HF 1634

as introduced - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to taxation; providing exemptions from 
  1.3             property, individual income, corporate franchise, 
  1.4             sales, and motor vehicle sales taxation for qualifying 
  1.5             family businesses; amending Minnesota Statutes 2002, 
  1.6             sections 272.02, by adding a subdivision; 290.01, 
  1.7             subdivision 19b; 290.05, subdivision 1; 290.06, 
  1.8             subdivision 2c; 290.067, subdivision 1; 290.0671, 
  1.9             subdivision 1; 290.091, subdivision 2; 290.0922, 
  1.10            subdivision 2; 297A.68, by adding a subdivision; 
  1.11            297B.03; proposing coding for new law in Minnesota 
  1.12            Statutes, chapters 116J; 477A.08. 
  1.13  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.14     Section 1.  [116J.891] [QUALIFIED FAMILY BUSINESS.] 
  1.15     Subdivision 1.  [QUALIFYING RULES.] "Qualified family 
  1.16  business" means a trade or business that meets all of the 
  1.17  following requirements: 
  1.18     (1) all of its facilities are located in Minnesota and 
  1.19  outside of the metropolitan area, as defined in section 473.121, 
  1.20  subdivision 2; 
  1.21     (2) it is a sole proprietorship, partnership, corporation, 
  1.22  S corporation, or limited liability company; 
  1.23     (3) immediate family members, each of whom lives no more 
  1.24  than 20 miles from the principal place of business, own more 
  1.25  than 50 percent of the voting power of all classes of stock or 
  1.26  other ownership interests; 
  1.27     (4) 25 percent or more of the full-time equivalent 
  1.28  employees of the business are immediate family members; and 
  1.29     (5) the business has been certified by the commissioner and 
  2.1   the certification applies for the taxable year or the assessment 
  2.2   year. 
  2.3      Subd. 2.  [IMMEDIATE FAMILY MEMBERS.] "Immediate family 
  2.4   member" means: 
  2.5      (1) spouse; 
  2.6      (2) child; 
  2.7      (3) parent; 
  2.8      (4) brother; 
  2.9      (5) half-brother; 
  2.10     (6) sister; 
  2.11     (7) half-sister; and 
  2.12     (8) grandparent. 
  2.13     Subd. 3.  [CERTIFICATION BY COMMISSIONER.] In order to be a 
  2.14  qualified family business, the owner of the business must apply 
  2.15  to the commissioner for certification.  The commissioner shall 
  2.16  prescribe the form of and manner for making application.  An 
  2.17  applicant shall provide all of the information specified by the 
  2.18  commissioner.  The commissioner shall certify each business that 
  2.19  meets the requirements of subdivision 1.  The certification must 
  2.20  be based on the most recent information available; full-time 
  2.21  equivalent employees are calculated on the basis of the previous 
  2.22  calendar year.  The certification applies for the taxable years 
  2.23  beginning, assessment years beginning, and purchases and sales 
  2.24  made beginning in the calendar year after the application is 
  2.25  granted. 
  2.26     Subd. 4.  [ANNUAL NOTIFICATION.] A business that has 
  2.27  received a certification under subdivision 3, must annually 
  2.28  notify the commissioner of its continuing eligibility as a 
  2.29  qualified family business.  The commissioner shall prescribe the 
  2.30  form and manner for providing the notification.  The applicant 
  2.31  shall provide all of the information to verify continuing 
  2.32  eligibility for a qualified family business, as specified by the 
  2.33  commissioner. 
  2.34     Subd. 5.  [REVOCATION OF CERTIFICATION.] (a) Failure to 
  2.35  notify the commissioner or to provide the specified information 
  2.36  results in revocation of the certification of a business as a 
  3.1   qualified family business.  The commissioner shall revoke the 
  3.2   certification, if the business fails to timely provide the 
  3.3   notification and required information under subdivision 4 or if 
  3.4   the commissioner determines the business no longer qualifies as 
  3.5   a qualified family business.  The business may appeal the 
  3.6   revocation under the contested case procedure of chapter 14.  
  3.7   The commissioner shall notify the commissioner of revenue and 
  3.8   the property tax assessor of any revocation. 
  3.9      (b) A revocation takes effect: 
  3.10     (1) for the general sales tax and motor vehicle sales tax 
  3.11  on the first day of the next calendar month beginning more than 
  3.12  15 days after the revocation becomes final; 
  3.13     (2) for revocations that become final before June 1 of a 
  3.14  year, for property taxes payable in the next calendar year and 
  3.15  for revocations that become final after May 31 of a year, for 
  3.16  property taxes payable in the second calendar year after the 
  3.17  revocation; and 
  3.18     (3) for taxable years beginning in the next calendar year 
  3.19  after the revocation becomes final for individual income and 
  3.20  corporate franchise taxes. 
  3.21     [EFFECTIVE DATE.] This section is effective the day 
  3.22  following final enactment. 
