1.1                          A bill for an act 
  1.2             relating to the operation of state government; 
  1.3             modifying parental contributions; modifying medical 
  1.4             assistance estate recovery provisions; eliminating 
  1.5             recoveries for alternative care costs; removing liens 
  1.6             against life estates and joint tenant interests; 
  1.7             limiting income tax deductions; appropriating money; 
  1.8             amending Minnesota Statutes 2002, sections 290.01, 
  1.9             subdivision 6b; 290.17, subdivisions 2, 4; Minnesota 
  1.10            Statutes 2003 Supplement, sections 252.27, subdivision 
  1.11            2a; 256B.15, subdivisions 1, 1a, 2; 256J.21, 
  1.12            subdivision 2; 256J.95, subdivision 9; 290.01, 
  1.13            subdivision 19d; 514.981, subdivision 6; 524.3-805; 
  1.14            repealing Minnesota Statutes 2003 Supplement, sections 
  1.15            256B.15, subdivisions 1c, 1d, 1e, 1f, 1g, 1h, 1i, 1j, 
  1.16            1k; 256J.37, subdivisions 3a, 3b; 514.991; 514.992; 
  1.17            514.993; 514.994; 514.995. 
  1.18  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.19                             ARTICLE 1
  1.20                           HUMAN SERVICES
  1.21     Section 1.  Minnesota Statutes 2003 Supplement, section 
  1.22  252.27, subdivision 2a, is amended to read: 
  1.23     Subd. 2a.  [CONTRIBUTION AMOUNT.] (a) The natural or 
  1.24  adoptive parents of a minor child, including a child determined 
  1.25  eligible for medical assistance without consideration of 
  1.26  parental income, must contribute monthly to the cost of health 
  1.27  services used by making monthly payments on a sliding scale 
  1.28  based on income, unless the child is married or has been 
  1.29  married, parental rights have been terminated, or the child's 
  1.30  adoption is subsidized according to section 259.67 or through 
  1.31  title IV-E of the Social Security Act. 
  2.1      (b) For households with adjusted gross income equal to or 
  2.2   greater than 100 percent of federal poverty guidelines, the 
  2.3   parental contribution shall be computed by applying the 
  2.4   following schedule of rates to the adjusted gross income of the 
  2.5   natural or adoptive parents: 
  2.6      (1) if the adjusted gross income is equal to or greater 
  2.7   than 100 percent of federal poverty guidelines and less than 175 
  2.8   percent of federal poverty guidelines, the parental contribution 
  2.9   is $4 per month; 
  2.10     (2) if the adjusted gross income is equal to or greater 
  2.11  than 175 percent of federal poverty guidelines and less than or 
  2.12  equal to 375 600 percent of federal poverty guidelines, the 
  2.13  parental contribution shall be determined using a sliding fee 
  2.14  scale established by the commissioner of human services which 
  2.15  begins at one percent of adjusted gross income at 175 percent of 
  2.16  federal poverty guidelines and increases to 7.5 percent of 
  2.17  adjusted gross income for those with adjusted gross income up to 
  2.18  375 600 percent of federal poverty guidelines; 
  2.19     (3) if the adjusted gross income is greater than 375 
  2.20  percent of federal poverty guidelines and less than 675 percent 
  2.21  of federal poverty guidelines, the parental contribution shall 
  2.22  be 7.5 percent of adjusted gross income; 
  2.23     (4) (3) if the adjusted gross income is equal to or greater 
  2.24  than 675 600 percent of federal poverty guidelines and less than 
  2.25  975 percent of federal poverty guidelines, the parental 
  2.26  contribution shall be ten percent of adjusted gross income 
  2.27  determined using a sliding fee scale established by the 
  2.28  commissioner of human services which begins at 7.5 percent of 
  2.29  adjusted gross income at 600 percent of federal poverty 
  2.30  guidelines and increases to ten percent of adjusted gross income 
  2.31  for those with adjusted gross income up to 975 percent of 
  2.32  federal poverty guidelines; and 
  2.33     (5) (4) if the adjusted gross income is equal to or greater 
  2.34  than 975 percent of federal poverty guidelines, the parental 
  2.35  contribution shall be 12.5 percent of adjusted gross income. 
  2.36     If the child lives with the parent, the annual adjusted 
  3.1   gross income is reduced by $2,400 $5,000 prior to calculating 
  3.2   the parental contribution.  If the child resides in an 
  3.3   institution specified in section 256B.35, the parent is 
  3.4   responsible for the personal needs allowance specified under 
  3.5   that section in addition to the parental contribution determined 
  3.6   under this section.  The parental contribution is reduced by any 
  3.7   amount required to be paid directly to the child pursuant to a 
  3.8   court order, but only if actually paid. 
  3.9      (c) The household size to be used in determining the amount 
  3.10  of contribution under paragraph (b) includes natural and 
  3.11  adoptive parents and their dependents under age 21, including 
  3.12  the child receiving services.  Adjustments in the contribution 
  3.13  amount due to annual changes in the federal poverty guidelines 
  3.14  shall be implemented on the first day of July following 
  3.15  publication of the changes. 
  3.16     (d) For purposes of paragraph (b), "income" means the 
  3.17  adjusted gross income of the natural or adoptive parents 
  3.18  determined according to the previous year's federal tax form. 
  3.19     (e) The contribution shall be explained in writing to the 
  3.20  parents at the time eligibility for services is being 
  3.21  determined.  The contribution shall be made on a monthly basis 
  3.22  effective with the first month in which the child receives 
  3.23  services.  Annually upon redetermination or at termination of 
  3.24  eligibility, if the contribution exceeded the cost of services 
  3.25  provided, the local agency or the state shall reimburse that 
  3.26  excess amount to the parents, either by direct reimbursement if 
  3.27  the parent is no longer required to pay a contribution, or by a 
  3.28  reduction in or waiver of parental fees until the excess amount 
  3.29  is exhausted. 
  3.30     (f) The monthly contribution amount must be reviewed at 
  3.31  least every 12 months; when there is a change in household size; 
  3.32  and when there is a loss of or gain in income from one month to 
  3.33  another in excess of ten percent.  The local agency shall mail a 
  3.34  written notice 30 days in advance of the effective date of a 
  3.35  change in the contribution amount.  A decrease in the 
  3.36  contribution amount is effective in the month that the parent 
  4.1   verifies a reduction in income or change in household size. 
  4.2      (g) Parents of a minor child who do not live with each 
  4.3   other shall each pay the contribution required under paragraph 
  4.4   (a).  An amount equal to the annual, except that a court-ordered 
  4.5   child support payment actually paid on behalf of the child 
  4.6   receiving services shall be deducted from the adjusted gross 
  4.7   income contribution of the parent making the payment prior to 
  4.8   calculating the parental contribution under paragraph (b). 
  4.9      (h) The contribution under paragraph (b) shall be increased 
  4.10  by an additional five percent if the local agency determines 
  4.11  that insurance coverage is available but not obtained for the 
  4.12  child.  For purposes of this section, "available" means the 
  4.13  insurance is a benefit of employment for a family member at an 
  4.14  annual cost of no more than five percent of the family's annual 
  4.15  income.  For purposes of this section, "insurance" means health 
  4.16  and accident insurance coverage, enrollment in a nonprofit 
  4.17  health service plan, health maintenance organization, 
  4.18  self-insured plan, or preferred provider organization. 
