from
the date of payment of the tax until the date the refund is paid or credited. For purposes of
this subdivision, the date of payment is the due date of the return or the date of actual
payment of the tax, whichever is later.
new text end

new text begin Subd. 10. new text end

new text begin Deposit of revenues. new text end

new text begin The commissioner must deposit all revenues, including
penalties and interest, derived from the tax imposed by this section in the general fund.
new text end

new text begin Subd. 11. new text end

new text begin Personal debt. new text end

new text begin The tax imposed by this section, and interest and penalties
imposed with respect to it, are a personal debt of the person required to file a return from
the time that the liability for it arises, irrespective of when the time for payment of the
liability occurs. The debt must, in the case of the executor or administrator of the estate of
a decedent and in the case of a fiduciary, be that of the person in the person's official or
fiduciary capacity only, unless the person has voluntarily distributed the assets held in that
capacity without reserving sufficient assets to pay the tax, interest, and penalties, in which
event the person is personally liable for any deficiency.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
September 30, 2026.
new text end

Sec. 4.

new text begin [295.86] HANDGUNS, FIREARMS, AND AMMUNITION LOCAL TAX
PROHIBITED.
new text end

new text begin A political subdivision of this state is prohibited from imposing a tax solely on the sale
of handguns, firearms, or ammunition, as defined in section 295.85, subdivision 1.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
September 30, 2026.
new text end

Sec. 5.

new text begin [295.90] SOCIAL MEDIA CONSUMER DATA COLLECTION TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have
the meanings given.
new text end

new text begin (b) "Collects" means collects, engages, maintains, uses, processes, or shares.
new text end

new text begin (c) "Commissioner" means the commissioner of revenue.
new text end

new text begin (d) "Consumer" means an individual who establishes an account with a social media
platform business or who accesses a social media platform through an account registered
with a social media platform business and whose consumer data is collected by the social
media platform business, regardless of whether the individual is charged for establishing
the account.
new text end

new text begin (e) "Consumer data" means any information that identifies, relates to, describes, is
capable of being associated with, or could reasonably be linked with a consumer, whether
directly submitted to the social media platform business by the consumer or derived from
other sources.
new text end

new text begin (f) "Minnesota consumer" means a consumer who is a resident of Minnesota.
new text end

new text begin (g) "Resident" has the meaning given in section 290.01, subdivision 7.
new text end

new text begin (h) "Social media platform" has the meaning given in section 325M.31, paragraph (j).
new text end

new text begin (i) "Social media platform business" means a for-profit entity that: (1) owns, controls,
or operates a social media platform; and (2) collects consumer data in support of the entity's
business activities.
new text end

new text begin Subd. 2. new text end

new text begin Tax imposed. new text end

new text begin A tax is imposed on social media platform businesses based on
the number of Minnesota social media platform consumers from whom a social media
platform business collects data within a month:
new text end

new text begin Minnesota consumers new text end	new text begin Tax new text end
new text begin Fewer than or equal to 100,000 new text end	new text begin Zero; new text end
new text begin Over 100,000 but not more than 500,000 new text end	new text begin $0.10 per month on the number of Minnesota consumers over 100,000 but not more than 500,000; new text end
new text begin Over 500,000 but not more than 1,000,000 new text end	new text begin $40,000 plus $0.25 per month on the number of Minnesota consumers over 500,000 but not more than 1,000,000; and new text end
new text begin Over 1,000,000 new text end	new text begin $165,000 plus $0.50 per month on the number of Minnesota consumers over 1,000,000. new text end

new text begin Subd. 3. new text end

new text begin Business entities. new text end

new text begin Business entities that are part of a controlled group of
corporations as defined in section 1563(a) of the Internal Revenue Code shall be treated as
a single entity for purposes of meeting the definition of a social media platform business
under this section. The entities constituting the single taxpayer are jointly and severally
liable for the tax.
new text end

new text begin Subd. 4. new text end

new text begin Counting Minnesota consumers. new text end

new text begin (a) A Minnesota consumer must be counted
only once in the calculation of tax imposed under this section. Until the contrary is
established, it is presumed that each account is an individual consumer. The burden of
proving that multiple accounts are one consumer is on the social media platform business.
new text end