  3.23     Sec. 2.  Minnesota Statutes 2002, section 272.02, is 
  3.24  amended by adding a subdivision to read: 
  3.25     Subd. 56.  [QUALIFIED FAMILY BUSINESS.] (a) Improvements to 
  3.26  real property and personal property, classified under section 
  3.27  273.13, subdivision 23 or 24, and owned by a qualified family 
  3.28  business, as defined in section 116J.891, are exempt from ad 
  3.29  valorem taxes levied under chapter 275. 
  3.30     (b) The exemption applies to each assessment year for which 
  3.31  the commissioner of trade and economic development has certified 
  3.32  the owner as a qualified family business.  This exemption does 
  3.33  not apply to a levy that was approved before the date of 
  3.34  enactment of this subdivision under: 
  3.35     (1) section 475.61 or similar levy provisions under any 
  3.36  other law to pay general obligation bonds; or 
  4.1      (2) section 126C.17. 
  4.2      (c) To qualify for the exemption under this subdivision, 
  4.3   the owner of the property must apply to the assessor by March 1 
  4.4   of each assessment year and provide a copy of the certification 
  4.5   of the business under section 116J.891.  Failure of the owner to 
  4.6   timely apply and provide the certification results in denial of 
  4.7   the exemption. 
  4.8      [EFFECTIVE DATE.] This section is effective beginning with 
  4.9   property taxes assessed in 2004, payable in 2005. 
  4.10     Sec. 3.  Minnesota Statutes 2002, section 290.01, 
  4.11  subdivision 19b, is amended to read: 
  4.12     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  4.13  individuals, estates, and trusts, there shall be subtracted from 
  4.14  federal taxable income: 
  4.15     (1) interest income on obligations of any authority, 
  4.16  commission, or instrumentality of the United States to the 
  4.17  extent includable in taxable income for federal income tax 
  4.18  purposes but exempt from state income tax under the laws of the 
  4.19  United States; 
  4.20     (2) if included in federal taxable income, the amount of 
  4.21  any overpayment of income tax to Minnesota or to any other 
  4.22  state, for any previous taxable year, whether the amount is 
  4.23  received as a refund or as a credit to another taxable year's 
  4.24  income tax liability; 
  4.25     (3) the amount paid to others, less the amount used to 
  4.26  claim the credit allowed under section 290.0674, not to exceed 
  4.27  $1,625 for each qualifying child in grades kindergarten to 6 and 
  4.28  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
  4.29  textbooks, and transportation of each qualifying child in 
  4.30  attending an elementary or secondary school situated in 
  4.31  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
  4.32  wherein a resident of this state may legally fulfill the state's 
  4.33  compulsory attendance laws, which is not operated for profit, 
  4.34  and which adheres to the provisions of the Civil Rights Act of 
  4.35  1964 and chapter 363.  For the purposes of this clause, 
  4.36  "tuition" includes fees or tuition as defined in section 
  5.1   290.0674, subdivision 1, clause (1).  As used in this clause, 
  5.2   "textbooks" includes books and other instructional materials and 
  5.3   equipment purchased or leased for use in elementary and 
  5.4   secondary schools in teaching only those subjects legally and 
  5.5   commonly taught in public elementary and secondary schools in 
  5.6   this state.  Equipment expenses qualifying for deduction 
  5.7   includes expenses as defined and limited in section 290.0674, 
  5.8   subdivision 1, clause (3).  "Textbooks" does not include 
  5.9   instructional books and materials used in the teaching of 
  5.10  religious tenets, doctrines, or worship, the purpose of which is 
  5.11  to instill such tenets, doctrines, or worship, nor does it 
  5.12  include books or materials for, or transportation to, 
  5.13  extracurricular activities including sporting events, musical or 
  5.14  dramatic events, speech activities, driver's education, or 
  5.15  similar programs.  For purposes of the subtraction provided by 
  5.16  this clause, "qualifying child" has the meaning given in section 
  5.17  32(c)(3) of the Internal Revenue Code; 
  5.18     (4) income as provided under section 290.0802; 
  5.19     (5) to the extent included in federal adjusted gross 
  5.20  income, income realized on disposition of property exempt from 
  5.21  tax under section 290.491; 
  5.22     (6) to the extent not deducted in determining federal 
  5.23  taxable income or used to claim the long-term care insurance 
  5.24  credit under section 290.0672, the amount paid for health 
  5.25  insurance of self-employed individuals as determined under 
  5.26  section 162(l) of the Internal Revenue Code, except that the 
  5.27  percent limit does not apply.  If the individual deducted 
  5.28  insurance payments under section 213 of the Internal Revenue 
  5.29  Code of 1986, the subtraction under this clause must be reduced 
  5.30  by the lesser of: 
  5.31     (i) the total itemized deductions allowed under section 
  5.32  63(d) of the Internal Revenue Code, less state, local, and 
  5.33  foreign income taxes deductible under section 164 of the 
