HF 1914

1st Committee Engrossment - 87th Legislature (2011 - 2012) Posted on 03/19/2013 07:33pm

1.1A bill for an act

1.2relating to taxation; making technical, policy, administrative, and clarifying
1.3changes to taxes on property, income and corporate franchise, aids to
1.4local governments; modifying property tax refunds; appropriating money;
1.5amending Minnesota Statutes 2010, sections 275.025, subdivisions 1, 2, 4;
1.6289A.08, subdivision 3; 290.01, subdivisions 5, 19d, by adding a subdivision;
1.7290.17, subdivision 4; 290A.04, subdivision 2a, by adding a subdivision;
1.8290A.23, subdivision 1; Minnesota Statutes 2011 Supplement, sections 290.01,
1.9subdivisions 19a, 19b, 19c; 290.0675, subdivision 1; 290A.03, subdivisions 11,
1.1013; 290A.04, subdivisions 2, 4; 477A.013, subdivision 9; repealing Minnesota
1.11Statutes 2010, sections 290.01, subdivision 6b; 290.0921, subdivision 7;
1.12477A.013, subdivision 8; Minnesota Statutes 2011 Supplement, section 477A.03,
1.13subdivision 2a.
1.14BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.15    Section 1. Minnesota Statutes 2010, section 275.025, subdivision 1, is amended to read:
1.16    Subdivision 1. Levy amount. (a) The state general levy is levied against
1.17commercial-industrial property and seasonal residential recreational property, as defined
1.18in this section.
1.19(b) The state general levy base amount for commercial-industrial property is
1.20$673,552,000. For taxes payable in 2013, the state general levy for commercial-industrial
1.21property is equal to the base amount. For taxes payable in 2014 to taxes payable in 2024,
1.22the levy is reduced each year from the previous year's levy amount by 8.33 percent of
1.23the base amount. For taxes payable in 2025 and thereafter, the state general levy for
1.24commercial-industrial property is $0.
1.25(c) The state general levy base amount for seasonal recreational property is
1.26$592,000,000 $41,797,000 for taxes payable in 2002 2013. For taxes payable in
1.27subsequent years, the levy base amount is increased each year by multiplying the levy
1.28base amount for the prior year by the sum of one plus the rate of increase, if any, in the
2.1implicit price deflator for government consumption expenditures and gross investment
2.2for state and local governments prepared by the Bureau of Economic Analysts of the
2.3United States Department of Commerce for the 12-month period ending March 31 of the
2.4year prior to the year the taxes are payable.
2.5(d) The tax under this section is not treated as a local tax rate under section 469.177
2.6and is not the levy of a governmental unit under chapters 276A and 473F.
2.7(e) The commissioner shall increase or decrease the preliminary or final rate rates for
2.8a year as necessary to account for errors and tax base changes that affected a preliminary
2.9or final rate for either of the two preceding years. Adjustments are allowed to the extent
2.10that the necessary information is available to the commissioner at the time the rates for a
2.11year must be certified, and for the following reasons:
2.12(1) an erroneous report of taxable value by a local official;
2.13(2) an erroneous calculation by the commissioner; and
2.14(3) an increase or decrease in taxable value for commercial-industrial or seasonal
2.15residential recreational property reported on the abstracts of tax lists submitted under
2.16section 275.29 that was not reported on the abstracts of assessment submitted under
2.17section 270C.89 for the same year.
2.18    (f) The commissioner may, but need not, make adjustments if the total difference in
2.19the tax levied for the year would be less than $100,000.
2.20EFFECTIVE DATE. This section is effective for taxes payable in 2013 and
2.21thereafter.

2.22    Sec. 2. Minnesota Statutes 2010, section 275.025, subdivision 2, is amended to read:
2.23    Subd. 2. Commercial-industrial tax capacity. For the purposes of this section,
2.24"commercial-industrial tax capacity" means the tax capacity of all taxable property
2.25classified as class 3 or class 5(1) under section 273.13, except for excluding: (1) the
2.26first $150,000 in value of each commercial-industrial property, (2) electric generation
2.27attached machinery under class 3, and (3) property described in section 473.625. County
2.28commercial-industrial tax capacity amounts are not adjusted for the captured net tax
2.29capacity of a tax increment financing district under section 469.177, subdivision 2, the
2.30net tax capacity of transmission lines deducted from a local government's total net tax
2.31capacity under section 273.425, or fiscal disparities contribution and distribution net
2.32tax capacities under chapter 276A or 473F.
2.33EFFECTIVE DATE.This section is effective for taxes payable in 2013 and
2.34thereafter.

3.1    Sec. 3. Minnesota Statutes 2010, section 275.025, subdivision 4, is amended to read:
3.2    Subd. 4. Apportionment and Levy of state general tax. Ninety-five percent of The
3.3state general tax must be levied by applying a uniform rate to all commercial-industrial tax
3.4capacity and five percent of the state general tax must be levied by applying a uniform
3.5rate to all seasonal residential recreational tax capacity. On or before October 1 each
3.6year, the commissioner of revenue shall certify the preliminary state general levy rates to
3.7each county auditor that must be used to prepare the notices of proposed property taxes
3.8for taxes payable in the following year. By January 1 of each year, the commissioner
3.9shall certify the final state general levy rate rates to each county auditor that shall be
3.10used in spreading taxes.
3.11EFFECTIVE DATE.This section is effective for taxes payable in 2013 and
3.12thereafter.

3.13    Sec. 4. Minnesota Statutes 2010, section 289A.08, subdivision 3, is amended to read:
3.14    Subd. 3. Corporations. (a) A corporation that is subject to the state's jurisdiction to
3.15tax under section 290.014, subdivision 5, must file a return, except that a foreign operating
3.16corporation as defined in section 290.01, subdivision 6b, is not required to file a return.
3.17(b) Members of a unitary business that are required to file a combined report on one
3.18return must designate a member of the unitary business to be responsible for tax matters,
3.19including the filing of returns, the payment of taxes, additions to tax, penalties, interest,
3.20or any other payment, and for the receipt of refunds of taxes or interest paid in excess of
3.21taxes lawfully due. The designated member must be a member of the unitary business that
3.22is filing the single combined report and either:
3.23(1) a corporation that is subject to the taxes imposed by chapter 290; or
3.24(2) a corporation that is not subject to the taxes imposed by chapter 290:
3.25(i) Such corporation consents by filing the return as a designated member under this
3.26clause to remit taxes, penalties, interest, or additions to tax due from the members of the
3.27unitary business subject to tax, and receive refunds or other payments on behalf of other
3.28members of the unitary business. The member designated under this clause is a "taxpayer"
3.29for the purposes of this chapter and chapter 270C, and is liable for any liability imposed
3.30on the unitary business under this chapter and chapter 290.
3.31(ii) If the state does not otherwise have the jurisdiction to tax the member designated
3.32under this clause, consenting to be the designated member does not create the jurisdiction
3.33to impose tax on the designated member, other than as described in item (i).
3.34(iii) The member designated under this clause must apply for a business tax account
3.35identification number.
4.1(c) The commissioner shall adopt rules for the filing of one return on behalf of the
4.2members of an affiliated group of corporations that are required to file a combined report.
4.3All members of an affiliated group that are required to file a combined report must file one
4.4return on behalf of the members of the group under rules adopted by the commissioner.
4.5(d) If a corporation claims on a return that it has paid tax in excess of the amount of
4.6taxes lawfully due, that corporation must include on that return information necessary for
4.7payment of the tax in excess of the amount lawfully due by electronic means.
4.8EFFECTIVE DATE.This section is effective for returns filed for taxable years
4.9beginning after December 31, 2011.

4.10    Sec. 5. Minnesota Statutes 2010, section 290.01, subdivision 5, is amended to read:
4.11    Subd. 5. Domestic corporation. The term "domestic" when applied to a corporation
4.12means a corporation:
4.13(1) created or organized in the United States, or under the laws of the United States
4.14or of any state, the District of Columbia, or any political subdivision of any of the
4.15foregoing but not including the Commonwealth of Puerto Rico, or any possession of
4.16the United States;
4.17(2) which qualifies as a DISC, as defined in section 992(a) of the Internal Revenue
4.18Code; or
4.19(3) which qualifies as a FSC, as defined in section 922 of the Internal Revenue Code.;
4.20    (4) which is incorporated in a tax haven;
4.21    (5) which is engaged in activity in a tax haven sufficient for the tax haven to impose
4.22a net income tax under United States constitutional standards and section 290.015, and
4.23which reports that 20 percent or more of its income is attributable to business in the tax
4.24haven; or
4.25    (6) which has the average of its property, payroll, and sales factors, as defined under
4.26section 290.191, within the 50 states of the United States and the District of Columbia, of
4.2720 percent or more.
4.28EFFECTIVE DATE.This section is effective for returns filed for taxable years
4.29beginning after December 31, 2011.