  4.19     Parents who have more than one child receiving services 
  4.20  shall not be required to pay more than the amount for the child 
  4.21  with the highest expenditures.  There shall be no resource 
  4.22  contribution from the parents.  The parent shall not be required 
  4.23  to pay a contribution in excess of the cost of the services 
  4.24  provided to the child, not counting payments made to school 
  4.25  districts for education-related services.  Notice of an increase 
  4.26  in fee payment must be given at least 30 days before the 
  4.27  increased fee is due.  
  4.28     (i) The contribution under paragraph (b) shall be reduced 
  4.29  by $300 per fiscal year if, in the 12 months prior to July 1: 
  4.30     (1) the parent applied for insurance for the child; 
  4.31     (2) the insurer denied insurance; 
  4.32     (3) the parents submitted a complaint or appeal, in writing 
  4.33  to the insurer, submitted a complaint or appeal, in writing, to 
  4.34  the commissioner of health or the commissioner of commerce, or 
  4.35  litigated the complaint or appeal; and 
  4.36     (4) as a result of the dispute, the insurer reversed its 
  5.1   decision and granted insurance. 
  5.2      For purposes of this section, "insurance" has the meaning 
  5.3   given in paragraph (h). 
  5.4      A parent who has requested a reduction in the contribution 
  5.5   amount under this paragraph shall submit proof in the form and 
  5.6   manner prescribed by the commissioner or county agency, 
  5.7   including, but not limited to, the insurer's denial of 
  5.8   insurance, the written letter or complaint of the parents, court 
  5.9   documents, and the written response of the insurer approving 
  5.10  insurance.  The determinations of the commissioner or county 
  5.11  agency under this paragraph are not rules subject to chapter 14. 
  5.12     Sec. 2.  Minnesota Statutes 2003 Supplement, section 
  5.13  256B.15, subdivision 1, is amended to read: 
  5.14     Subdivision 1.  [POLICY, APPLICABILITY, PURPOSE, AND 
  5.15  CONSTRUCTION; DEFINITION.] (a) It is the policy of this state 
  5.16  that individuals or couples, either or both of whom participate 
  5.17  in the medical assistance program, use their own assets to pay 
  5.18  their share of the total cost of their care during or after 
  5.19  their enrollment in the program according to applicable federal 
  5.20  law and the laws of this state.  The following provisions apply: 
  5.21     (1) subdivisions 1c to 1k shall not apply to claims arising 
  5.22  under this section which are presented under section 525.313; 
  5.23     (2) the provisions of subdivisions 1c to 1k expanding the 
  5.24  interests included in an estate for purposes of recovery under 
  5.25  this section give effect to the provisions of United States 
  5.26  Code, title 42, section 1396p, governing recoveries, but do not 
  5.27  give rise to any express or implied liens in favor of any other 
  5.28  parties not named in these provisions; 
  5.29     (3) the continuation of a recipient's life estate or joint 
  5.30  tenancy interest in real property after the recipient's death 
  5.31  for the purpose of recovering medical assistance under this 
  5.32  section modifies common law principles holding that these 
  5.33  interests terminate on the death of the holder; 
  5.34     (4) all laws, rules, and regulations governing or involved 
  5.35  with a recovery of medical assistance shall be liberally 
  5.36  construed to accomplish their intended purposes; 
  6.1      (5) a deceased recipient's life estate and joint tenancy 
  6.2   interests continued under this section shall be owned by the 
  6.3   remaindermen or surviving joint tenants as their interests may 
  6.4   appear on the date of the recipient's death.  They shall not be 
  6.5   merged into the remainder interest or the interests of the 
  6.6   surviving joint tenants by reason of ownership.  They shall be 
  6.7   subject to the provisions of this section.  Any conveyance, 
  6.8   transfer, sale, assignment, or encumbrance by a remainderman, a 
  6.9   surviving joint tenant, or their heirs, successors, and assigns 
  6.10  shall be deemed to include all of their interest in the deceased 
  6.11  recipient's life estate or joint tenancy interest continued 
  6.12  under this section; and 
  6.13     (6) the provisions of subdivisions 1c to 1k continuing a 
  6.14  recipient's joint tenancy interests in real property after the 
  6.15  recipient's death do not apply to a homestead owned of record, 
  6.16  on the date the recipient dies, by the recipient and the 
  6.17  recipient's spouse as joint tenants with a right of 
  6.18  survivorship.  Homestead means the real property occupied by the 
  6.19  surviving joint tenant spouse as their sole residence on the 
  6.20  date the recipient dies and classified and taxed to the 
  6.21  recipient and surviving joint tenant spouse as homestead 
  6.22  property for property tax purposes in the calendar year in which 
  6.23  the recipient dies.  For purposes of this exemption, real 
  6.24  property the recipient and their surviving joint tenant spouse 
  6.25  purchase solely with the proceeds from the sale of their prior 
  6.26  homestead, own of record as joint tenants, and qualify as 
  6.27  homestead property under section 273.124 in the calendar year in 
  6.28  which the recipient dies and prior to the recipient's death 
  6.29  shall be deemed to be real property classified and taxed to the 
  6.30  recipient and their surviving joint tenant spouse as homestead 
  6.31  property in the calendar year in which the recipient dies.  The 
  6.32  surviving spouse, or any person with personal knowledge of the 
  6.33  facts, may provide an affidavit describing the homestead 
  6.34  property affected by this clause and stating facts showing 
  6.35  compliance with this clause.  The affidavit shall be prima facie 
  6.36  evidence of the facts it states. 
  7.1      (b) For purposes of this section, "medical assistance" 
  7.2   includes the medical assistance program under this chapter and 
  7.3   the general assistance medical care program under chapter 256D 
  7.4   and but does not include the alternative care program for 
  7.5   nonmedical assistance recipients under section 256B.0913. 
  7.6      Sec. 3.  Minnesota Statutes 2003 Supplement, section 
  7.7   256B.15, subdivision 1a, is amended to read: 
  7.8      Subd. 1a.  [ESTATES SUBJECT TO CLAIMS.] If a person 
  7.9   receives any medical assistance hereunder, on the person's 
  7.10  death, if single, or on the death of the survivor of a married 
  7.11  couple, either or both of whom received medical assistance, or 
  7.12  as otherwise provided for in this section, the total amount paid 
  7.13  for medical assistance rendered for the person and spouse shall 
  7.14  be filed as a claim against the estate of the person or the 
  7.15  estate of the surviving spouse in the court having jurisdiction 
  7.16  to probate the estate or to issue a decree of descent according 
  7.17  to sections 525.31 to 525.313.  
  7.18     A claim shall be filed if medical assistance was rendered 
  7.19  for either or both persons under one of the following 
  7.20  circumstances: 
  7.21     (a) the person was over 55 years of age, and received 
  7.22  services under this chapter, excluding alternative care; 
  7.23     (b) the person resided in a medical institution for six 
  7.24  months or longer, received services under this chapter, 
  7.25  excluding alternative care, and, at the time of 
  7.26  institutionalization or application for medical assistance, 
  7.27  whichever is later, the person could not have reasonably been 
  7.28  expected to be discharged and returned home, as certified in 
  7.29  writing by the person's treating physician.  For purposes of 
  7.30  this section only, a "medical institution" means a skilled 
  7.31  nursing facility, intermediate care facility, intermediate care 
  7.32  facility for persons with mental retardation, nursing facility, 
  7.33  or inpatient hospital; or 
  7.34     (c) the person received general assistance medical care 
  7.35  services under chapter 256D.  
