HF 3306

as introduced - 86th Legislature (2009 - 2010) Posted on 03/03/2010 03:49pm

A bill for an act
relating to taxation; making policy, technical, administrative, enforcement, and
other changes to individual income, corporate franchise, property, aids, payments,
credits, refunds, and other taxes and tax-related provisions; conforming to
changes made to the Internal Revenue Code; providing an Angel investment
credit and a Minnesota business investment company credit; establishing a
TECHZ business program; appropriating money; amending Minnesota Statutes
2008, sections 97A.061, by adding a subdivision; 268.19, subdivision 1;
270A.03, subdivision 7; 270B.14, subdivision 3; 270B.15; 270C.52, subdivision
2; 272.02, subdivision 42, by adding a subdivision; 273.1384, by adding a
subdivision; 275.71, subdivision 5; 289A.12, by adding a subdivision; 289A.50,
subdivision 1; 290.01, subdivisions 6, 29; 290.06, subdivision 1, by adding a
subdivision; 290.068; 290.0921, subdivisions 1, 3; 290.095, subdivision 11;
290A.03, subdivisions 11, 13; 297A.68, by adding a subdivision; 477A.013,
subdivision 9; 477A.03, subdivisions 2a, 2b; 477A.12, by adding a subdivision;
477A.14, by adding a subdivision; Minnesota Statutes 2009 Supplement, sections
275.70, subdivision 5; 289A.02, subdivision 7; 289A.08, subdivision 16; 290.01,
subdivisions 19, 19b, 19d, 31; 290.06, subdivision 2c; 290.091, subdivision
2; 290A.03, subdivision 15; 290C.07; 291.005, subdivision 1; 297A.75,
subdivisions 1, 2; Laws 2008, chapter 366, article 3, sections 3; 4; proposing
coding for new law in Minnesota Statutes, chapters 116J; 270C; 290; 297I; 469;
477A; repealing Minnesota Statutes 2008, sections 10A.322, subdivision 4;
13.4967, subdivision 2; 290.06, subdivision 23; 477A.03, subdivision 5; Laws
2009, chapter 88, article 12, section 21.

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

ARTICLE 1

INDIVIDUAL INCOME AND CORPORATE FRANCHISE TAXES

Section 1.

Minnesota Statutes 2009 Supplement, section 290.01, subdivision 19b,
is amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For individuals, estates,
and trusts, there shall be subtracted from federal taxable income:

(1) net interest income on obligations of any authority, commission, or
instrumentality of the United States to the extent includable in taxable income for federal
income tax purposes but exempt from state income tax under the laws of the United States;

(2) if included in federal taxable income, the amount of any overpayment of income
tax to Minnesota or to any other state, for any previous taxable year, whether the amount
is received as a refund or as a credit to another taxable year's income tax liability;

(3) the amount paid to others, less the amount used to claim the credit allowed under
section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
transportation of each qualifying child in attending an elementary or secondary school
situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
resident of this state may legally fulfill the state's compulsory attendance laws, which
is not operated for profit, and which adheres to the provisions of the Civil Rights Act
of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and equipment purchased
or leased for use in elementary and secondary schools in teaching only those subjects
legally and commonly taught in public elementary and secondary schools in this state.
Equipment expenses qualifying for deduction includes expenses as defined and limited in
section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
books and materials used in the teaching of religious tenets, doctrines, or worship, the
purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
or materials for, or transportation to, extracurricular activities including sporting events,
musical or dramatic events, speech activities, driver's education, or similar programs. No
deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
the qualifying child's vehicle to provide such transportation for a qualifying child. For
purposes of the subtraction provided by this clause, "qualifying child" has the meaning
given in section 32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross income, income realized on
disposition of property exempt from tax under section 290.491;

(6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
of the Internal Revenue Code in determining federal taxable income by an individual
who does not itemize deductions for federal income tax purposes for the taxable year, an
amount equal to 50 percent of the excess of charitable contributions over $500 allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and
under the provisions of Public Law 109-1;

(7) for taxable years beginning before January 1, 2008, the amount of the federal
small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
which is included in gross income under section 87 of the Internal Revenue Code;

(8) for individuals who are allowed a federal foreign tax credit for taxes that do not
qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
of subnational foreign taxes for the taxable year, but not to exceed the total subnational
foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
"federal foreign tax credit" means the credit allowed under section 27 of the Internal
Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
the extent they exceed the federal foreign tax credit;

(9) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the
positive value of any net operating loss under section 172 of the Internal Revenue Code
generated for the tax year of the addition. The resulting delayed depreciation cannot be
less than zero;

(10) job opportunity building zone income as provided under section 469.316;

(11) to the extent included in federal taxable income, the amount of compensation
paid to members of the Minnesota National Guard or other reserve components of the
United States military for active service performed in Minnesota, excluding compensation
for services performed under the Active Guard Reserve (AGR) program. For purposes of
this clause, "active service" means (i) state active service as defined in section 190.05,
subdivision 5a, clause (1); (ii) federally funded state active service as defined in section
190.05, subdivision 5b; or (iii) federal active service as defined in section 190.05,
subdivision 5c, but "active service" excludes service performed in accordance with section
190.08, subdivision 3;

(12) to the extent included in federal taxable income, the amount of compensation
paid to Minnesota residents who are members of the armed forces of the United States or
United Nations for active duty performed outside Minnesota under United States Code,
title 10, section 101(d); United States Code, title 32, section 101(12); or the authority of
the United Nations;

(13) an amount, not to exceed $10,000, equal to qualified expenses related to a
qualified donor's donation, while living, of one or more of the qualified donor's organs
to another person for human organ transplantation. For purposes of this clause, "organ"
means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
"human organ transplantation" means the medical procedure by which transfer of a human
organ is made from the body of one person to the body of another person; "qualified
expenses" means unreimbursed expenses for both the individual and the qualified donor
for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
may be subtracted under this clause only once; and "qualified donor" means the individual
or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
individual may claim the subtraction in this clause for each instance of organ donation for
transplantation during the taxable year in which the qualified expenses occur;

(14) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
case of a shareholder of a corporation that is an S corporation, minus the positive value of
any net operating loss under section 172 of the Internal Revenue Code generated for the
tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
subtraction is not allowed under this clause;

(15) to the extent included in federal taxable income, compensation paid to a service
member as defined in United States Code, title 10, section 101(a)(5), for military service
as defined in the Servicemembers Civil Relief Act, Public Law 108-189, section 101(2);

(16) international economic development zone income as provided under section
469.325;

(17) to the extent included in federal taxable income, the amount of national service
educational awards received from the National Service Trust under United States Code,
title 42, sections 12601 to 12604, for service in an approved Americorps National Service
program; deleted text begin and
deleted text end