  5.34  Internal Revenue Code and the standard deduction under section 
  5.35  63(c) of the Internal Revenue Code; or 
  5.36     (ii) the lesser of (A) the amount of insurance qualifying 
  6.1   as "medical care" under section 213(d) of the Internal Revenue 
  6.2   Code to the extent not deducted under section 162(1) of the 
  6.3   Internal Revenue Code or excluded from income or (B) the total 
  6.4   amount deductible for medical care under section 213(a); 
  6.5      (7) the exemption amount allowed under Laws 1995, chapter 
  6.6   255, article 3, section 2, subdivision 3; 
  6.7      (8) to the extent included in federal taxable income, 
  6.8   postservice benefits for youth community service under section 
  6.9   124D.42 for volunteer service under United States Code, title 
  6.10  42, sections 12601 to 12604; 
  6.11     (9) to the extent not deducted in determining federal 
  6.12  taxable income by an individual who does not itemize deductions 
  6.13  for federal income tax purposes for the taxable year, an amount 
  6.14  equal to 50 percent of the excess of charitable contributions 
  6.15  allowable as a deduction for the taxable year under section 
  6.16  170(a) of the Internal Revenue Code over $500; 
  6.17     (10) for taxable years beginning before January 1, 2008, 
  6.18  the amount of the federal small ethanol producer credit allowed 
  6.19  under section 40(a)(3) of the Internal Revenue Code which is 
  6.20  included in gross income under section 87 of the Internal 
  6.21  Revenue Code; 
  6.22     (11) for individuals who are allowed a federal foreign tax 
  6.23  credit for taxes that do not qualify for a credit under section 
  6.24  290.06, subdivision 22, an amount equal to the carryover of 
  6.25  subnational foreign taxes for the taxable year, but not to 
  6.26  exceed the total subnational foreign taxes reported in claiming 
  6.27  the foreign tax credit.  For purposes of this clause, "federal 
  6.28  foreign tax credit" means the credit allowed under section 27 of 
  6.29  the Internal Revenue Code, and "carryover of subnational foreign 
  6.30  taxes" equals the carryover allowed under section 904(c) of the 
  6.31  Internal Revenue Code minus national level foreign taxes to the 
  6.32  extent they exceed the federal foreign tax credit; and 
  6.33     (12) in each of the five tax years immediately following 
  6.34  the tax year in which an addition is required under subdivision 
  6.35  19a, clause (7), an amount equal to one-fifth of the delayed 
  6.36  depreciation.  For purposes of this clause, "delayed 
  7.1   depreciation" means the amount of the addition made by the 
  7.2   taxpayer under subdivision 19a, clause (7), minus the positive 
  7.3   value of any net operating loss under section 172 of the 
  7.4   Internal Revenue Code generated for the tax year of the 
  7.5   addition.  The resulting delayed depreciation cannot be less 
  7.6   than zero; and 
  7.7      (13) to the extent included in federal taxable income, net 
  7.8   income from the operation of a qualified family business, 
  7.9   certified under section 116J.891 for the taxable year, received 
  7.10  or accrued by an owner of the qualified family business, but 
  7.11  excluding wage or salary income, interest, dividends, capital 
  7.12  gains, or rents received from or by a qualified family 
  7.13  business.  The maximum exclusion under this clause is limited to 
  7.14  $50,000 ($100,000 for a married joint filer). 
  7.15     [EFFECTIVE DATE.] This section is effective for taxable 
  7.16  years beginning after December 31, 2003. 
  7.17     Sec. 4.  Minnesota Statutes 2002, section 290.05, 
  7.18  subdivision 1, is amended to read: 
  7.19     Subdivision 1.  [EXEMPT ENTITIES.] The following 
  7.20  corporations, individuals, estates, trusts, and organizations 
  7.21  shall be exempted from taxation under this chapter, provided 
  7.22  that every such person or corporation claiming exemption under 
  7.23  this chapter, in whole or in part, must establish to the 
  7.24  satisfaction of the commissioner the taxable status of any 
  7.25  income or activity: 
  7.26     (a) corporations, individuals, estates, and trusts engaged 
  7.27  in the business of mining or producing iron ore and other ores 
  7.28  the mining or production of which is subject to the occupation 
  7.29  tax imposed by section 298.01; but if any such corporation, 
  7.30  individual, estate, or trust engages in any other business or 
  7.31  activity or has income from any property not used in such 
  7.32  business it shall be subject to this tax computed on the net 
  7.33  income from such property or such other business or activity.  
  7.34  Royalty shall not be considered as income from the business of 
  7.35  mining or producing iron ore within the meaning of this section; 
  7.36     (b) the United States of America, the state of Minnesota or 
  8.1   any political subdivision of either agencies or 
  8.2   instrumentalities, whether engaged in the discharge of 
  8.3   governmental or proprietary functions; and 
  8.4      (c) any insurance company; and 
  8.5      (d) a corporation, certified as a qualified family business 
  8.6   under section 116J.891 for the taxable year. 