4.30    Sec. 6. Minnesota Statutes 2010, section 290.01, is amended by adding a subdivision
4.31to read:
4.32    Subd. 5c. Tax haven. (a) "Tax haven" means the following foreign jurisdictions,
4.33unless the listing of the jurisdiction does not apply under paragraph (b):
5.1(1) Andorra;
5.2(2) Anguilla;
5.3(3) Antigua and Barbuda;
5.4(4) Aruba;
5.5(5) Bahamas;
5.6(6) Bahrain;
5.7(7) Belize;
5.8(8) British Virgin Islands;
5.9(9) Cayman Islands;
5.10(10) Cook Islands;
5.11(11) Costa Rica;
5.12(12) Dominica;
5.13(13) Gibraltar;
5.14(14) Grenada;
5.15(15) Guernsey-Sark-Alderney;
5.16(16) Jersey;
5.17(17) Jordan;
5.18(18) Lebanon;
5.19(19) Liberia;
5.20(20) Liechtenstein;
5.21(21) Maldives;
5.22(22) Marshall Islands;
5.23(23) Monaco;
5.24(24) Montserrat;
5.25(25) Nauru;
5.26(26) Netherlands Antilles;
5.27(27) Niue;
5.28(28) Panama;
5.29(29) St. Kitts and Nevis;
5.30(30) St. Lucia;
5.31(31) St. Vincent and Grenadines;
5.32(32) Tonga;
5.33(33) Turks and Caicos; and
5.34(34) Vanuatu.
5.35(b) A foreign jurisdiction's listing under paragraph (a) does not apply to the first
5.36taxable year after the United States enters into a tax treaty or other agreement with the
6.1foreign jurisdiction that provides for prompt, obligatory, and automatic exchange of
6.2information with the United States government relevant to enforcing the provisions of
6.3federal tax laws and the treaty or other agreement was in effect for the taxable year.
6.4EFFECTIVE DATE.This section is effective for returns filed for taxable years
6.5beginning after December 31, 2011.

6.6    Sec. 7. Minnesota Statutes 2011 Supplement, section 290.01, subdivision 19a, is
6.7amended to read:
6.8    Subd. 19a. Additions to federal taxable income. For individuals, estates, and
6.9trusts, there shall be added to federal taxable income:
6.10    (1)(i) interest income on obligations of any state other than Minnesota or a political
6.11or governmental subdivision, municipality, or governmental agency or instrumentality
6.12of any state other than Minnesota exempt from federal income taxes under the Internal
6.13Revenue Code or any other federal statute; and
6.14    (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
6.15Code, except:
6.16(A) the portion of the exempt-interest dividends exempt from state taxation under
6.17the laws of the United States; and
6.18(B) the portion of the exempt-interest dividends derived from interest income
6.19on obligations of the state of Minnesota or its political or governmental subdivisions,
6.20municipalities, governmental agencies or instrumentalities, but only if the portion of the
6.21exempt-interest dividends from such Minnesota sources paid to all shareholders represents
6.2295 percent or more of the exempt-interest dividends, including any dividends exempt
6.23under subitem (A), that are paid by the regulated investment company as defined in section
6.24851(a) of the Internal Revenue Code, or the fund of the regulated investment company as
6.25defined in section 851(g) of the Internal Revenue Code, making the payment; and
6.26    (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
6.27government described in section 7871(c) of the Internal Revenue Code shall be treated as
6.28interest income on obligations of the state in which the tribe is located;
6.29    (2) the amount of income, sales and use, motor vehicle sales, or excise taxes paid or
6.30accrued within the taxable year under this chapter and the amount of taxes based on net
6.31income paid, sales and use, motor vehicle sales, or excise taxes paid to any other state
6.32or to any province or territory of Canada, to the extent allowed as a deduction under
6.33section 63(d) of the Internal Revenue Code, but the addition may not be more than the
6.34amount by which the itemized deductions as allowed under section 63(d) of the Internal
6.35Revenue Code exceeds the amount of the standard deduction as defined in section 63(c) of
7.1the Internal Revenue Code, disregarding the amounts allowed under sections 63(c)(1)(C)
7.2and 63(c)(1)(E) of the Internal Revenue Code, minus any addition that would have been
7.3required under clause (21) if the taxpayer had claimed the standard deduction, and plus
7.4any subtraction allowed under subdivision 19b, clauses (19) and (20). For the purpose of
7.5this paragraph, the disallowance of itemized deductions under section 68 of the Internal
7.6Revenue Code of 1986, income, sales and use, motor vehicle sales, or excise taxes are
7.7the last itemized deductions disallowed;
7.8    (3) the capital gain amount of a lump-sum distribution to which the special tax under
7.9section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
7.10    (4) the amount of income taxes paid or accrued within the taxable year under this
7.11chapter and taxes based on net income paid to any other state or any province or territory
7.12of Canada, to the extent allowed as a deduction in determining federal adjusted gross
7.13income. For the purpose of this paragraph, income taxes do not include the taxes imposed
7.14by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
7.15    (5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
7.16other than expenses or interest used in computing net interest income for the subtraction
7.17allowed under subdivision 19b, clause (1);
7.18    (6) the amount of a partner's pro rata share of net income which does not flow
7.19through to the partner because the partnership elected to pay the tax on the income under
7.20section 6242(a)(2) of the Internal Revenue Code;
7.21    (7) 80 percent of the depreciation deduction allowed under section 168(k) of the
7.22Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
7.23in the taxable year generates a deduction for depreciation under section 168(k) and the
7.24activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
7.25the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
7.26limited to excess of the depreciation claimed by the activity under section 168(k) over the
7.27amount of the loss from the activity that is not allowed in the taxable year. In succeeding
7.28taxable years when the losses not allowed in the taxable year are allowed, the depreciation
7.29under section 168(k) is allowed;
7.30    (8) 80 percent of the amount by which the deduction allowed by section 179 of the
7.31Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
7.32Revenue Code of 1986, as amended through December 31, 2003;
7.33    (9) to the extent deducted in computing federal taxable income, the amount of the
7.34deduction allowable under section 199 of the Internal Revenue Code;
8.1    (10) for taxable years beginning before January 1, 2013, the exclusion allowed
8.2under section 139A of the Internal Revenue Code for federal subsidies for prescription
8.3drug plans;
8.4(11) the amount of expenses disallowed under section 290.10, subdivision 2;
8.5    (12) for taxable years beginning before January 1, 2010, the amount deducted for
8.6qualified tuition and related expenses under section 222 of the Internal Revenue Code, to
8.7the extent deducted from gross income;
8.8    (13) for taxable years beginning before January 1, 2010, the amount deducted for
8.9certain expenses of elementary and secondary school teachers under section 62(a)(2)(D)
8.10of the Internal Revenue Code, to the extent deducted from gross income;
8.11(14) the additional standard deduction for property taxes payable that is allowable
8.12under section 63(c)(1)(C) of the Internal Revenue Code;
8.13(15) the additional standard deduction for qualified motor vehicle sales taxes
8.14allowable under section 63(c)(1)(E) of the Internal Revenue Code;
8.15(16) discharge of indebtedness income resulting from reacquisition of business
8.16indebtedness and deferred under section 108(i) of the Internal Revenue Code;
8.17(17) the amount of unemployment compensation exempt from tax under section
8.1885(c) of the Internal Revenue Code;
8.19(18) changes to federal taxable income attributable to a net operating loss that the
8.20taxpayer elected to carry back for more than two years for federal purposes but for which
8.21the losses can be carried back for only two years under section 290.095, subdivision
8.2211, paragraph (c);
8.23(19) to the extent included in the computation of federal taxable income in taxable
8.24years beginning after December 31, 2010, the amount of disallowed itemized deductions,
8.25but the amount of disallowed itemized deductions plus the addition required under clause
8.26(2) may not be more than the amount by which the itemized deductions as allowed under
8.27section 63(d) of the Internal Revenue Code exceeds the amount of the standard deduction
8.28as defined in section 63(c) of the Internal Revenue Code, disregarding the amounts
8.29allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code, and
8.30reduced by any addition that would have been required under clause (21) if the taxpayer
8.31had claimed the standard deduction:
8.32(i) the amount of disallowed itemized deductions is equal to the lesser of:
8.33(A) three percent of the excess of the taxpayer's federal adjusted gross income
8.34over the applicable amount; or
8.35(B) 80 percent of the amount of the itemized deductions otherwise allowable to the
8.36taxpayer under the Internal Revenue Code for the taxable year;
9.1(ii) the term "applicable amount" means $100,000, or $50,000 in the case of a
9.2married individual filing a separate return. Each dollar amount shall be increased by
9.3an amount equal to:
9.4(A) such dollar amount, multiplied by
9.5(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
9.6Revenue Code for the calendar year in which the taxable year begins, by substituting
9.7"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof;
9.8(iii) the term "itemized deductions" does not include:
9.9(A) the deduction for medical expenses under section 213 of the Internal Revenue
9.10Code;
9.11(B) any deduction for investment interest as defined in section 163(d) of the Internal
9.12Revenue Code; and
9.13(C) the deduction under section 165(a) of the Internal Revenue Code for casualty or
9.14theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue
9.15Code or for losses described in section 165(d) of the Internal Revenue Code;
9.16(20) to the extent included in federal taxable income in taxable years beginning after
9.17December 31, 2010, the amount of disallowed personal exemptions for taxpayers with
9.18federal adjusted gross income over the threshold amount:
9.19(i) the disallowed personal exemption amount is equal to the dollar amount of the
9.20personal exemptions claimed by the taxpayer in the computation of federal taxable income
9.21multiplied by the applicable percentage;
9.22(ii) "applicable percentage" means two percentage points for each $2,500 (or
9.23fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable
9.24year exceeds the threshold amount. In the case of a married individual filing a separate
9.25return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In
9.26no event shall the applicable percentage exceed 100 percent;
9.27(iii) the term "threshold amount" means:
9.28(A) $150,000 in the case of a joint return or a surviving spouse;
9.29(B) $125,000 in the case of a head of a household;
9.30(C) $100,000 in the case of an individual who is not married and who is not a
9.31surviving spouse or head of a household; and
9.32(D) $75,000 in the case of a married individual filing a separate return; and
9.33(iv) the thresholds shall be increased by an amount equal to:
9.34(A) such dollar amount, multiplied by
10.1(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
10.2Revenue Code for the calendar year in which the taxable year begins, by substituting
10.3"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; and
10.4(21) to the extent deducted in the computation of federal taxable income, for
10.5taxable years beginning after December 31, 2010, and before January 1, 2013 2012, of
10.6the difference between the standard deduction allowed under section 63(c) of the Internal
10.7Revenue Code and the standard deduction allowed for 2011 and 2012 under the Internal
10.8Revenue Code as amended through December 1, 2010.
10.9EFFECTIVE DATE.This section is effective for taxable years beginning after
10.10December 31, 2011.