  7.36     The claim shall be considered an expense of the last 
  8.1   illness of the decedent for the purpose of section 524.3-805.  
  8.2   Any statute of limitations that purports to limit any county 
  8.3   agency or the state agency, or both, to recover for medical 
  8.4   assistance granted hereunder shall not apply to any claim made 
  8.5   hereunder for reimbursement for any medical assistance granted 
  8.6   hereunder.  Notice of the claim shall be given to all heirs and 
  8.7   devisees of the decedent whose identity can be ascertained with 
  8.8   reasonable diligence.  The notice must include procedures and 
  8.9   instructions for making an application for a hardship waiver 
  8.10  under subdivision 5; time frames for submitting an application 
  8.11  and determination; and information regarding appeal rights and 
  8.12  procedures.  Counties are entitled to one-half of the nonfederal 
  8.13  share of medical assistance collections from estates that are 
  8.14  directly attributable to county effort.  Counties are entitled 
  8.15  to ten percent of the collections for alternative care directly 
  8.16  attributable to county effort. 
  8.17     Sec. 4.  Minnesota Statutes 2003 Supplement, section 
  8.18  256B.15, subdivision 2, is amended to read: 
  8.19     Subd. 2.  [LIMITATIONS ON CLAIMS.] The claim shall include 
  8.20  only the total amount of medical assistance rendered after age 
  8.21  55 or during a period of institutionalization described in 
  8.22  subdivision 1a, clause (b), and the total amount of general 
  8.23  assistance medical care rendered, and shall not include 
  8.24  interest.  Claims that have been allowed but not paid shall bear 
  8.25  interest according to section 524.3-806, paragraph (d).  A claim 
  8.26  against the estate of a surviving spouse who did not receive 
  8.27  medical assistance, for medical assistance rendered for the 
  8.28  predeceased spouse, is limited to the value of the assets of the 
  8.29  estate that were marital property or jointly owned property at 
  8.30  any time during the marriage.  Claims for alternative care shall 
  8.31  be net of all premiums paid under section 256B.0913, subdivision 
  8.32  12, on or after July 1, 2003, and shall be limited to services 
  8.33  provided on or after July 1, 2003. 
  8.34     Sec. 5.  Minnesota Statutes 2003 Supplement, section 
  8.35  256J.21, subdivision 2, is amended to read: 
  8.36     Subd. 2.  [INCOME EXCLUSIONS.] The following must be 
  9.1   excluded in determining a family's available income: 
  9.2      (1) payments for basic care, difficulty of care, and 
  9.3   clothing allowances received for providing family foster care to 
  9.4   children or adults under Minnesota Rules, parts 9545.0010 to 
  9.5   9545.0260 and 9555.5050 to 9555.6265, and payments received and 
  9.6   used for care and maintenance of a third-party beneficiary who 
  9.7   is not a household member; 
  9.8      (2) reimbursements for employment training received through 
  9.9   the Workforce Investment Act of 1998, United States Code, title 
  9.10  20, chapter 73, section 9201; 
  9.11     (3) reimbursement for out-of-pocket expenses incurred while 
  9.12  performing volunteer services, jury duty, employment, or 
  9.13  informal carpooling arrangements directly related to employment; 
  9.14     (4) all educational assistance, except the county agency 
  9.15  must count graduate student teaching assistantships, 
  9.16  fellowships, and other similar paid work as earned income and, 
  9.17  after allowing deductions for any unmet and necessary 
  9.18  educational expenses, shall count scholarships or grants awarded 
  9.19  to graduate students that do not require teaching or research as 
  9.20  unearned income; 
  9.21     (5) loans, regardless of purpose, from public or private 
  9.22  lending institutions, governmental lending institutions, or 
  9.23  governmental agencies; 
  9.24     (6) loans from private individuals, regardless of purpose, 
  9.25  provided an applicant or participant documents that the lender 
  9.26  expects repayment; 
  9.27     (7)(i) state income tax refunds; and 
  9.28     (ii) federal income tax refunds; 
  9.29     (8)(i) federal earned income credits; 
  9.30     (ii) Minnesota working family credits; 
  9.31     (iii) state homeowners and renters credits under chapter 
  9.32  290A; and 
  9.33     (iv) federal or state tax rebates; 
  9.34     (9) funds received for reimbursement, replacement, or 
  9.35  rebate of personal or real property when these payments are made 
  9.36  by public agencies, awarded by a court, solicited through public 
 10.1   appeal, or made as a grant by a federal agency, state or local 
 10.2   government, or disaster assistance organizations, subsequent to 
 10.3   a presidential declaration of disaster; 
 10.4      (10) the portion of an insurance settlement that is used to 
 10.5   pay medical, funeral, and burial expenses, or to repair or 
 10.6   replace insured property; 
 10.7      (11) reimbursements for medical expenses that cannot be 
 10.8   paid by medical assistance; 
 10.9      (12) payments by a vocational rehabilitation program 
 10.10  administered by the state under chapter 268A, except those 
 10.11  payments that are for current living expenses; 
 10.12     (13) in-kind income, including any payments directly made 
 10.13  by a third party to a provider of goods and services; 
 10.14     (14) assistance payments to correct underpayments, but only 
 10.15  for the month in which the payment is received; 
 10.16     (15) payments for short-term emergency needs under section 
 10.17  256J.626, subdivision 2; 
 10.18     (16) funeral and cemetery payments as provided by section 
 10.19  256.935; 
 10.20     (17) nonrecurring cash gifts of $30 or less, not exceeding 
 10.21  $30 per participant in a calendar month; 
 10.22     (18) any form of energy assistance payment made through 
 10.23  Public Law 97-35, Low-Income Home Energy Assistance Act of 1981, 
 10.24  payments made directly to energy providers by other public and 
 10.25  private agencies, and any form of credit or rebate payment 
 10.26  issued by energy providers; 
 10.27     (19) Supplemental Security Income (SSI), including 
 10.28  retroactive SSI payments and other income of an SSI recipient, 
 10.29  except as described in section 256J.37, subdivision 3b; 
 10.30     (20) Minnesota supplemental aid, including retroactive 
 10.31  payments; 
 10.32     (21) proceeds from the sale of real or personal property; 
 10.33     (22) adoption assistance payments under section 259.67; 
 10.34     (23) state-funded family subsidy program payments made 
 10.35  under section 252.32 to help families care for children with 
 10.36  mental retardation or related conditions, consumer support grant 
 11.1   funds under section 256.476, and resources and services for a 
 11.2   disabled household member under one of the home and 
 11.3   community-based waiver services programs under chapter 256B; 
 11.4      (24) interest payments and dividends from property that is 
 11.5   not excluded from and that does not exceed the asset limit; 
