HF 2944

as introduced - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to taxation; updating certain provisions to 
  1.3             changes in the Internal Revenue Code; amending 
  1.4             Minnesota Statutes 1996, sections 290.06, subdivision 
  1.5             2c; 290.067, subdivision 2a; 290.0921, subdivision 3a; 
  1.6             and 290A.03, subdivision 3; Minnesota Statutes 1997 
  1.7             Supplement, sections 289A.02, subdivision 7; 290.01, 
  1.8             subdivisions 19, 19a, 19c, and 31; 290.0671, 
  1.9             subdivision 1; 290A.03, subdivision 15; and 291.005, 
  1.10            subdivision 1. 
  1.11  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.12     Section 1.  Minnesota Statutes 1997 Supplement, section 
  1.13  289A.02, subdivision 7, is amended to read: 
  1.14     Subd. 7.  [INTERNAL REVENUE CODE.] Unless specifically 
  1.15  defined otherwise, "Internal Revenue Code" means the Internal 
  1.16  Revenue Code of 1986, as amended through December 31, 1996, and 
  1.17  includes the provisions of section 1(a) and (b) of Public Law 
  1.18  Number 104-117 1997. 
  1.19     Sec. 2.  Minnesota Statutes 1997 Supplement, section 
  1.20  290.01, subdivision 19, is amended to read: 
  1.21     Subd. 19.  [NET INCOME.] The term "net income" means the 
  1.22  federal taxable income, as defined in section 63 of the Internal 
  1.23  Revenue Code of 1986, as amended through the date named in this 
  1.24  subdivision, incorporating any elections made by the taxpayer in 
  1.25  accordance with the Internal Revenue Code in determining federal 
  1.26  taxable income for federal income tax purposes, and with the 
  1.27  modifications provided in subdivisions 19a to 19f. 
  1.28     In the case of a regulated investment company or a fund 
  2.1   thereof, as defined in section 851(a) or 851(h) of the Internal 
  2.2   Revenue Code, federal taxable income means investment company 
  2.3   taxable income as defined in section 852(b)(2) of the Internal 
  2.4   Revenue Code, except that:  
  2.5      (1) the exclusion of net capital gain provided in section 
  2.6   852(b)(2)(A) of the Internal Revenue Code does not apply; 
  2.7      (2) the deduction for dividends paid under section 
  2.8   852(b)(2)(D) of the Internal Revenue Code must be applied by 
  2.9   allowing a deduction for capital gain dividends and 
  2.10  exempt-interest dividends as defined in sections 852(b)(3)(C) 
  2.11  and 852(b)(5) of the Internal Revenue Code; and 
  2.12     (3) the deduction for dividends paid must also be applied 
  2.13  in the amount of any undistributed capital gains which the 
  2.14  regulated investment company elects to have treated as provided 
  2.15  in section 852(b)(3)(D) of the Internal Revenue Code.  
  2.16     The net income of a real estate investment trust as defined 
  2.17  and limited by section 856(a), (b), and (c) of the Internal 
  2.18  Revenue Code means the real estate investment trust taxable 
  2.19  income as defined in section 857(b)(2) of the Internal Revenue 
  2.20  Code.  
  2.21     The net income of a designated settlement fund as defined 
  2.22  in section 468B(d) of the Internal Revenue Code means the gross 
  2.23  income as defined in section 468B(b) of the Internal Revenue 
  2.24  Code. 
  2.25     The Internal Revenue Code of 1986, as amended through 
  2.26  December 31, 1986, shall be in effect for taxable years 
  2.27  beginning after December 31, 1986.  The provisions of sections 
  2.28  10104, 10202, 10203, 10204, 10206, 10212, 10221, 10222, 10223, 
  2.29  10226, 10227, 10228, 10611, 10631, 10632, and 10711 of the 
  2.30  Omnibus Budget Reconciliation Act of 1987, Public Law Number 
  2.31  100-203, the provisions of sections 1001, 1002, 1003, 1004, 
  2.32  1005, 1006, 1008, 1009, 1010, 1011, 1011A, 1011B, 1012, 1013, 
  2.33  1014, 1015, 1018, 2004, 3041, 4009, 6007, 6026, 6032, 6137, 
  2.34  6277, and 6282 of the Technical and Miscellaneous Revenue Act of 
  2.35  1988, Public Law Number 100-647, the provisions of sections 
  2.36  7811, 7816, and 7831 of the Omnibus Budget Reconciliation Act of 
  3.1   1989, Public Law Number 101-239, and the provisions of sections 
  3.2   1305, 1704(r), and 1704(e)(1) of the Small Business Job 
  3.3   Protection Act, Public Law Number 104-188, and the provisions of 
  3.4   sections 975 and 1604(d)(2) and (e) of the Taxpayer Relief Act 
  3.5   of 1997, Public Law Number 105-34, shall be effective at the 
  3.6   time they become effective for federal income tax purposes.  