(18) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19a, clause (16) deleted text begin . deleted text end new text begin ;
new text end

new text begin (19) to the extent included in federal taxable income, the amount of gain on the sale
or exchange of small business stock. "Small business stock" means an equity interest, held
directly or indirectly, in a corporation or partnership when that interest is:
new text end

new text begin (i) purchased for money or property, not including stock or payment for services;
new text end

new text begin (ii) purchased after June 30, 2010;
new text end

new text begin (iii) less than 100 percent in a corporation or less than 50 percent by vote or value in
a partnership; and
new text end

new text begin (iv) in a corporation or partnership that:
new text end

new text begin (A) is a single legal entity and not part of any unitary business of the taxpayer;
new text end

new text begin (B) has fewer than 100 employees, or in the case of a corporation or partnership that
is part of a unitary business, the unitary business has fewer than 100 employees;
new text end

new text begin (C) has not issued stock listed on the New York Stock Exchange, American Stock
Exchange, or National Association of Securities Dealers automated quotation system;
new text end

new text begin (D) in the year of purchase, had more than 50 percent of its property and payroll, as
determined under section 290.191, within this state;
new text end

new text begin (E) in the year of purchase, derived less than $25,000 in gross receipts from rents,
interest, dividends, and the sale of intangible investment assets;
new text end

new text begin (F) is not in a trade or business involving the performance of services in the fields
of health, law, engineering, architecture, accounting, actuarial science, performing arts,
consulting, athletics, financial services, brokerage services, or any trade or business where
the principal asset of the trade or business is the reputation or skill of one or more of
its employees;
new text end

new text begin (G) is not in a trade or business involving banking, insurance, financing, leasing,
investing, or similar business;
new text end

new text begin (H) is not a regulated investment company, real estate investment trust, or real
estate mortgage investment conduit;
new text end

new text begin (I) is not a cooperative; and
new text end

new text begin (J) did not liquidate its assets in whole or in part for the purpose of fulfilling the
requirements of this clause.
new text end

new text begin The small business stock must be held for more than five years to qualify for this
subtraction;
new text end

new text begin (20) an amount not less than zero and not to exceed the applicable percent multiplied
by the distributive share of income or loss, as defined in sections 703(a) and 1366(a)(2) of
the Internal Revenue Code, combined from all partnerships or S corporations in which
the taxpayer materially participates, as defined in section 469(h) of the Internal Revenue
Code, and that have employees or tangible property located in this state. As used in this
clause, the "applicable percent" for taxable years beginning in 2011 is five percent; for
taxable years beginning in 2012 is ten percent; for taxable years beginning in 2013 is 15
percent; and for taxable years beginning after December 31, 2013, is 20 percent.
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, 2010.
new text end

Sec. 2.

Minnesota Statutes 2009 Supplement, section 290.01, subdivision 19d, is
amended to read:

Subd. 19d.

Corporations; modifications decreasing federal taxable income.

For
corporations, there shall be subtracted from federal taxable income after the increases
provided in subdivision 19c:

(1) the amount of foreign dividend gross-up added to gross income for federal
income tax purposes under section 78 of the Internal Revenue Code;

(2) the amount of salary expense not allowed for federal income tax purposes due to
claiming the work opportunity credit under section 51 of the Internal Revenue Code;

(3) any dividend (not including any distribution in liquidation) paid within the
taxable year by a national or state bank to the United States, or to any instrumentality of
the United States exempt from federal income taxes, on the preferred stock of the bank
owned by the United States or the instrumentality;

(4) amounts disallowed for intangible drilling costs due to differences between
this chapter and the Internal Revenue Code in taxable years beginning before January
1, 1987, as follows:

(i) to the extent the disallowed costs are represented by physical property, an amount
equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
subdivision 7, subject to the modifications contained in subdivision 19e; and

(ii) to the extent the disallowed costs are not represented by physical property, an
amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
290.09, subdivision 8;

(5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
Internal Revenue Code, except that:

(i) for capital losses incurred in taxable years beginning after December 31, 1986,
capital loss carrybacks shall not be allowed;

(ii) for capital losses incurred in taxable years beginning after December 31, 1986,
a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
allowed;

(iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
capital loss carryback to each of the three taxable years preceding the loss year, subject to
the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and

(iv) for capital losses incurred in taxable years beginning before January 1, 1987,
a capital loss carryover to each of the five taxable years succeeding the loss year to the
extent such loss was not used in a prior taxable year and subject to the provisions of
Minnesota Statutes 1986, section 290.16, shall be allowed;

(6) an amount for interest and expenses relating to income not taxable for federal
income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
291 of the Internal Revenue Code in computing federal taxable income;

(7) in the case of mines, oil and gas wells, other natural deposits, and timber for
which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
reasonable allowance for depletion based on actual cost. In the case of leases the deduction
must be apportioned between the lessor and lessee in accordance with rules prescribed
by the commissioner. In the case of property held in trust, the allowable deduction must
be apportioned between the income beneficiaries and the trustee in accordance with the
pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
of the trust's income allocable to each;

(8) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
1986, section 290.09, subdivision 7;

(9) amounts included in federal taxable income that are due to refunds of income,
excise, or franchise taxes based on net income or related minimum taxes paid by the
corporation to Minnesota, another state, a political subdivision of another state, the
District of Columbia, or a foreign country or possession of the United States to the extent
that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
clause (1), in a prior taxable year;

(10) 80 percent of royalties, fees, or other like income accrued or received from a
foreign operating corporation or a foreign corporation which is part of the same unitary
business as the receiving corporation, unless the income resulting from such payments or
accruals is income from sources within the United States as defined in subtitle A, chapter
1, subchapter N, part 1, of the Internal Revenue Code;

(11) income or gains from the business of mining as defined in section 290.05,
subdivision 1, clause (a), that are not subject to Minnesota franchise tax;

(12) the amount of disability access expenditures in the taxable year which are not
allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;

(13) the amount of qualified research expenses not allowed for federal income tax
purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
the amount exceeds the amount of the credit allowed under section 290.068;

(14) the amount of salary expenses not allowed for federal income tax purposes due
to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
Code;

(15) for taxable years beginning before January 1, 2008, the amount of the federal
small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
which is included in gross income under section 87 of the Internal Revenue Code;

(16) for a corporation whose foreign sales corporation, as defined in section 922
of the Internal Revenue Code, constituted a foreign operating corporation during any
taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
claiming the deduction under section 290.21, subdivision 4, for income received from
the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of
income excluded under section 114 of the Internal Revenue Code, provided the income is
not income of a foreign operating company;

(17) any decrease in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard to
the provisions of Division C, title III, section 303(b) of Public Law 110-343;

(18) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of
the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
amount of the addition made by the taxpayer under subdivision 19c, clause (15). The
resulting delayed depreciation cannot be less than zero;

