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HF 885

3rd Engrossment - 86th Legislature (2009 - 2010) Posted on 02/09/2010 01:42am

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - 3rd Engrossment

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A bill for an act
relating to the financing of state and local government; making changes to
income, liquor, gross receipts, and other tax-related provisions; providing a
surtax on certain interest income; creating certain accounts in the general fund,
including an E-12 education account, a nursing home and long-term care
account, and a hospital account; creating tax compliance initiative; appropriating
money; amending Minnesota Statutes 2008, sections 290.06, subdivisions 2c, 2d;
295.75, subdivision 2; 297G.03, subdivision 1; 297G.04; proposing coding for
new law in Minnesota Statutes, chapter 290.

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

Section 1.

Minnesota Statutes 2008, 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 deleted text begin$25,680deleted text endnew text begin $33,220new text end, 5.35 percent;

(2) on all over deleted text begin$25,680deleted text endnew text begin $33,220new text end, but not over deleted text begin$102,030deleted text endnew text begin $131,970new text end, 7.05 percent;

(3) on all over deleted text begin$102,030deleted text endnew text begin $131,970new text end, new text beginbut not over $250,000, new text end7.85 percentdeleted text begin.deleted text endnew text begin; and
new text end

new text begin (4) on all over $250,000, nine percent.
new text end

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.

(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 deleted text begin$17,570deleted text endnew text begin $22,730new text end, 5.35 percent;

(2) on all over deleted text begin$17,570deleted text endnew text begin $22,730new text end, but not over deleted text begin$57,710deleted text endnew text begin $74,650new text end, 7.05 percent;

(3) on all over deleted text begin$57,710deleted text endnew text begin $74,650new text end, new text beginbut not over $141,250, new text end7.85 percentdeleted text begin.deleted text endnew text begin; and
new text end

new text begin (4) on all over $141,250, nine percent.
new text end

(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 deleted text begin$21,630deleted text endnew text begin $27,980new text end, 5.35 percent;

(2) on all over deleted text begin$21,630deleted text endnew text begin $27,980new text end, but not over deleted text begin$86,910deleted text endnew text begin $112,420new text end, 7.05 percent;

(3) on all over deleted text begin$86,910deleted text endnew text begin $112,420new text end,new text begin but not over $212,500,new text end 7.85 percentdeleted text begin.deleted text endnew text begin; and
new text end

new text begin (4) on all over $212,500, nine percent.
new text end

(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 the additions
required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), and
(13) and reduced by the Minnesota assignable portion of the subtraction for United States
government interest under section 290.01, subdivision 19b, clause (1), and the subtractions
under section 290.01, subdivision 19b, clauses (9), (10), (14), (15), and (16), 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 of 1986, increased by the amounts specified in
section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), and (13) and
reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1), (9),
(10), (14), (15), and (16).

new text begin (f) For taxable years beginning after December 31, 2013, the maximum tax rate
under this subdivision is 7.85 percent, if the commissioner of finance estimates in the
February 2013 economic forecast that the unrestricted general fund balance at the end of
fiscal year 2013 equals or exceeds $500,000,000.
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, 2008.
new text end

Sec. 2.

Minnesota Statutes 2008, section 290.06, subdivision 2d, is amended to read:


Subd. 2d.

Inflation adjustment of brackets.

(a) For taxable years beginning after
December 31, deleted text begin2000deleted text endnew text begin 2009new text end, the minimum and maximum dollar amounts for each rate
bracket for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the
percentage determined under paragraph (b). For the purpose of making the adjustment as
provided in this subdivision all of the rate brackets provided in subdivision 2c shall be the
rate brackets as they existed for taxable years beginning after December 31, deleted text begin1999deleted text endnew text begin 2008new text end,
and before January 1, deleted text begin2001deleted text endnew text begin 2010new text end. The rate applicable to any rate bracket must not be
changed. The dollar amounts setting forth the tax shall be adjusted to reflect the changes
in the rate brackets. The rate brackets as adjusted must be rounded to the nearest $10
amount. If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.

(b) The commissioner shall adjust the rate brackets and by the percentage determined
pursuant to the provisions of section 1(f) of the Internal Revenue Code, except thatnew text begin:
new text end

new text begin (1) in section 1(f)(2)(A) the words "increasing or decreasing" shall be substituted
for the word "increasing";
new text end

new text begin (2) in section 1(f)(3)(A) the words "differs from" shall be substituted for the word
"exceeds"; and
new text end

new text begin (3) new text endin section 1(f)(3)(B) the word deleted text begin"1999"deleted text endnew text begin "2008"new text end shall be substituted for the word
"1992." For deleted text begin2001deleted text endnew text begin 2010new text end, the commissioner shall then determine the percent change from
the 12 months ending on August 31, deleted text begin1999deleted text endnew text begin 2008new text end, to the 12 months ending on August 31,
deleted text begin 2000deleted text endnew text begin 2009new text end, and in each subsequent year, from the 12 months ending on August 31, deleted text begin1999deleted text endnew text begin
2008
new text end, to the 12 months ending on August 31 of the year preceding the taxable year. The
determination of the commissioner pursuant to this subdivision shall not be considered a
"rule" and shall not be subject to the Administrative Procedure Act contained in chapter 14.