  8.7      [EFFECTIVE DATE.] This section is effective for taxable 
  8.8   years beginning after December 31, 2003. 
  8.9      Sec. 5.  Minnesota Statutes 2002, section 290.06, 
  8.10  subdivision 2c, is amended to read: 
  8.11     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
  8.12  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
  8.13  married individuals filing joint returns and surviving spouses 
  8.14  as defined in section 2(a) of the Internal Revenue Code must be 
  8.15  computed by applying to their taxable net income the following 
  8.16  schedule of rates: 
  8.17     (1) On the first $25,680, 5.35 percent; 
  8.18     (2) On all over $25,680, but not over $102,030, 7.05 
  8.19  percent; 
  8.20     (3) On all over $102,030, 7.85 percent. 
  8.21     Married individuals filing separate returns, estates, and 
  8.22  trusts must compute their income tax by applying the above rates 
  8.23  to their taxable income, except that the income brackets will be 
  8.24  one-half of the above amounts.  
  8.25     (b) The income taxes imposed by this chapter upon unmarried 
  8.26  individuals must be computed by applying to taxable net income 
  8.27  the following schedule of rates: 
  8.28     (1) On the first $17,570, 5.35 percent; 
  8.29     (2) On all over $17,570, but not over $57,710, 7.05 
  8.30  percent; 
  8.31     (3) On all over $57,710, 7.85 percent. 
  8.32     (c) The income taxes imposed by this chapter upon unmarried 
  8.33  individuals qualifying as a head of household as defined in 
  8.34  section 2(b) of the Internal Revenue Code must be computed by 
  8.35  applying to taxable net income the following schedule of rates: 
  8.36     (1) On the first $21,630, 5.35 percent; 
  9.1      (2) On all over $21,630, but not over $86,910, 7.05 
  9.2   percent; 
  9.3      (3) On all over $86,910, 7.85 percent. 
  9.4      (d) In lieu of a tax computed according to the rates set 
  9.5   forth in this subdivision, the tax of any individual taxpayer 
  9.6   whose taxable net income for the taxable year is less than an 
  9.7   amount determined by the commissioner must be computed in 
  9.8   accordance with tables prepared and issued by the commissioner 
  9.9   of revenue based on income brackets of not more than $100.  The 
  9.10  amount of tax for each bracket shall be computed at the rates 
  9.11  set forth in this subdivision, provided that the commissioner 
  9.12  may disregard a fractional part of a dollar unless it amounts to 
  9.13  50 cents or more, in which case it may be increased to $1. 
  9.14     (e) An individual who is not a Minnesota resident for the 
  9.15  entire year must compute the individual's Minnesota income tax 
  9.16  as provided in this subdivision.  After the application of the 
  9.17  nonrefundable credits provided in this chapter, the tax 
  9.18  liability must then be multiplied by a fraction in which:  
  9.19     (1) the numerator is the individual's Minnesota source 
  9.20  federal adjusted gross income as defined in section 62 of the 
  9.21  Internal Revenue Code and increased by the additions required 
  9.22  under section 290.01, subdivision 19a, clauses (1) and (6), and 
  9.23  reduced by the subtraction under section 290.01, subdivision 
  9.24  19b, clause (13), and the Minnesota assignable portion of the 
  9.25  subtraction for United States government interest under section 
  9.26  290.01, subdivision 19b, clause (1), after applying the 
  9.27  allocation and assignability provisions of section 290.081, 
  9.28  clause (a), or 290.17; and 
  9.29     (2) the denominator is the individual's federal adjusted 
  9.30  gross income as defined in section 62 of the Internal Revenue 
  9.31  Code of 1986, increased by the amounts specified in section 
  9.32  290.01, subdivision 19a, clauses (1) and (6), and reduced by the 
  9.33  amounts specified in section 290.01, subdivision 19b, clause 
  9.34  clauses (1) and (13). 
  9.35     [EFFECTIVE DATE.] This section is effective for taxable 
  9.36  years beginning after December 31, 2003. 