(19) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of
the amount of the addition; and

(20) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19c, clause (25).

new text begin (21) to the extent included in federal taxable income, the amount of gain on the
sale or exchange of small business stock assigned or apportioned to this state. "Small
business stock" means an equity interest, held directly or indirectly, in a corporation or
partnership when that interest is:
new text end

new text begin (i) purchased for money or property, not including stock or payment for services;
new text end

new text begin (ii) purchased after June 30, 2010;
new text end

new text begin (iii) less than 100 percent in a corporation or less than 50 percent by vote or value in
a partnership; and
new text end

new text begin (iv) in a corporation or partnership that:
new text end

new text begin (A) is a single legal entity and not part of any unitary business of the taxpayer;
new text end

new text begin (B) has fewer than 100 employees, or in the case of a corporation or partnership that
is part of a unitary business, the unitary business has fewer than 100 employees;
new text end

new text begin (C) has not issued stock listed on the New York Stock Exchange, American Stock
Exchange, or National Association of Securities Dealers automated quotation system;
new text end

new text begin (D) in the year of purchase, had more than 50 percent of its property and payroll, as
determined under section 290.191, within this state;
new text end

new text begin (E) in the year of purchase, derived less than $25,000 in gross receipts from rents,
interest, dividends, and the sale of intangible investment assets;
new text end

new text begin (F) is not in a trade or business involving the performance of services in the fields
of health, law, engineering, architecture, accounting, actuarial science, performing arts,
consulting, athletics, financial services, brokerage services, or any trade or business where
the principal asset of the trade or business is the reputation or skill of one or more of
its employees;
new text end

new text begin (G) is not in a trade or business involving banking, insurance, financing, leasing,
investing, or similar business;
new text end

new text begin (H) is not a regulated investment company, real estate investment trust, or real
estate mortgage investment conduit;
new text end

new text begin (I) is not a cooperative; and
new text end

new text begin (J) did not liquidate its assets in whole or in part for the purpose of fulfilling the
requirements of this clause.
new text end

new text begin The small business stock must be held for more than five years to qualify for this
subtraction.
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, 2010.
new text end

Sec. 3.

Minnesota Statutes 2008, section 290.06, subdivision 1, is amended to read:

Subdivision 1.

Computation, corporations.

The franchise tax imposed upon
corporations shall be computed by applying to their taxable income the rate of deleted text begin 9.8 percent. deleted text end new text begin :
new text end

new text begin (1) 9.8 percent in taxable year 2010;
new text end

new text begin (2) 9.3 percent in taxable year 2011;
new text end

new text begin (3) 8.8 percent in taxable year 2012;
new text end

new text begin (4) 8.3 percent in taxable year 2013; and
new text end

new text begin (5) 7.8 percent in taxable years 2014 and thereafter.
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, 2010.
new text end

Sec. 4.

Minnesota Statutes 2009 Supplement, section 290.06, subdivision 2c, is
amended to read:

Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

(a) The income
taxes imposed by this chapter upon married individuals filing joint returns and surviving
spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
applying to their taxable net income the following schedule of rates:

(1) On the first $25,680, 5.35 percent;

(2) On all over $25,680, but not over $102,030, 7.05 percent;

(3) On all over $102,030, 7.85 percent.

Married individuals filing separate returns, estates, and trusts must compute their
income tax by applying the above rates to their taxable income, except that the income
brackets will be one-half of the above amounts.

(b) The income taxes imposed by this chapter upon unmarried individuals must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $17,570, 5.35 percent;

(2) On all over $17,570, but not over $57,710, 7.05 percent;

(3) On all over $57,710, 7.85 percent.

(c) The income taxes imposed by this chapter upon unmarried individuals qualifying
as a head of household as defined in section 2(b) of the Internal Revenue Code must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $21,630, 5.35 percent;

(2) On all over $21,630, but not over $86,910, 7.05 percent;

(3) On all over $86,910, 7.85 percent.

(d) In lieu of a tax computed according to the rates set forth in this subdivision, the
tax of any individual taxpayer whose taxable net income for the taxable year is less than
an amount determined by the commissioner must be computed in accordance with tables
prepared and issued by the commissioner of revenue based on income brackets of not
more than $100. The amount of tax for each bracket shall be computed at the rates set
forth in this subdivision, provided that the commissioner may disregard a fractional part of
a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the entire year must compute
the individual's Minnesota income tax as provided in this subdivision. After the
application of the nonrefundable credits provided in this chapter, the tax liability must
then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income
as defined in section 62 of the Internal Revenue Code and increased by the additions
required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12),
(13), (16), and (17), and reduced by the Minnesota assignable portion of the subtraction
for United States government interest under section 290.01, subdivision 19b, clause (1),
and the subtractions under section 290.01, subdivision 19b, clauses (9), (10), (14), (15),
(16), and (18) new text begin to (20) new text end , after applying the allocation and assignability provisions of section
290.081, clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted gross income as defined in
section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), (13), (16), and
(17), and reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1),
(9), (10), (14), (15), (16), and (18) new text begin to (20) 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, 2010.
new text end

Sec. 5.

Minnesota Statutes 2008, section 290.068, is amended to read:

290.068 CREDIT FOR INCREASING RESEARCH ACTIVITIES.

Subdivision 1.

Credit allowed.

A corporation, deleted text begin other than deleted text end new text begin partners in a partnership,
or shareholders in new text end a corporation treated as an "S" corporation under section 290.9725 deleted text begin ,
is deleted text end new text begin are new text end allowed a credit against deleted text begin the portion of deleted text end the deleted text begin franchise deleted text end tax computed under section
290.06 deleted text begin , subdivision 1 deleted text end deleted text begin , deleted text end for the taxable year equal to deleted text begin :
deleted text end

deleted text begin (a) deleted text end 5 percent deleted text begin of the first $2,000,000 deleted text end of the excess (if any) of new text begin :
new text end

(1) the qualified research expenses for the taxable year, over

(2) the base amount deleted text begin ; and deleted text end new text begin .
new text end

deleted text begin (b) 2.5 percent on all of such excess expenses over $2,000,000.
deleted text end

Subd. 2.

Definitions.

For purposes of this section, the following terms have the
meanings given.

(a) "Qualified research expenses" means (i) qualified research expenses and basic
research payments as defined in section 41(b) and (e) of the Internal Revenue Code, except
it does not include expenses incurred for qualified research or basic research conducted
outside the state of Minnesota pursuant to section 41(d) and (e) of the Internal Revenue
Code; and (ii) contributions to a nonprofit corporation established and operated pursuant
to the provisions of chapter 317A for the purpose of promoting the establishment and
expansion of business in this state, provided the contributions are invested by the nonprofit
corporation for the purpose of providing funds for small, technologically innovative
enterprises in Minnesota during the early stages of their development.