  3.7      The Internal Revenue Code of 1986, as amended through 
  3.8   December 31, 1987, shall be in effect for taxable years 
  3.9   beginning after December 31, 1987.  The provisions of sections 
  3.10  4001, 4002, 4011, 5021, 5041, 5053, 5075, 6003, 6008, 6011, 
  3.11  6030, 6031, 6033, 6057, 6064, 6066, 6079, 6130, 6176, 6180, 
  3.12  6182, 6280, and 6281 of the Technical and Miscellaneous Revenue 
  3.13  Act of 1988, Public Law Number 100-647, the provisions of 
  3.14  sections 7815 and 7821 of the Omnibus Budget Reconciliation Act 
  3.15  of 1989, Public Law Number 101-239, and the provisions of 
  3.16  section 11702 of the Revenue Reconciliation Act of 1990, Public 
  3.17  Law Number 101-508, shall become effective at the time they 
  3.18  become effective for federal tax purposes.  
  3.19     The Internal Revenue Code of 1986, as amended through 
  3.20  December 31, 1988, shall be in effect for taxable years 
  3.21  beginning after December 31, 1988.  The provisions of sections 
  3.22  7101, 7102, 7104, 7105, 7201, 7202, 7203, 7204, 7205, 7206, 
  3.23  7207, 7210, 7211, 7301, 7302, 7303, 7304, 7601, 7621, 7622, 
  3.24  7641, 7642, 7645, 7647, 7651, and 7652 of the Omnibus Budget 
  3.25  Reconciliation Act of 1989, Public Law Number 101-239, the 
  3.26  provision of section 1401 of the Financial Institutions Reform, 
  3.27  Recovery, and Enforcement Act of 1989, Public Law Number 101-73, 
  3.28  the provisions of sections 11701 and 11703 of the Revenue 
  3.29  Reconciliation Act of 1990, Public Law Number 101-508, and the 
  3.30  provisions of sections 1702(g) and 1704(f)(2)(A) and (B) of the 
  3.31  Small Business Job Protection Act, Public Law Number 104-188, 
  3.32  shall become effective at the time they become effective for 
  3.33  federal tax purposes.  
  3.34     The Internal Revenue Code of 1986, as amended through 
  3.35  December 31, 1989, shall be in effect for taxable years 
  3.36  beginning after December 31, 1989.  The provisions of sections 
  4.1   11321, 11322, 11324, 11325, 11403, 11404, 11410, and 11521 of 
  4.2   the Revenue Reconciliation Act of 1990, Public Law Number 
  4.3   101-508, and the provisions of sections 13224 and 13261 of the 
  4.4   Omnibus Budget Reconciliation Act of 1993, Public Law Number 
  4.5   103-66, shall become effective at the time they become effective 
  4.6   for federal purposes.  
  4.7      The Internal Revenue Code of 1986, as amended through 
  4.8   December 31, 1990, shall be in effect for taxable years 
  4.9   beginning after December 31, 1990. 
  4.10     The provisions of section 13431 of the Omnibus Budget 
  4.11  Reconciliation Act of 1993, Public Law Number 103-66, shall 
  4.12  become effective at the time they became effective for federal 
  4.13  purposes.  
  4.14     The Internal Revenue Code of 1986, as amended through 
  4.15  December 31, 1991, shall be in effect for taxable years 
  4.16  beginning after December 31, 1991.  
  4.17     The provisions of sections 1936 and 1937 of the 
  4.18  Comprehensive National Energy Policy Act of 1992, Public Law 
  4.19  Number 102-486, and the provisions of sections 13101, 13114, 
  4.20  13122, 13141, 13150, 13151, 13174, 13239, 13301, and 13442 of 
  4.21  the Omnibus Budget Reconciliation Act of 1993, Public Law Number 
  4.22  103-66, and the provisions of section 1604(a)(1), (2), and (3) 
  4.23  of the Taxpayer Relief Act of 1997, Public Law Number 105-34, 
  4.24  shall become effective at the time they become effective for 
  4.25  federal purposes.  
  4.26     The Internal Revenue Code of 1986, as amended through 
  4.27  December 31, 1992, shall be in effect for taxable years 
  4.28  beginning after December 31, 1992.  
  4.29     The provisions of sections 13116, 13121, 13206, 13210, 
  4.30  13222, 13223, 13231, 13232, 13233, 13239, 13262, and 13321 of 
  4.31  the Omnibus Budget Reconciliation Act of 1993, Public Law Number 
  4.32  103-66, and the provisions of sections 1703(a), 1703(d), 
  4.33  1703(i), 1703(l), and 1703(m) of the Small Business Job 
  4.34  Protection Act, Public Law Number 104-188, and the provision of 
  4.35  section 1604(c) of the Taxpayer Relief Act of 1997, Public Law 
  4.36  Number 105-34, shall become effective at the time they become 
  5.1   effective for federal purposes. 