 11.6      (25) rent rebates; 
 11.7      (26) income earned by a minor caregiver, minor child 
 11.8   through age 6, or a minor child who is at least a half-time 
 11.9   student in an approved elementary or secondary education 
 11.10  program; 
 11.11     (27) income earned by a caregiver under age 20 who is at 
 11.12  least a half-time student in an approved elementary or secondary 
 11.13  education program; 
 11.14     (28) MFIP child care payments under section 119B.05; 
 11.15     (29) all other payments made through MFIP to support a 
 11.16  caregiver's pursuit of greater economic stability; 
 11.17     (30) income a participant receives related to shared living 
 11.18  expenses; 
 11.19     (31) reverse mortgages; 
 11.20     (32) benefits provided by the Child Nutrition Act of 1966, 
 11.21  United States Code, title 42, chapter 13A, sections 1771 to 
 11.22  1790; 
 11.23     (33) benefits provided by the women, infants, and children 
 11.24  (WIC) nutrition program, United States Code, title 42, chapter 
 11.25  13A, section 1786; 
 11.26     (34) benefits from the National School Lunch Act, United 
 11.27  States Code, title 42, chapter 13, sections 1751 to 1769e; 
 11.28     (35) relocation assistance for displaced persons under the 
 11.29  Uniform Relocation Assistance and Real Property Acquisition 
 11.30  Policies Act of 1970, United States Code, title 42, chapter 61, 
 11.31  subchapter II, section 4636, or the National Housing Act, United 
 11.32  States Code, title 12, chapter 13, sections 1701 to 1750jj; 
 11.33     (36) benefits from the Trade Act of 1974, United States 
 11.34  Code, title 19, chapter 12, part 2, sections 2271 to 2322; 
 11.35     (37) war reparations payments to Japanese Americans and 
 11.36  Aleuts under United States Code, title 50, sections 1989 to 
 12.1   1989d; 
 12.2      (38) payments to veterans or their dependents as a result 
 12.3   of legal settlements regarding Agent Orange or other chemical 
 12.4   exposure under Public Law 101-239, section 10405, paragraph 
 12.5   (a)(2)(E); 
 12.6      (39) income that is otherwise specifically excluded from 
 12.7   MFIP consideration in federal law, state law, or federal 
 12.8   regulation; 
 12.9      (40) security and utility deposit refunds; 
 12.10     (41) American Indian tribal land settlements excluded under 
 12.11  Public Laws 98-123, 98-124, and 99-377 to the Mississippi Band 
 12.12  Chippewa Indians of White Earth, Leech Lake, and Mille Lacs 
 12.13  reservations and payments to members of the White Earth Band, 
 12.14  under United States Code, title 25, chapter 9, section 331, and 
 12.15  chapter 16, section 1407; 
 12.16     (42) all income of the minor parent's parents and 
 12.17  stepparents when determining the grant for the minor parent in 
 12.18  households that include a minor parent living with parents or 
 12.19  stepparents on MFIP with other children; 
 12.20     (43) income of the minor parent's parents and stepparents 
 12.21  equal to 200 percent of the federal poverty guideline for a 
 12.22  family size not including the minor parent and the minor 
 12.23  parent's child in households that include a minor parent living 
 12.24  with parents or stepparents not on MFIP when determining the 
 12.25  grant for the minor parent.  The remainder of income is deemed 
 12.26  as specified in section 256J.37, subdivision 1b; 
 12.27     (44) payments made to children eligible for relative 
 12.28  custody assistance under section 257.85; 
 12.29     (45) vendor payments for goods and services made on behalf 
 12.30  of a client unless the client has the option of receiving the 
 12.31  payment in cash; and 
 12.32     (46) the principal portion of a contract for deed payment. 
 12.33     Sec. 6.  Minnesota Statutes 2003 Supplement, section 
 12.34  256J.95, subdivision 9, is amended to read: 
 12.35     Subd. 9.  [PROPERTY AND INCOME LIMITATIONS.] The asset 
 12.36  limits and exclusions in section 256J.20 apply to applicants and 
 13.1   recipients of DWP.  All payments, unless excluded in section 
 13.2   256J.21, must be counted as income to determine eligibility for 
 13.3   the diversionary work program.  The county shall treat income as 
 13.4   outlined in section 256J.37, except for subdivision 3a.  The 
 13.5   initial income test and the disregards in section 256J.21, 
 13.6   subdivision 3, shall be followed for determining eligibility for 
 13.7   the diversionary work program. 
 13.8      Sec. 7.  Minnesota Statutes 2003 Supplement, section 
 13.9   514.981, subdivision 6, is amended to read: 
 13.10     Subd. 6.  [TIME LIMITS; CLAIM LIMITS; LIENS ON LIFE ESTATES 
 13.11  AND JOINT TENANCIES.] (a) A medical assistance lien is a lien on 
 13.12  the real property it describes for a period of ten years from 
 13.13  the date it attaches according to section 514.981, subdivision 
 13.14  2, paragraph (a), except as otherwise provided for in sections 
 13.15  514.980 to 514.985.  The agency may renew a medical assistance 
 13.16  lien for an additional ten years from the date it would 
 13.17  otherwise expire by recording or filing a certificate of renewal 
 13.18  before the lien expires.  The certificate shall be recorded or 
 13.19  filed in the office of the county recorder or registrar of 
 13.20  titles for the county in which the lien is recorded or filed.  
 13.21  The certificate must refer to the recording or filing data for 
 13.22  the medical assistance lien it renews.  The certificate need not 
 13.23  be attested, certified, or acknowledged as a condition for 
 13.24  recording or filing.  The registrar of titles or the recorder 
 13.25  shall file, record, index, and return the certificate of renewal 
 13.26  in the same manner as provided for medical assistance liens in 
 13.27  section 514.982, subdivision 2. 
 13.28     (b) A medical assistance lien is not enforceable against 
 13.29  the real property of an estate to the extent there is a 
 13.30  determination by a court of competent jurisdiction, or by an 
 13.31  officer of the court designated for that purpose, that there are 
 13.32  insufficient assets in the estate to satisfy the agency's 
 13.33  medical assistance lien in whole or in part because of the 
 13.34  homestead exemption under section 256B.15, subdivision 4, the 
 13.35  rights of the surviving spouse or minor children under section 
 13.36  524.2-403, paragraphs (a) and (b), or claims with a priority 
 14.1   under section 524.3-805, paragraph (a), clauses (1) to (4).  For 
 14.2   purposes of this section, the rights of the decedent's adult 
 14.3   children to exempt property under section 524.2-403, paragraph 
 14.4   (b), shall not be considered costs of administration under 
 14.5   section 524.3-805, paragraph (a), clause (1). 
 14.6      (c) Notwithstanding any law or rule to the contrary, the 
 14.7   provisions in clauses (1) to (7) apply if a life estate subject 
 14.8   to a medical assistance lien ends according to its terms, or if 
 14.9   a medical assistance recipient who owns a life estate or any 
 14.10  interest in real property as a joint tenant that is subject to a 
 14.11  medical assistance lien dies. 