(b) "Qualified research" means qualified research as defined in section 41(d) of the
Internal Revenue Code, except that the term does not include qualified research conducted
outside the state of Minnesota.

(c) "Base amount" means base amount as defined in section 41(c) of the Internal
Revenue Code, except that the average annual gross receipts must be calculated using
Minnesota sales or receipts under section 290.191 and the definitions contained in clauses
(a) and (b) shall apply. new text begin If a taxpayer does not have records to substantiate the aggregate
qualified research expenses for the taxable years beginning after December 31, 1983, and
before January 1, 1989, to compute the base amount, and is not a start-up company to
which Internal Revenue Code, section 41(c)(3)(B) applies, the corporation is permitted to
use a fixed-base percentage of 16 percent.
new text end

Subd. 3.

Limitation; carryover.

(a)(1) The credit for deleted text begin the deleted text end new text begin a new text end taxable year new text begin beginning
before January 1, 2012, new text end shall not exceed the liability for tax. "Liability for tax" for
purposes of this section means the tax imposed under section 290.06, subdivision 1, for the
taxable year reduced by the sum of the nonrefundable credits allowed under this chapter.

(2) In the case of a corporation which is a partner in a partnership, the credit allowed
for the taxable year shall not exceed the lesser of the amount determined under clause (1)
for the taxable year or an amount (separately computed with respect to the corporation's
interest in the trade or business or entity) equal to the amount of tax attributable to that
portion of taxable income which is allocable or apportionable to the corporation's interest
in the trade or business or entity.

(b) If the amount of the credit determined under this section for any taxable year
exceeds the limitation under clause (a), the excess shall be a research credit carryover to
each of the 15 succeeding taxable years. The entire amount of the excess unused credit for
the taxable year shall be carried first to the earliest of the taxable years to which the credit
may be carried and then to each successive year to which the credit may be carried. The
amount of the unused credit which may be added under this clause shall not exceed the
taxpayer's liability for tax less the research credit for the taxable year.

Subd. 4.

Partnerships new text begin and S corporations new text end .

In the case of partnerships the credit
shall be allocated in the same manner provided by section 41(f)(2) of the Internal Revenue
Code.

new text begin In the case of shareholders in S corporations the credit shall be allocated in the same
manner as provided by section 1366(a) of the Internal Revenue Code.
new text end

Subd. 5.

Adjustments; acquisitions and dispositions.

If a taxpayer acquires or
disposes of the major portion of a trade or business or the major portion of a separate unit
of a trade or business in a transaction with another taxpayer, the taxpayer's qualified
research expenses and base amount are adjusted in the same manner provided by section
41(f)(3) of the Internal Revenue Code.

new text begin Subd. 6. new text end

new text begin Credit to be refundable. new text end

new text begin If the amount of credit allowed in this section for
qualified research expenses incurred in taxable years beginning after December 31, 2011,
exceeds the taxpayer's tax liability under section 290.02 or 290.03, the commissioner
shall refund the excess amount. This credit must be used before any other credit allowed
under this chapter.
new text end

new text begin Subd. 7. new text end

new text begin Appropriation. new text end

new text begin An amount sufficient to pay the refunds required by this
section is appropriated to the commissioner from the general fund.
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, 2011.
new text end

Sec. 6.

Minnesota Statutes 2009 Supplement, section 290.091, subdivision 2, is
amended to read:

Subd. 2.

Definitions.

For purposes of the tax imposed by this section, the following
terms have the meanings given:

(a) "Alternative minimum taxable income" means the sum of the following for
the taxable year:

(1) the taxpayer's federal alternative minimum taxable income as defined in section
55(b)(2) of the Internal Revenue Code;

(2) the taxpayer's itemized deductions allowed in computing federal alternative
minimum taxable income, but excluding:

(i) the charitable contribution deduction under section 170 of the Internal Revenue
Code;

(ii) the medical expense deduction;

(iii) the casualty, theft, and disaster loss deduction; and

(iv) the impairment-related work expenses of a disabled person;

(3) for depletion allowances computed under section 613A(c) of the Internal
Revenue Code, with respect to each property (as defined in section 614 of the Internal
Revenue Code), to the extent not included in federal alternative minimum taxable income,
the excess of the deduction for depletion allowable under section 611 of the Internal
Revenue Code for the taxable year over the adjusted basis of the property at the end of the
taxable year (determined without regard to the depletion deduction for the taxable year);

(4) to the extent not included in federal alternative minimum taxable income, the
amount of the tax preference for intangible drilling cost under section 57(a)(2) of the
Internal Revenue Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative minimum taxable income, the
amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and

(6) the amount of addition required by section 290.01, subdivision 19a, clauses (7)
to (9), (12), (13), (16), and (17);

less the sum of the amounts determined under the following:

(1) interest income as defined in section 290.01, subdivision 19b, clause (1);

(2) an overpayment of state income tax as provided by section 290.01, subdivision
19b, clause (2), to the extent included in federal alternative minimum taxable income;

(3) the amount of investment interest paid or accrued within the taxable year on
indebtedness to the extent that the amount does not exceed net investment income, as
defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include
amounts deducted in computing federal adjusted gross income; and

(4) amounts subtracted from federal taxable income as provided by section 290.01,
subdivision 19b, clauses (6), (9) to (16), and (18) new text begin to (20) new text end .

In the case of an estate or trust, alternative minimum taxable income must be
computed as provided in section 59(c) of the Internal Revenue Code.

(b) "Investment interest" means investment interest as defined in section 163(d)(3)
of the Internal Revenue Code.

(c) "Net minimum tax" means the minimum tax imposed by this section.

(d) "Regular tax" means the tax that would be imposed under this chapter (without
regard to this section and section 290.032), reduced by the sum of the nonrefundable
credits allowed under this chapter.

(e) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable
income after subtracting the exemption amount determined under subdivision 3.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

Sec. 7.

Minnesota Statutes 2008, section 290.0921, subdivision 1, is amended to read:

Subdivision 1.

Tax imposed.

In addition to the taxes computed under this chapter
without regard to this section, the franchise tax imposed on corporations includes a tax
equal to the excess, if any, for the taxable year of:

(1) new text begin (i) new text end 5.8 percent of Minnesota alternative minimum taxable income new text begin in taxable
year 2010 new text end ;

new text begin (ii) 5.5 percent of Minnesota alternative minimum taxable income in taxable year
2011;
new text end

new text begin (iii) 5.2 percent of Minnesota alternative minimum taxable income in taxable year
2012;
new text end

new text begin (iv) 4.9 percent of Minnesota alternative minimum taxable income in taxable year
2013, and
new text end

new text begin (v) 4.6 percent of Minnesota alternative minimum taxable income in taxable year
2014 and thereafter;
new text end

over

(2) the tax imposed under section 290.06, subdivision 1, new text begin for the taxable year new text end without
regard to this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

Sec. 8.