  5.2      The Internal Revenue Code of 1986, as amended through 
  5.3   December 31, 1993, shall be in effect for taxable years 
  5.4   beginning after December 31, 1993. 
  5.5      The provision of section 741 of Legislation to Implement 
  5.6   Uruguay Round of General Agreement on Tariffs and Trade, Public 
  5.7   Law Number 103-465, the provisions of sections 1, 2, and 3, of 
  5.8   the Self-Employed Health Insurance Act of 1995, Public Law 
  5.9   Number 104-7, the provision of section 501(b)(2) of the Health 
  5.10  Insurance Portability and Accountability Act, Public Law Number 
  5.11  104-191, and the provisions of sections 1604 and 1704(p)(1) and 
  5.12  (2) of the Small Business Job Protection Act, Public Law Number 
  5.13  104-188, and the provisions of sections 1011, 1211(b)(1), and 
  5.14  1602(f) of the Taxpayer Relief Act of 1997, Public Law Number 
  5.15  105-34, shall become effective at the time they become effective 
  5.16  for federal purposes. 
  5.17     The Internal Revenue Code of 1986, as amended through 
  5.18  December 31, 1994, shall be in effect for taxable years 
  5.19  beginning after December 31, 1994. 
  5.20     The provisions of sections 1119(a), 1120, 1121, 1202(a), 
  5.21  1444, 1449(b), 1602(a), 1610(a), 1613, and 1805 of the Small 
  5.22  Business Job Protection Act, Public Law Number 104-188, and the 
  5.23  provision of section 511 of the Health Insurance Portability and 
  5.24  Accountability Act, Public Law Number 104-191, and the 
  5.25  provisions of sections 1174 and 1601(i)(2) of the Taxpayer 
  5.26  Relief Act of 1997, Public Law Number 105-34, shall become 
  5.27  effective at the time they become effective for federal purposes.
  5.28     The Internal Revenue Code of 1986, as amended through March 
  5.29  22, 1996, is in effect for taxable years beginning after 
  5.30  December 31, 1995. 
  5.31     The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 
  5.32  1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 
  5.33  1616, 1617, 1704(l), and 1704(m) of the Small Business Job 
  5.34  Protection Act, Public Law Number 104-188, and the provisions of 
  5.35  Public Law Number 104-117, and the provisions of sections 313(a) 
  5.36  and (b)(1), 602(a), 913(b), 941, 961, 971, 1001(a) and (b), 
  6.1   1002, 1003, 1012, 1013, 1014, 1061, 1062, 1081, 1084(b), 1086, 
  6.2   1087, 1111(a), 1131(b) and (c), 1211(b), 1213, 1530(c)(2), 
  6.3   1601(f)(5) and (h), and 1604(d)(1) of the Taxpayer Relief Act of 
  6.4   1997, Public Law Number 105-34, shall become effective at the 
  6.5   time they become effective for federal purposes. 
  6.6      The Internal Revenue Code of 1986, as amended through 
  6.7   December 31, 1996, shall be in effect for taxable years 
  6.8   beginning after December 31, 1996. 
  6.9      The provisions of sections 202(a) and (b), 221(a), 225, 
  6.10  312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 
  6.11  (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 
  6.12  1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 
  6.13  1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 
  6.14  of the Taxpayer Relief Act of 1997, Public Law Number 105-34, 
  6.15  shall become effective at the time they become effective for 
  6.16  federal purposes. 
  6.17     The Internal Revenue Code of 1986, as amended through 
  6.18  December 31, 1997, shall be in effect for taxable years 
  6.19  beginning after December 31, 1997. 
  6.20     Except as otherwise provided, references to the Internal 
  6.21  Revenue Code in subdivisions 19a to 19g mean the code in effect 
  6.22  for purposes of determining net income for the applicable year. 