 10.1      Sec. 6.  Minnesota Statutes 2002, section 290.067, 
 10.2   subdivision 1, is amended to read: 
 10.3      Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
 10.4   as a credit against the tax due from the taxpayer and a spouse, 
 10.5   if any, under this chapter an amount equal to the dependent care 
 10.6   credit for which the taxpayer is eligible pursuant to the 
 10.7   provisions of section 21 of the Internal Revenue Code subject to 
 10.8   the limitations provided in subdivision 2 except that in 
 10.9   determining whether the child qualified as a dependent, income 
 10.10  received as a Minnesota family investment program grant or 
 10.11  allowance to or on behalf of the child must not be taken into 
 10.12  account in determining whether the child received more than half 
 10.13  of the child's support from the taxpayer, and the provisions of 
 10.14  section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
 10.15     (b) If a child who has not attained the age of six years at 
 10.16  the close of the taxable year is cared for at a licensed family 
 10.17  day care home operated by the child's parent, the taxpayer is 
 10.18  deemed to have paid employment-related expenses.  If the child 
 10.19  is 16 months old or younger at the close of the taxable year, 
 10.20  the amount of expenses deemed to have been paid equals the 
 10.21  maximum limit for one qualified individual under section 21(c) 
 10.22  and (d) of the Internal Revenue Code.  If the child is older 
 10.23  than 16 months of age but has not attained the age of six years 
 10.24  at the close of the taxable year, the amount of expenses deemed 
 10.25  to have been paid equals the amount the licensee would charge 
 10.26  for the care of a child of the same age for the same number of 
 10.27  hours of care.  
 10.28     (c) If a married couple: 
 10.29     (1) has a child who has not attained the age of one year at 
 10.30  the close of the taxable year; 
 10.31     (2) files a joint tax return for the taxable year; and 
 10.32     (3) does not participate in a dependent care assistance 
 10.33  program as defined in section 129 of the Internal Revenue Code, 
 10.34  in lieu of the actual employment related expenses paid for that 
 10.35  child under paragraph (a) or the deemed amount under paragraph 
 10.36  (b), the lesser of (i) the combined earned income of the couple 
 11.1   or (ii) the amount of the maximum limit for one qualified 
 11.2   individual under section 21(c) and (d) of the Internal Revenue 
 11.3   Code will be deemed to be the employment related expense paid 
 11.4   for that child.  The earned income limitation of section 21(d) 
 11.5   of the Internal Revenue Code shall not apply to this deemed 
 11.6   amount.  These deemed amounts apply regardless of whether any 
 11.7   employment-related expenses have been paid.  
 11.8      (d) If the taxpayer is not required and does not file a 
 11.9   federal individual income tax return for the tax year, no credit 
 11.10  is allowed for any amount paid to any person unless: 
 11.11     (1) the name, address, and taxpayer identification number 
 11.12  of the person are included on the return claiming the credit; or 
 11.13     (2) if the person is an organization described in section 
 11.14  501(c)(3) of the Internal Revenue Code and exempt from tax under 
 11.15  section 501(a) of the Internal Revenue Code, the name and 
 11.16  address of the person are included on the return claiming the 
 11.17  credit.  
 11.18  In the case of a failure to provide the information required 
 11.19  under the preceding sentence, the preceding sentence does not 
 11.20  apply if it is shown that the taxpayer exercised due diligence 
 11.21  in attempting to provide the information required. 
 11.22     In the case of a nonresident, part-year resident, or a 
 11.23  person who has earned income not subject to tax under this 
 11.24  chapter including earned income excluded under section 290.01, 
 11.25  subdivision 19b, clause (13), the credit determined under 
 11.26  section 21 of the Internal Revenue Code must be allocated based 
 11.27  on the ratio by which the earned income of the claimant and the 
 11.28  claimant's spouse from Minnesota sources bears to the total 
 11.29  earned income of the claimant and the claimant's spouse. 
 11.30     [EFFECTIVE DATE.] This section is effective for taxable 
 11.31  years beginning after December 31, 2003. 
 11.32     Sec. 7.  Minnesota Statutes 2002, section 290.0671, 
 11.33  subdivision 1, is amended to read: 
 11.34     Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
 11.35  allowed a credit against the tax imposed by this chapter equal 
 11.36  to a percentage of earned income.  To receive a credit, a 
 12.1   taxpayer must be eligible for a credit under section 32 of the 
 12.2   Internal Revenue Code.  
 12.3      (b) For individuals with no qualifying children, the credit 
 12.4   equals 1.9125 percent of the first $4,620 of earned income.  The 
 12.5   credit is reduced by 1.9125 percent of earned income or modified 
 12.6   adjusted gross income, whichever is greater, in excess of 
 12.7   $5,770, but in no case is the credit less than zero. 
 12.8      (c) For individuals with one qualifying child, the credit 
 12.9   equals 8.5 percent of the first $6,920 of earned income and 8.5 
 12.10  percent of earned income over $12,080 but less than $13,450.  
 12.11  The credit is reduced by 5.73 percent of earned income or 
 12.12  modified adjusted gross income, whichever is greater, in excess 
 12.13  of $15,080, but in no case is the credit less than zero. 
 12.14     (d) For individuals with two or more qualifying children, 
 12.15  the credit equals ten percent of the first $9,720 of earned 
 12.16  income and 20 percent of earned income over $14,860 but less 
 12.17  than $16,800.  The credit is reduced by 10.3 percent of earned 
 12.18  income or modified adjusted gross income, whichever is greater, 
 12.19  in excess of $17,890, but in no case is the credit less than 
 12.20  zero. 