Minnesota Statutes 2008, section 290.0921, subdivision 3, is amended to read:

Subd. 3.

Alternative minimum taxable income.

"Alternative minimum taxable
income" is Minnesota net income as defined in section 290.01, subdivision 19, and
includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e),
(f), and (h) of the Internal Revenue Code. If a corporation files a separate company
Minnesota tax return, the minimum tax must be computed on a separate company basis.
If a corporation is part of a tax group filing a unitary return, the minimum tax must be
computed on a unitary basis. The following adjustments must be made.

(1) For purposes of the depreciation adjustments under section 56(a)(1) and
56(g)(4)(A) of the Internal Revenue Code, the basis for depreciable property placed in
service in a taxable year beginning before January 1, 1990, is the adjusted basis for federal
income tax purposes, including any modification made in a taxable year under section
290.01, subdivision 19e, or Minnesota Statutes 1986, section 290.09, subdivision 7,
paragraph (c).

For taxable years beginning after December 31, 2000, the amount of any remaining
modification made under section 290.01, subdivision 19e, or Minnesota Statutes 1986,
section 290.09, subdivision 7, paragraph (c), not previously deducted is a depreciation
allowance in the first taxable year after December 31, 2000.

(2) The portion of the depreciation deduction allowed for federal income tax
purposes under section 168(k) of the Internal Revenue Code that is required as an
addition under section 290.01, subdivision 19c, clause (15), is disallowed in determining
alternative minimum taxable income.

(3) The subtraction for depreciation allowed under section 290.01, subdivision 19d,
clause (18), is allowed as a depreciation deduction in determining alternative minimum
taxable income.

(4) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d)
of the Internal Revenue Code does not apply.

(5) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal
Revenue Code does not apply.

(6) The special rule for dividends from section 936 companies under section
56(g)(4)(C)(iii) does not apply.

(7) The tax preference for depletion under section 57(a)(1) of the Internal Revenue
Code does not apply.

(8) The tax preference for intangible drilling costs under section 57(a)(2) of the
Internal Revenue Code must be calculated without regard to subparagraph (E) and the
subtraction under section 290.01, subdivision 19d, clause (4).

(9) The tax preference for tax exempt interest under section 57(a)(5) of the Internal
Revenue Code does not apply.

(10) The tax preference for charitable contributions of appreciated property under
section 57(a)(6) of the Internal Revenue Code does not apply.

(11) For purposes of calculating the tax preference for accelerated depreciation or
amortization on certain property placed in service before January 1, 1987, under section
57(a)(7) of the Internal Revenue Code, the deduction allowable for the taxable year is the
deduction allowed under section 290.01, subdivision 19e.

For taxable years beginning after December 31, 2000, the amount of any remaining
modification made under section 290.01, subdivision 19e, not previously deducted is a
depreciation or amortization allowance in the first taxable year after December 31, 2004.

(12) For purposes of calculating the adjustment for adjusted current earnings in
section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable
income" as it is used in section 56(g) of the Internal Revenue Code, means alternative
minimum taxable income as defined in this subdivision, determined without regard to the
adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.

(13) For purposes of determining the amount of adjusted current earnings under
section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section
56(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend
gross-up subtracted as provided in section 290.01, subdivision 19d, clause (1), (ii) the
amount of refunds of income, excise, or franchise taxes subtracted as provided in section
290.01, subdivision 19d, clause (9), or (iii) the amount of royalties, fees or other like
income subtracted as provided in section 290.01, subdivision 19d, clause (10).

(14) Alternative minimum taxable income excludes the income from operating in a
job opportunity building zone as provided under section 469.317.

(15) Alternative minimum taxable income excludes the income from operating in a
biotechnology and health sciences industry zone as provided under section 469.337.

(16) Alternative minimum taxable income excludes the income from operating in an
international economic development zone as provided under section 469.326.

new text begin (17) Alternative minimum taxable income includes the subtraction for small business
stock as provided under section 290.01, subdivision 19d, clause (21).
new text end

Items of tax preference must not be reduced below zero as a result of the
modifications in this subdivision.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

ARTICLE 2

FEDERAL UPDATE

Section 1.

Minnesota Statutes 2009 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 deleted text begin March 31,
2009 deleted text end new text begin January 22, 2010 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

Sec. 2.

Minnesota Statutes 2009 Supplement, section 290.01, subdivision 19, is
amended to read:

Subd. 19.

Net income.

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 subdivisions 19a to 19f.

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.

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.

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.

The Internal Revenue Code of 1986, as amended through deleted text begin March 31, 2009 deleted text end new text begin January
22, 2010 new text end , shall be in effect for taxable years beginning after December 31, 1996.

Except as otherwise provided, references to the Internal Revenue Code in
subdivisions 19 to 19f 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.
new text end

Sec. 3.

Minnesota Statutes 2009 Supplement, section 290.01, subdivision 19b, is
amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For individuals, estates,
and trusts, there shall be subtracted from federal taxable income:

(1) net interest income on obligations of any authority, commission, or
instrumentality of the United States to the extent includable in taxable income for federal
income tax purposes but exempt from state income tax under the laws of the United States;

(2) if included in federal taxable income, the amount of any overpayment of income
tax to Minnesota or to any other state, for any previous taxable year, whether the amount
is received as a refund or as a credit to another taxable year's income tax liability;

(3) the amount paid to others, less the amount used to claim the credit allowed under
section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
transportation of each qualifying child in attending an elementary or secondary school
situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
resident of this state may legally fulfill the state's compulsory attendance laws, which
is not operated for profit, and which adheres to the provisions of the Civil Rights Act
of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and equipment purchased
or leased for use in elementary and secondary schools in teaching only those subjects
legally and commonly taught in public elementary and secondary schools in this state.
Equipment expenses qualifying for deduction includes expenses as defined and limited in
section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
books and materials used in the teaching of religious tenets, doctrines, or worship, the
purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
or materials for, or transportation to, extracurricular activities including sporting events,
musical or dramatic events, speech activities, driver's education, or similar programs. No
deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
the qualifying child's vehicle to provide such transportation for a qualifying child. For
purposes of the subtraction provided by this clause, "qualifying child" has the meaning
given in section 32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross income, income realized on
disposition of property exempt from tax under section 290.491;

(6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
of the Internal Revenue Code in determining federal taxable income by an individual
who does not itemize deductions for federal income tax purposes for the taxable year, an
amount equal to 50 percent of the excess of charitable contributions over $500 allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and
under the provisions of Public Law 109-1 new text begin and Public Law 111-126 new text end ;

(7) for taxable years beginning before January 1, 2008, the amount of the federal
small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
which is included in gross income under section 87 of the Internal Revenue Code;