new text begin (b) The single member of a single member limited liability company must be treated as
a consumer under this section.
new text end

new text begin (c) Until the contrary is established, it is presumed that a consumer whose information
on record with or available to a social media platform business indicates a Minnesota home
address, a Minnesota mailing address, or an internet protocol address connected with a
Minnesota location is a Minnesota consumer for purposes of this section. The burden of
proving that a consumer is not a Minnesota resident is on the social media platform business.
new text end

new text begin (d) A social media platform business and the commissioner may agree on a methodology
for determining the number of Minnesota consumers for purposes of calculating the tax.
new text end

new text begin Subd. 5. new text end

new text begin Credit against tax paid to another jurisdiction. new text end

new text begin A social media platform
business that has paid tax under this section may claim a credit against the tax paid with
respect to a Minnesota consumer if another state imposes an excise tax identical to the tax
imposed under this section with respect to the same consumer.
new text end

new text begin Subd. 6. new text end

new text begin Record keeping. new text end

new text begin A social media platform business must maintain records
necessary to demonstrate compliance with this section or as required by the commissioner.
new text end

new text begin Subd. 7. new text end

new text begin Administration. new text end

new text begin Unless specifically provided otherwise, the audit, assessment,
refund, penalty, interest, criminal penalty, enforcement, collection remedy, appeal, and
administrative provisions of chapters 270C and 289A that are applicable to taxes imposed
under chapter 297A apply to the tax imposed under this section.
new text end

new text begin Subd. 8. new text end

new text begin Returns; payment of tax. new text end

new text begin (a) On or before the 20th of the month following
the month that tax liability is incurred under subdivision 2, a social media platform business
must report the tax on a return prescribed by the commissioner and must remit the tax in a
form and manner prescribed by the commissioner.
new text end

new text begin (b) A social media platform business that owes tax imposed under this section must file
a return in subsequent months until it reports no tax liability for 12 consecutive months.
new text end

new text begin (c) Interest must be paid on an overpayment refunded or credited to the taxpayer from
the date of payment of the tax until the date the refund is paid or credited. For purposes of
this subdivision, the date of payment is the due date of the return or the date of actual
payment of the tax, whichever is later.
new text end

new text begin Subd. 9. new text end

new text begin Deposit of revenues. new text end

new text begin The commissioner must deposit the revenues, including
penalties and interest, derived from the tax imposed under this section to the general fund.
new text end

new text begin Subd. 10. new text end

new text begin Personal debt. new text end

new text begin The tax imposed under this section, and interest and penalties
imposed with respect to the tax, are a personal debt of the person required to file a return
from the time that the liability for the tax arises, irrespective of when the time for payment
of the liability occurs. The debt must, in the case of the executor or administrator of the
estate of a decedent and in the case of a fiduciary, be that of the person in the person's official
or fiduciary capacity only, unless the person has voluntarily distributed the assets held in
that capacity without reserving sufficient assets to pay the tax, interest, and penalties, in
which event the person is personally liable for any deficiency.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for consumer data collected after
December 31, 2026.
new text end

Sec. 6.

Minnesota Statutes 2024, section 297A.61, subdivision 3, is amended to read:

Subd. 3.

Sale and purchase.

(a) "Sale" and "purchase" include, but are not limited to,
each of the transactions listed in this subdivision. In applying the provisions of this chapter,
the terms "tangible personal property" and "retail sale" include the taxable services listed
in paragraph (g), clause (6), items (i) to (vi) and (viii), and the provision of these taxable
services, unless specifically provided otherwise. Services performed by an employee for
an employer are not taxable. Services performed by a partnership or association for another
partnership or association are not taxable if one of the entities owns or controls more than
80 percent of the voting power of the equity interest in the other entity. Services performed
between members of an affiliated group of corporations are not taxable. For purposes of
the preceding sentence, "affiliated group of corporations" means those entities that would
be classified as members of an affiliated group as defined under United States Code, title
26, section 1504, disregarding the exclusions in section 1504(b).