 14.12     (1) The medical assistance recipient's life estate or joint 
 14.13  tenancy interest in the real property shall not end upon the 
 14.14  recipient's death but shall merge into the remainder interest or 
 14.15  other interest in real property the medical assistance recipient 
 14.16  owned in joint tenancy with others.  The medical assistance lien 
 14.17  shall attach to and run with the remainder or other interest in 
 14.18  the real property to the extent of the medical assistance 
 14.19  recipient's interest in the property at the time of the 
 14.20  recipient's death as determined under this section. 
 14.21     (2) If the medical assistance recipient's interest was a 
 14.22  life estate in real property, the lien shall be a lien against 
 14.23  the portion of the remainder equal to the percentage factor for 
 14.24  the life estate of a person the medical assistance recipient's 
 14.25  age on the date the life estate ended according to its terms or 
 14.26  the date of the medical assistance recipient's death as listed 
 14.27  in the Life Estate Mortality Table in the health care program's 
 14.28  manual. 
 14.29     (3) If the medical assistance recipient owned the interest 
 14.30  in real property in joint tenancy with others, the lien shall be 
 14.31  a lien against the portion of that interest equal to the 
 14.32  fractional interest the medical assistance recipient would have 
 14.33  owned in the jointly owned interest had the medical assistance 
 14.34  recipient and the other owners held title to that interest as 
 14.35  tenants in common on the date the medical assistance recipient 
 14.36  died. 
 15.1      (4) The medical assistance lien shall remain a lien against 
 15.2   the remainder or other jointly owned interest for the length of 
 15.3   time and be renewable as provided in paragraph (a). 
 15.4      (5) Subdivision 5, paragraph (a), clause (4), paragraph 
 15.5   (b), clauses (1) and (2); and subdivision 6, paragraph (b), do 
 15.6   not apply to medical assistance liens which attach to interests 
 15.7   in real property as provided under this subdivision. 
 15.8      (6) The continuation of a medical assistance recipient's 
 15.9   life estate or joint tenancy interest in real property after the 
 15.10  medical assistance recipient's death for the purpose of 
 15.11  recovering medical assistance provided for in sections 514.980 
 15.12  to 514.985 modifies common law principles holding that these 
 15.13  interests terminate on the death of the holder. 
 15.14     (7) Notwithstanding any law or rule to the contrary, no 
 15.15  release, satisfaction, discharge, or affidavit under section 
 15.16  256B.15 shall extinguish or terminate the life estate or joint 
 15.17  tenancy interest of a medical assistance recipient subject to a 
 15.18  lien under sections 514.980 to 514.985 on the date the recipient 
 15.19  dies. 
 15.20     (8) The provisions of clauses (1) to (7) do not apply to a 
 15.21  homestead owned of record, on the date the recipient dies, by 
 15.22  the recipient and the recipient's spouse as joint tenants with a 
 15.23  right of survivorship.  Homestead means the real property 
 15.24  occupied by the surviving joint tenant spouse as their sole 
 15.25  residence on the date the recipient dies and classified and 
 15.26  taxed to the recipient and surviving joint tenant spouse as 
 15.27  homestead property for property tax purposes in the calendar 
 15.28  year in which the recipient dies.  For purposes of this 
 15.29  exemption, real property the recipient and their surviving joint 
 15.30  tenant spouse purchase solely with the proceeds from the sale of 
 15.31  their prior homestead, own of record as joint tenants, and 
 15.32  qualify as homestead property under section 273.124 in the 
 15.33  calendar year in which the recipient dies and prior to the 
 15.34  recipient's death shall be deemed to be real property classified 
 15.35  and taxed to the recipient and their surviving joint tenant 
 15.36  spouse as homestead property in the calendar year in which the 
 16.1   recipient dies.  The surviving spouse, or any person with 
 16.2   personal knowledge of the facts, may provide an affidavit 
 16.3   describing the homestead property affected by this clause and 
 16.4   stating facts showing compliance with this clause.  The 
 16.5   affidavit shall be prima facie evidence of the facts it states. 
 16.6      Sec. 8.  Minnesota Statutes 2003 Supplement, section 
 16.7   524.3-805, is amended to read: 
 16.8      524.3-805 [CLASSIFICATION OF CLAIMS.] 
 16.9      (a) If the applicable assets of the estate are insufficient 
 16.10  to pay all claims in full, the personal representative shall 
 16.11  make payment in the following order: 
 16.12     (1) costs and expenses of administration; 
 16.13     (2) reasonable funeral expenses; 
 16.14     (3) debts and taxes with preference under federal law; 
 16.15     (4) reasonable and necessary medical, hospital, or nursing 
 16.16  home expenses of the last illness of the decedent, including 
 16.17  compensation of persons attending the decedent, a claim filed 
 16.18  under section 256B.15 for recovery of expenditures for 
 16.19  alternative care for nonmedical assistance recipients under 
 16.20  section 256B.0913, and including a claim filed pursuant to 
 16.21  section 256B.15; 
 16.22     (5) reasonable and necessary medical, hospital, and nursing 
 16.23  home expenses for the care of the decedent during the year 
 16.24  immediately preceding death; 
 16.25     (6) debts with preference under other laws of this state, 
 16.26  and state taxes; 
 16.27     (7) all other claims. 
 16.28     (b) No preference shall be given in the payment of any 
 16.29  claim over any other claim of the same class, and a claim due 
 16.30  and payable shall not be entitled to a preference over claims 
 16.31  not due, except that if claims for expenses of the last illness 
 16.32  involve only claims filed under section 256B.15 for recovery of 
 16.33  expenditures for alternative care for nonmedical assistance 
 16.34  recipients under section 256B.0913, section 246.53 for costs of 
 16.35  state hospital care and claims filed under section 256B.15, 
 16.36  claims filed to recover expenditures for alternative care for 
 17.1   nonmedical assistance recipients under section 256B.0913 shall 
 17.2   have preference over claims filed under both sections 246.53 and 
 17.3   other claims filed under section 256B.15, and.  Claims filed 
 17.4   under section 246.53 have preference over claims filed under 
 17.5   section 256B.15 for recovery of amounts other than those for 
 17.6   expenditures for alternative care for nonmedical assistance 
 17.7   recipients under section 256B.0913. 
 17.8      Sec. 9.  [APPROPRIATION.] 
 17.9      $....... is appropriated from the general fund to the 
 17.10  commissioner of human services for the fiscal year beginning 
 17.11  July 1, 2004, for the purposes of this article.  
 17.12     Sec. 10.  [REPEALER.] 
 17.13     Minnesota Statutes 2003 Supplement, sections 256B.15, 
 17.14  subdivisions 1c, 1d, 1e, 1f, 1g, 1h, 1i, 1j, and 1k; 256J.37, 
 17.15  subdivisions 3a and 3b; 514.991; 514.992; 514.993; 514.994; and 
 17.16  514.995, are repealed retroactively from July 1, 2003. 
 17.17     Sec. 11.  [EFFECTIVE DATE.] 
 17.18     Sections 1, 5, and 6 are effective July 1, 2004.  Sections 
 17.19  2, 3, 4, 7, and 8 are effective retroactively from July 1, 2003. 
