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HF 2108

as introduced - 88th Legislature (2013 - 2014) Posted on 02/25/2014 03:08pm

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

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Current Version - as introduced

A bill for an act
relating to taxation; unifying the estate and gift taxes; modifying base, rate,
administrative, and procedural provisions of the taxes; imposing penalties;
amending Minnesota Statutes 2012, sections 270C.585; 289A.01; 289A.10,
subdivisions 2, 3, by adding a subdivision; 289A.18, subdivision 3, by adding
a subdivision; 289A.19, subdivision 4, by adding a subdivision; 289A.20, by
adding a subdivision; 289A.30, subdivision 2, by adding a subdivision; 289A.35;
289A.38, subdivisions 6, 7; 289A.50, subdivision 1; 289A.56, subdivision 3;
289A.60, subdivisions 1, 2; 291.03, by adding a subdivision; Minnesota Statutes
2013 Supplement, sections 289A.10, subdivision 1; 291.005, subdivision 1;
291.03, subdivision 1; 292.16; 292.17, subdivision 1, by adding subdivisions;
292.20; proposing coding for new law in Minnesota Statutes, chapters 291; 292;
repealing Minnesota Statutes 2012, sections 291.03, subdivision 1b; 291.41;
291.42; 291.43; 291.44; 291.45; 291.46; 291.47; Minnesota Statutes 2013
Supplement, sections 291.03, subdivision 1c; 292.17, subdivisions 2, 3; 292.18;
292.19; 292.21.

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

Section 1.

Minnesota Statutes 2012, section 270C.585, is amended to read:


270C.585 TRANSFEREE LIABILITY FOR ESTATE AND GIFT TAX.

(a) The personal representative and person to whom property that is subject to
taxation under chapter 291 is transferred, other than a bona fide purchaser, mortgagee, or
lessee, is personally liable for that tax, until its payment, to the extent of the value of the
property at the time of the transfer. Personal liability also does not extend to subsequent
transferees from bona fide purchasers, mortgagees, and lessees.

(b) The person to whom property that is subject to taxation under chapter 292 is
transferred, other than a bona fide purchaser, mortgagee, or lessee, is personally liable
for that tax, until its payment, to the extent of the value of the property at the time of the
transfer. The personal representative, if required to file a gift tax return, is personally liable
for that tax until its payment to the extent of the value of the probate property at the time
of the decedent's death. Personal liability also does not extend to subsequent transferees
from bona fide purchasers, mortgagees, and lessees.

Sec. 2.

Minnesota Statutes 2012, section 289A.01, is amended to read:


289A.01 APPLICATION OF CHAPTER.

This chapter applies to laws administered by the commissioner under chapters 290,
290A, 291, 292, and 297A, and sections 298.01 and 298.015.

Sec. 3.

Minnesota Statutes 2013 Supplement, section 289A.10, subdivision 1, is
amended to read:


Subdivision 1.

Return required.

In the case of a decedent who has an interest in
property with a situs in Minnesota, the personal representative must submit a Minnesota
estate tax return to the commissioner, on a form prescribed by the commissioner, if:

(1) a federal estate tax return is required to be filed; or

(2) the sum of the federal gross estate and federal adjusted taxable gifts made within
three years of the date of the decedent's death
, as defined in section 2001(b) of the Internal
Revenue Code,
exceeds $1,000,000 $1,500,000.

The return must contain a computation of the Minnesota estate tax due. The return
must be signed by the personal representative.

Sec. 4.

Minnesota Statutes 2012, section 289A.10, is amended by adding a subdivision
to read:


Subd. 1b.

Gift tax return required.

Any individual who makes a taxable gift
during the taxable year shall file a gift tax return on a form prescribed by the commissioner.
If the donor dies before filing the return, the personal representative of the donor's estate
shall file the return. If the donor becomes legally incompetent before filing the return, the
guardian or conservator shall file the return.

Sec. 5.

Minnesota Statutes 2012, section 289A.10, subdivision 2, is amended to read:


Subd. 2.

Documents required.

The commissioner may designate on the return
estate and gift tax returns the documents that are required to be filed together with the
return to determine the computation of tax.

Sec. 6.

Minnesota Statutes 2012, section 289A.10, subdivision 3, is amended to read:


Subd. 3.

Definitions.

For purposes of this section, the definitions contained in
section sections 291.005 and 292.16 apply.

Sec. 7.