(b) Sale and purchase include:

(1) any transfer of title or possession, or both, of tangible personal property, whether
absolutely or conditionally, for a consideration in money or by exchange or barter; and

(2) the leasing of or the granting of a license to use or consume, for a consideration in
money or by exchange or barter, tangible personal property, other than a manufactured
home used for residential purposes for a continuous period of 30 days or more.

(c) Sale and purchase include the production, fabrication, printing, or processing of
tangible personal property for a consideration for consumers who furnish either directly or
indirectly the materials used in the production, fabrication, printing, or processing.

(d) Sale and purchase include the preparing for a consideration of food. Notwithstanding
section 297A.67, subdivision 2, taxable food includes, but is not limited to, the following:

(1) prepared food sold by the retailer;

(2) soft drinks;

(3) candy; and

(4) dietary supplements.

(e) A sale and a purchase includes the furnishing for a consideration of electricity, gas,
water, or steam for use or consumption within this state.

(f) A sale and a purchase includes the transfer for a consideration of prewritten computer
software whether delivered electronically, by load and leave, or otherwise.

(g) A sale and a purchase includes the furnishing for a consideration of the following
services:

(1) the privilege of admission to places of amusement, recreational areas, or athletic
events, and the making available of amusement devices, tanning facilities, reducing salons,
steam baths, health clubs, and spas or athletic facilities;

(2) lodging and related services by a hotel, rooming house, resort, campground, motel,
or trailer camp, including furnishing the guest of the facility with access to telecommunication
services, and the granting of any similar license to use real property in a specific facility,
other than the renting or leasing of it for a continuous period of 30 days or more under an
enforceable written agreement that may not be terminated without prior notice and including
accommodations intermediary services provided in connection with other services provided
under this clause;

(3) nonresidential parking services, whether on a contractual, hourly, or other periodic
basis, except for parking at a meter;

(4) the granting of membership in a club, association, or other organization if:

(i) the club, association, or other organization makes available for the use of its members
sports and athletic facilities, without regard to whether a separate charge is assessed for use
of the facilities; and

(ii) use of the sports and athletic facility is not made available to the general public on
the same basis as it is made available to members.

Granting of membership means both onetime initiation fees and periodic membership dues.
Sports and athletic facilities include golf courses; tennis, racquetball, handball, and squash
courts; basketball and volleyball facilities; running tracks; exercise equipment; swimming
pools; and other similar athletic or sports facilities;

(5) delivery of aggregate materials by a third party, excluding delivery of aggregate
material used in road construction; and delivery of concrete block by a third party if the
delivery would be subject to the sales tax if provided by the seller of the concrete block.
For purposes of this clause, "road construction" means construction of:

(i) public roads;

(ii) cartways; and

(iii) private roads in townships located outside of the seven-county metropolitan area
up to the point of the emergency response location sign; and

(6) services as provided in this clause:

(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
include services provided by coin operated facilities operated by the customer;

(ii) motor vehicle washing, waxing, and cleaning services, including services provided
by coin operated facilities operated by the customer, and rustproofing, undercoating, and
towing of motor vehicles;

(iii) building and residential cleaning, maintenance, and disinfecting services and pest
control and exterminating services;

(iv) detective, security, burglar, fire alarm, and armored car services; but not including
services performed within the jurisdiction they serve by off-duty licensed peace officers as
defined in section 626.84, subdivision 1, or services provided by a nonprofit organization
or any organization at the direction of a county for monitoring and electronic surveillance
of persons placed on in-home detention pursuant to court order or under the direction of the
Minnesota Department of Corrections;

(v) pet grooming services;

(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor plant
care; tree, bush, shrub, and stump removal, except when performed as part of a land clearing
contract as defined in section 297A.68, subdivision 40; and tree trimming for public utility
lines. Services performed under a construction contract for the installation of shrubbery,
plants, sod, trees, bushes, and similar items are not taxable;

(vii) massages, except when provided by a licensed health care facility or professional
or upon written referral from a licensed health care facility or professional for treatment of
illness, injury, or disease; and

(viii) the furnishing of lodging, board, and care services for animals in kennels and other
similar arrangements, but excluding veterinary and horse boarding services.