 17.20                             ARTICLE 2
 17.21         INDIVIDUAL INCOME TAX AND CORPORATE FRANCHISE TAX
 17.22     Section 1.  Minnesota Statutes 2002, section 290.01, 
 17.23  subdivision 6b, is amended to read: 
 17.24     Subd. 6b.  [FOREIGN OPERATING CORPORATION.] The term 
 17.25  "foreign operating corporation," when applied to a corporation, 
 17.26  means a domestic corporation with the following characteristics: 
 17.27     (1) it is part of a unitary business at least one member of 
 17.28  which is taxable in this state; 
 17.29     (2) it is not a foreign sales corporation under section 922 
 17.30  of the Internal Revenue Code, as amended through December 31, 
 17.31  1999, for the taxable year; and 
 17.32     (3) either (i) the average of the percentages of its 
 17.33  property and payrolls assigned to locations inside outside the 
 17.34  United States and the District of Columbia, excluding the 
 17.35  commonwealth of Puerto Rico and possessions of the United 
 17.36  States, as determined under section 290.191 or 290.20, is 20 80 
 18.1   percent or less greater and it has at least $2,000,000 of 
 18.2   property and $1,000,000 of payroll as determined under section 
 18.3   290.191 or 290.20; or (ii) it has in effect a valid election 
 18.4   under section 936 of the Internal Revenue Code. 
 18.5      <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
 18.6   beginning after December 31, 2003. 
 18.7      Sec. 2.  Minnesota Statutes 2003 Supplement, section 
 18.8   290.01, subdivision 19d, is amended to read: 
 18.9      Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
 18.10  TAXABLE INCOME.] For corporations, there shall be subtracted 
 18.11  from federal taxable income after the increases provided in 
 18.12  subdivision 19c:  
 18.13     (1) the amount of foreign dividend gross-up added to gross 
 18.14  income for federal income tax purposes under section 78 of the 
 18.15  Internal Revenue Code; 
 18.16     (2) the amount of salary expense not allowed for federal 
 18.17  income tax purposes due to claiming the federal jobs credit 
 18.18  under section 51 of the Internal Revenue Code; 
 18.19     (3) any dividend (not including any distribution in 
 18.20  liquidation) paid within the taxable year by a national or state 
 18.21  bank to the United States, or to any instrumentality of the 
 18.22  United States exempt from federal income taxes, on the preferred 
 18.23  stock of the bank owned by the United States or the 
 18.24  instrumentality; 
 18.25     (4) amounts disallowed for intangible drilling costs due to 
 18.26  differences between this chapter and the Internal Revenue Code 
 18.27  in taxable years beginning before January 1, 1987, as follows: 
 18.28     (i) to the extent the disallowed costs are represented by 
 18.29  physical property, an amount equal to the allowance for 
 18.30  depreciation under Minnesota Statutes 1986, section 290.09, 
 18.31  subdivision 7, subject to the modifications contained in 
 18.32  subdivision 19e; and 
 18.33     (ii) to the extent the disallowed costs are not represented 
 18.34  by physical property, an amount equal to the allowance for cost 
 18.35  depletion under Minnesota Statutes 1986, section 290.09, 
 18.36  subdivision 8; 
 19.1      (5) the deduction for capital losses pursuant to sections 
 19.2   1211 and 1212 of the Internal Revenue Code, except that: 
 19.3      (i) for capital losses incurred in taxable years beginning 
 19.4   after December 31, 1986, capital loss carrybacks shall not be 
 19.5   allowed; 
 19.6      (ii) for capital losses incurred in taxable years beginning
 19.7   after December 31, 1986, a capital loss carryover to each of the 
 19.8   15 taxable years succeeding the loss year shall be allowed; 
 19.9      (iii) for capital losses incurred in taxable years 
 19.10  beginning before January 1, 1987, a capital loss carryback to 
 19.11  each of the three taxable years preceding the loss year, subject 
 19.12  to the provisions of Minnesota Statutes 1986, section 290.16, 
 19.13  shall be allowed; and 
 19.14     (iv) for capital losses incurred in taxable years beginning
 19.15  before January 1, 1987, a capital loss carryover to each of the 
 19.16  five taxable years succeeding the loss year to the extent such 
 19.17  loss was not used in a prior taxable year and subject to the 
 19.18  provisions of Minnesota Statutes 1986, section 290.16, shall be 
 19.19  allowed; 
 19.20     (6) an amount for interest and expenses relating to income 
 19.21  not taxable for federal income tax purposes, if (i) the income 
 19.22  is taxable under this chapter and (ii) the interest and expenses 
 19.23  were disallowed as deductions under the provisions of section 
 19.24  171(a)(2), 265 or 291 of the Internal Revenue Code in computing 
 19.25  federal taxable income; 
 19.26     (7) in the case of mines, oil and gas wells, other natural 
 19.27  deposits, and timber for which percentage depletion was 
 19.28  disallowed pursuant to subdivision 19c, clause (11), a 
 19.29  reasonable allowance for depletion based on actual cost.  In the 
 19.30  case of leases the deduction must be apportioned between the 
 19.31  lessor and lessee in accordance with rules prescribed by the 
 19.32  commissioner.  In the case of property held in trust, the 
 19.33  allowable deduction must be apportioned between the income 
 19.34  beneficiaries and the trustee in accordance with the pertinent 
 19.35  provisions of the trust, or if there is no provision in the 
 19.36  instrument, on the basis of the trust's income allocable to 
 20.1   each; 
 20.2      (8) for certified pollution control facilities placed in 
 20.3   service in a taxable year beginning before December 31, 1986, 
 20.4   and for which amortization deductions were elected under section 
 20.5   169 of the Internal Revenue Code of 1954, as amended through 
 20.6   December 31, 1985, an amount equal to the allowance for 
 20.7   depreciation under Minnesota Statutes 1986, section 290.09, 
 20.8   subdivision 7; 
 20.9      (9) amounts included in federal taxable income that are due 
 20.10  to refunds of income, excise, or franchise taxes based on net 
 20.11  income or related minimum taxes paid by the corporation to 
 20.12  Minnesota, another state, a political subdivision of another 
 20.13  state, the District of Columbia, or a foreign country or 
 20.14  possession of the United States to the extent that the taxes 
 20.15  were added to federal taxable income under section 290.01, 
 20.16  subdivision 19c, clause (1), in a prior taxable year; 
 20.17     (10) 80 percent of royalties, fees, or other like income 
 20.18  accrued or received from a foreign operating corporation or a 
 20.19  foreign corporation which is part of the same unitary business 
 20.20  as the receiving corporation; 
 20.21     (11) income or gains from the business of mining as defined 
 20.22  in section 290.05, subdivision 1, clause (a), that are not 
 20.23  subject to Minnesota franchise tax; 
 20.24     (12) (11) the amount of handicap access expenditures in the 
 20.25  taxable year which are not allowed to be deducted or capitalized 
 20.26  under section 44(d)(7) of the Internal Revenue Code; 
 20.27     (13) (12) the amount of qualified research expenses not 
 20.28  allowed for federal income tax purposes under section 280C(c) of 
 20.29  the Internal Revenue Code, but only to the extent that the 
 20.30  amount exceeds the amount of the credit allowed under section 
 20.31  290.068; 
 20.32     (14) (13) the amount of salary expenses not allowed for 
 20.33  federal income tax purposes due to claiming the Indian 
 20.34  employment credit under section 45A(a) of the Internal Revenue 
 20.35  Code; 
 20.36     (15) (14) the amount of any refund of environmental taxes 
 21.1   paid under section 59A of the Internal Revenue Code; 
 21.2      (16) (15) for taxable years beginning before January 1, 
 21.3   2008, the amount of the federal small ethanol producer credit 
 21.4   allowed under section 40(a)(3) of the Internal Revenue Code 
 21.5   which is included in gross income under section 87 of the 
 21.6   Internal Revenue Code; 
 21.7      (17) (16) for a corporation whose foreign sales 
 21.8   corporation, as defined in section 922 of the Internal Revenue 
 21.9   Code, constituted a foreign operating corporation during any 
 21.10  taxable year ending before January 1, 1995, and a return was 
 21.11  filed by August 15, 1996, claiming the deduction under section 
 21.12  290.21, subdivision 4, for income received from the foreign 
 21.13  operating corporation, an amount equal to 1.23 multiplied by the 
 21.14  amount of income excluded under section 114 of the Internal 
 21.15  Revenue Code, provided the income is not income of a foreign 
 21.16  operating company; 
 21.17     (18) (17) any decrease in subpart F income, as defined in 
 21.18  section 952(a) of the Internal Revenue Code, for the taxable 
 21.19  year when subpart F income is calculated without regard to the 
 21.20  provisions of section 614 of Public Law 107-147; and 
 21.21     (19) (18) in each of the five tax years immediately 
 21.22  following the tax year in which an addition is required under 
 21.23  subdivision 19c, clause (16), an amount equal to one-fifth of 
 21.24  the delayed depreciation.  For purposes of this clause, "delayed 
 21.25  depreciation" means the amount of the addition made by the 
 21.26  taxpayer under subdivision 19c, clause (16).  The resulting 
 21.27  delayed depreciation cannot be less than zero. 