Minnesota Statutes 2012, section 289A.18, subdivision 3, is amended to read:


Subd. 3.

Estate tax returns.

An estate tax return must be filed with the
commissioner within nine months after the decedent's death. Except in the case of the
estate of a decedent dying after December 31, 2009, and before December 17, 2010, then
an estate tax return must be filed with the commissioner within nine months after the
decedent's death; within the time provided by section 289A.19, subdivision 4; or before
September 20, 2011; whichever is later.

Sec. 8.

Minnesota Statutes 2012, section 289A.18, is amended by adding a subdivision
to read:


Subd. 3b.

Gift tax returns.

Gift tax returns must be filed with the commissioner by
the April 15 following the close of the calendar year during which the gift was made.

Sec. 9.

Minnesota Statutes 2012, section 289A.19, subdivision 4, is amended to read:


Subd. 4.

Estate tax returns.

The time for filing an estate tax return shall be is
extended for either six months or. If an estate is required to file a federal estate tax
return, the time for filing an estate tax return is extended by six months or
the amount of
time granted under section 6081 of the Internal Revenue Code to file the federal estate
tax return, whichever is longer.

Sec. 10.

Minnesota Statutes 2012, section 289A.19, is amended by adding a
subdivision to read:


Subd. 4a.

Gift tax returns.

The time for filing a gift tax return is extended for
the amount of time granted under section 6075 of the Internal Revenue Code to file the
federal gift tax return.

Sec. 11.

Minnesota Statutes 2012, section 289A.20, is amended by adding a
subdivision to read:


Subd. 3b.

Gift tax.

Taxes imposed under chapter 292 must be paid by the April 15
following the close of the calendar year during which the gift was made.

Sec. 12.

Minnesota Statutes 2012, section 289A.30, subdivision 2, is amended to read:


Subd. 2.

Estate tax.

(a) Where good cause exists, the commissioner may extend the
time for payment of estate tax for a period of not more than six months.

(b) If an estate is required to file a federal estate tax return and an extension to pay
the federal estate tax has been granted under section 6161 of the Internal Revenue Code,
the time for payment of the estate tax without penalty is extended for that period. A
taxpayer who owes at least $5,000 in taxes and who, under section 6161 or 6166 of the
Internal Revenue Code has been granted an extension for payment of the tax shown on the
return, may elect to pay the tax due to the commissioner in equal amounts at the same time
as required for federal purposes. A taxpayer electing to pay the tax in installments shall
defer a percentage of tax that does not exceed the percentage of federal tax deferred and
must notify the commissioner in writing no later than nine months after the death of the
person whose estate is subject to taxation. If the taxpayer fails to pay an installment on
time, unless it is shown that the failure is due to reasonable cause, the election is revoked
and the entire amount of unpaid tax plus accrued interest is due and payable 90 days after
the date on which the installment was payable.

Sec. 13.

Minnesota Statutes 2012, section 289A.30, is amended by adding a
subdivision to read:


Subd. 3.

Gift tax.

(a) Where good cause exists, the commissioner may extend the
time for payment of gift tax for a period of not more than six months.

(b) If an individual is required to file a federal gift tax return and an extension to pay
the federal gift tax has been granted under section 6161 of the Internal Revenue Code, the
time for payment of the gift tax without penalty is extended for that period.

Sec. 14.

Minnesota Statutes 2012, section 289A.35, is amended to read:


289A.35 ASSESSMENTS ON RETURNS.

(a) The commissioner may audit and adjust the taxpayer's computation of federal
taxable income, items of federal tax preferences, or federal credit amounts to make them
conform with the provisions of chapter 290 or section 298.01. If a return has been filed,
the commissioner shall enter the liability reported on the return and may make any audit
or investigation that is considered necessary.

(b) The commissioner may audit and adjust the taxpayer's computation of tax under
chapter chapters 291 and 292. In the case of a return filed pursuant to section 289A.10,
the commissioner shall notify the estate no later than nine months after the filing date,
as provided by section 289A.38, subdivision 2, whether the return is under examination
or the return has been processed as filed.

Sec. 15.

Minnesota Statutes 2012, section 289A.38, subdivision 6, is amended to read:


Subd. 6.

Omission in excess of 25 percent.