(h) A sale and a purchase includes the furnishing for a consideration of tangible personal
property or taxable services by the United States or any of its agencies or instrumentalities,
or the state of Minnesota, its agencies, instrumentalities, or political subdivisions.

(i) A sale and a purchase includes the furnishing for a consideration of
telecommunications services, ancillary services associated with telecommunication services,
and pay television services. Telecommunication services include, but are not limited to, the
following services, as defined in section 297A.669: air-to-ground radiotelephone service,
mobile telecommunication service, postpaid calling service, prepaid calling service, prepaid
wireless calling service, and private communication services. The services in this paragraph
are taxed to the extent allowed under federal law.

(j) A sale and a purchase includes the furnishing for a consideration of installation if the
installation charges would be subject to the sales tax if the installation were provided by
the seller of the item being installed.

(k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer to a
customer when (1) the vehicle is rented by the customer for a consideration, or (2) the motor
vehicle dealer is reimbursed pursuant to a service contract as defined in section 59B.02,
subdivision 11.

(l) A sale and a purchase includes furnishing for a consideration of specified digital
products or other digital products or granting the right for a consideration to use specified
digital products or other digital products on a temporary or permanent basis and regardless
of whether the purchaser is required to make continued payments for such right. Wherever
the term "tangible personal property" is used in this chapter, other than in subdivisions 10
and 38, the provisions also apply to specified digital products, or other digital products,
unless specifically provided otherwise or the context indicates otherwise.

(m) The sale of the privilege of admission under section 297A.61, subdivision 3,
paragraph (g), clause (1), to a place of amusement, recreational area, or athletic event
includes all charges included in the privilege of admission's sales price, without deduction
for amenities that may be provided, unless the amenities are separately stated and the
purchaser of the privilege of admission is entitled to add or decline the amenities, and the
amenities are not otherwise taxable.

(n) A sale and purchase includes the transfer for consideration of a taxable cannabis
product as defined in section 295.81, subdivision 1, paragraph (r).

new text begin (o) A sale and purchase includes the furnishing for a consideration of the following
services when purchased by a person other than a trade or business:
new text end

new text begin (1) accounting services, including but not limited to audit, bookkeeping, financial
statement preparation, payroll, and tax return preparation services, but excluding tax
preparation services used to claim the Minnesota child tax credit under section 290.0661
or the Minnesota working family credit under section 290.0671;
new text end

new text begin (2) banking and brokerage services, including but not limited to account maintenance
fees, safety deposit boxes, credit card fees, loan servicing, payment services, wealth
management, financial planning, retirement planning, trust management, and investment
management, but excluding origination fees, overdraft fees, late fees, and the management
of defined benefit pension funds; and
new text end

new text begin (3) legal services, including but not limited to attorney fees, paralegal and legal assistant
services, law clerk services, notary fees, process serving, mediation and arbitration, and
title search, but excluding legal aid services funded as described in section 480.242.
new text end

new text begin (p) A seller of the services listed in paragraph (o) must retain records identifying through
reasonable and verifiable standards whether the services were purchased by a trade or
business or a person other than a trade or business.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
September 30, 2026.
new text end

Sec. 7.

Minnesota Statutes 2024, section 297A.62, subdivision 1, is amended to read:

Subdivision 1.

Generally.

Except as otherwise provided in subdivision 3 or in this
chapter, a sales tax of deleted text begin 6.5 deleted text end new text begin 6.425 new text end percent is imposed on the gross receipts from retail sales
as defined in section 297A.61, subdivision 4, made in this state or to a destination in this
state by a person who is required to have or voluntarily obtains a permit under section
297A.83, subdivision 1.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
September 30, 2026.
new text end

Sec. 8.

Minnesota Statutes 2024, section 297F.25, subdivision 1, is amended to read:

Subdivision 1.

Imposition.