10.11    Sec. 8. Minnesota Statutes 2011 Supplement, section 290.01, subdivision 19b, is
10.12amended to read:
10.13    Subd. 19b. Subtractions from federal taxable income. For individuals, estates,
10.14and trusts, there shall be subtracted from federal taxable income:
10.15    (1) net interest income on obligations of any authority, commission, or
10.16instrumentality of the United States to the extent includable in taxable income for federal
10.17income tax purposes but exempt from state income tax under the laws of the United States;
10.18    (2) if included in federal taxable income, the amount of any overpayment of income
10.19tax to Minnesota or to any other state, for any previous taxable year, whether the amount
10.20is received as a refund or as a credit to another taxable year's income tax liability;
10.21    (3) the amount paid to others, less the amount used to claim the credit allowed under
10.22section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
10.23to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
10.24transportation of each qualifying child in attending an elementary or secondary school
10.25situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
10.26resident of this state may legally fulfill the state's compulsory attendance laws, which
10.27is not operated for profit, and which adheres to the provisions of the Civil Rights Act
10.28of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
10.29tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
10.30"textbooks" includes books and other instructional materials and equipment purchased
10.31or leased for use in elementary and secondary schools in teaching only those subjects
10.32legally and commonly taught in public elementary and secondary schools in this state.
10.33Equipment expenses qualifying for deduction includes expenses as defined and limited in
10.34section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
10.35books and materials used in the teaching of religious tenets, doctrines, or worship, the
11.1purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
11.2or materials for, or transportation to, extracurricular activities including sporting events,
11.3musical or dramatic events, speech activities, driver's education, or similar programs. No
11.4deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
11.5the qualifying child's vehicle to provide such transportation for a qualifying child. For
11.6purposes of the subtraction provided by this clause, "qualifying child" has the meaning
11.7given in section 32(c)(3) of the Internal Revenue Code;
11.8    (4) income as provided under section 290.0802;
11.9    (5) to the extent included in federal adjusted gross income, income realized on
11.10disposition of property exempt from tax under section 290.491;
11.11    (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
11.12of the Internal Revenue Code in determining federal taxable income by an individual
11.13who does not itemize deductions for federal income tax purposes for the taxable year, an
11.14amount equal to 50 percent of the excess of charitable contributions over $500 allowable
11.15as a deduction for the taxable year under section 170(a) of the Internal Revenue Code,
11.16under the provisions of Public Law 109-1 and Public Law 111-126;
11.17    (7) for individuals who are allowed a federal foreign tax credit for taxes that do not
11.18qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
11.19of subnational foreign taxes for the taxable year, but not to exceed the total subnational
11.20foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
11.21"federal foreign tax credit" means the credit allowed under section 27 of the Internal
11.22Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
11.23under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
11.24the extent they exceed the federal foreign tax credit;
11.25    (8) in each of the five tax years immediately following the tax year in which an
11.26addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
11.27of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
11.28of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
11.29the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
11.30subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the
11.31positive value of any net operating loss under section 172 of the Internal Revenue Code
11.32generated for the tax year of the addition. The resulting delayed depreciation cannot be
11.33less than zero;
11.34    (9) job opportunity building zone income as provided under section 469.316;
11.35    (10) to the extent included in federal taxable income, the amount of compensation
11.36paid to members of the Minnesota National Guard or other reserve components of the
12.1United States military for active service, excluding compensation for services performed
12.2under the Active Guard Reserve (AGR) program. For purposes of this clause, "active
12.3service" means (i) state active service as defined in section 190.05, subdivision 5a, clause
12.4(1); or (ii) federally funded state active service as defined in section 190.05, subdivision
12.55b , but "active service" excludes service performed in accordance with section 190.08,
12.6subdivision 3 ;
12.7    (11) to the extent included in federal taxable income, the amount of compensation
12.8paid to Minnesota residents who are members of the armed forces of the United States
12.9or United Nations for active duty performed under United States Code, title 10; or the
12.10authority of the United Nations;
12.11    (12) an amount, not to exceed $10,000, equal to qualified expenses related to a
12.12qualified donor's donation, while living, of one or more of the qualified donor's organs
12.13to another person for human organ transplantation. For purposes of this clause, "organ"
12.14means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
12.15"human organ transplantation" means the medical procedure by which transfer of a human
12.16organ is made from the body of one person to the body of another person; "qualified
12.17expenses" means unreimbursed expenses for both the individual and the qualified donor
12.18for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
12.19may be subtracted under this clause only once; and "qualified donor" means the individual
12.20or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
12.21individual may claim the subtraction in this clause for each instance of organ donation for
12.22transplantation during the taxable year in which the qualified expenses occur;
12.23    (13) in each of the five tax years immediately following the tax year in which an
12.24addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
12.25shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
12.26addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
12.27case of a shareholder of a corporation that is an S corporation, minus the positive value of
12.28any net operating loss under section 172 of the Internal Revenue Code generated for the
12.29tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
12.30subtraction is not allowed under this clause;
12.31    (14) to the extent included in the federal taxable income of a nonresident of
12.32Minnesota, compensation paid to a service member as defined in United States Code, title
12.3310, section 101(a)(5), for military service as defined in the Servicemembers Civil Relief
12.34Act, Public Law 108-189, section 101(2);
12.35    (15) international economic development zone income as provided under section
12.36469.325 ;
13.1    (16) to the extent included in federal taxable income, the amount of national service
13.2educational awards received from the National Service Trust under United States Code,
13.3title 42, sections 12601 to 12604, for service in an approved Americorps National Service
13.4program;
13.5(17) to the extent included in federal taxable income, discharge of indebtedness
13.6income resulting from reacquisition of business indebtedness included in federal taxable
13.7income under section 108(i) of the Internal Revenue Code. This subtraction applies only
13.8to the extent that the income was included in net income in a prior year as a result of the
13.9addition under section 290.01, subdivision 19a, clause (16); and
13.10(18) the amount of the net operating loss allowed under section 290.095, subdivision
13.1111, paragraph (c).;
13.12(19) for taxable years beginning after December 31, 2012, for married couples
13.13filing joint returns who claimed the standard deduction under section 63(c) of the Internal
13.14Revenue Code, an amount equal to the difference between (i) twice the standard deduction
13.15allowed for the taxable year under section 63(c) of the Internal Revenue Code for single
13.16filers and (ii) the standard deduction allowed for the taxable year under section 63(c) of
13.17the Internal Revenue Code for married couples filing joint returns; and
13.18(20) for taxable years beginning after December 31, 2012, for married couples filing
13.19separate returns who claimed the standard deduction under section 63(c) of the Internal
13.20Revenue Code, an amount equal to the difference between (i) the standard deduction
13.21allowed for the taxable year under section 63(c) of the Internal Revenue Code for single
13.22filers and (ii) the standard deduction allowed for the taxable year under section 63(c) of
13.23the Internal Revenue Code for married couples filing separate returns.
13.24EFFECTIVE DATE.This section is effective for taxable years beginning after
13.25December 31, 2011.