  6.23     Sec. 3.  Minnesota Statutes 1997 Supplement, section 
  6.24  290.01, subdivision 19a, is amended to read: 
  6.25     Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
  6.26  individuals, estates, and trusts, there shall be added to 
  6.27  federal taxable income: 
  6.28     (1)(i) interest income on obligations of any state other 
  6.29  than Minnesota or a political or governmental subdivision, 
  6.30  municipality, or governmental agency or instrumentality of any 
  6.31  state other than Minnesota exempt from federal income taxes 
  6.32  under the Internal Revenue Code or any other federal statute, 
  6.33  and 
  6.34     (ii) exempt-interest dividends as defined in section 
  6.35  852(b)(5) of the Internal Revenue Code, except the portion of 
  6.36  the exempt-interest dividends derived from interest income on 
  7.1   obligations of the state of Minnesota or its political or 
  7.2   governmental subdivisions, municipalities, governmental agencies 
  7.3   or instrumentalities, but only if the portion of the 
  7.4   exempt-interest dividends from such Minnesota sources paid to 
  7.5   all shareholders represents 95 percent or more of the 
  7.6   exempt-interest dividends that are paid by the regulated 
  7.7   investment company as defined in section 851(a) of the Internal 
  7.8   Revenue Code, or the fund of the regulated investment company as 
  7.9   defined in section 851(h) of the Internal Revenue Code, making 
  7.10  the payment; and 
  7.11     (iii) for the purposes of items (i) and (ii), interest on 
  7.12  obligations of an Indian tribal government described in section 
  7.13  7871(c) of the Internal Revenue Code shall be treated as 
  7.14  interest income on obligations of the state in which the tribe 
  7.15  is located; 
  7.16     (2) the amount of income taxes paid or accrued within the 
  7.17  taxable year under this chapter and income taxes paid to any 
  7.18  other state or to any province or territory of Canada, to the 
  7.19  extent allowed as a deduction under section 63(d) of the 
  7.20  Internal Revenue Code, but the addition may not be more than the 
  7.21  amount by which the itemized deductions as allowed under section 
  7.22  63(d) of the Internal Revenue Code exceeds the amount of the 
  7.23  standard deduction as defined in section 63(c) of the Internal 
  7.24  Revenue Code.  For the purpose of this paragraph, the 
  7.25  disallowance of itemized deductions under section 68 of the 
  7.26  Internal Revenue Code of 1986, income tax is the last itemized 
  7.27  deduction disallowed; 
  7.28     (3) the capital gain amount of a lump sum distribution to 
  7.29  which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
  7.30  Reform Act of 1986, Public Law Number 99-514, applies; 
  7.31     (4) the amount of income taxes paid or accrued within the 
  7.32  taxable year under this chapter and income taxes paid to any 
  7.33  other state or any province or territory of Canada, to the 
  7.34  extent allowed as a deduction in determining federal adjusted 
  7.35  gross income.  For the purpose of this paragraph, income taxes 
  7.36  do not include the taxes imposed by sections 290.0922, 
  8.1   subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 
  8.2      (5) the amount of loss or expense included in federal 
  8.3   taxable income under section 1366 of the Internal Revenue Code 
  8.4   flowing from a corporation that has a valid election in effect 
  8.5   for the taxable year under section 1362 of the Internal Revenue 
  8.6   Code, but which is not allowed to be an "S" corporation under 
  8.7   section 290.9725; and 
  8.8      (6) the amount of any distributions in cash or property 
  8.9   made to a shareholder during the taxable year by a corporation 
  8.10  that has a valid election in effect for the taxable year under 
  8.11  section 1362 of the Internal Revenue Code, but which is not 
  8.12  allowed to be an "S" corporation under section 290.9725 to the 
  8.13  extent not already included in federal taxable income under 
  8.14  section 1368 of the Internal Revenue Code.; and 
  8.15     (7) the amount of a partner's pro rata share of net income 
  8.16  which does not flow through to the partner because the 
  8.17  partnership elected to pay the tax on the income under section 
  8.18  6242(a)(2) of the Internal Revenue Code. 
  8.19     Sec. 4.  Minnesota Statutes 1997 Supplement, section 
  8.20  290.01, subdivision 19c, is amended to read: 
  8.21     Subd. 19c.  [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 
  8.22  INCOME.] For corporations, there shall be added to federal 
  8.23  taxable income: 
  8.24     (1) the amount of any deduction taken for federal income 
  8.25  tax purposes for income, excise, or franchise taxes based on net 
  8.26  income or related minimum taxes paid by the corporation to 
  8.27  Minnesota, another state, a political subdivision of another 
  8.28  state, the District of Columbia, or any foreign country or 
  8.29  possession of the United States; 
  8.30     (2) interest not subject to federal tax upon obligations 
  8.31  of:  the United States, its possessions, its agencies, or its 
  8.32  instrumentalities; the state of Minnesota or any other state, 
  8.33  any of its political or governmental subdivisions, any of its 