(a) A tax is imposed on distributors on the sale of cigarettes
by a cigarette distributor to a retailer or cigarette subjobber for resale in this state. The tax
is equal to deleted text begin the combined tax rate under section 297A.62 deleted text end new text begin 6.875 percent new text end , multiplied by the
weighted average retail price and must be expressed in cents per pack rounded to the nearest
one-tenth of a cent. The weighted average retail price must be determined annually, with
new rates published by November 1, and effective for sales on or after January 1 of the
following year. The weighted average retail price must be established by surveying cigarette
retailers statewide in a manner and time determined by the commissioner. The commissioner
shall make an inflation adjustment in accordance with the Consumer Price Index for all
urban consumers inflation indicator as published in the most recent state budget forecast.
The commissioner shall use the inflation factor for the calendar year in which the new tax
rate takes effect. If the survey indicates that the average retail price of cigarettes has not
increased relative to the average retail price in the previous year's survey, then the
commissioner shall not make an inflation adjustment. The determination of the commissioner
pursuant to this subdivision is not a "rule" and is not subject to the Administrative Procedure
Act contained in chapter 14. For packs of cigarettes with other than 20 cigarettes, the tax
must be adjusted proportionally.

(b) Notwithstanding paragraph (a), and in lieu of a survey of cigarette retailers, the tax
calculation of the weighted average retail price for the sales of cigarettes from August 1,
2011, through December 31, 2011, shall be calculated by: (1) increasing the average retail
price per pack of 20 cigarettes from the most recent survey by the percentage change in a
weighted average of the presumed legal prices for cigarettes during the year after completion
of that survey, as reported and published by the Department of Commerce under section
325D.371; (2) subtracting the sales tax included in the retail price; and (3) adjusting for
expected inflation. The rate must be published by May 1 and is effective for sales after July
31. If the weighted average of the presumed legal prices indicates that the average retail
price of cigarettes has not increased relative to the average retail price in the most recent
survey, then no inflation adjustment must be made. For packs of cigarettes with other than
20 cigarettes, the tax must be adjusted proportionally.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
September 30, 2026.
new text end

ARTICLE 4

CANNABIS TAXES

Section 1.

Minnesota Statutes 2024, section 270C.726, subdivision 2, is amended to read:

Subd. 2.

Sales prohibited.

Beginning the third business day after the list is posted, no
cannabis cultivator, cannabis manufacturer, cannabis microbusiness, cannabis mezzobusiness,
medical cannabis combination business, cannabis wholesaler, new text begin lower-potency hemp edible
manufacturer, lower-potency hemp edible wholesaler, new text end or industrial hemp grower as defined
in chapter 342 may sell or deliver any product to a taxpayer included on the posted list.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2026.
new text end

Sec. 2.

Minnesota Statutes 2024, section 270C.726, subdivision 3, is amended to read:

Subd. 3.

Penalty.

A cannabis cultivator, cannabis manufacturer, cannabis microbusiness,
cannabis mezzobusiness, medical cannabis combination business, cannabis wholesaler,
new text begin lower-potency hemp edible manufacturer, lower-potency hemp edible wholesaler, new text end or
industrial hemp grower as defined in chapter 342 who violates subdivision 2 is subject to
the penalties provided in sections 342.19 and 342.21.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2026.
new text end

Sec. 3.

Minnesota Statutes 2024, section 295.81, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have
the meanings given.

(b) "Bundled transaction" means the retail sale of two or more products when the products
are otherwise distinct and identifiable and the products are sold for one nonitemized price.

(c) "Cannabis flower" has the meaning given in section 342.01, subdivision 16.

(d) "Cannabis product" has the meaning given in section 342.01, subdivision 20.

(e) "Cannabis solution product" means any cartridge, bottle, or other package that contains
a taxable cannabis product in a solution that is consumed or meant to be consumed through
the use of a heating element, power source, electronic circuit, or other electronic, chemical,
or mechanical means that produces vapor or aerosol. A cannabis solution product includes
any electronic delivery system, electronic vaping device, electronic vape pen, electronic
oral device, electronic delivery device, or similar product or device, and any batteries,
heating elements, or other components, parts, or accessories sold with and meant to be used
in the consumption of a solution containing a taxable cannabis product.

(f) "Cannabis mezzobusiness" means a cannabis business licensed under section 342.29.

(g) "Cannabis microbusiness" means a cannabis business licensed under section 342.28.