Additional taxes may be assessed
within 6-1/2 years after the due date of the return or the date the return was filed,
whichever is later, if:

(1) the taxpayer omits from gross income an amount properly includable in it that is
in excess of 25 percent of the amount of gross income stated in the return;

(2) the taxpayer omits from a sales, use, or withholding tax return an amount of taxes
in excess of 25 percent of the taxes reported in the return; or

(3) the taxpayer omits from the gross estate assets in excess of 25 percent of the
gross estate reported in the return.; or

(4) the taxpayer omits from Minnesota taxable gifts the value of gifts in excess of 25
percent of the value of Minnesota taxable gifts reported on the return.

Sec. 16.

Minnesota Statutes 2012, section 289A.38, subdivision 7, is amended to read:


Subd. 7.

Federal tax changes.

If the amount of income, items of tax preference,
deductions, or credits for any year of a taxpayer, or the wages paid by a taxpayer for
any period, as reported to the Internal Revenue Service is changed or corrected by the
commissioner of Internal Revenue or other officer of the United States or other competent
authority, or where a renegotiation of a contract or subcontract with the United States
results in a change in income, items of tax preference, deductions, credits, or withholding
tax, or, in the case of estate or gift tax, where there are adjustments to the taxable estate or
taxable gifts
, the taxpayer shall report the change or correction or renegotiation results
in writing to the commissioner. The report must be submitted within 180 days after the
final determination and must be in the form of either an amended Minnesota estate, gift
withholding tax, corporate franchise tax, or income tax return conceding the accuracy of
the federal determination or a letter detailing how the federal determination is incorrect
or does not change the Minnesota tax. An amended Minnesota income tax return must
be accompanied by an amended property tax refund return, if necessary. A taxpayer
filing an amended federal tax return must also file a copy of the amended return with the
commissioner of revenue within 180 days after filing the amended return.

Sec. 17.

Minnesota Statutes 2012, section 289A.50, subdivision 1, is amended to read:


Subdivision 1.

General right to refund.

(a) Subject to the requirements of this
section and section 289A.40, a taxpayer who has paid a tax in excess of the taxes lawfully
due and who files a written claim for refund will be refunded or credited the overpayment
of the tax determined by the commissioner to be erroneously paid.

(b) The claim must specify the name of the taxpayer, the date when and the period
for which the tax was paid, the kind of tax paid, the amount of the tax that the taxpayer
claims was erroneously paid, the grounds on which a refund is claimed, and other
information relative to the payment and in the form required by the commissioner. An
income tax, estate tax, gift tax, or corporate franchise tax return, or amended return
claiming an overpayment constitutes a claim for refund.

(c) When, in the course of an examination, and within the time for requesting a
refund, the commissioner determines that there has been an overpayment of tax, the
commissioner shall refund or credit the overpayment to the taxpayer and no demand
is necessary. If the overpayment exceeds $1, the amount of the overpayment must
be refunded to the taxpayer. If the amount of the overpayment is less than $1, the
commissioner is not required to refund. In these situations, the commissioner does not
have to make written findings or serve notice by mail to the taxpayer.

(d) If the amount allowable as a credit for withholding, estimated taxes, or dependent
care exceeds the tax against which the credit is allowable, the amount of the excess is
considered an overpayment. The refund allowed by section 290.06, subdivision 23, is also
considered an overpayment. The requirements of section 270C.33 do not apply to the
refunding of such an overpayment shown on the original return filed by a taxpayer.

(e) If the entertainment tax withheld at the source exceeds by $1 or more the taxes,
penalties, and interest reported in the return of the entertainment entity or imposed by
section 290.9201, the excess must be refunded to the entertainment entity. If the excess is
less than $1, the commissioner need not refund that amount.

(f) If the surety deposit required for a construction contract exceeds the liability of
the out-of-state contractor, the commissioner shall refund the difference to the contractor.

(g) An action of the commissioner in refunding the amount of the overpayment does
not constitute a determination of the correctness of the return of the taxpayer.

(h) There is appropriated from the general fund to the commissioner of revenue the
amount necessary to pay refunds allowed under this section.

Sec. 18.

Minnesota Statutes 2012, section 289A.56, subdivision 3, is amended to read:


Subd. 3.

Withholding tax, entertainer withholding tax, withholding from
payments to out-of-state contractors, estate tax, gift tax, and sales tax overpayments.

When a refund is due for overpayments of withholding tax, entertainer withholding tax, or
withholding from payments to out-of-state contractors, interest is computed from the date
of payment to the date the refund is paid or credited. For purposes of this subdivision, the
date of payment is the later of the date the tax was finally due or was paid.