 12.21     (e) For a nonresident or part-year resident, the credit 
 12.22  must be allocated based on the percentage calculated under 
 12.23  section 290.06, subdivision 2c, paragraph (e). 
 12.24     (f) For a person who was a resident for the entire tax year 
 12.25  and has earned income not subject to tax under this 
 12.26  chapter including income excluded under section 290.01, 
 12.27  subdivision 19b, clause (13), the credit must be allocated based 
 12.28  on the ratio of federal adjusted gross income reduced by the 
 12.29  earned income not subject to tax under this chapter over federal 
 12.30  adjusted gross income. 
 12.31     (g) For tax years beginning after December 31, 2001, and 
 12.32  before December 31, 2004, the $5,770 in paragraph (b) is 
 12.33  increased to $6,770, the $15,080 in paragraph (c) is increased 
 12.34  to $16,080, and the $17,890 in paragraph (d) is increased to 
 12.35  $18,890 for married taxpayers filing joint returns. 
 12.36     (h) For tax years beginning after December 31, 2004, and 
 13.1   before December 31, 2007, the $5,770 in paragraph (b) is 
 13.2   increased to $7,770, the $15,080 in paragraph (c) is increased 
 13.3   to $17,080, and the $17,890 in paragraph (d) is increased to 
 13.4   $19,890 for married taxpayers filing joint returns. 
 13.5      (i) For tax years beginning after December 31, 2007, and 
 13.6   before December 31, 2010, the $5,770 in paragraph (b) is 
 13.7   increased to $8,770, the $15,080 in paragraph (c) is increased 
 13.8   to $18,080 and the $17,890 in paragraph (d) is increased to 
 13.9   $20,890 for married taxpayers filing joint returns. 
 13.10     (j) The commissioner shall construct tables showing the 
 13.11  amount of the credit at various income levels and make them 
 13.12  available to taxpayers.  The tables shall follow the schedule 
 13.13  contained in this subdivision, except that the commissioner may 
 13.14  graduate the transition between income brackets. 
 13.15     [EFFECTIVE DATE.] This section is effective for taxable 
 13.16  years beginning after December 31, 2003. 
 13.17     Sec. 8.  Minnesota Statutes 2002, section 290.091, 
 13.18  subdivision 2, is amended to read: 
 13.19     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
 13.20  this section, the following terms have the meanings given: 
 13.21     (a) "Alternative minimum taxable income" means the sum of 
 13.22  the following for the taxable year: 
 13.23     (1) the taxpayer's federal alternative minimum taxable 
 13.24  income as defined in section 55(b)(2) of the Internal Revenue 
 13.25  Code; 
 13.26     (2) the taxpayer's itemized deductions allowed in computing 
 13.27  federal alternative minimum taxable income, but excluding: 
 13.28     (i) the charitable contribution deduction under section 170 
 13.29  of the Internal Revenue Code to the extent that the deduction 
 13.30  exceeds 1.3 percent of adjusted gross income, as defined in 
 13.31  section 62 of the Internal Revenue Code; 
 13.32     (ii) the medical expense deduction; 
 13.33     (iii) the casualty, theft, and disaster loss deduction; and 
 13.34     (iv) the impairment-related work expenses of a disabled 
 13.35  person; 
 13.36     (3) for depletion allowances computed under section 613A(c) 
 14.1   of the Internal Revenue Code, with respect to each property (as 
 14.2   defined in section 614 of the Internal Revenue Code), to the 
 14.3   extent not included in federal alternative minimum taxable 
 14.4   income, the excess of the deduction for depletion allowable 
 14.5   under section 611 of the Internal Revenue Code for the taxable 
 14.6   year over the adjusted basis of the property at the end of the 
 14.7   taxable year (determined without regard to the depletion 
 14.8   deduction for the taxable year); 
 14.9      (4) to the extent not included in federal alternative 
 14.10  minimum taxable income, the amount of the tax preference for 
 14.11  intangible drilling cost under section 57(a)(2) of the Internal 
 14.12  Revenue Code determined without regard to subparagraph (E); 
 14.13     (5) to the extent not included in federal alternative 
 14.14  minimum taxable income, the amount of interest income as 
 14.15  provided by section 290.01, subdivision 19a, clause (1); and 
 14.16     (6) the amount of addition required by section 290.01, 
 14.17  subdivision 19a, clause (7); 
 14.18     less the sum of the amounts determined under the following: 
 14.19     (1) interest income as defined in section 290.01, 
 14.20  subdivision 19b, clause (1); 
 14.21     (2) an overpayment of state income tax as provided by 
 14.22  section 290.01, subdivision 19b, clause (2), to the extent 
 14.23  included in federal alternative minimum taxable income; 
 14.24     (3) the amount of investment interest paid or accrued 
 14.25  within the taxable year on indebtedness to the extent that the 
 14.26  amount does not exceed net investment income, as defined in 
 14.27  section 163(d)(4) of the Internal Revenue Code.  Interest does 
 14.28  not include amounts deducted in computing federal adjusted gross 
 14.29  income; and 
 14.30     (4) amounts subtracted from federal taxable income as 
 14.31  provided by section 290.01, subdivision 19b, clause clauses (12) 
 14.32  and (13). 