(8) for individuals who are allowed a federal foreign tax credit for taxes that do not
qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
of subnational foreign taxes for the taxable year, but not to exceed the total subnational
foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
"federal foreign tax credit" means the credit allowed under section 27 of the Internal
Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
the extent they exceed the federal foreign tax credit;

(9) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the
positive value of any net operating loss under section 172 of the Internal Revenue Code
generated for the tax year of the addition. The resulting delayed depreciation cannot be
less than zero;

(10) job opportunity building zone income as provided under section 469.316;

(11) to the extent included in federal taxable income, the amount of compensation
paid to members of the Minnesota National Guard or other reserve components of the
United States military for active service performed in Minnesota, excluding compensation
for services performed under the Active Guard Reserve (AGR) program. For purposes of
this clause, "active service" means (i) state active service as defined in section 190.05,
subdivision 5a, clause (1); (ii) federally funded state active service as defined in section
190.05, subdivision 5b; or (iii) federal active service as defined in section 190.05,
subdivision 5c, but "active service" excludes service performed in accordance with section
190.08, subdivision 3;

(12) to the extent included in federal taxable income, the amount of compensation
paid to Minnesota residents who are members of the armed forces of the United States or
United Nations for active duty performed outside Minnesota under United States Code,
title 10, section 101(d); United States Code, title 32, section 101(12); or the authority of
the United Nations;

(13) an amount, not to exceed $10,000, equal to qualified expenses related to a
qualified donor's donation, while living, of one or more of the qualified donor's organs
to another person for human organ transplantation. For purposes of this clause, "organ"
means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
"human organ transplantation" means the medical procedure by which transfer of a human
organ is made from the body of one person to the body of another person; "qualified
expenses" means unreimbursed expenses for both the individual and the qualified donor
for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
may be subtracted under this clause only once; and "qualified donor" means the individual
or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
individual may claim the subtraction in this clause for each instance of organ donation for
transplantation during the taxable year in which the qualified expenses occur;

(14) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
case of a shareholder of a corporation that is an S corporation, minus the positive value of
any net operating loss under section 172 of the Internal Revenue Code generated for the
tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
subtraction is not allowed under this clause;

(15) to the extent included in federal taxable income, compensation paid to a service
member as defined in United States Code, title 10, section 101(a)(5), for military service
as defined in the Servicemembers Civil Relief Act, Public Law 108-189, section 101(2);

(16) international economic development zone income as provided under section
469.325;

(17) to the extent included in federal taxable income, the amount of national service
educational awards received from the National Service Trust under United States Code,
title 42, sections 12601 to 12604, for service in an approved Americorps National Service
program; and

(18) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19a, clause (16).

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

Minnesota Statutes 2009 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 deleted text begin March 31,
2009 deleted text end new text begin January 22, 2010 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 that the changes incorporated by federal changes are effective at the same time as
the changes were effective for federal purposes.
new text end

Sec. 5.

Minnesota Statutes 2008, section 290.095, subdivision 11, is amended to read:

Subd. 11.

Carryback or carryover adjustments.

(a) new text begin Except as provided in
paragraph (c), new text end for individuals, estates, and trusts the amount of a net operating loss
that may be carried back or carried over shall be the same dollar amount allowable in
the determination of federal taxable income, provided that, notwithstanding any other
provision, estates and trusts must apply the following adjustments to the amount of the net
operating loss that may be carried back or carried over:

(1) Nonassignable income or losses as required by section 290.17.

(2) Deductions not allocable to Minnesota under section 290.17.

(b) The net operating loss carryback or carryover applied as a deduction in the taxable
year to which the net operating loss is carried back or carried over shall be equal to the
net operating loss carryback or carryover applied in the taxable year in arriving at federal
taxable income provided that trusts and estates must apply the following modifications:

(1) Increase the amount of carryback or carryover applied in the taxable year by
the amount of losses and interest, taxes and other expenses not assignable or allowable
to Minnesota incurred in the taxable year.

(2) Decrease the amount of carryback or carryover applied in the taxable year by
the amount of income not assignable to Minnesota earned in the taxable year. For estates
and trusts, the net operating loss carryback or carryover to the next consecutive taxable
year shall be the net operating loss carryback or carryover as calculated in clause (b)
less the amount applied in the earlier taxable year(s). No additional net operating loss
carryback or carryover shall be allowed to estates and trusts if the entire amount has been
used to offset Minnesota income in a year earlier than was possible on the federal return.
However, if a net operating loss carryback or carryover was allowed to offset federal
income in a year earlier than was possible on the Minnesota return, an estate or trust
shall still be allowed to offset Minnesota income but only if the loss was assignable to
Minnesota in the year the loss occurred.

new text begin (c)(1) A net operating loss of an individual, estate, or trust that is allowed under this
subdivision and for which the taxpayer elects to carry back for more than two years under
section 172(b)(1)(H) of the Internal Revenue Code is a net operating loss carryback to
each of the two taxable years preceding the loss, and unused portions may be carried
forward for 20 taxable years after the loss.
new text end

new text begin (2) The entire amount of the net operating loss for any taxable year shall be carried
to the earliest of the taxable years to which the loss may be carried. The portion of the
loss which is carried to each of the other taxable years is the excess, if any, of the amount
of the loss over the taxable net income for each of the taxable years to which the loss
may be carried.
new text end

new text begin This paragraph does not apply to eligible small businesses that make a valid election
to carry back their losses for federal purposes under section 172(b)(1)(H) of the Internal
Revenue Code, as amended through March 31, 2009.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for net operating losses generated in
taxable years beginning after December 31, 2007.
new text end

Sec. 6.

Minnesota Statutes 2009 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 deleted text begin March 31, 2009 deleted text end new text begin January 22, 2010 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, 2009, and rent paid after December 31, 2008.
new text end

Sec. 7.

Minnesota Statutes 2009 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 valued and
otherwise determined for federal estate tax purposes by federal taxing authorities pursuant
to the provisions of the Internal Revenue Code.

(3) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through deleted text begin March 31, 2009 deleted text end new text begin January 22, 2010 new text end .

(4) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
defined by section 2011(b)(3) of the Internal Revenue Code, increased by the amount of
deduction for state death taxes allowed under section 2058 of the Internal Revenue Code.