No later than December 15 of each year, the commissioner shall announce the
specific percentage that will be used to adjust the tax rate brackets.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2008.
new text end

Sec. 3.

new text begin [290.094] SURTAX ON CERTAIN INTEREST INCOME.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) Unless the language or context clearly indicates that
a different meaning is intended, for the purposes of this section, the following terms
have the meanings given them.
new text end

new text begin (b) "Annual percentage rate" has the meaning given the term in Code of Federal
Regulations, title 12, parts 226.14 and 226.22, related to open-end and closed-end credit.
new text end

new text begin (c) "Borrower" means a debtor under a loan or a purchaser of debt under a credit
sale contract.
new text end

new text begin (d) "Cardholder" means a person to whom a credit card is issued or who has agreed
with the financial institution to pay obligations arising from the issuance to or use of the
card by another person.
new text end

new text begin (e) "Consumer loan" means a loan made by a financial institution in which:
new text end

new text begin (1) the debtor is a person other than an organization;
new text end

new text begin (2) the debt is incurred primarily for a personal, family, or household purpose; and
new text end

new text begin (3) the debt is payable in installments or a finance charge is made.
new text end

new text begin (f) "Credit" means the right granted by a financial institution to a borrower to defer
payment of a debt, to incur debt and defer its payment, or to purchase property or services
and defer payment.
new text end

new text begin (g) "Credit card" means a card or device issued under an arrangement under
which a financial institution gives to a cardholder the privilege of obtaining credit from
the financial institution or other person in purchasing or leasing property or services,
obtaining loans, or otherwise. A transaction is "pursuant to a credit card" only if credit is
obtained according to the terms of the arrangement by transmitting information contained
on the card or device orally, in writing, by mechanical or electronic methods, or in any
other manner. A transaction is not "pursuant to a credit card" if the card or device is
used solely in that transaction to:
new text end

new text begin (1) identify the cardholder or evidence the cardholder's creditworthiness and credit is
not obtained according to the terms of the arrangement;
new text end

new text begin (2) obtain a guarantee of payment from the cardholder's deposit account, whether or
not the payment results in a credit extension to the cardholder by the financial institution; or
new text end

new text begin (3) effect an immediate transfer of funds from the cardholder's deposit account by
electronic or other means, whether or not the transfer results in a credit extension to
the cardholder by the financial institution.
new text end

new text begin (h) "Credit sale contract" means a contract evidencing a credit sale. "Credit sale"
means a sale of goods or services, or an interest in land, in which:
new text end

new text begin (1) credit is granted by a seller who regularly engages as a seller in credit transactions
of the same kind; and
new text end

new text begin (2) the debt is payable in installments or a finance charge is made.
new text end

new text begin (i) "Financial institution" means a state or federally chartered bank, a state or
federally chartered bank and trust, a trust company with banking powers, a state or
federally chartered savings association, an industrial loan and thrift company organized
under chapter 53, a regulated lender organized under chapter 56, or an operating subsidiary
of any such institution.
new text end

new text begin (j) "Loan" means:
new text end

new text begin (1) the creation of debt by the financial institution's payment of money to the
borrower or a third person for the account of the borrower;
new text end

new text begin (2) the creation of debt pursuant to a credit card in any manner, including a cash
advance or the financial institution's honoring a draft or similar order for the payment of
money drawn or accepted by the borrower, paying or agreeing to pay the borrower's
obligation, or purchasing or otherwise acquiring the borrower's obligation from the
obligee or the borrower's assignee;
new text end

new text begin (3) the creation of debt by a cash advance to a borrower pursuant to an overdraft
line of credit arrangement;
new text end

new text begin (4) the creation of debt by a credit to an account with the financial institution upon
which the borrower is entitled to draw immediately;
new text end

new text begin (5) the forbearance of debt arising from a loan; and
new text end

new text begin (6) the creation of debt pursuant to open-end credit.
new text end

new text begin "Loan" does not include the forbearance of debt arising from a sale or lease, a credit
sale contract, or an overdraft from a person's deposit account with a financial institution
which is not pursuant to a written agreement to pay overdrafts with the right to defer
repayment thereof.
new text end

new text begin (k) "Organization" means a corporation, government, government subdivision or
agency, trust, estate, partnership, joint venture, cooperative, limited liability company,
limited liability partnership, or association.
new text end