 21.28     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
 21.29  beginning after December 31, 2003. 
 21.30     Sec. 3.  Minnesota Statutes 2002, section 290.17, 
 21.31  subdivision 2, is amended to read: 
 21.32     Subd. 2.  [INCOME NOT DERIVED FROM CONDUCT OF A TRADE OR 
 21.33  BUSINESS.] The income of a taxpayer subject to the allocation 
 21.34  rules that is not derived from the conduct of a trade or 
 21.35  business must be assigned in accordance with paragraphs (a) to 
 21.36  (f):  
 22.1      (a)(1) Subject to paragraphs (a)(2), (a)(3), and 
 22.2   (a)(4) clauses (2) and (3), income from wages as defined in 
 22.3   section 3401(a) and (f) of the Internal Revenue Code is assigned 
 22.4   to this state if, and to the extent that, the work of the 
 22.5   employee is performed within it; all other income from such 
 22.6   sources is treated as income from sources without this state.  
 22.7      Severance pay shall be considered income from labor or 
 22.8   personal or professional services. 
 22.9      (2) In the case of an individual who is a nonresident of 
 22.10  Minnesota and who is an athlete or entertainer, income from 
 22.11  compensation for labor or personal services performed within 
 22.12  this state shall be determined in the following manner:  
 22.13     (i) The amount of income to be assigned to Minnesota for an 
 22.14  individual who is a nonresident salaried athletic team employee 
 22.15  shall be determined by using a fraction in which the denominator 
 22.16  contains the total number of days in which the individual is 
 22.17  under a duty to perform for the employer, and the numerator is 
 22.18  the total number of those days spent in Minnesota.  For purposes 
 22.19  of this paragraph, off-season training activities, unless 
 22.20  conducted at the team's facilities as part of a team imposed 
 22.21  program, are not included in the total number of duty days.  
 22.22  Bonuses earned as a result of play during the regular season or 
 22.23  for participation in championship, play-off, or all-star games 
 22.24  must be allocated under the formula.  Signing bonuses are not 
 22.25  subject to allocation under the formula if they are not 
 22.26  conditional on playing any games for the team, are payable 
 22.27  separately from any other compensation, and are nonrefundable; 
 22.28  and 
 22.29     (ii) The amount of income to be assigned to Minnesota for 
 22.30  an individual who is a nonresident, and who is an athlete or 
 22.31  entertainer not listed in clause (i), for that person's athletic 
 22.32  or entertainment performance in Minnesota shall be determined by 
 22.33  assigning to this state all income from performances or athletic 
 22.34  contests in this state.  
 22.35     (3) For purposes of this section, amounts received by a 
 22.36  nonresident as "retirement income" as defined in section (b)(1) 
 23.1   of the State Income Taxation of Pension Income Act, Public Law 
 23.2   104-95, are not considered income derived from carrying on a 
 23.3   trade or business or from wages or other compensation for work 
 23.4   an employee performed in Minnesota, and are not taxable under 
 23.5   this chapter.  
 23.6      (4) Wages, otherwise assigned to this state under clause 
 23.7   (1) and not qualifying under clause (3), are not taxable under 
 23.8   this chapter if the following conditions are met: 
 23.9      (i) the recipient was not a resident of this state for any 
 23.10  part of the taxable year in which the wages were received; and 
 23.11     (ii) the wages are for work performed while the recipient 
 23.12  was a resident of this state. 
 23.13     (b) Income or gains from tangible property located in this 
 23.14  state that is not employed in the business of the recipient of 
 23.15  the income or gains must be assigned to this state. 
 23.16     (c) Income or gains from intangible personal property not 
 23.17  employed in the business of the recipient of the income or gains 
 23.18  must be assigned to this state if the recipient of the income or 
 23.19  gains is a resident of this state or is a resident trust or 
 23.20  estate.  
 23.21     Gain on the sale of a partnership interest is allocable to 
 23.22  this state in the ratio of the original cost of partnership 
 23.23  tangible property in this state to the original cost of 
 23.24  partnership tangible property everywhere, determined at the time 
 23.25  of the sale.  If more than 50 percent of the value of the 
 23.26  partnership's assets consists of intangibles, gain or loss from 
 23.27  the sale of the partnership interest is allocated to this state 
 23.28  in accordance with the sales factor of the partnership for its 
 23.29  first full tax period immediately preceding the tax period of 
 23.30  the partnership during which the partnership interest was sold. 
 23.31     Gain on the sale of goodwill or income from a covenant not 
 23.32  to compete that is connected with a business operating all or 
 23.33  partially in Minnesota is allocated to this state to the extent 
 23.34  that the income from the business in the year preceding the year 
 23.35  of sale was assignable to Minnesota under subdivision 3.  
 23.36     When an employer pays an employee for a covenant not to 
 24.1   compete, the income allocated to this state is in the ratio of 
 24.2   the employee's service in Minnesota in the calendar year 
 24.3   preceding leaving the employment of the employer over the total 
 24.4   services performed by the employee for the employer in that year.
 24.5      (d) Income from winnings on a bet made by an individual 
 24.6   while in Minnesota is assigned to this state.  In this 
 24.7   paragraph, "bet" has the meaning given in section 609.75, 
 24.8   subdivision 2, as limited by section 609.75, subdivision 3, 
 24.9   clauses (1), (2), and (3).  
 24.10     (e) All items of gross income not covered in paragraphs (a) 
 24.11  to (d) and not part of the taxpayer's income from a trade or 
 24.12  business shall be assigned to the taxpayer's domicile. 