13.26    Sec. 9. Minnesota Statutes 2011 Supplement, section 290.01, subdivision 19c, is
13.27amended to read:
13.28    Subd. 19c. Corporations; additions to federal taxable income. For corporations,
13.29there shall be added to federal taxable income:
13.30    (1) the amount of any deduction taken for federal income tax purposes for income,
13.31excise, or franchise taxes based on net income or related minimum taxes, including but not
13.32limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
13.33another state, a political subdivision of another state, the District of Columbia, or any
13.34foreign country or possession of the United States;
14.1    (2) interest not subject to federal tax upon obligations of: the United States, its
14.2possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
14.3state, any of its political or governmental subdivisions, any of its municipalities, or any
14.4of its governmental agencies or instrumentalities; the District of Columbia; or Indian
14.5tribal governments;
14.6    (3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
14.7Revenue Code;
14.8    (4) the amount of any net operating loss deduction taken for federal income tax
14.9purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
14.10deduction under section 810 of the Internal Revenue Code;
14.11    (5) the amount of any special deductions taken for federal income tax purposes
14.12under sections 241 to 247 and 965 of the Internal Revenue Code;
14.13    (6) losses from the business of mining, as defined in section 290.05, subdivision 1,
14.14clause (a), that are not subject to Minnesota income tax;
14.15    (7) the amount of any capital losses deducted for federal income tax purposes under
14.16sections 1211 and 1212 of the Internal Revenue Code;
14.17    (8) the exempt foreign trade income of a foreign sales corporation under sections
14.18921(a) and 291 of the Internal Revenue Code;
14.19    (9) the amount of percentage depletion deducted under sections 611 through 614 and
14.20291 of the Internal Revenue Code;
14.21    (10) for certified pollution control facilities placed in service in a taxable year
14.22beginning before December 31, 1986, and for which amortization deductions were elected
14.23under section 169 of the Internal Revenue Code of 1954, as amended through December
14.2431, 1985, the amount of the amortization deduction allowed in computing federal taxable
14.25income for those facilities;
14.26    (11) the amount of any deemed dividend from a foreign operating corporation
14.27determined pursuant to section 290.17, subdivision 4, paragraph (g). The deemed dividend
14.28shall be reduced by the amount of the addition to income required by clauses (20), (21),
14.29(22), and (23);
14.30    (12) (11) the amount of a partner's pro rata share of net income which does not flow
14.31through to the partner because the partnership elected to pay the tax on the income under
14.32section 6242(a)(2) of the Internal Revenue Code;
14.33    (13) (12) the amount of net income excluded under section 114 of the Internal
14.34Revenue Code;
15.1    (14) (13) any increase in subpart F income, as defined in section 952(a) of the
15.2Internal Revenue Code, for the taxable year when subpart F income is calculated without
15.3regard to the provisions of Division C, title III, section 303(b) of Public Law 110-343;
15.4    (15) (14) 80 percent of the depreciation deduction allowed under section
15.5168(k)(1)(A) and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if
15.6the taxpayer has an activity that in the taxable year generates a deduction for depreciation
15.7under section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable
15.8year that the taxpayer is not allowed to claim for the taxable year, "the depreciation
15.9allowed under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess
15.10of the depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A)
15.11over the amount of the loss from the activity that is not allowed in the taxable year. In
15.12succeeding taxable years when the losses not allowed in the taxable year are allowed, the
15.13depreciation under section 168(k)(1)(A) and (k)(4)(A) is allowed;
15.14    (16) (15) 80 percent of the amount by which the deduction allowed by section 179 of
15.15the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
15.16Revenue Code of 1986, as amended through December 31, 2003;
15.17    (17) (16) to the extent deducted in computing federal taxable income, the amount of
15.18the deduction allowable under section 199 of the Internal Revenue Code;
15.19    (18) (17) for taxable years beginning before January 1, 2013, the exclusion allowed
15.20under section 139A of the Internal Revenue Code for federal subsidies for prescription
15.21drug plans;
15.22    (19) (18) the amount of expenses disallowed under section 290.10, subdivision 2;
15.23    (20) an amount equal to the interest and intangible expenses, losses, and costs paid,
15.24accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit
15.25of a corporation that is a member of the taxpayer's unitary business group that qualifies
15.26as a foreign operating corporation. For purposes of this clause, intangible expenses and
15.27costs include:
15.28    (i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
15.29use, maintenance or management, ownership, sale, exchange, or any other disposition of
15.30intangible property;
15.31    (ii) losses incurred, directly or indirectly, from factoring transactions or discounting
15.32transactions;
15.33    (iii) royalty, patent, technical, and copyright fees;
15.34    (iv) licensing fees; and
15.35    (v) other similar expenses and costs.
16.1For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
16.2applications, trade names, trademarks, service marks, copyrights, mask works, trade
16.3secrets, and similar types of intangible assets.
16.4This clause does not apply to any item of interest or intangible expenses or costs paid,
16.5accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect
16.6to such item of income to the extent that the income to the foreign operating corporation
16.7is income from sources without the United States as defined in subtitle A, chapter 1,
16.8subchapter N, part 1, of the Internal Revenue Code;
16.9    (21) except as already included in the taxpayer's taxable income pursuant to clause
16.10(20), any interest income and income generated from intangible property received or
16.11accrued by a foreign operating corporation that is a member of the taxpayer's unitary
16.12group. For purposes of this clause, income generated from intangible property includes:
16.13    (i) income related to the direct or indirect acquisition, use, maintenance or
16.14management, ownership, sale, exchange, or any other disposition of intangible property;
16.15    (ii) income from factoring transactions or discounting transactions;
16.16    (iii) royalty, patent, technical, and copyright fees;
16.17    (iv) licensing fees; and
16.18    (v) other similar income.
16.19For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
16.20applications, trade names, trademarks, service marks, copyrights, mask works, trade
16.21secrets, and similar types of intangible assets.
16.22This clause does not apply to any item of interest or intangible income received or accrued
16.23by a foreign operating corporation with respect to such item of income to the extent that
16.24the income is income from sources without the United States as defined in subtitle A,
16.25chapter 1, subchapter N, part 1, of the Internal Revenue Code;
16.26    (22) the dividends attributable to the income of a foreign operating corporation that
16.27is a member of the taxpayer's unitary group in an amount that is equal to the dividends
16.28paid deduction of a real estate investment trust under section 561(a) of the Internal
16.29Revenue Code for amounts paid or accrued by the real estate investment trust to the
16.30foreign operating corporation;
16.31    (23) the income of a foreign operating corporation that is a member of the taxpayer's
16.32unitary group in an amount that is equal to gains derived from the sale of real or personal
16.33property located in the United States;
17.1    (24) (19) for taxable years beginning before January 1, 2010, the additional amount
17.2allowed as a deduction for donation of computer technology and equipment under section
17.3170(e)(6) of the Internal Revenue Code, to the extent deducted from taxable income; and
17.4(25) (20) discharge of indebtedness income resulting from reacquisition of business
17.5indebtedness and deferred under section 108(i) of the Internal Revenue Code.
17.6EFFECTIVE DATE.This section is effective for taxable years beginning after
17.7December 31, 2011.