 14.33     In the case of an estate or trust, alternative minimum 
 14.34  taxable income must be computed as provided in section 59(c) of 
 14.35  the Internal Revenue Code. 
 14.36     (b) "Investment interest" means investment interest as 
 15.1   defined in section 163(d)(3) of the Internal Revenue Code. 
 15.2      (c) "Tentative minimum tax" equals 6.4 percent of 
 15.3   alternative minimum taxable income after subtracting the 
 15.4   exemption amount determined under subdivision 3. 
 15.5      (d) "Regular tax" means the tax that would be imposed under 
 15.6   this chapter (without regard to this section and section 
 15.7   290.032), reduced by the sum of the nonrefundable credits 
 15.8   allowed under this chapter.  
 15.9      (e) "Net minimum tax" means the minimum tax imposed by this 
 15.10  section. 
 15.11     [EFFECTIVE DATE.] This section is effective for taxable 
 15.12  years beginning after December 31, 2003. 
 15.13     Sec. 9.  Minnesota Statutes 2002, section 290.0922, 
 15.14  subdivision 2, is amended to read: 
 15.15     Subd. 2.  [EXEMPTIONS.] The following entities are exempt 
 15.16  from the tax imposed by this section: 
 15.17     (1) corporations exempt from tax under section 290.05; 
 15.18     (2) real estate investment trusts; 
 15.19     (3) regulated investment companies or a fund thereof; and 
 15.20     (4) entities having a valid election in effect under 
 15.21  section 860D(b) of the Internal Revenue Code; 
 15.22     (5) town and farmers' mutual insurance companies; and 
 15.23     (6) cooperatives organized under chapter 308A that provide 
 15.24  housing exclusively to persons age 55 and over and are 
 15.25  classified as homesteads under section 273.124, subdivision 3; 
 15.26  and 
 15.27     (7) a qualified family business, certified under section 
 15.28  116J.891 for the taxable year. 
 15.29     Entities not specifically exempted by this subdivision are 
 15.30  subject to tax under this section, notwithstanding section 
 15.31  290.05.  
 15.32     [EFFECTIVE DATE.] This section is effective for taxable 
 15.33  years beginning after December 31, 2003. 
 15.34     Sec. 10.  Minnesota Statutes 2002, section 297A.68, is 
 15.35  amended by adding a subdivision to read: 
 15.36     Subd. 37.  [QUALIFIED FAMILY BUSINESSES.] (a) Purchases of 
 16.1   tangible personal property or taxable services by a qualified 
 16.2   family business, certified under section 116J.891, are exempt, 
 16.3   if the property or services are primarily used or consumed in 
 16.4   the operation of the qualified family business. 
 16.5      (b) Purchases and use of construction materials, supplies, 
 16.6   and equipment for construction of improvements to real property 
 16.7   are exempt if the improvements after completion of the 
 16.8   construction are to be used in the conduct of a qualified family 
 16.9   business, certified under section 116J.891.  This exemption 
 16.10  applies regardless of whether the purchases are made by the 
 16.11  qualified family business or a contractor. 
 16.12     (c) The exemptions under this subdivision apply to a local 
 16.13  sales and use tax, regardless of whether the local sales tax is 
 16.14  imposed on sales taxable as defined in this chapter. 
 16.15     [EFFECTIVE DATE.] This section is effective for sales and 
 16.16  purchases made after December 31, 2003. 
 16.17     Sec. 11.  Minnesota Statutes 2002, section 297B.03, is 
 16.18  amended to read: 
 16.19     297B.03 [EXEMPTIONS.] 