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

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

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

(9) "Situs of property" means, with respect to real property, the state or country in
which it is located; with respect to tangible personal property, the state or country in which
it was normally kept or located at the time of the decedent's death; and with respect to
intangible personal property, the state or country in which the decedent was domiciled
at death.

new text begin EFFECTIVE DATE. new text end

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

ARTICLE 3

ANGEL INVESTMENT TAX CREDIT

Section 1.

new text begin [116J.8737] ANGEL INVESTMENT TAX CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the following terms
have the meanings given.
new text end

new text begin (b) "Qualified small business" means a business that satisfies all of the following
conditions:
new text end

new text begin (1) the business has its headquarters in Minnesota;
new text end

new text begin (2) at least 51 percent of the business's employees are employed in Minnesota, and
51 percent of the business's total payroll is paid or incurred in the state;
new text end

new text begin (3) the business is engaged in, or is committed to engage in, innovation in Minnesota
in one of the following:
new text end

new text begin (i) using proprietary technology to add value to a product, process, or service in a
qualified high-technology field;
new text end

new text begin (ii) researching or developing a proprietary product, process, or service in a qualified
high-technology field;
new text end

new text begin (iii) researching, developing, or producing a new proprietary technology for use in
the fields of tourism, forestry, mining, or transportation; or
new text end

new text begin (iv) qualified green manufacturing;
new text end

new text begin (4) other than the activities specifically listed in clause (3), the business is not
engaged in real estate development, insurance, banking, lending, lobbying, political
consulting, information technology consulting, wholesale or retail trade, leisure,
hospitality, transportation, construction, ethanol production from corn, or professional
services provided by attorneys, accountants, business consultants, physicians, or health
care consultants;
new text end

new text begin (5) the business has fewer than 25 employees;
new text end

new text begin (6) if the business has five or more employees as measured on a full-time equivalent
basis, the business must pay its employees in excess of the first five annual wages at least
175 percent of the federal poverty guideline for the year for a family of four;
new text end

new text begin (7) the business has not been in operation for more than ten consecutive years;
new text end

new text begin (8) the business has not received more than $4,000,000 in qualifying investments
that have qualified for and received tax credits under this section;
new text end

new text begin (9) the business is not a member of a unitary group that employs more than 100
employees; and
new text end

new text begin (10) the business has not previously received private equity investments of more
than $2,000,000.
new text end

new text begin (c) "Qualified high-technology field" includes, but is not limited to, aerospace,
agricultural processing, alternative energy, environmental engineering, food technology,
cellulosic ethanol, information technology, materials science technology, nanotechnology,
telecommunications, biotechnology, medical device products, pharmaceuticals,
diagnostics, biologicals, and veterinary science.
new text end

new text begin (d) "Proprietary technology" means the technical innovations that are unique and
legally owned or licensed by a business and includes, without limitation, those innovations
that are patented, patent pending, a subject of trade secrets, or copyrighted.
new text end

new text begin (e) "Qualified green manufacturing" means a business whose primary business
activity is production of products, processes, methods, technologies, or services, excluding
consulting, intended to do one or more of the following:
new text end

new text begin (1) increase the use of energy from renewable sources, as defined in section
216B.1691;
new text end

new text begin (2) increase the energy efficiency of the electric utility-producing infrastructure
system or to increase energy conservation related to electricity or other utility use, as
provided in sections 216B.2401 and 216B.241;
new text end

new text begin (3) monitor, protect, restore, and preserve the quality of surface waters; and
new text end

new text begin (4) expand use of biofuels, including expanding the feasibility or reducing the cost
of producing biofuels or the types of equipment, machinery, and vehicles that can use
biofuels.
new text end

new text begin (f) "Qualified taxpayer" means an accredited investor, within the meaning of
Regulation D of the Securities and Exchange Commission, Code of Federal Regulations,
title 17, section 230.501(a), who:
new text end

new text begin (1) does not own, control, or hold power to vote 20 percent or more of the outstanding
securities of the qualified small business in which the eligible investment is proposed; or
new text end

new text begin (2) does not receive more than 50 percent of the taxpayer's gross annual income from
the qualified small business in which the eligible investment is proposed.
new text end

new text begin A member of the family of a taxpayer disqualified by this subdivision is not eligible
for a credit under this section.
new text end

new text begin (g)(1) "Qualified angel investment network fund" means a pooled investment fund
that:
new text end

new text begin (i) invests in qualified small businesses;
new text end

new text begin (ii) is organized as a pass-through entity; and
new text end

new text begin (iii) has at least three separate investors, all of whom are qualified taxpayers
as defined in paragraph (f), and that own no more than 50 percent of the outstanding
ownership interests in the fund; and
new text end

new text begin (2) for purposes of determining the number of investors and the ownership interest
of an investor under this paragraph, the ownership interests of an investor include those of
the investor's family, and any corporation, limited liability company, partnership, or trust
in which the investor or the investor's family has a controlling equity interest or exercises
management control. Investments in the fund may consist of equity investments or notes
that pay interest or other fixed amounts, or any combination of both.
new text end

new text begin (h) "Qualified investment" means either a cash investment of a minimum of:
new text end

new text begin (1) $10,000 in a calendar year by a qualified taxpayer; or
new text end

new text begin (2) $50,000 in a calendar year by a qualified angel investment network fund.
new text end

new text begin The qualified investment in a qualified small business must be in exchange
for common stock, a partnership or membership interest, preferred stock, debt with
mandatory conversion to equity, or an equivalent ownership interest as determined by
the commissioner.
new text end

new text begin (i) "Family" means a family member within the meaning of the Internal Revenue
Code, section 267(c)(4).
new text end

new text begin Subd. 2. new text end

new text begin Certification of small businesses. new text end

new text begin (a) Businesses may apply to the
commissioner for certification as a qualified small business. The application must be in the
form and be made under the procedures specified by the commissioner, accompanied by
an application fee of $150. The application for certification must be made available on the
department's Web site by August 1, 2010. Applications for subsequent years' certification
must be made available on the department's Web site by November 1 of the preceding
year. Application fees collected are appropriated to the commissioner to be used for
personnel and administrative expenses related to administering the program.
new text end

new text begin (b) A business seeking certification must submit an application for each taxable
year for which the business desires certification. If a qualified small business receives
a qualified investment for which tax credits are allocated, the business must annually
submit a certified small business report in the form required by the commissioner with
the required fee no later than February 1 for the two years subsequent to the last qualified
investment. Failure to file an annual report as required under this subdivision results in a
fine of $500 and revocation of certification.
new text end

new text begin (c) The commissioner must maintain a list of businesses certified under this
subdivision and make the list accessible to the public on the department's Web site.
new text end

new text begin Subd. 3. new text end

new text begin Certification of qualified taxpayers. new text end

new text begin (a) Taxpayers may apply to the
commissioner for certification as a qualified taxpayer. The application must be in the
form and be made under the procedures specified by the commissioner, accompanied by
an application fee of $350. The application for certification of qualified taxpayers must
be made available on the department's Web site by August 1, 2010. Applications for
subsequent years' certification must be made available on the department's Web site by
November 1 of the preceding year. Application fees are appropriated to the commissioner
for personnel and administrative expenses related to administering the program.
new text end