  8.34  municipalities, or any of its governmental agencies or 
  8.35  instrumentalities; the District of Columbia; or Indian tribal 
  8.36  governments; 
  9.1      (3) exempt-interest dividends received as defined in 
  9.2   section 852(b)(5) of the Internal Revenue Code; 
  9.3      (4) the amount of any net operating loss deduction taken 
  9.4   for federal income tax purposes under section 172 or 832(c)(10) 
  9.5   of the Internal Revenue Code or operations loss deduction under 
  9.6   section 810 of the Internal Revenue Code; 
  9.7      (5) the amount of any special deductions taken for federal 
  9.8   income tax purposes under sections 241 to 247 of the Internal 
  9.9   Revenue Code; 
  9.10     (6) losses from the business of mining, as defined in 
  9.11  section 290.05, subdivision 1, clause (a), that are not subject 
  9.12  to Minnesota income tax; 
  9.13     (7) the amount of any capital losses deducted for federal 
  9.14  income tax purposes under sections 1211 and 1212 of the Internal 
  9.15  Revenue Code; 
  9.16     (8) the amount of any charitable contributions deducted for 
  9.17  federal income tax purposes under section 170 of the Internal 
  9.18  Revenue Code; 
  9.19     (9) the exempt foreign trade income of a foreign sales 
  9.20  corporation under sections 921(a) and 291 of the Internal 
  9.21  Revenue Code; 
  9.22     (10) the amount of percentage depletion deducted under 
  9.23  sections 611 through 614 and 291 of the Internal Revenue Code; 
  9.24     (11) for certified pollution control facilities placed in 
  9.25  service in a taxable year beginning before December 31, 1986, 
  9.26  and for which amortization deductions were elected under section 
  9.27  169 of the Internal Revenue Code of 1954, as amended through 
  9.28  December 31, 1985, the amount of the amortization deduction 
  9.29  allowed in computing federal taxable income for those 
  9.30  facilities; 
  9.31     (12) the amount of any deemed dividend from a foreign 
  9.32  operating corporation determined pursuant to section 290.17, 
  9.33  subdivision 4, paragraph (g); and 
  9.34     (13) the amount of any environmental tax paid under section 
  9.35  59(a) of the Internal Revenue Code.; and 
  9.36     (14) the amount of a partner's pro rata share of net income 
 10.1   which does not flow through to the partner because the 
 10.2   partnership elected to pay the tax on the income under section 
 10.3   6242(a)(2) of the Internal Revenue Code. 
 10.4      Sec. 5.  Minnesota Statutes 1997 Supplement, section 
 10.5   290.01, subdivision 31, is amended to read: 
 10.6      Subd. 31.  [INTERNAL REVENUE CODE.] Unless specifically 
 10.7   defined otherwise, "Internal Revenue Code" means the Internal 
 10.8   Revenue Code of 1986, as amended through December 31, 1996, and 
 10.9   includes the provisions of section 1(a) and (b) of Public Law 
 10.10  Number 104-117 1997. 
 10.11     Sec. 6.  Minnesota Statutes 1996, section 290.06, 
 10.12  subdivision 2c, is amended to read: 
 10.13     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
 10.14  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
 10.15  married individuals filing joint returns and surviving spouses 
 10.16  as defined in section 2(a) of the Internal Revenue Code must be 
 10.17  computed by applying to their taxable net income the following 
 10.18  schedule of rates: 
 10.19     (1) On the first $19,910, 6 percent; 
 10.20     (2) On all over $19,910, but not over $79,120, 8 percent; 
 10.21     (3) On all over $79,120, 8.5 percent. 
 10.22     Married individuals filing separate returns, estates, and 
 10.23  trusts must compute their income tax by applying the above rates 
 10.24  to their taxable income, except that the income brackets will be 
 10.25  one-half of the above amounts.  
 10.26     (b) The income taxes imposed by this chapter upon unmarried 
 10.27  individuals must be computed by applying to taxable net income 
 10.28  the following schedule of rates: 
 10.29     (1) On the first $13,620, 6 percent; 
 10.30     (2) On all over $13,620, but not over $44,750, 8 percent; 
 10.31     (3) On all over $44,750, 8.5 percent. 
 10.32     (c) The income taxes imposed by this chapter upon unmarried 
 10.33  individuals qualifying as a head of household as defined in 
 10.34  section 2(b) of the Internal Revenue Code must be computed by 
 10.35  applying to taxable net income the following schedule of rates: 
 10.36     (1) On the first $16,770, 6 percent; 
 11.1      (2) On all over $16,770, but not over $67,390, 8 percent; 
 11.2      (3) On all over $67,390, 8.5 percent. 
 11.3      (d) In lieu of a tax computed according to the rates set 
 11.4   forth in this subdivision, the tax of any individual taxpayer 
 11.5   whose taxable net income for the taxable year is less than an 
 11.6   amount determined by the commissioner must be computed in 
 11.7   accordance with tables prepared and issued by the commissioner 
 11.8   of revenue based on income brackets of not more than $100.  The 
 11.9   amount of tax for each bracket shall be computed at the rates 
 11.10  set forth in this subdivision, provided that the commissioner 
 11.11  may disregard a fractional part of a dollar unless it amounts to 
 11.12  50 cents or more, in which case it may be increased to $1. 