 16.20     There is specifically exempted from the provisions of this 
 16.21  chapter and from computation of the amount of tax imposed by it 
 16.22  the following:  
 16.23     (1) purchase or use, including use under a lease purchase 
 16.24  agreement or installment sales contract made pursuant to section 
 16.25  465.71, of any motor vehicle by the United States and its 
 16.26  agencies and instrumentalities and by any person described in 
 16.27  and subject to the conditions provided in section 297A.67, 
 16.28  subdivision 11; 
 16.29     (2) purchase or use of any motor vehicle by any person who 
 16.30  was a resident of another state or country at the time of the 
 16.31  purchase and who subsequently becomes a resident of Minnesota, 
 16.32  provided the purchase occurred more than 60 days prior to the 
 16.33  date such person began residing in the state of Minnesota and 
 16.34  the motor vehicle was registered in the person's name in the 
 16.35  other state or country; 
 16.36     (3) purchase or use of any motor vehicle by any person 
 17.1   making a valid election to be taxed under the provisions of 
 17.2   section 297A.90; 
 17.3      (4) purchase or use of any motor vehicle previously 
 17.4   registered in the state of Minnesota when such transfer 
 17.5   constitutes a transfer within the meaning of section 118, 331, 
 17.6   332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 
 17.7   1563(a) of the Internal Revenue Code of 1986, as amended through 
 17.8   December 31, 1999; 
 17.9      (5) purchase or use of any vehicle owned by a resident of 
 17.10  another state and leased to a Minnesota based private or for 
 17.11  hire carrier for regular use in the transportation of persons or 
 17.12  property in interstate commerce provided the vehicle is titled 
 17.13  in the state of the owner or secured party, and that state does 
 17.14  not impose a sales tax or sales tax on motor vehicles used in 
 17.15  interstate commerce; 
 17.16     (6) purchase or use of a motor vehicle by a private 
 17.17  nonprofit or public educational institution for use as an 
 17.18  instructional aid in automotive training programs operated by 
 17.19  the institution.  "Automotive training programs" includes motor 
 17.20  vehicle body and mechanical repair courses but does not include 
 17.21  driver education programs; 
 17.22     (7) purchase of a motor vehicle for use as an ambulance by 
 17.23  an ambulance service licensed under section 144E.10; 
 17.24     (8) purchase of a motor vehicle by or for a public library, 
 17.25  as defined in section 134.001, subdivision 2, as a bookmobile or 
 17.26  library delivery vehicle; 
 17.27     (9) purchase of a ready-mixed concrete truck; 
 17.28     (10) purchase or use of a motor vehicle by a town for use 
 17.29  exclusively for road maintenance, including snowplows and dump 
 17.30  trucks, but not including automobiles, vans, or pickup trucks; 
 17.31     (11) purchase or use of a motor vehicle by a corporation, 
 17.32  society, association, foundation, or institution organized and 
 17.33  operated exclusively for charitable, religious, or educational 
 17.34  purposes, except a public school, university, or library, but 
 17.35  only if the vehicle is: 
 17.36     (i) a truck, as defined in section 168.011, a bus, as 
 18.1   defined in section 168.011, or a passenger automobile, as 
 18.2   defined in section 168.011, if the automobile is designed and 
 18.3   used for carrying more than nine persons including the driver; 
 18.4   and 
 18.5      (ii) intended to be used primarily to transport tangible 
 18.6   personal property or individuals, other than employees, to whom 
 18.7   the organization provides service in performing its charitable, 
 18.8   religious, or educational purpose; 
 18.9      (12) purchase of a motor vehicle for use by a transit 
 18.10  provider exclusively to provide transit service is exempt if the 
 18.11  transit provider is either (i) receiving financial assistance or 
 18.12  reimbursement under section 174.24 or 473.384, or (ii) operating 
 18.13  under section 174.29, 473.388, or 473.405; 
 18.14     (13) purchase or use of a motor vehicle by a qualified 
 18.15  family business, certified under section 116J.891, if the motor 
 18.16  vehicle is primarily used as part of or in direct support of the 
 18.17  operations of the qualified family business.  The exemption 
 18.18  under this section also applies to any local sales and use tax. 
 18.19     [EFFECTIVE DATE.] This section is effective for sales and 
 18.20  purchases made after December 31, 2003. 
 18.21     Sec. 12.  [477A.08] [QUALIFIED FAMILY BUSINESS AID.] 
 18.22     Subdivision 1.  [ELIGIBILITY FOR AID.] (a) For each 
 18.23  assessment year that the exemption for qualified family business 
 18.24  property is in effect under section 272.02, subdivision 56, the 
 18.25  assessor shall determine the difference between the actual net 
 18.26  tax capacity and the net tax capacity that would apply if the 
 18.27  exemption were not in effect. 
 18.28     (b) Each city, county, and school district is eligible for 
 18.29  aid equal to the amount by which the sum of the differences 
 18.30  determined in paragraph (a) for the corresponding assessment 
 18.31  year, multiplied by the city's, county's, or school district's, 
 18.32  as applicable, average local tax rate for taxes payable in the 
 18.33  prior year.  The tax rates exclude the taxes as defined in 
 18.34  section 272.02, subdivision 56, paragraph (b), clauses (1) and 
 18.35  (2). 
 18.36     Subd. 2.  [CERTIFICATION.] The county assessor shall notify 
 19.1   the commissioner of revenue of the amount determined under 
 19.2   subdivision 1, paragraph (b), for any city, county, or school 
 19.3   district that qualifies for aid under this section by June 30 of 
 19.4   the assessment year, in a form prescribed by the commissioner.  
 19.5   The commissioner shall notify each city, county, and school 
 19.6   district of its qualifying aid amount by August 15 of the 
 19.7   assessment year. 
 19.8      [EFFECTIVE DATE.] This section is effective beginning with 
 19.9   property taxes assessed in 2004, payable in 2005.