17.8    Sec. 10. Minnesota Statutes 2010, section 290.01, subdivision 19d, is amended to read:
17.9    Subd. 19d. Corporations; modifications decreasing federal taxable income. For
17.10corporations, there shall be subtracted from federal taxable income after the increases
17.11provided in subdivision 19c:
17.12    (1) the amount of foreign dividend gross-up added to gross income for federal
17.13income tax purposes under section 78 of the Internal Revenue Code;
17.14    (2) the amount of salary expense not allowed for federal income tax purposes due to
17.15claiming the work opportunity credit under section 51 of the Internal Revenue Code;
17.16    (3) any dividend (not including any distribution in liquidation) paid within the
17.17taxable year by a national or state bank to the United States, or to any instrumentality of
17.18the United States exempt from federal income taxes, on the preferred stock of the bank
17.19owned by the United States or the instrumentality;
17.20    (4) amounts disallowed for intangible drilling costs due to differences between
17.21this chapter and the Internal Revenue Code in taxable years beginning before January
17.221, 1987, as follows:
17.23    (i) to the extent the disallowed costs are represented by physical property, an amount
17.24equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
17.25subdivision 7 , subject to the modifications contained in subdivision 19e; and
17.26    (ii) to the extent the disallowed costs are not represented by physical property, an
17.27amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
17.28290.09, subdivision 8 ;
17.29    (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
17.30Internal Revenue Code, except that:
17.31    (i) for capital losses incurred in taxable years beginning after December 31, 1986,
17.32capital loss carrybacks shall not be allowed;
17.33    (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
17.34a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
17.35allowed;
18.1    (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
18.2capital loss carryback to each of the three taxable years preceding the loss year, subject to
18.3the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
18.4    (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
18.5a capital loss carryover to each of the five taxable years succeeding the loss year to the
18.6extent such loss was not used in a prior taxable year and subject to the provisions of
18.7Minnesota Statutes 1986, section 290.16, shall be allowed;
18.8    (6) an amount for interest and expenses relating to income not taxable for federal
18.9income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
18.10expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
18.11291 of the Internal Revenue Code in computing federal taxable income;
18.12    (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
18.13which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
18.14reasonable allowance for depletion based on actual cost. In the case of leases the deduction
18.15must be apportioned between the lessor and lessee in accordance with rules prescribed
18.16by the commissioner. In the case of property held in trust, the allowable deduction must
18.17be apportioned between the income beneficiaries and the trustee in accordance with the
18.18pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
18.19of the trust's income allocable to each;
18.20    (8) for certified pollution control facilities placed in service in a taxable year
18.21beginning before December 31, 1986, and for which amortization deductions were elected
18.22under section 169 of the Internal Revenue Code of 1954, as amended through December
18.2331, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
18.241986, section 290.09, subdivision 7;
18.25    (9) amounts included in federal taxable income that are due to refunds of income,
18.26excise, or franchise taxes based on net income or related minimum taxes paid by the
18.27corporation to Minnesota, another state, a political subdivision of another state, the
18.28District of Columbia, or a foreign country or possession of the United States to the extent
18.29that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
18.30clause (1), in a prior taxable year;
18.31    (10) 80 percent of royalties, fees, or other like income accrued or received from a
18.32foreign operating corporation or a foreign corporation which is part of the same unitary
18.33business as the receiving corporation, unless the income resulting from such payments or
18.34accruals is income from sources within the United States as defined in subtitle A, chapter
18.351, subchapter N, part 1, of the Internal Revenue Code;
19.1    (11) income or gains from the business of mining as defined in section 290.05,
19.2subdivision 1 , clause (a), that are not subject to Minnesota franchise tax;
19.3    (12) the amount of disability access expenditures in the taxable year which are not
19.4allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
19.5    (13) the amount of qualified research expenses not allowed for federal income tax
19.6purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
19.7the amount exceeds the amount of the credit allowed under section 290.068;
19.8    (14) the amount of salary expenses not allowed for federal income tax purposes due
19.9to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
19.10Code;
19.11    (15) for a corporation whose foreign sales corporation, as defined in section 922
19.12of the Internal Revenue Code, constituted a foreign operating corporation during any
19.13taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
19.14claiming the deduction under section 290.21, subdivision 4, for income received from
19.15the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of
19.16income excluded under section 114 of the Internal Revenue Code, provided the income is
19.17not income of a foreign operating company;
19.18    (16) any decrease in subpart F income, as defined in section 952(a) of the Internal
19.19Revenue Code, for the taxable year when subpart F income is calculated without regard to
19.20the provisions of Division C, title III, section 303(b) of Public Law 110-343;
19.21    (17) in each of the five tax years immediately following the tax year in which an
19.22addition is required under subdivision 19c, clause (15) (14), an amount equal to one-fifth
19.23of the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
19.24amount of the addition made by the taxpayer under subdivision 19c, clause (15) (14). The
19.25resulting delayed depreciation cannot be less than zero;
19.26    (18) in each of the five tax years immediately following the tax year in which an
19.27addition is required under subdivision 19c, clause (16) (15), an amount equal to one-fifth
19.28of the amount of the addition; and
19.29(19) to the extent included in federal taxable income, discharge of indebtedness
19.30income resulting from reacquisition of business indebtedness included in federal taxable
19.31income under section 108(i) of the Internal Revenue Code. This subtraction applies only
19.32to the extent that the income was included in net income in a prior year as a result of the
19.33addition under section 290.01, subdivision 19c, clause (25) (20).
19.34EFFECTIVE DATE.This section is effective for taxable years beginning after
19.35December 31, 2011.

20.1    Sec. 11. Minnesota Statutes 2011 Supplement, section 290.0675, subdivision 1,
20.2is amended to read:
20.3    Subdivision 1. Definitions. (a) For purposes of this section the following terms
20.4have the meanings given.
20.5(b) "Earned income" means the sum of the following, to the extent included in
20.6Minnesota taxable income:
20.7(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
20.8(2) income received from a retirement pension, profit-sharing, stock bonus, or
20.9annuity plan; and
20.10(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue
20.11Code.
20.12(c) "Taxable income" means net income as defined in section 290.01, subdivision 19.
20.13(d) "Earned income of lesser-earning spouse" means the earned income of the spouse
20.14with the lesser amount of earned income as defined in paragraph (b) for the taxable year
20.15minus the sum of (i) the amount for one exemption under section 151(d) of the Internal
20.16Revenue Code and (ii) one-half the amount of the standard deduction under section
20.1763(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition required
20.18under section 290.01, subdivision 19a, clause (21), and one-half of the addition that would
20.19have been required under section 290.01, subdivision 19a, clause (21), if the taxpayer
20.20had claimed the standard deduction, and plus one-half of any subtraction allowed under
20.21section 290.01, subdivision 19b, clause (19).
20.22EFFECTIVE DATE.This section is effective for taxable years beginning after
20.23December 31, 2011.