(h) "Cannabis retailer" means a cannabis business licensed under section 342.32.

(i) "Commissioner" means the commissioner of revenue.

(j) "Gross receipts" means the total amount received in money or by barter or exchange
for all taxable cannabis product sales at retail as measured by the sales price. Gross receipts
include but are not limited to delivery charges and packaging costs. Gross receipts do not
include:

(1) any taxes imposed directly on the customer that are separately stated on the invoice,
bill of sale, or similar document given to the purchaser; and

(2) discounts, including cash, terms, or coupons, that are not reimbursed by a third party
and that are allowed by the seller and taken by a purchaser on a sale.

(k) "Hemp-derived consumer product" has the meaning given in section 342.01,
subdivision 37.

(l) "Lower-potency hemp edible" has the meaning given in section 342.01, subdivision
50.

(m) "Lower-potency hemp edible retailer" means a cannabis business licensed under
section 342.43, subdivision 1, clause (2).

(n) "Medical cannabis flower" has the meaning given in section 342.01, subdivision 54.

(o) "Medical cannabinoid product" has the meaning given in section 342.01, subdivision
52.

(p) "Medical cannabis paraphernalia" has the meaning given in section 342.01,
subdivision 55.

new text begin (q) "Registry program" has the meaning given in section 342.01, subdivision 65.
new text end

deleted text begin (q) deleted text end new text begin (r) new text end "Retail sale" has the meaning given in section 297A.61, subdivision 4.

deleted text begin (r) deleted text end new text begin (s) new text end "Taxable cannabis product" means cannabis flower, cannabis product, cannabis
solution product, hemp-derived consumer product, lower-potency hemp edible, and any
substantially similar item. new text begin Taxable cannabis product does not include medical items purchased
by or for a patient enrolled in the registry program or Tribal medical cannabis program,
including medical cannabis flower, medical cannabinoid products, or medical cannabis
paraphernalia.
new text end

deleted text begin (s) deleted text end new text begin (t) new text end "Taxable cannabis product retailer" means a retailer that sells any taxable cannabis
product, and includes a cannabis retailer, cannabis microbusiness, cannabis mezzobusiness,
medical cannabis combination business, and lower-potency hemp edible retailer. Taxable
cannabis product retailer includes but is not limited to a:

(1) retailer maintaining a place of business in this state;

(2) marketplace provider maintaining a place of business in this state, as defined in
section 297A.66, subdivision 1, paragraph (a);

(3) retailer not maintaining a place of business in this state; and

(4) marketplace provider not maintaining a place of business in this state, as defined in
section 297A.66, subdivision 1, paragraph (b).

new text begin (u) "Tribal medical cannabis program" has the meaning given in section 342.01,
subdivision 69d.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin (a) For medical items purchased by or for a patient in the registry
program, the amendment to paragraph (s) is effective the day following final enactment.
new text end

new text begin (b) For medical items purchased by or for a patient in a Tribal medical cannabis program,
the amendment to paragraph (s) is effective for sales and purchases made after June 30,
2026.
new text end

new text begin (c) The addition of paragraphs (q) and (u) is effective for sales and purchases made after
June 30, 2026.
new text end

Sec. 4.

Minnesota Statutes 2024, section 295.81, subdivision 3, is amended to read:

Subd. 3.

Use tax imposed; credit for taxes paid.

(a) A person that receives taxable
cannabis products for use or storage in Minnesota, other than from a taxable cannabis product
retailer that paid the tax under subdivision 2, is subject to tax at the rate imposed under
subdivision 2. Liability for the tax is incurred when the person has possession of the taxable
cannabis product in Minnesota. The tax must be remitted to the commissioner in the same
manner prescribed for taxes imposed under chapter 297A.

(b) A person that has paid taxes to another state or any subdivision thereof deleted text begin on the same
transaction deleted text end new text begin measured by gross receipts new text end and is subject to tax under this section new text begin on the same
gross receipts new text end is entitled to a credit for the tax legally due and paid to another state or
subdivision thereof to the extent of the lesser of (1) the tax actually paid to the other state
or subdivision thereof, or (2) the amount of tax imposed by Minnesota on the deleted text begin transaction deleted text end new text begin
gross receipts new text end subject to tax in the other state or subdivision thereof.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2024, section 295.81, subdivision 4, is amended to read:

Subd. 4.