For the purposes of computing interest on estate tax refunds, interest is paid from
the later of the date of overpayment, the date the estate tax return is due, or the date the
original estate tax return is filed to the date the refund is paid.

For the purposes of computing interest on gift tax refunds, interest is paid from the
later of the date of overpayment, the date the gift tax return is due, or the date the original
gift tax return is filed to the date the refund is paid.

For purposes of computing interest on sales and use tax refunds, interest is paid from
the date of payment to the date the refund is paid or credited, if the refund claim includes a
detailed schedule reflecting the tax periods covered in the claim. If the refund claim
submitted does not include a detailed schedule reflecting the tax periods covered in the
claim, interest is computed from the date the claim was filed.

Sec. 19.

Minnesota Statutes 2012, section 289A.60, subdivision 1, is amended to read:


Subdivision 1.

Penalty for failure to pay tax.

(a) If a corporate franchise,
fiduciary income, mining company, estate, gift, partnership, S corporation, or nonresident
entertainer tax is not paid within the time specified for payment, a penalty of six percent
is added to the unpaid tax, except that if a corporation or mining company meets the
requirements of section 289A.19, subdivision 2, the penalty is not imposed.

(b) For the taxes listed in paragraph (a), in addition to the penalty in that paragraph,
whether imposed or not, if a return or amended return is filed after the due date, without
regard to extensions, and any tax reported as remaining due is not remitted with the return
or amended return, a penalty of five percent of the tax not paid is added to the tax. If the
commissioner issues an order assessing additional tax for a tax listed in paragraph (a),
and the tax is not paid within 60 days after the mailing of the order or, if appealed, within
60 days after final resolution of the appeal, a penalty of five percent of the unpaid tax
is added to the tax.

(c) If an individual income tax is not paid within the time specified for payment, a
penalty of four percent is added to the unpaid tax. There is a presumption of reasonable
cause for the late payment if the individual: (i) pays by the due date of the return at
least 90 percent of the amount of tax, after credits other than withholding and estimated
payments, shown owing on the return; (ii) files the return within six months after the due
date; and (iii) pays the remaining balance of the reported tax when the return is filed.

(d) If the commissioner issues an order assessing additional individual income tax,
and the tax is not paid within 60 days after the mailing of the order or, if appealed, within
60 days after final resolution of the appeal, a penalty of four percent of the unpaid tax
is added to the tax.

(e) If a withholding or sales or use tax is not paid within the time specified for
payment, a penalty must be added to the amount required to be shown as tax. The penalty
is five percent of the tax not paid on or before the date specified for payment of the tax
if the failure is for not more than 30 days, with an additional penalty of five percent of
the amount of tax remaining unpaid during each additional 30 days or fraction of 30 days
during which the failure continues, not exceeding 15 percent in the aggregate.

Sec. 20.

Minnesota Statutes 2012, section 289A.60, subdivision 2, is amended to read:


Subd. 2.

Penalty for failure to make and file return.

(a) If a taxpayer fails to make
and file a tax return within the time prescribed, including an extension, or fails to file an
individual income tax return within six months after the due date, a penalty of equal to
the greater of:

(1) five percent of the amount of tax not paid by the end of that period; or

(2) the amount under paragraph (b) is added to the tax.

(b) If an individual fails to make and file a gift tax return within the time prescribed,
including an extension, and the amount of the Minnesota taxable gift equals or exceeds
$100,000, a penalty equal to the lesser of five percent of:

(1) the Minnesota taxable gift; or

(2) the amount of the individual's net worth that exceeds $1,500,000, or $3,000,000
in combined net worth for a married couple.

The maximum penalty under this paragraph is limited to $25,000.

(c) For purposes of this subdivision, "net worth" means the sum of the following
amounts owned by the individual donor (or the sum of the amounts owned by either or
both spouses in the case of a married couple) at the close of the taxable year in which
the gift was made:

(1) the fair market value of marketable securities, as defined in section 731(c)(2)(A)
of the Internal Revenue Code; and

(2) the lesser of the fair market value or the adjusted basis, as defined in section 1011
of the Internal Revenue Code, of property, other than marketable securities.

Sec. 21.

Minnesota Statutes 2013 Supplement, section 291.005, subdivision 1, is
amended to read:


Subdivision 1.

Scope.

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

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

(2) "Federal gross estate" means the gross estate of a decedent as required to be valued
and otherwise determined for federal estate tax purposes under the Internal Revenue Code.