20.24    Sec. 12. Minnesota Statutes 2010, section 290.17, subdivision 4, is amended to read:
20.25    Subd. 4. Unitary business principle. (a) If a trade or business conducted wholly
20.26within this state or partly within and partly without this state is part of a unitary business,
20.27the entire income of the unitary business is subject to apportionment pursuant to section
20.28290.191 . Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
20.29business is considered to be derived from any particular source and none may be allocated
20.30to a particular place except as provided by the applicable apportionment formula. The
20.31provisions of this subdivision do not apply to business income subject to subdivision 5,
20.32income of an insurance company, or income of an investment company determined under
20.33section 290.36.
20.34(b) The term "unitary business" means business activities or operations which
20.35result in a flow of value between them. The term may be applied within a single legal
21.1entity or between multiple entities and without regard to whether each entity is a sole
21.2proprietorship, a corporation, a partnership or a trust.
21.3(c) Unity is presumed whenever there is unity of ownership, operation, and use,
21.4evidenced by centralized management or executive force, centralized purchasing,
21.5advertising, accounting, or other controlled interaction, but the absence of these
21.6centralized activities will not necessarily evidence a nonunitary business. Unity is also
21.7presumed when business activities or operations are of mutual benefit, dependent upon or
21.8contributory to one another, either individually or as a group.
21.9(d) Where a business operation conducted in Minnesota is owned by a business
21.10entity that carries on business activity outside the state different in kind from that
21.11conducted within this state, and the other business is conducted entirely outside the state, it
21.12is presumed that the two business operations are unitary in nature, interrelated, connected,
21.13and interdependent unless it can be shown to the contrary.
21.14(e) Unity of ownership is not deemed to exist when a corporation is involved unless
21.15that corporation is a member of a group of two or more business entities and more than 50
21.16percent of the voting stock of each member of the group is directly or indirectly owned
21.17by a common owner or by common owners, either corporate or noncorporate, or by one
21.18or more of the member corporations of the group. For this purpose, the term "voting
21.19stock" shall include membership interests of mutual insurance holding companies formed
21.20under section 66A.40.
21.21(f) The net income and apportionment factors under section 290.191 or 290.20 of
21.22foreign corporations and other foreign entities which are part of a unitary business shall
21.23not be included in the net income or the apportionment factors of the unitary business.
21.24A foreign corporation or other foreign entity which is required to file a return under this
21.25chapter shall file on a separate return basis. The net income and apportionment factors
21.26under section 290.191 or 290.20 of foreign operating corporations shall not be included in
21.27the net income or the apportionment factors of the unitary business except as provided in
21.28paragraph (g). The provisions of this paragraph are not severable from the provisions of
21.29section 290.01, subdivision 5, clauses (4) to (6); if any of those provisions are found to be
21.30unconstitutional, the provisions of this paragraph are void for the respective taxable years.
21.31(g) The adjusted net income of a foreign operating corporation shall be deemed to
21.32be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
21.33proportion to each shareholder's ownership, with which such corporation is engaged in
21.34a unitary business. Such deemed dividend shall be treated as a dividend under section
21.35290.21, subdivision 4.
22.1Dividends actually paid by a foreign operating corporation to a corporate shareholder
22.2which is a member of the same unitary business as the foreign operating corporation shall
22.3be eliminated from the net income of the unitary business in preparing a combined report
22.4for the unitary business. The adjusted net income of a foreign operating corporation
22.5shall be its net income adjusted as follows:
22.6(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
22.7Rico, or a United States possession or political subdivision of any of the foregoing shall
22.8be a deduction; and
22.9(2) the subtraction from federal taxable income for payments received from foreign
22.10corporations or foreign operating corporations under section 290.01, subdivision 19d,
22.11clause (10), shall not be allowed.
22.12If a foreign operating corporation incurs a net loss, neither income nor deduction
22.13from that corporation shall be included in determining the net income of the unitary
22.14business.
22.15(h) (g) For purposes of determining the net income of a unitary business and the
22.16factors to be used in the apportionment of net income pursuant to section 290.191 or
22.17290.20 , there must be included only the income and apportionment factors of domestic
22.18corporations or other domestic entities other than foreign operating corporations that are
22.19determined to be part of the unitary business pursuant to this subdivision, notwithstanding
22.20that foreign corporations or other foreign entities might be included in the unitary business.
22.21(i) (h) Deductions for expenses, interest, or taxes otherwise allowable under
22.22this chapter that are connected with or allocable against dividends, deemed dividends
22.23described in paragraph (g), or royalties, fees, or other like income described in section
22.24290.01, subdivision 19d , clause (10), shall not be disallowed.
22.25(j) (i) Each corporation or other entity, except a sole proprietorship, that is part of
22.26a unitary business must file combined reports as the commissioner determines. On the
22.27reports, all intercompany transactions between entities included pursuant to paragraph
22.28(h) (g) must be eliminated and the entire net income of the unitary business determined in
22.29accordance with this subdivision is apportioned among the entities by using each entity's
22.30Minnesota factors for apportionment purposes in the numerators of the apportionment
22.31formula and the total factors for apportionment purposes of all entities included pursuant
22.32to paragraph (h) (g) in the denominators of the apportionment formula. All sales of the
22.33unitary business made within Minnesota pursuant to section 290.191 or 290.20 must be
22.34included on the separate combined report of a corporation that is a member of the unitary
22.35business and is subject to the jurisdiction of this state to impose tax under this chapter.
23.1(k) (j) If a corporation has been divested from a unitary business and is included in a
23.2combined report for a fractional part of the common accounting period of the combined
23.3report:
23.4(1) its income includable in the combined report is its income incurred for that part
23.5of the year determined by proration or separate accounting; and
23.6(2) its sales, property, and payroll included in the apportionment formula must
23.7be prorated or accounted for separately.
23.8EFFECTIVE DATE.This section is effective for returns filed for taxable years
23.9beginning after December 31, 2011.

23.10    Sec. 13. Minnesota Statutes 2011 Supplement, section 290A.03, subdivision 11,
23.11is amended to read:
23.12    Subd. 11. Rent constituting property taxes. "Rent constituting property taxes"
23.13means 17 15 percent of the gross rent actually paid in cash, or its equivalent, or the portion
23.14of rent paid in lieu of property taxes, in any calendar year by a claimant for the right
23.15of occupancy of the claimant's Minnesota homestead in the calendar year, and which
23.16rent constitutes the basis, in the succeeding calendar year of a claim for relief under this
23.17chapter by the claimant.
23.18EFFECTIVE DATE.This section is effective for claims based on rent paid in
23.192011 and thereafter.

23.20    Sec. 14. Minnesota Statutes 2011 Supplement, section 290A.03, subdivision 13,
23.21is amended to read:
23.22    Subd. 13. Property taxes payable. "Property taxes payable" means the property tax
23.23exclusive of special assessments, penalties, and interest payable on a claimant's homestead
23.24after deductions made under sections 273.135, 273.1384, 273.1391, 273.42, subdivision 2,
23.25and any other state paid property tax credits in any calendar year, and after any refund
23.26claimed and allowable under section 290A.04, subdivision 2h, that is first payable in
23.27the year that the property tax is payable. In the case of a claimant who makes ground
23.28lease payments, "property taxes payable" includes the amount of the payments directly
23.29attributable to the property taxes assessed against the parcel on which the house is located.
23.30No apportionment or reduction of the "property taxes payable" shall be required for the
23.31use of a portion of the claimant's homestead for a business purpose if the claimant does not
23.32deduct any business depreciation expenses for the use of a portion of the homestead in the
23.33determination of federal adjusted gross income. For homesteads which are manufactured
24.1homes as defined in section 273.125, subdivision 8, and for homesteads which are park
24.2trailers taxed as manufactured homes under section 168.012, subdivision 9, "property
24.3taxes payable" shall also include 17 15 percent of the gross rent paid in the preceding
24.4year for the site on which the homestead is located. When a homestead is owned by
24.5two or more persons as joint tenants or tenants in common, such tenants shall determine
24.6between them which tenant may claim the property taxes payable on the homestead. If
24.7they are unable to agree, the matter shall be referred to the commissioner of revenue
24.8whose decision shall be final. Property taxes are considered payable in the year prescribed
24.9by law for payment of the taxes.
24.10In the case of a claim relating to "property taxes payable," the claimant must have
24.11owned and occupied the homestead on January 2 of the year in which the tax is payable
24.12and (i) the property must have been classified as homestead property pursuant to section
24.13273.124 , on or before December 15 of the assessment year to which the "property taxes
24.14payable" relate; or (ii) the claimant must provide documentation from the local assessor
24.15that application for homestead classification has been made on or before December 15
24.16of the year in which the "property taxes payable" were payable and that the assessor has
24.17approved the application.
24.18EFFECTIVE DATE.This section is effective for claims based on rent paid in
24.192011 and thereafter.

24.20    Sec. 15. Minnesota Statutes 2011 Supplement, section 290A.04, subdivision 2, is
24.21amended to read:
24.22    Subd. 2. Homeowners. A claimant whose property taxes payable are in excess
24.23of the percentage of the household income stated below shall pay an amount equal to
24.24the percent of income shown for the appropriate household income level along with the
24.25percent to be paid by the claimant of the remaining amount of property taxes payable.
24.26The state refund equals the amount of property taxes payable that remain, up to the state
24.27refund amount shown below.