Exemptions.

(a) The use tax imposed under subdivision 3, paragraph (a), does
not apply to the possession, use, or storage of taxable cannabis products if (1) the taxable
cannabis products have an aggregate cost in any calendar month to the customer of $100
or less, and (2) the taxable cannabis products were carried into this state by the customer. new text begin
If a customer carries taxable cannabis products having an aggregate cost in any calendar
month of more than $100 into this state, the customer must pay the use tax imposed under
subdivision 3, paragraph (a), on the entire monthly cost amount.
new text end

deleted text begin (b) The tax imposed under this section does not apply to sales of medical items purchased
by or for a patient enrolled in the registry program, including medical cannabis flower,
medical cannabinoid products, or medical cannabis paraphernalia.
deleted text end

deleted text begin (c) deleted text end new text begin (b) new text end Unless otherwise specified in this section, the exemptions applicable to taxes
imposed under chapter 297A are not applicable to the taxes imposed under this section.

deleted text begin (d) deleted text end new text begin (c) new text end The tax imposed under this section does not apply to:

(1) sales made on Tribally regulated land as defined in section 3.9228, subdivision 1,
by a cannabis business licensed by a Minnesota Tribal government, as defined in section
3.9228, subdivision 1, paragraph (f); or

(2) use tax owed on taxable cannabis products purchased on Tribally regulated land as
defined in section 3.9228, subdivision 1, from a cannabis business licensed by a Minnesota
Tribal government as defined in section 3.9228, subdivision 1, paragraph (f).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 6.

Minnesota Statutes 2024, section 295.81, subdivision 6, is amended to read:

Subd. 6.

Taxes paid to another state or any subdivision thereof; credit.

A taxable
cannabis product retailer that has paid taxes to another state or any subdivision thereof
measured by gross receipts and is subject to tax under this section on the same gross receipts
is entitled to a credit for the tax legally due and paid to another state or deleted text begin any deleted text end subdivision
thereof to the extent of the lesser of (1) the tax actually paid to the other state or deleted text begin any deleted text end
subdivision thereof, or (2) the amount of tax imposed by Minnesota on the gross receipts
subject to tax in the other taxing state or deleted text begin any deleted text end subdivision thereof.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

Minnesota Statutes 2024, section 295.81, subdivision 9, is amended to read:

Subd. 9.

Returns; payment of tax.

(a) A taxable cannabis product retailer must report
the tax on a return prescribed by the commissioner and must remit the tax in a form and
manner prescribed by the commissioner. The return and the tax must be filed and paid using
the filing cycle and due dates provided for taxes imposed under deleted text begin section 289A.20, subdivision
4, and deleted text end chapter 297A.

(b) Interest must be paid on an overpayment refunded or credited to the taxpayer from
the date of payment of the tax until the date the refund is paid or credited. For purposes of
this subdivision, the date of payment is the due date of the return or the date of actual
payment of the tax, whichever is later.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

ARTICLE 5

MISCELLANEOUS

Section 1. new text begin ADMINISTRATIVE APPROPRIATIONS.
new text end

new text begin (a) $91,000 in fiscal year 2027 is appropriated from the general fund to the commissioner
of revenue to administer the gross receipts tax on handguns, firearms, and ammunition under
Minnesota Statutes, section 295.85. The base for this appropriation is $170,000 in fiscal
year 2028 and thereafter.
new text end

new text begin (b) $885,000 in fiscal year 2027 is appropriated from the general fund to the commissioner
of revenue for purposes of auditing pass-through entities. The base for this appropriation
is $1,833,000 in fiscal year 2028 and thereafter. This appropriation is meant to supplement
and not supplant existing funding.
new text end

new text begin (c) $912,000 in fiscal year 2027 is appropriated from the general fund to the commissioner
of revenue to administer this act. The base for this appropriation is $936,000 in fiscal year
2028 and $875,000 each fiscal year thereafter. This appropriation is meant to supplement
and not supplant existing funding.
new text end