 11.13     (e) An individual who is not a Minnesota resident for the 
 11.14  entire year must compute the individual's Minnesota income tax 
 11.15  as provided in this subdivision.  After the application of the 
 11.16  nonrefundable credits provided in this chapter, the tax 
 11.17  liability must then be multiplied by a fraction in which:  
 11.18     (1) The numerator is the individual's Minnesota source 
 11.19  federal adjusted gross income as defined in section 62 of the 
 11.20  Internal Revenue Code increased by the addition additions 
 11.21  required for interest income from non-Minnesota state and 
 11.22  municipal bonds under section 290.01, subdivision 19a, clause 
 11.23  clauses (1) and (7), after applying the allocation and 
 11.24  assignability provisions of section 290.081, clause (a), or 
 11.25  290.17; and 
 11.26     (2) the denominator is the individual's federal adjusted 
 11.27  gross income as defined in section 62 of the Internal Revenue 
 11.28  Code of 1986, as amended through April 15, 1995, increased by 
 11.29  the addition required for interest income from non-Minnesota 
 11.30  state and municipal bonds amounts specified under section 
 11.31  290.01, subdivision 19a, clause clauses (1) and (7). 
 11.32     Sec. 7.  Minnesota Statutes 1996, section 290.067, 
 11.33  subdivision 2a, is amended to read: 
 11.34     Subd. 2a.  [INCOME.] (a) For purposes of this section, 
 11.35  "income" means the sum of the following: 
 11.36     (1) federal adjusted gross income as defined in section 62 
 12.1   of the Internal Revenue Code; and 
 12.2      (2) the sum of the following amounts to the extent not 
 12.3   included in clause (1): 
 12.4      (i) all nontaxable income; 
 12.5      (ii) the amount of a passive activity loss that is not 
 12.6   disallowed as a result of section 469, paragraph (i) or (m) of 
 12.7   the Internal Revenue Code and the amount of passive activity 
 12.8   loss carryover allowed under section 469(b) of the Internal 
 12.9   Revenue Code; 
 12.10     (iii) an amount equal to the total of any discharge of 
 12.11  qualified farm indebtedness of a solvent individual excluded 
 12.12  from gross income under section 108(g) of the Internal Revenue 
 12.13  Code; 
 12.14     (iv) cash public assistance and relief; 
 12.15     (v) any pension or annuity (including railroad retirement 
 12.16  benefits, all payments received under the federal Social 
 12.17  Security Act, supplemental security income, and veterans 
 12.18  benefits), which was not exclusively funded by the claimant or 
 12.19  spouse, or which was funded exclusively by the claimant or 
 12.20  spouse and which funding payments were excluded from federal 
 12.21  adjusted gross income in the years when the payments were made; 
 12.22     (vi) interest received from the federal or a state 
 12.23  government or any instrumentality or political subdivision 
 12.24  thereof; 
 12.25     (vii) workers' compensation; 
 12.26     (viii) nontaxable strike benefits; 
 12.27     (ix) the gross amounts of payments received in the nature 
 12.28  of disability income or sick pay as a result of accident, 
 12.29  sickness, or other disability, whether funded through insurance 
 12.30  or otherwise; 
 12.31     (x) a lump sum distribution under section 402(e)(3) of the 
 12.32  Internal Revenue Code; 
 12.33     (xi) contributions made by the claimant to an individual 
 12.34  retirement account, including a qualified voluntary employee 
 12.35  contribution; simplified employee pension plan; self-employed 
 12.36  retirement plan; cash or deferred arrangement plan under section 
 13.1   401(k) of the Internal Revenue Code; or deferred compensation 
 13.2   plan under section 457 of the Internal Revenue Code; and 
 13.3      (xii) nontaxable scholarship or fellowship grants. 
 13.4      In the case of an individual who files an income tax return 
 13.5   on a fiscal year basis, the term "federal adjusted gross income" 
 13.6   means federal adjusted gross income reflected in the fiscal year 
 13.7   ending in the next calendar year.  Federal adjusted gross income 
 13.8   may not be reduced by the amount of a net operating loss 
 13.9   carryback or carryforward or a capital loss carryback or 
 13.10  carryforward allowed for the year. 
 13.11     (b) "Income" does not include: 
 13.12     (1) amounts excluded pursuant to the Internal Revenue Code, 
 13.13  sections 101(a), and 102, and 121; 
 13.14     (2) amounts of any pension or annuity that were exclusively 
 13.15  funded by the claimant or spouse if the funding payments were 
 13.16  not excluded from federal adjusted gross income in the years 
 13.17  when the payments were made; 
 13.18     (3) surplus food or other relief in kind supplied by a 
 13.19  governmental agency; 
 13.20     (4) relief granted under chapter 290A; and 
 13.21     (5) child support payments received under a temporary or 
 13.22  final decree of dissolution or legal separation. 
 13.23     Sec. 8.  Minnesota Statutes 1997 Supplement, section 
 13.24  290.0671, subdivision 1, is amended to read: 
 13.25     Subdivision 1.  [CREDIT ALLOWED.] An individual is allowed 
 13.26  a credit against the tax imposed by this chapter equal to a 
 13.27  percentage of the credit for which the individual is eligible 
 13.28  under section 32 of the Internal Revenue Code disregarding the 
 13.29  supplemental child credit of clause (m)[(n)].  The percentage is 
 13.30  15 for individuals without a qualifying child, and 25 for 
 13.31  individuals with at least one qualifying child.  For purposes of 
 13.32  this section, "qualifying child" has the meaning given in 
 13.33  section 32(c)(3) of the Internal Revenue Code. 