new text begin (l) "Person" means a natural person or an organization.
new text end

new text begin (m) "Principal" means the total of:
new text end

new text begin (1) the amount paid to, received by, or paid or repayable for the account of, the
borrower; and
new text end

new text begin (2) to the extent that payment is deferred:
new text end

new text begin (i) the amount actually paid or to be paid by the financial institution for additional
charges permitted under this section; and
new text end

new text begin (ii) prepaid finance charges.
new text end

new text begin Subd. 2. new text end

new text begin Scope. new text end

new text begin (a) Any person or organization conducting a trade or business
in this state who is subject to the truth in lending requirements under Code of Federal
Regulations, title 12, part 226 (Federal Regulation Z), and who charges interest on the
credit issued shall be subject to a surtax on each transaction as prescribed by this chapter.
Transactions include any open-end and closed-end credit transactions subject to Federal
Regulation Z such as loans, consumer loans, credit sale contracts, extensions of credit, and
credit issued pursuant to a credit card. A transferee or assignee of a transaction subject to
the surtax under this section is also subject to the tax under this section.
new text end

new text begin (b) The tax shall be determined for each transaction subject to the requirements of
this section that occurs during the calendar year.
new text end

new text begin Subd. 3. new text end

new text begin Surtax rate. new text end

new text begin The surtax shall be imposed at the rate of 30 percent on any
income attributable to interest collected from the portion of an annual percentage rate
that exceeds 15 percent on transactions subject to Code of Federal Regulations, title 12,
part 226 (Federal Regulation Z).
new text end

new text begin Subd. 4. new text end

new text begin Collection and administration. new text end

new text begin The tax imposed by this section shall
be paid annually to the commissioner of revenue and is subject to the same collection,
enforcement, and penalty provisions as other taxes imposed by this chapter.
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, 2008.
new text end

Sec. 4.

Minnesota Statutes 2008, section 295.75, subdivision 2, is amended to read:


Subd. 2.

Gross receipts tax imposed.

A tax is imposed on each liquor retailer equal
to deleted text begin2.5deleted text endnew text begin fivenew text end percent of gross receipts from retail sales in Minnesota of liquor.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for gross receipts received after
June 30, 2009.
new text end

Sec. 5.

Minnesota Statutes 2008, section 297G.03, subdivision 1, is amended to read:


Subdivision 1.

General rate; distilled spirits and wine.

The following excise tax is
imposed on all distilled spirits and wine manufactured, imported, sold, or possessed in
this state:

Standard
Metric
(a) Distilled spirits, liqueurs,
cordials, and specialties regardless
of alcohol content (excluding ethyl
alcohol)
$
deleted text begin5.03deleted text endnew text begin7.59new text end per
gallon
$
deleted text begin1.33deleted text end new text begin 2.01
new text endper liter
(b) Wine containing 14 percent
or less alcohol by volume (except
cider as defined in section 297G.01,
subdivision 3a)
$
deleted text begin.30deleted text endnew text begin.81new text end per
gallon
$
deleted text begin.08deleted text endnew text begin.22new text end per
liter
(c) Wine containing more than
14 percent but not more than 21
percent alcohol by volume
$
deleted text begin.95deleted text endnew text begin1.46new text end per
gallon
$
deleted text begin.25deleted text endnew text begin.39new text end per
liter
(d) Wine containing more than
21 percent but not more than 24
percent alcohol by volume
$
deleted text begin1.82deleted text endnew text begin2.33new text end per
gallon
$
deleted text begin.48deleted text endnew text begin.62new text end per
liter
(e) Wine containing more than 24
percent alcohol by volume
$
deleted text begin3.52deleted text endnew text begin4.03new text end per
gallon
$
deleted text begin .93deleted text endnew text begin1.07new text end
per liter
(f) Natural and artificial sparkling
wines containing alcohol
$
deleted text begin1.82deleted text endnew text begin2.33new text end per
gallon
$
deleted text begin .48deleted text endnew text begin.62new text end per
liter
(g) Cider as defined in section
297G.01, subdivision 3a
$
deleted text begin.15deleted text endnew text begin.66new text end per
gallon
$
deleted text begin .04deleted text endnew text begin.18new text end per
liter
(h) Low alcohol dairy cocktails
$
.08 per gallon
$
.02 per liter

In computing the tax on a package of distilled spirits or wine, a proportional tax at a
like rate on all fractional parts of a gallon or liter must be paid, except that the tax on a
fractional part of a gallon less than 1/16 of a gallon is the same as for 1/16 of a gallon.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2009.
new text end

Sec. 6.

Minnesota Statutes 2008, section 297G.04, is amended to read:


297G.04 FERMENTED MALT BEVERAGES; RATE OF TAX.

Subdivision 1.

Tax imposed.

