HF 3245

as introduced - 91st Legislature (2019 - 2020) Posted on 02/13/2020 12:37pm

A bill for an act
relating to taxation; income, corporate franchise, and estates; conforming to federal
changes; amending Minnesota Statutes 2019 Supplement, sections 289A.02,
subdivision 7; 290.01, subdivisions 19, 31; 290.993; 290A.03, subdivision 15;
291.005, subdivision 1.

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

Section 1.

Minnesota Statutes 2019 Supplement, section 289A.02, subdivision 7, is
amended to read:

Subd. 7.

Internal Revenue Code.

Unless specifically defined otherwise, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through December
31, deleted text begin 2018 deleted text end new text begin 2019 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment, except
the changes incorporated by federal changes are effective retroactively at the same time as
the changes were effective for federal purposes.
new text end

Sec. 2.

Minnesota Statutes 2019 Supplement, section 290.01, subdivision 19, is amended
to read:

Subd. 19.

Net income.

(a) For a trust or estate taxable under section 290.03, and a
corporation taxable under section 290.02, the term "net income" means the federal taxable
income, as defined in section 63 of the Internal Revenue Code of 1986, as amended through
the date named in this subdivision, incorporating the federal effective dates of changes to
the Internal Revenue Code and any elections made by the taxpayer in accordance with the
Internal Revenue Code in determining federal taxable income for federal income tax
purposes, and with the modifications provided in sections 290.0131 to 290.0136.

(b) For an individual, the term "net income" means federal adjusted gross income with
the modifications provided in sections 290.0131, 290.0132, and 290.0135 to 290.0137.

(c) In the case of a regulated investment company or a fund thereof, as defined in section
851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
except that:

(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
Revenue Code does not apply;

(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal Revenue
Code must be applied by allowing a deduction for capital gain dividends and exempt-interest
dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal Revenue Code;
and

(3) the deduction for dividends paid must also be applied in the amount of any
undistributed capital gains which the regulated investment company elects to have treated
as provided in section 852(b)(3)(D) of the Internal Revenue Code.

(d) The net income of a real estate investment trust as defined and limited by section
856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
taxable income as defined in section 857(b)(2) of the Internal Revenue Code.

(e) The net income of a designated settlement fund as defined in section 468B(d) of the
Internal Revenue Code means the gross income as defined in section 468B(b) of the Internal
Revenue Code.

(f) The Internal Revenue Code of 1986, as amended through December 31, deleted text begin 2018 deleted text end new text begin 2019 new text end ,
shall be in effect for taxable years beginning after December 31, 1996.

(g) Except as otherwise provided, references to the Internal Revenue Code in this
subdivision and sections 290.0131 to 290.0136 mean the code in effect for purposes of
determining net income for the applicable year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment, except
the changes incorporated by federal changes are effective retroactively at the same time as
the changes were effective for federal purposes.
new text end

Sec. 3.

Minnesota Statutes 2019 Supplement, section 290.01, subdivision 31, is amended
to read:

Subd. 31.

Internal Revenue Code.

Unless specifically defined otherwise, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through December
31, deleted text begin 2018 deleted text end new text begin 2019 new text end . Internal Revenue Code also includes any uncodified provision in federal
law that relates to provisions of the Internal Revenue Code that are incorporated into
Minnesota law.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment, except
the changes incorporated by federal changes are effective retroactively at the same time as
the changes were effective for federal purposes.
new text end

Sec. 4.

Minnesota Statutes 2019 Supplement, section 290.993, is amended to read:

290.993 SPECIAL LIMITED ADJUSTMENT.

(a) For an individual income taxpayer subject to tax under section 290.06, subdivision
2c, or a partnership that elects to file a composite return under section 289A.08, subdivision
7, for taxable years beginning after December 31, 2017, and before January 1, 2019, the
following special rules apply:

(1) an individual income taxpayer may: (i) take the standard deduction; or (ii) make an
election under section 63(e) of the Internal Revenue Code to itemize, for Minnesota individual
income tax purposes, regardless of the choice made on their federal return; and

(2) there is an adjustment to tax equal to the difference between the tax calculated under
this chapter using the Internal Revenue Code as amended through December 16, 2016, and
the tax calculated under this chapter using the Internal Revenue Code amended through
December 31, 2018, before the application of credits. The end result must be zero additional
tax due or refund.

(b) The adjustment in paragraph (a), clause (2), does not apply to any changes due to
sections 11012, 13101, 13201, 13202, 13203, 13204, 13205, 13207, 13301, 13302, 13303,
13313, 13502, 13503, 13801, 14101, 14102, 14211 through 14215, and 14501 of Public
Law 115-97; and section 40411 of Public Law 115-123.

new text begin (c) For an individual income taxpayer or partnership subject to an adjustment under
paragraph (a), clause (2), any change in tax as a result of amendments to the Internal Revenue
Code in Public Law 116-94 must be calculated after the adjustment.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017, and before January 1, 2019.
new text end

Sec. 5.

Minnesota Statutes 2019 Supplement, section 290A.03, subdivision 15, is amended
to read:

Subd. 15.

Internal Revenue Code.

"Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended through December 31, deleted text begin 2018 deleted text end new text begin 2019 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property tax refunds based on property
taxes payable after December 31, 2020, and rent paid after December 31, 2019.
new text end

Sec. 6.

Minnesota Statutes 2019 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,
increased by the value of any property in which the decedent had a qualifying income interest
for life and for which an election was made under section 291.03, subdivision 1d, for
Minnesota estate tax purposes, but was not made for federal estate tax purposes.

(3) "Internal Revenue Code" means the United States Internal Revenue Code of 1986,
as amended through December 31, deleted text begin 2018 deleted text end new text begin 2019 new text end .

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

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

(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.

(7) "Resident decedent" means an individual whose domicile at the time of death was
in Minnesota. The provisions of section 290.01, subdivision 7, paragraphs (c) and (d), apply
to determinations of domicile under this chapter.

(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;

(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.

(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 includable in the decedent's federal gross estate;
but excludes

(v) an entity whose ownership interest securities are traded on an exchange regulated
by the Securities and Exchange Commission as a national securities exchange under section
6 of the Securities Exchange Act, United States Code, title 15, section 78f.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after December 31, 2017.
new text end

Sec. 7. new text begin INDIVIDUAL INCOME TAX COLLECTION ACTION PROHIBITED.
new text end

new text begin Notwithstanding any law to the contrary, the commissioner of revenue shall not increase
the amount due or decrease the refund for an individual income tax return for the taxable
year beginning after December 31, 2017, and before January 1, 2020, to the extent the
amount due was understated on the original return or the refund was overstated on the
original return because the taxpayer calculated the tax or refund based on the Internal
Revenue Code, as amended through December 31, 2018, rather than based on the Internal
Revenue Code, as amended through December 31, 2019, as provided in this act.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end