24.28 24.29 24.30	Household Income	Percent of Income	Percent Paid by Claimant	Maximum State Refund
24.31	$0 to 1,549	1.0 percent	15 percent	$	2,460
24.32	1,550 to 3,089	1.1 percent	15 percent	$	2,460
24.33	3,090 to 4,669	1.2 percent	15 percent	$	2,460
24.34	4,670 to 6,229	1.3 percent	20 percent	$	2,460
24.35	6,230 to 7,769	1.4 percent	20 percent	$	2,460
24.36	7,770 to 10,879	1.5 percent	20 percent	$	2,460
25.1	10,880 to 12,429	1.6 percent	20 percent	$	2,460
25.2	12,430 to 13,989	1.7 percent	20 percent	$	2,460
25.3	13,990 to 15,539	1.8 percent	20 percent	$	2,460
25.4	15,540 to 17,079	1.9 percent	25 percent	$	2,460
25.5	17,080 to 18,659	2.0 percent	25 percent	$	2,460
25.6	18,660 to 21,759	2.1 percent	25 percent	$	2,460
25.7	21,760 to 23,309	2.2 percent	30 percent	$	2,460
25.8	23,310 to 24,859	2.3 percent	30 percent	$	2,460
25.9	24,860 to 26,419	2.4 percent	30 percent	$	2,460
25.10	26,420 to 32,629	2.5 percent	35 percent	$	2,460
25.11	32,630 to 37,279	2.6 percent	35 percent	$	2,460
25.12 25.13	37,280 to 46,609	2.7 percent	35 percent	$	2,000 2,400
25.14 25.15	46,610 to 54,369	2.8 percent	35 percent	$	2,000 2,400
25.16 25.17	54,370 to 62,139	2.8 percent	40 percent	$	1,750 2,100
25.18 25.19	62,140 to 69,909	3.0 percent	40 percent	$	1,440 1,730
25.20 25.21	69,910 to 77,679	3.0 percent	40 percent	$	1,290 1,550
25.22 25.23	77,680 to 85,449	3.0 percent	40 percent	$	1,130 1,360
25.24 25.25	85,450 to 90,119	3.5 percent	45 percent	$	960 1,150
25.26 25.27	90,120 to 93,239	3.5 percent	45 percent	$	790 950
25.28 25.29	93,240 to 97,009	3.5 percent	50 percent	$	650 780
25.30 25.31	97,010 to 100,779	3.5 percent	50 percent	$	480 580

25.32    The payment made to a claimant shall be the amount of the state refund calculated
25.33under this subdivision. No payment is allowed if the claimant's household income is
25.34$100,780 or more.
25.35EFFECTIVE DATE.This section is effective for refund claims based on taxes
25.36payable in 2012 and thereafter.

25.37    Sec. 16. Minnesota Statutes 2010, section 290A.04, subdivision 2a, is amended to read:
25.38    Subd. 2a. Renters; senior or disabled. A claimant whose rent constituting property
25.39taxes exceeds the percentage of the household income stated below must pay an amount
25.40equal to the percent of income shown for the appropriate household income level along
25.41with the percent to be paid by the claimant of the remaining amount of rent constituting
25.42property taxes. The state refund equals the amount of rent constituting property taxes that
26.1remain, up to the maximum state refund amount shown below. This subdivision applies
26.2only if the claimant or the claimant's spouse was disabled or attained the age of 65 on or
26.3before December 31 of the year for which the rent was paid.

26.4 26.5 26.6	Household Income	Percent of Income	Percent Paid by Claimant	Maximum State Refund
26.7	$0 to 3,589	1.0 percent	5 percent	$	1,190
26.8	3,590 to 4,779	1.0 percent	10 percent	$	1,190
26.9	4,780 to 5,969	1.1 percent	10 percent	$	1,190
26.10	5,970 to 8,369	1.2 percent	10 percent	$	1,190
26.11	8,370 to 10,759	1.3 percent	15 percent	$	1,190
26.12	10,760 to 11,949	1.4 percent	15 percent	$	1,190
26.13	11,950 to 13,139	1.4 percent	20 percent	$	1,190
26.14	13,140 to 15,539	1.5 percent	20 percent	$	1,190
26.15	15,540 to 16,729	1.6 percent	20 percent	$	1,190
26.16	16,730 to 17,919	1.7 percent	25 percent	$	1,190
26.17	17,920 to 20,319	1.8 percent	25 percent	$	1,190
26.18	20,320 to 21,509	1.9 percent	30 percent	$	1,190
26.19	21,510 to 22,699	2.0 percent	30 percent	$	1,190
26.20	22,700 to 23,899	2.2 percent	30 percent	$	1,190
26.21	23,900 to 25,089	2.4 percent	30 percent	$	1,190
26.22	25,090 to 26,289	2.6 percent	35 percent	$	1,190
26.23	26,290 to 27,489	2.7 percent	35 percent	$	1,190
26.24	27,490 to 28,679	2.8 percent	35 percent	$	1,190
26.25	28,680 to 29,869	2.9 percent	40 percent	$	1,190
26.26	29,870 to 31,079	3.0 percent	40 percent	$	1,190
26.27	31,080 to 32,269	3.1 percent	40 percent	$	1,190
26.28	32,270 to 33,459	3.2 percent	40 percent	$	1,190
26.29	33,460 to 34,649	3.3 percent	45 percent	$	1,080
26.30	34,650 to 35,849	3.4 percent	45 percent	$	960
26.31	35,850 to 37,049	3.5 percent	45 percent	$	830
26.32	37,050 to 38,239	3.5 percent	50 percent	$	720
26.33	38,240 to 39,439	3.5 percent	50 percent	$	600
26.34	38,440 to 40,629	3.5 percent	50 percent	$	360
26.35	40,630 to 41,819	3.5 percent	50 percent	$	120

26.36 26.37 26.38	Household Income	Percent of Income	Percent Paid by Claimant	Maximum State Refund
26.39	$0 to 4,689	1.0 percent	5 percent	$	1,550
26.40	4,690 to 6,239	1.0 percent	10 percent	$	1,550
26.41	6,240 to 7,799	1.1 percent	10 percent	$	1,550
26.42	7,800 to 10,929	1.2 percent	10 percent	$	1,550
27.1	10,930 to 14,049	1.3 percent	15 percent	$	1,550
27.2	14,050 to 15,609	1.4 percent	15 percent	$	1,550
27.3	15,610 to 17,159	1.4 percent	20 percent	$	1,550
27.4	17,160 to 20,289	1.5 percent	20 percent	$	1,550
27.5	20,290 to 21,849	1.6 percent	20 percent	$	1,550
27.6	21,850 to 23,399	1.7 percent	25 percent	$	1,550
27.7	23,400 to 26,539	1.8 percent	25 percent	$	1,500
27.8	26,540 to 28,089	1.9 percent	30 percent	$	1,400
27.9	28,090 to 29,649	2.0 percent	30 percent	$	1,300
27.10	29,650 to 31,209	2.2 percent	30 percent	$	1,200
27.11	31,210 to 32,769	2.4 percent	30 percent	$	1,100
27.12	32,770 to 34,329	2.6 percent	35 percent	$	1,000
27.13	34,330 to 35,899	2.7 percent	35 percent	$	1,000
27.14	35,900 to 37,449	2.8 percent	35 percent	$	750
27.15	37,450 to 39,009	2.9 percent	40 percent	$	500
27.16	39,010 to 39,999	3.0 percent	40 percent	$	250

27.17The payment made to a claimant is the amount of the state refund calculated under
27.18this subdivision. No payment is allowed if the claimant's household income is $41,820
27.19$40,000 or more.
27.20EFFECTIVE DATE.This section is effective for claims based on rent paid in
27.212011 and thereafter.

27.22    Sec. 17. Minnesota Statutes 2010, section 290A.04, is amended by adding a
27.23subdivision to read:
27.24    Subd. 2k. Renters; nonsenior nondisabled. A claimant whose rent constituting
27.25property taxes exceeds the percentage of the household income stated below must pay
27.26an amount equal to the percent of income shown for the appropriate household income
27.27level along with the percent to be paid by the claimant of the remaining amount of rent
27.28constituting property taxes. The state refund equals the amount of rent constituting
27.29property taxes that remain, up to the maximum state refund amount shown below. This
27.30subdivision applies only if the claimant or the claimant's spouse is not eligible for a refund
27.31under subdivision 2a.

27.32 27.33 27.34	Household Income	Percent of Income	Percent Paid by Claimant	Maximum State Refund
27.35	$0 to 6,239	1.0 percent	15 percent	$	1,000
27.36	6,240 to 7,799	1.1 percent	20 percent	$	1,000
27.37	7,800 to 10,929	1.2 percent	20 percent	$	900
27.38	10,930 to 14,049	1.3 percent	25 percent	$	800
28.1	14,050 to 15,609	1.4 percent	25 percent	$	800
28.2	15,610 to 17,159	1.4 percent	30 percent	$	600
28.3	17,160 to 20,289	1.5 percent	30 percent	$	600
28.4	20,290 to 21,849	1.6 percent	35 percent	$	400
28.5	21,850 to 23,399	1.7 percent	35 percent	$	400
28.6	23,400 to 24,999	1.8 percent	40 percent	$	200

28.7The payment made to a claimant is the amount of the state refund calculated under
28.8this subdivision. No payment is allowed if the claimant's household income is $25,000
28.9or more.
28.10EFFECTIVE DATE.This section is effective for claims based on rent paid in
28.112011 and thereafter.