The following excise tax is imposed on all fermented
malt beverages that are imported, directly or indirectly sold, or possessed in this state:

(1) on fermented malt beverages containing not more than 3.2 percent alcohol by
weight, deleted text begin$2.40deleted text endnew text begin $9.01new text end per 31-gallon barrel; and

(2) on fermented malt beverages containing more than 3.2 percent alcohol by
weight, deleted text begin$4.60deleted text endnew text begin $11.21new text end per 31-gallon barrel.

For fractions of a 31-gallon barrel, the tax rate is calculated proportionally.

Subd. 2.

Tax credit.

A qualified brewer producing fermented malt beverages is
entitled to a tax credit of deleted text begin$4.60deleted text endnew text begin $11.21new text end per barrel on 25,000 barrels sold in any fiscal year
beginning July 1, regardless of the alcohol content of the product. Qualified brewers may
take the credit on the 18th day of each month, but the total credit allowed may not exceed
in any fiscal year the lesser of:

(1) the liability for tax; or

(2) deleted text begin$115,000deleted text endnew text begin $280,000new text end.

For purposes of this subdivision, a "qualified brewer" means a brewer, whether
or not located in this state, manufacturing less than 100,000 barrels of fermented malt
beverages in the calendar year immediately preceding the calendar year for which the
credit under this subdivision is claimed. In determining the number of barrels, all brands
or labels of a brewer must be combined. All facilities for the manufacture of fermented
malt beverages owned or controlled by the same person, corporation, or other entity
must be treated as a single brewer.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2009.
new text end

Sec. 7. new text beginGENERAL FUND ACCOUNTS; FISCAL YEARS 2010-2013.
new text end

new text begin Subdivision 1. new text end

new text begin E-12 education account. new text end

new text begin An E-12 education account is created in
the general fund. Amounts remain in the account until appropriated for E-12 education.
Appropriations from the account may only be used for E-12 education.
new text end

new text begin Subd. 2. new text end

new text begin Nursing home and long-term care account. new text end

new text begin A nursing home and
long-term care account is created in the general fund. Amounts remain in the account until
appropriated for nursing homes or long-term care services. Appropriations from the
account may only be used for nursing homes and long-term care services.
new text end

new text begin Subd. 3. new text end

new text begin Hospital account. new text end

new text begin A hospital account is created in the general fund.
Amounts remain in the account until appropriated for hospitals. Appropriations from the
account may only be used for hospitals.
new text end

new text begin Subd. 4. new text end

new text begin Expiration. new text end

new text begin This section expires June 30, 2013.
new text end

Sec. 8. new text beginTRANSFERS.
new text end

new text begin (a) In the fiscal year 2010-2011 biennium, $986,000,000 is transferred to the
accounts established in section 7 as follows:
new text end

new text begin (1) $585,784,000 to the E-12 education account;
new text end

new text begin (2) $287,566,000 to the nursing home and long-term care account; and
new text end

new text begin (3) $114,130,000 to the hospital account.
new text end

new text begin (b) In the fiscal year 2012-2013 biennium, $1,000,000,000 is transferred to the
accounts established in section 7 as follows:
new text end

new text begin (1) $465,259,000 to the E-12 education account;
new text end

new text begin (2) $361,643,000 to the nursing home and long-term care account; and
new text end

new text begin (3) $173,978,000 to the hospital account.
new text end

Sec. 9. new text beginAPPROPRIATIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Tax compliance. new text end

new text begin (a) $1,194,300 the first year and $2,350,200 the
second year are appropriated from the general fund to the commissioner of revenue for
additional activities to identify and collect tax liabilities from individuals and businesses
that currently do not pay all taxes owed. This initiative is expected to result in new general
fund revenues of $7,948,700 for the biennium ending June 30, 2011.
new text end

new text begin (b) The department must report to the chairs of the house of representatives Ways
and Means and senate Finance Committees by March 1, 2010, and January 15, 2011,
on the following performance indicators:
new text end

new text begin (1) the number of corporations noncompliant with the corporate tax system each
year and the percentage and dollar amounts of valid tax liabilities collected;
new text end

new text begin (2) the number of businesses noncompliant with the sales and use tax system and the
percentage and dollar amount of the valid tax liabilities collected; and
new text end

new text begin (3) the number of individual noncompliant cases resolved and the percentage and
dollar amounts of valid tax liabilities collected.
new text end

new text begin Subd. 2. new text end

new text begin Debt collection management. new text end

new text begin $364,800 the first year and $750,700 the
second year are appropriated from the general fund to the commissioner of revenue for
additional activities to identify and collect tax liabilities from individuals and businesses
that currently do not pay all taxes owed. This initiative is expected to result in new general
fund revenues of $10,691,300 for the biennium ending June 30, 2011.
new text end