 13.34     For a nonresident or part-year resident, the credit 
 13.35  determined under section 32 of the Internal Revenue Code must be 
 13.36  allocated based on the percentage calculated under section 
 14.1   290.06, subdivision 2c, paragraph (e). 
 14.2      For a person who was a resident for the entire tax year and 
 14.3   has earned income not subject to tax under this chapter, the 
 14.4   credit must be allocated based on the ratio of federal adjusted 
 14.5   gross income reduced by the earned income not subject to tax 
 14.6   under this chapter over federal adjusted gross income. 
 14.7      Sec. 9.  Minnesota Statutes 1996, section 290.0921, 
 14.8   subdivision 3a, is amended to read: 
 14.9      Subd. 3a.  [EXEMPTIONS.] The following entities are exempt 
 14.10  from the tax imposed by this section: 
 14.11     (1) cooperatives taxable under subchapter T of the Internal 
 14.12  Revenue Code or organized under chapter 308 or a similar law of 
 14.13  another state; 
 14.14     (2) corporations subject to tax under section 60A.15, 
 14.15  subdivision 1; 
 14.16     (3) real estate investment trusts; 
 14.17     (4) regulated investment companies or a fund thereof; and 
 14.18     (5) entities having a valid election in effect under 
 14.19  section 860D(b) of the Internal Revenue Code.; and 
 14.20     (6) small corporations exempt from the federal alternative 
 14.21  minimum tax under section 55(e) of the Internal Revenue Code. 
 14.22     Sec. 10.  Minnesota Statutes 1996, section 290A.03, 
 14.23  subdivision 3, is amended to read: 
 14.24     Subd. 3.  [INCOME.] (1) "Income" means the sum of the 
 14.25  following:  
 14.26     (a) federal adjusted gross income as defined in the 
 14.27  Internal Revenue Code; and 
 14.28     (b) the sum of the following amounts to the extent not 
 14.29  included in clause (a):  
 14.30     (i) all nontaxable income; 
 14.31     (ii) the amount of a passive activity loss that is not 
 14.32  disallowed as a result of section 469, paragraph (i) or (m) of 
 14.33  the Internal Revenue Code and the amount of passive activity 
 14.34  loss carryover allowed under section 469(b) of the Internal 
 14.35  Revenue Code; 
 14.36     (iii) an amount equal to the total of any discharge of 
 15.1   qualified farm indebtedness of a solvent individual excluded 
 15.2   from gross income under section 108(g) of the Internal Revenue 
 15.3   Code; 
 15.4      (iv) cash public assistance and relief; 
 15.5      (v) any pension or annuity (including railroad retirement 
 15.6   benefits, all payments received under the federal Social 
 15.7   Security Act, supplemental security income, and veterans 
 15.8   benefits), which was not exclusively funded by the claimant or 
 15.9   spouse, or which was funded exclusively by the claimant or 
 15.10  spouse and which funding payments were excluded from federal 
 15.11  adjusted gross income in the years when the payments were made; 
 15.12     (vi) interest received from the federal or a state 
 15.13  government or any instrumentality or political subdivision 
 15.14  thereof; 
 15.15     (vii) workers' compensation; 
 15.16     (viii) nontaxable strike benefits; 
 15.17     (ix) the gross amounts of payments received in the nature 
 15.18  of disability income or sick pay as a result of accident, 
 15.19  sickness, or other disability, whether funded through insurance 
 15.20  or otherwise; 
 15.21     (x) a lump sum distribution under section 402(e)(3) of the 
 15.22  Internal Revenue Code; 
 15.23     (xi) contributions made by the claimant to an individual 
 15.24  retirement account, including a qualified voluntary employee 
 15.25  contribution; simplified employee pension plan; self-employed 
 15.26  retirement plan; cash or deferred arrangement plan under section 
 15.27  401(k) of the Internal Revenue Code; or deferred compensation 
 15.28  plan under section 457 of the Internal Revenue Code; and 
 15.29     (xii) nontaxable scholarship or fellowship grants.  
 15.30     In the case of an individual who files an income tax return 
 15.31  on a fiscal year basis, the term "federal adjusted gross income" 
 15.32  shall mean federal adjusted gross income reflected in the fiscal 
 15.33  year ending in the calendar year.  Federal adjusted gross income 
 15.34  shall not be reduced by the amount of a net operating loss 
 15.35  carryback or carryforward or a capital loss carryback or 
 15.36  carryforward allowed for the year.  