28.12    Sec. 18. Minnesota Statutes 2011 Supplement, section 290A.04, subdivision 4, is
28.13amended to read:
28.14    Subd. 4. Inflation adjustment. (a) Beginning for property tax refunds payable in
28.15calendar year 2002, the commissioner shall annually adjust the dollar amounts of the
28.16income thresholds and the maximum refunds under subdivisions 2 and 2a subdivision 2
28.17for inflation. The commissioner shall make the inflation adjustments in accordance with
28.18section 1(f) of the Internal Revenue Code, except that for purposes of this subdivision the
28.19percentage increase shall be determined as provided in this subdivision.
28.20(b) In adjusting the dollar amounts of the income thresholds and the maximum
28.21refunds under subdivision 2 for inflation, the percentage increase shall be determined from
28.22the year ending on June 30, 2011, to the year ending on June 30 of the year preceding that
28.23in which the refund is payable.
28.24(c) In adjusting the dollar amounts of the income thresholds and the maximum
28.25refunds under subdivision 2a for inflation, the percentage increase shall be determined
28.26from the year ending on June 30, 2000, to the year ending on June 30 of the year preceding
28.27that in which the refund is payable.
28.28(d) (c) The commissioner shall use the appropriate percentage increase to annually
28.29adjust the income thresholds and maximum refunds under subdivisions 2 and 2a for
28.30inflation without regard to whether or not the income tax brackets are adjusted for inflation
28.31in that year. The commissioner shall round the thresholds and the maximum amounts,
28.32as adjusted to the nearest $10 amount. If the amount ends in $5, the commissioner shall
28.33round it up to the next $10 amount.
29.1(e) (d) The commissioner shall annually announce the adjusted refund schedule at
29.2the same time provided under section 290.06. The determination of the commissioner
29.3under this subdivision is not a rule under the Administrative Procedure Act.
29.4EFFECTIVE DATE.This section is effective for claims based on rent paid in
29.52012 and thereafter.

29.6    Sec. 19. Minnesota Statutes 2010, section 290A.23, subdivision 1, is amended to read:
29.7    Subdivision 1. Renters credit. There is appropriated from the general fund in the
29.8state treasury to the commissioner of revenue the amount necessary to make the payments
29.9required under section 290A.04, subdivision 2a subdivisions 2a and 2k.
29.10EFFECTIVE DATE.This section is effective for claims based on rent paid in
29.112011 and thereafter.

29.12    Sec. 20. Minnesota Statutes 2011 Supplement, section 477A.013, subdivision 9,
29.13is amended to read:
29.14    Subd. 9. City aid distribution. (a) In calendar year 2009 2013 and thereafter, each
29.15city shall receive an aid distribution equal to the sum of (1) the city formula aid under
29.16subdivision 8, and (2) its city aid base amount of aid it received under subdivision 11 in
29.17calendar year 2012.
29.18    (b) For aids payable in 2013 only, the total aid in the previous year for any city
29.19shall mean the amount of aid it was certified to receive for aids payable in 2012 under
29.20this section. For aids payable in 2014 and thereafter, the total aid in the previous year
29.21for any city means the amount of aid it was certified to receive under this section in the
29.22previous payable year.
29.23    (c) For aids payable in 2010 and thereafter, the total aid for any city shall not exceed
29.24the sum of (1) ten percent of the city's net levy for the year prior to the aid distribution
29.25plus (2) its total aid in the previous year. For aids payable in 2009 and thereafter, the total
29.26aid for any city with a population of 2,500 or more may not be less than its total aid under
29.27this section in the previous year minus the lesser of $10 multiplied by its population, or ten
29.28percent of its net levy in the year prior to the aid distribution.
29.29    (d) For aids payable in 2010 and thereafter, the total aid for a city with a population
29.30less than 2,500 must not be less than the amount it was certified to receive in the
29.31previous year minus the lesser of $10 multiplied by its population, or five percent of its
29.322003 certified aid amount. For aids payable in 2009 only, the total aid for a city with a
29.33population less than 2,500 must not be less than what it received under this section in the
30.1previous year unless its total aid in calendar year 2008 was aid under section 477A.011,
30.2subdivision 36, paragraph (s), in which case its minimum aid is zero.
30.3    (e) A city's aid loss under this section may not exceed $300,000 in any year in
30.4which the total city aid appropriation under section 477A.03, subdivision 2a, is equal or
30.5greater than the appropriation under that subdivision in the previous year, unless the
30.6city has an adjustment in its city net tax capacity under the process described in section
30.7469.174, subdivision 28.
30.8    (f) If a city's net tax capacity used in calculating aid under this section has decreased
30.9in any year by more than 25 percent from its net tax capacity in the previous year due to
30.10property becoming tax-exempt Indian land, the city's maximum allowed aid increase
30.11under paragraph (c) shall be increased by an amount equal to (1) the city's tax rate in the
30.12year of the aid calculation, multiplied by (2) the amount of its net tax capacity decrease
30.13resulting from the property becoming tax exempt.
30.14EFFECTIVE DATE.This section is effective for aids payable in calendar year
30.152013 and thereafter.

30.16    Sec. 21. SUPPLEMENTAL TARGETING REFUND FOR TAXES PAYABLE IN
30.172012 ONLY.
30.18    Subdivision 1. Determination of supplemental refund. (a) For property tax refund
30.19claims under Minnesota Statutes, section 290A.04, subdivision 2h, based upon property
30.20taxes payable in 2012, the state must pay a supplemental refund such that the combined
30.21amount of the regular refund under Minnesota Statutes, section 290A.04, subdivision 2h,
30.22and the supplemental refund is equal to 90 percent of the increase over the greater of (1) 12
30.23percent of the payable 2011 property taxes, or (2) $100. The maximum combined refund
30.24under Minnesota Statutes, section 290A.04, subdivision 2h, and this section is $1,000.
30.25(b) The supplemental refund amount must be determined by the commissioner of
30.26revenue based upon the information submitted with the claim for the regular refund and
30.27must be combined with the regular refund for payment.
30.28(c) Any supplemental refund paid under this section must be subtracted from
30.29"property taxes payable" for the purposes of determining any refund amount under
30.30Minnesota Statutes, section 290A.04, subdivision 2, based upon property taxes payable
30.31in 2012.
30.32(d) Any supplemental refund paid under this section must be subtracted from
30.33"property taxes payable" for taxes payable in 2012 for the purposes of determining any
30.34refund amount under Minnesota Statutes, section 290A.04, subdivision 2h, based upon
30.35property taxes payable in 2013.
31.1    Subd. 2. Appropriation. The amount necessary to make the payments required
31.2under this section is appropriated to the commissioner of revenue from the general fund
31.3for fiscal years 2013 and 2014.
31.4EFFECTIVE DATE.This section is effective for refund claims based on taxes
31.5payable in 2012 only.

31.6    Sec. 22. SPECIAL RECOVERY FUND; CANCELLATION.
31.7$4,300,000 of the balance in the Revenue Department service and recovery special
31.8revenue fund is transferred in fiscal year 2012 to the general fund.
31.9EFFECTIVE DATE.This section is effective the day following final enactment.

31.10    Sec. 23. ADMINISTRATION OF PROPERTY TAX REFUND CLAIMS; 2012.
31.11In administering this bill for claims for refunds submitted using 17 percent of gross
31.12rent as rent constituting property taxes under prior law, the commissioner shall recalculate
31.13and pay the refund amounts using 15 percent of gross rent, subject to the reduced
31.14maximum income limits, maximum refunds, and increased co-payment percentages in
31.15this bill. The commissioner shall notify the claimant that the recalculation was mandated
31.16by action of the 2012 legislature.

31.17    Sec. 24. REPEALER.
31.18(a) Minnesota Statutes 2010, sections 290.01, subdivision 6b; and 290.0921,
31.19subdivision 7, are repealed.
31.20(b) Minnesota Statutes 2010, section 477A.013, subdivision 8, and Minnesota
31.21Statutes 2011 Supplement, section 477A.03, subdivision 2a, are repealed.
31.22EFFECTIVE DATE.Paragraph (a) is effective for returns filed for taxable years
31.23beginning after December 31, 2011. Paragraph (b) is effective for aids payable in calendar
31.24year 2013 and thereafter.