 24.13     (f) For the purposes of this section, working as an 
 24.14  employee shall not be considered to be conducting a trade or 
 24.15  business. 
 24.16     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
 24.17  beginning after December 31, 2003. 
 24.18     Sec. 4.  Minnesota Statutes 2002, section 290.17, 
 24.19  subdivision 4, is amended to read: 
 24.20     Subd. 4.  [UNITARY BUSINESS PRINCIPLE.] (a) If a trade or 
 24.21  business conducted wholly within this state or partly within and 
 24.22  partly without this state is part of a unitary business, the 
 24.23  entire income of the unitary business is subject to 
 24.24  apportionment pursuant to section 290.191.  Notwithstanding 
 24.25  subdivision 2, paragraph (c), none of the income of a unitary 
 24.26  business is considered to be derived from any particular source 
 24.27  and none may be allocated to a particular place except as 
 24.28  provided by the applicable apportionment formula.  The 
 24.29  provisions of this subdivision do not apply to business income 
 24.30  subject to subdivision 5, income of an insurance company, or 
 24.31  income of an investment company determined under section 290.36. 
 24.32     (b) The term "unitary business" means business activities 
 24.33  or operations which result in a flow of value between them.  The 
 24.34  term may be applied within a single legal entity or between 
 24.35  multiple entities and without regard to whether each entity is a 
 24.36  sole proprietorship, a corporation, a partnership or a trust.  
 25.1      (c) Unity is presumed whenever there is unity of ownership, 
 25.2   operation, and use, evidenced by centralized management or 
 25.3   executive force, centralized purchasing, advertising, 
 25.4   accounting, or other controlled interaction, but the absence of 
 25.5   these centralized activities will not necessarily evidence a 
 25.6   nonunitary business.  Unity is also presumed when business 
 25.7   activities or operations are of mutual benefit, dependent upon 
 25.8   or contributory to one another, either individually or as a 
 25.9   group. 
 25.10     (d) Where a business operation conducted in Minnesota is 
 25.11  owned by a business entity that carries on business activity 
 25.12  outside the state different in kind from that conducted within 
 25.13  this state, and the other business is conducted entirely outside 
 25.14  the state, it is presumed that the two business operations are 
 25.15  unitary in nature, interrelated, connected, and interdependent 
 25.16  unless it can be shown to the contrary.  
 25.17     (e) Unity of ownership is not deemed to exist when a 
 25.18  corporation is involved unless that corporation is a member of a 
 25.19  group of two or more business entities and more than 50 percent 
 25.20  of the voting stock of each member of the group is directly or 
 25.21  indirectly owned by a common owner or by common owners, either 
 25.22  corporate or noncorporate, or by one or more of the member 
 25.23  corporations of the group.  For this purpose, the term "voting 
 25.24  stock" shall include membership interests of mutual insurance 
 25.25  holding companies formed under section 60A.077.  
 25.26     (f) The net income and apportionment factors under section 
 25.27  290.191 or 290.20 of foreign corporations and other foreign 
 25.28  entities which are part of a unitary business shall not be 
 25.29  included in the net income or the apportionment factors of the 
 25.30  unitary business.  A foreign corporation or other foreign entity 
 25.31  which is required to file a return under this chapter shall file 
 25.32  on a separate return basis.  The net income and apportionment 
 25.33  factors under section 290.191 or 290.20 of foreign operating 
 25.34  corporations shall not be included in the net income or the 
 25.35  apportionment factors of the unitary business except as provided 
 25.36  in paragraph (g). 
 26.1      (g) The adjusted net income of a foreign operating 
 26.2   corporation shall be deemed to be paid as a dividend on the last 
 26.3   day of its taxable year to each shareholder thereof, in 
 26.4   proportion to each shareholder's ownership, with which such 
 26.5   corporation is engaged in a unitary business.  Such deemed 
 26.6   dividend shall be treated as a dividend under section 290.21, 
 26.7   subdivision 4.  The dividend received deduction shall not be 
 26.8   allowed on dividends, interest, royalties, or capital gains 
 26.9   received by the foreign operating corporation included in the 
 26.10  deemed dividend. 
 26.11     Dividends actually paid by a foreign operating corporation 
 26.12  to a corporate shareholder which is a member of the same unitary 
 26.13  business as the foreign operating corporation shall be 
 26.14  eliminated from the net income of the unitary business in 
 26.15  preparing a combined report for the unitary business.  The 
 26.16  adjusted net income of a foreign operating corporation shall be 
 26.17  its net income adjusted as follows: 
 26.18     (1) any taxes paid or accrued to a foreign country, the 
 26.19  commonwealth of Puerto Rico, or a United States possession or 
 26.20  political subdivision of any of the foregoing shall be a 
 26.21  deduction; and 
 26.22     (2) the subtraction from federal taxable income for 
 26.23  payments received from foreign corporations or foreign operating 
 26.24  corporations under section 290.01, subdivision 19d, clause (10), 
 26.25  shall not be allowed. 
 26.26     If a foreign operating corporation incurs a net loss, 
 26.27  neither income nor deduction from that corporation shall be 
 26.28  included in determining the net income of the unitary business. 
 26.29     (h) For purposes of determining the net income of a unitary 
 26.30  business and the factors to be used in the apportionment of net 
 26.31  income pursuant to section 290.191 or 290.20, there must be 
 26.32  included only the income and apportionment factors of domestic 
 26.33  corporations or other domestic entities other than foreign 
 26.34  operating corporations that are determined to be part of the 
 26.35  unitary business pursuant to this subdivision, notwithstanding 
 26.36  that foreign corporations or other foreign entities might be 
 27.1   included in the unitary business.  
 27.2      (i) Deductions for expenses, interest, or taxes otherwise 
 27.3   allowable under this chapter that are connected with or 
 27.4   allocable against dividends, deemed dividends described in 
 27.5   paragraph (g), or royalties, fees, or other like income 
 27.6   described in section 290.01, subdivision 19d, clause (10), shall 
 27.7   not be disallowed. 
 27.8      (j) Each corporation or other entity, except a sole 
 27.9   proprietorship, that is part of a unitary business must file 
 27.10  combined reports as the commissioner determines.  On the 
 27.11  reports, all intercompany transactions between entities included 
 27.12  pursuant to paragraph (h) must be eliminated and the entire net 
 27.13  income of the unitary business determined in accordance with 
 27.14  this subdivision is apportioned among the entities by using each 
 27.15  entity's Minnesota factors for apportionment purposes in the 
 27.16  numerators of the apportionment formula and the total factors 
 27.17  for apportionment purposes of all entities included pursuant to 
 27.18  paragraph (h) in the denominators of the apportionment formula. 
 27.19     (k) If a corporation has been divested from a unitary 
 27.20  business and is included in a combined report for a fractional 
 27.21  part of the common accounting period of the combined report:  
 27.22     (1) its income includable in the combined report is its 
 27.23  income incurred for that part of the year determined by 
 27.24  proration or separate accounting; and 
 27.25     (2) its sales, property, and payroll included in the 
 27.26  apportionment formula must be prorated or accounted for 
 27.27  separately. 
 27.28     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
 27.29  beginning after December 31, 2003.