 16.1      (2) "Income" does not include 
 16.2      (a) amounts excluded pursuant to the Internal Revenue Code, 
 16.3   sections 101(a), and 102, and 121; 
 16.4      (b) amounts of any pension or annuity which was exclusively 
 16.5   funded by the claimant or spouse and which funding payments were 
 16.6   not excluded from federal adjusted gross income in the years 
 16.7   when the payments were made; 
 16.8      (c) surplus food or other relief in kind supplied by a 
 16.9   governmental agency; 
 16.10     (d) relief granted under this chapter; or 
 16.11     (e) child support payments received under a temporary or 
 16.12  final decree of dissolution or legal separation.  
 16.13     (3) The sum of the following amounts may be subtracted from 
 16.14  income:  
 16.15     (a) for the claimant's first dependent, the exemption 
 16.16  amount multiplied by 1.4; 
 16.17     (b) for the claimant's second dependent, the exemption 
 16.18  amount multiplied by 1.3; 
 16.19     (c) for the claimant's third dependent, the exemption 
 16.20  amount multiplied by 1.2; 
 16.21     (d) for the claimant's fourth dependent, the exemption 
 16.22  amount multiplied by 1.1; 
 16.23     (e) for the claimant's fifth dependent, the exemption 
 16.24  amount; and 
 16.25     (f) if the claimant or claimant's spouse was disabled or 
 16.26  attained the age of 65 on or before December 31 of the year for 
 16.27  which the taxes were levied or rent paid, the exemption amount.  
 16.28     For purposes of this subdivision, the "exemption amount" 
 16.29  means the exemption amount under section 151(d) of the Internal 
 16.30  Revenue Code for the taxable year for which the income is 
 16.31  reported.  
 16.32     Sec. 11.  Minnesota Statutes 1997 Supplement, section 
 16.33  290A.03, subdivision 15, is amended to read: 
 16.34     Subd. 15.  [INTERNAL REVENUE CODE.] "Internal Revenue Code" 
 16.35  means the Internal Revenue Code of 1986, as amended through 
 16.36  December 31, 1996 1997. 
 17.1      Sec. 12.  Minnesota Statutes 1997 Supplement, section 
 17.2   291.005, subdivision 1, is amended to read: 
 17.3      Subdivision 1.  Unless the context otherwise clearly 
 17.4   requires, the following terms used in this chapter shall have 
 17.5   the following meanings: 
 17.6      (1) "Federal gross estate" means the gross estate of a 
 17.7   decedent as valued and otherwise determined for federal estate 
 17.8   tax purposes by federal taxing authorities pursuant to the 
 17.9   provisions of the Internal Revenue Code. 
 17.10     (2) "Minnesota gross estate" means the federal gross estate 
 17.11  of a decedent after (a) excluding therefrom any property 
 17.12  included therein which has its situs outside Minnesota and (b) 
 17.13  including therein any property omitted from the federal gross 
 17.14  estate which is includable therein, has its situs in Minnesota, 
 17.15  and was not disclosed to federal taxing authorities.  
 17.16     (3) "Personal representative" means the executor, 
 17.17  administrator or other person appointed by the court to 
 17.18  administer and dispose of the property of the decedent.  If 
 17.19  there is no executor, administrator or other person appointed, 
 17.20  qualified, and acting within this state, then any person in 
 17.21  actual or constructive possession of any property having a situs 
 17.22  in this state which is included in the federal gross estate of 
 17.23  the decedent shall be deemed to be a personal representative to 
 17.24  the extent of the property and the Minnesota estate tax due with 
 17.25  respect to the property. 
 17.26     (4) "Resident decedent" means an individual whose domicile 
 17.27  at the time of death was in Minnesota. 
 17.28     (5) "Nonresident decedent" means an individual whose 
 17.29  domicile at the time of death was not in Minnesota. 
 17.30     (6) "Situs of property" means, with respect to real 
 17.31  property, the state or country in which it is located; with 
 17.32  respect to tangible personal property, the state or country in 
 17.33  which it was normally kept or located at the time of the 
 17.34  decedent's death; and with respect to intangible personal 
 17.35  property, the state or country in which the decedent was 
 17.36  domiciled at death. 
 18.1      (7) "Commissioner" means the commissioner of revenue or any 
 18.2   person to whom the commissioner has delegated functions under 
 18.3   this chapter. 
 18.4      (8) "Internal Revenue Code" means the United States 
 18.5   Internal Revenue Code of 1986, as amended through December 31, 
 18.6   1996, and includes the provisions of section 1(a)(4) of Public 
 18.7   Law Number 104-117 1997. 
 18.8      Sec. 13.  [EFFECTIVE DATES.] 
 18.9      Sections 1, 3, 4, and 6 to 10 are effective for tax years 
 18.10  beginning after December 31, 1997.  Sections 5, 11, and 12 are 
 18.11  effective at the same time federal changes made by the Taxpayer 
 18.12  Relief Act of 1997, Public Law Number 105-34, which are 
 18.13  incorporated into Minnesota Statutes, chapters 290, 290A, and 
 18.14  291 by these sections, become effective for federal tax purposes.