(3) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through January 3, 2013, but without regard to the provisions of section
2011, paragraph (f), of the Internal Revenue Code
.

(4) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
defined by section 2011(b)(3) of the Internal Revenue Code, plus

(i) the amount of deduction for state death taxes allowed under section 2058 of the
Internal Revenue Code;

(ii) the amount of taxable gifts, as defined in section 292.16, and made by the
decedent within three years of the decedent's date of death; less

(iii)(A) the value of qualified small business property under section 291.03,
subdivision 9
, and the value of qualified farm property under section 291.03, subdivision
10
, or (B) $4,000,000, whichever is less.

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

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

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

(8) (7) "Resident decedent" means an individual whose domicile at the time of
death was in Minnesota.

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

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

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

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

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

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

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

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

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

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

(iv) a trust to the extent the property is includible in the decedent's federal gross estate.

Sec. 22.

[291.016] MINNESOTA TAXABLE ESTATE.

Subdivision 1.

General.

For purposes of the tax under this chapter, the Minnesota
taxable estate equals the federal taxable estate as provided under section 2051 of the Internal
Revenue Code, without regard to whether the estate is subject to the federal estate tax:

(1) increased by the additions under subdivision 2; and

(2) decreased by the subtraction under subdivision 3.

Subd. 2.

Additions.

The following amounts, to the extent deducted in computing
the federal taxable estate, must be added in computing the Minnesota taxable estate:

(1) the amount of the deduction for state death taxes allowed under section 2058 of
the Internal Revenue Code;

(2) the amount of the deduction for foreign death taxes allowed under section
2053(d) of the Internal Revenue Code;

(3) the aggregate amount of all taxable gifts as defined in section 292.16 and made
by the decedent after June 30, 2013; and

(4) the amount of any tax paid by the decedent or the estate under chapter 292 during
the three-year period ending on the date of the decedent's death.

Subd. 3.

Subtraction.

The value of qualified small business property under section
291.03 and the value of qualified farm property under section 291.03, subdivision 10, or
$3,500,000, whichever is less, may be subtracted in computing the Minnesota taxable
estate but must not reduce the Minnesota taxable estate to less than zero.

Sec. 23.

Minnesota Statutes 2013 Supplement, section 291.03, subdivision 1, is
amended to read:


Subdivision 1.

Tax amount.

(a) In the case of a resident decedent, the tax imposed
shall be an amount equal to the proportion of the maximum credit for state death taxes
computed under section 2011 of the Internal Revenue Code, but using Minnesota adjusted
taxable estate instead of federal adjusted taxable estate, as the Minnesota gross estate bears
to the value of the federal gross estate. The tax is reduced by:

(1) the gift tax paid by the decedent under section 292.17 on gifts included in the
Minnesota adjusted taxable estate and not subtracted as qualified farm or small business
property; and

(2) any credit allowed under subdivision 1c. under this subdivision must be
computed by applying to the Minnesota taxable estate the following schedule of rates:

Amount of the Minnesota taxable estate
Rate of tax
Not over $1,500,000
None
Over $1,500,000, but not over $4,000,000
12 percent of the excess over $1,500,000
Over $4,000,000, but not over $6,000,000
$300,000, plus 14 percent of the excess over
$4,000,000
Over $6,000,000, but not over $10,000,000
$580,000, plus 16 percent of the excess over
$6,000,000
Over $10,000,000
$1,220,000, plus 18 percent of the excess
over $10,000,000

(b) In the case of a nonresident decedent, the tax determined under this subdivision
must not be greater than the sum of the following amounts multiplied by a fraction, the
numerator of which is the Minnesota gross estate and the denominator of which is the
federal gross estate:
be computed as provided under paragraph (a) and then multiplied
by a fraction, the numerator of which is the value of the Minnesota gross estate plus the
aggregate amount of all Minnesota taxable gifts as defined in section 292.16 and made
by the decedent after June 30, 2013, and the denominator of which is the federal gross
estate plus the value of taxable gifts as defined in section 292.16 and made by the decedent
after June 30, 2013.

(1) the rates and brackets under section 2001(c) of the Internal Revenue Code
multiplied by the sum of:

(i) the taxable estate, as defined under section 2051 of the Internal Revenue Code; plus

(ii) adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue
Code; less

(iii) the lesser of (A) the sum of the value of qualified small business property
under subdivision 9, and the value of qualified farm property under subdivision 10, or
(B) $4,000,000; less

(2) the amount of tax allowed under section 2001(b)(2) of the Internal Revenue
Code; and less

(3) the federal credit allowed under section 2010 of the Internal Revenue Code.

(c) For purposes of this subdivision, "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through December 31, 2000.

Sec. 24.

Minnesota Statutes 2012, section 291.03, is amended by adding a subdivision
to read:


Subd. 1d.

Elections.

(a) For the purposes of this section, the value of the Minnesota
taxable estate is determined by taking into account the deduction available under section
2056(b) of the Internal Revenue Code. An election under section 2056(b) of the Internal
Revenue Code may be made for state estate tax purposes regardless of whether the
election is made for federal estate tax purposes. The value of the gross estate includes
the value of any property in which the decedent had a qualifying income interest for life
for which an election was made under this subdivision.

(b) Except for an election made under section 2056(b) of the Internal Revenue Code,
no federal election is allowable in computing the tax under this chapter unless the estate is
required to file a federal estate tax return, the election is made on the federal estate tax
return, and the election is allowed under federal law.

Sec. 25.

[291.031] CREDITS.

Subdivision 1.

Gift tax credit.

A credit is allowed against the tax imposed under
this chapter for gift tax paid by the decedent under section 292.17 on gifts included in the
Minnesota taxable estate and not subtracted as qualified small business or farm property.

Subd. 2.

Resident decedent tax credit.

The estate of a resident decedent is allowed
a credit against the tax due under this section equal to the lesser of:

(1) the amount of estate or inheritance tax paid by the estate to another state that is
attributable to property with a situs outside of Minnesota; or

(2) the amount of tax paid under this chapter attributable to that property.

Subd. 3.

Nonresident decedent tax credit.

(a) The estate of a nonresident decedent
that is subject to tax under this chapter on the value of Minnesota situs property held in
a pass-through entity is allowed a credit against the tax due under this section equal to
the lesser of:

(1) the amount of estate or inheritance tax paid to another state that is attributable to
the Minnesota situs property held in the pass-through entity; or

(2) the amount of tax paid under this chapter attributable to the Minnesota situs
property held in the pass-through entity.

(b) The amount of tax attributable to the Minnesota situs property held in the
pass-through entity must be determined by the increase in the estate or inheritance tax that
results from including the market value of the property in the estate or treating the value
as a taxable inheritance to the recipient of the property.

Sec. 26.

Minnesota Statutes 2013 Supplement, section 292.16, is amended to read:


292.16 DEFINITIONS.

(a) For purposes of this chapter, the following definitions apply.

(b) The definitions of terms defined in section 291.005 apply.

(c) "Minnesota taxable gifts" means taxable gifts, including any gifts that were not
disclosed to federal tax authorities, after:

(1) excluding taxable gifts of any property with its situs outside Minnesota made by
a nonresident;

(2) including taxable gifts of any property with its situs in Minnesota made by
a nonresident; and

(3) including taxable gifts of any property made by a resident.

(d) "Nonresident" means an individual whose domicile at the time of transfer of
the property by gift was not in Minnesota.

(e) "Resident" has the meaning given in section 290.01, subdivision 7, paragraph
(a)
means an individual whose domicile at the time of transfer of the property by gift
was in Minnesota
.

(d) (f) "Taxable gifts" means:

(1) the transfers by gift which are included in taxable gifts for federal gift tax
purposes under the following sections of the Internal Revenue Code:

(i) section 2501(a)(4);

(ii) section 2503;

(ii) (iii) sections 2511 to 2514; and

(iii) (iv) sections 2516 to 2519;

(v) section 529; and

(vi) section 530; plus

(2) for a transfer that includes a "qualified interest," as defined in section 2702 of
the Internal Revenue Code, consisting of a term interest of less than ten years, excluding
any life interest, or for which the value of the qualified interest reduces the value of the
gift to zero, in the calendar year the term interest ends other than as a result of the death
of the grantor, the lesser of the following:

(i) the fair market value of the remaining property after the final transfer is made to the
grantor or the spouse of the grantor less any tax paid under this chapter on the transfer; or

(ii) the value of the qualified interest as disclosed on the federal gift tax return; less

(2) (3) the deductions allowed in sections 2522 to 2524 of the Internal Revenue Code.

Sec. 27.

Minnesota Statutes 2013 Supplement, section 292.17, subdivision 1, is
amended to read:


Subdivision 1.

Imposition.

(a) For each calendar year, a tax is imposed on the
transfer of property by gift by any individual resident or nonresident in an amount equal to
ten percent of the amount of the taxable gift
determined under this chapter.

(b) The donor is liable for payment of the tax. If the gift tax is not paid when due,
the donee of any gift is personally liable for the tax to the extent of the value of the gift.

Sec. 28.

Minnesota Statutes 2013 Supplement, section 292.17, is amended by adding a
subdivision to read:


Subd. 1a.

Rate of tax.

The tax imposed for each calendar year is computed by
applying to the aggregate of Minnesota taxable gifts made by the donor during the donor's
lifetime the following schedule of rates:

Amount of the Minnesota taxable estate
Rate of tax
Not over $1,500,000
None
Over $1,500,000, but not over $4,000,000
12 percent of the excess over $1,500,000
Over $4,000,000, but not over $6,000,000
$300,000, plus 14 percent of the excess over
$4,000,000
Over $6,000,000, but not over $10,000,000
$580,000, plus 16 percent of the excess over
$6,000,000
Over $10,000,000
$1,220,000, plus 18 percent of the excess
over $10,000,000

Sec. 29.

Minnesota Statutes 2013 Supplement, section 292.17, is amended by adding a
subdivision to read:


Subd. 4.

Application of federal rules.

In administering the tax under this chapter,
the commissioner shall apply the provisions of sections 2701 to 2704 of the Internal
Revenue Code. The words "secretary or his delegate," as used in those sections of the
Internal Revenue Code, mean the commissioner.

Sec. 30.

Minnesota Statutes 2013 Supplement, section 292.17, is amended by adding a
subdivision to read:


Subd. 5.

Elections.

(a) For purposes of this section, the value of the Minnesota
taxable gift is determined by taking into account the deduction available under section
2523(f) of the Internal Revenue Code. An election under section 2523(f) of the Internal
Revenue Code may be made for Minnesota gift tax purposes regardless of whether the
election is made for federal gift tax purposes. The value of the Minnesota taxable estate
includes the value of any property in which the decedent had a qualifying income interest
for life for which an election was made under this subdivision.

(b) Except for an election made under section 2523(f) of the Internal Revenue Code,
no federal election is allowable in computing the tax under this chapter unless the donor is
required to file a federal gift tax return, the election is made on the federal gift tax return,
and the election is allowed under federal law.

Sec. 31.

[292.181] CREDITS.

Subdivision 1.

Gift tax credit.

A credit is allowed against the tax imposed on the
donor under this chapter for gift tax paid on gifts included in Minnesota taxable gifts on
a prior return.

Subd. 2.

Nonresident tax credit.

(a) A nonresident who is subject to tax under this
chapter on the value of Minnesota situs property held in a pass-through entity is allowed a
credit against the tax due under this section equal to the lesser of:

(1) the amount of gift tax paid to another state that is attributable to the Minnesota
situs property held in the pass-through entity; or

(2) the amount of tax paid under this chapter attributable to the Minnesota situs
property held in the pass-through entity.

(b) The amount of tax attributable to the Minnesota situs property held in the
pass-through entity must be determined by the increase in the gift tax that results from
including the market value of the property in the value of Minnesota taxable gifts.

Sec. 32.

Minnesota Statutes 2013 Supplement, section 292.20, is amended to read:


292.20 APPRAISAL OF PROPERTY; DECLARATION BY DONOR.

The commissioner may require the donor or the donee to show the property subject
to the tax under section 292.17 to the commissioner upon demand and may employ
a suitable person to appraise the property. The donor shall submit a declaration, in a
form prescribed by the commissioner and including any certification required by the
commissioner, that the property shown by the donor on the gift tax return includes all of
the property transferred by gift for the calendar year and not deductible under section
292.16, paragraph (d) (f), clause (2).

Sec. 33. REPEALER.

Minnesota Statutes 2012, sections 291.03, subdivision 1b; 291.41; 291.42; 291.43;
291.44; 291.45; 291.46; and 291.47,
are repealed.

Minnesota Statutes 2013 Supplement, sections 291.03, subdivision 1c; 292.17,
subdivisions 2 and 3; 292.18; 292.19; and 292.21,
are repealed.

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700 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, MN 55155 ♦ Phone: (651) 296-2868 ♦ TTY: 1-800-627-3529 ♦ Fax: (651) 296-0569