new text begin (b) A qualified taxpayer seeking certification must submit an application for each
taxable year in which the qualified taxpayer seeks certification. If a qualified taxpayer
receives tax credits under this section, a qualified taxpayer must submit an angel investor
annual report in the form required by the commissioner with the required fee no later than
February 1 of each year for two years subsequent to the last allocation of tax credits.
Failure to file an angel investor annual report as required under this subdivision results
in the revocation of tax credits. Once a qualified taxpayer has filed the required annual
reports and accompanying fees for two subsequent years following allocation of tax
credits and complied with all other requirements for that allocation, the tax credits are
no longer subject to revocation.
new text end

new text begin Subd. 4. new text end

new text begin Certification of qualified angel investment network funds. new text end

new text begin (a)
Angel investment network funds may apply to the commissioner of employment and
economic development for certification as a qualified angel investment network fund.
The application must be in the form and be made under the procedures specified by
the commissioner, accompanied by an application fee of $1,000. The application for
certification of qualified angel investor network funds must be made available on the
department's Web site by August 1, 2010. Applications for subsequent years' certification
must be made available by November 1 of the preceding year. Application fees collected
are appropriated to the commissioner to be used for personnel and administrative expenses
related to administering the program.
new text end

new text begin (b) A qualified angel investment network fund seeking certification must submit an
application for each taxable year for which the angel investment network fund seeks
certification. If any member of a qualified angel investment network fund receives tax
credits under this section for qualified investments made by the fund, the qualified angel
investment network fund must annually submit an angel investor annual report in the
form required by the commissioner with the required fee no later than February 1 of
each year for two years subsequent to the last allocation of credits. Failure to file an
angel investor annual report as required under this subdivision results in revocation of
tax credits. Once a qualified angel investment network fund has filed the required annual
reports and accompanying fees for two subsequent years following allocation of tax
credits and complied with all other requirements for that allocation, the tax credits are
no longer subject to revocation.
new text end

new text begin new text end

new text begin Subd. 5. new text end

new text begin Credit allowed. new text end

new text begin (a) A qualified taxpayer or angel investor network fund is
allowed a credit for investment in a qualified small business in the amount determined by
the certification allocated by the commissioner against the tax imposed by chapter 290.
The commissioner must not allocate more than $5,000,000 in credits to qualified taxpayers
or angel investment network funds in calendar year 2010, and must not allocate more
than $10,000,000 in credits in calendar year 2011 and in each calendar year thereafter.
Any portion of a year's credits that is not allocated by the commissioner does not cancel
and may be carried forward to the subsequent year until all credits have been allocated.
Applications for tax investment credits must be made available on the department's
Web site by September 1, 2010, and the department must begin accepting applications
by September 1, 2010. Applications for subsequent years must be made available by
November 1 of the preceding year.
new text end

new text begin (b) Tax investment credits must be allocated to qualified taxpayers or angel investor
network funds in the order that the tax credit request applications are filed with the
department. The investment specified in the application must be made within 60 days of
the allocation of the credits. If the investment is not made within 60 days, the credits are
deemed revoked. A qualified taxpayer or angel investor network fund that fails to invest
as specified in the application, within 60 days from allocation of the credits, must notify
the department of the failure to invest within five business days of the expiration of the
60-day investment period.
new text end

new text begin (c) All tax credit request applications filed with the department on the same day must
be treated as having been filed contemporaneously. In the event that two or more qualified
taxpayers or angel investment network funds file tax credit request applications on the
same day, and the aggregate amount of credit allocation claims exceeds the aggregate limit
of credit under this section or the lesser amount of credits that remain unallocated on that
day, then the credits must be allocated among the qualified taxpayers or angel investment
network funds who filed on that day on a pro rata basis with respect to the amounts claimed.
The pro rata allocation for any one qualified taxpayer or angel investment network fund is
the product obtained by multiplying a fraction, the numerator of which is the amount of
the credit allocation claim filed on behalf of a qualified taxpayer and the denominator of
which is the total of all credit allocation claims filed on behalf of all applicants on that day,
by the amount of credits that remain unallocated on that day for the fiscal year.
new text end

new text begin (d) The commissioner must notify the commissioner of revenue of every credit
allocated and every credit revoked under this section.
new text end

new text begin Subd. 6. new text end

new text begin Annual reports. new text end

new text begin (a) By February 1 of each year for two years subsequent
to the last allocation of credits, qualified small businesses, qualified taxpayers, and
qualified angel investment network funds must submit an annual report and a filing fee of
$100. All report fees collected are appropriated to the commissioner for personnel and
administrative expense related to administering the program.
new text end

new text begin (b) Qualified small businesses must certify to the department in the form required by
the commissioner that it satisfies the following requirements:
new text end

new text begin (1) the business has its headquarters in Minnesota;
new text end

new text begin (2) at least 51 percent of the business's employees are employed in Minnesota, and
51 percent of the business's total payroll is paid or incurred in the state;
new text end

new text begin (3) that the business is engaged in, or is committed to engage in, innovation in
Minnesota as defined under subdivision 1; and
new text end

new text begin (4) that the business meets the payroll requirements in subdivision 1, paragraph
(b), clause (6).
new text end

new text begin (c) Qualified taxpayers must certify to the department in the form required by the
commissioner that the investor satisfies the following requirements:
new text end

new text begin (1) the taxpayer continues to meet the requirements of subdivision 1, paragraph
(f); and
new text end

new text begin (2) that the taxpayer continues to remain invested in the qualified small business as
required by section 290.0692, subdivision 3.
new text end

new text begin (d) Qualified angel investment network funds must certify to the department in the
form required by the commissioner that the investor satisfies the following requirements:
new text end

new text begin (1) the taxpayer continues to meet the requirements of subdivision 1, paragraph
(g); and
new text end

new text begin (2) that the angel investment network fund continues to remain invested in the
qualified small business as required by section 290.0692, subdivision 3.
new text end

new text begin Subd. 7. new text end

new text begin Rulemaking exception. new text end

new text begin The commissioner's actions in establishing
procedures and requirements and in making determinations and certifications to administer
this section are not a rule for purposes of chapter 14, are not subject to the Administrative
Procedure Act contained in chapter 14, and are not subject to section 14.386.
new text end

new text begin Subd. 8. new text end

new text begin Report. new text end

new text begin Beginning in 2011, the commissioner must annually report by
March 15 to the chairs of the legislative committees and divisions having jurisdiction over
taxes and economic development in the senate and the house of representatives on the tax
credits issued under this section. The report must include:
new text end

new text begin (1) the number and amount of the credits issued;
new text end

new text begin (2) the recipients of the credits;
new text end

new text begin (3) the number and type of each business certified as a qualified small business;
new text end

new text begin (4) to the extent determinable, the total amount of investment generated by these
credits; and
new text end

new text begin (5) any other information relevant to evaluating the effect of these credits.
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

Sec. 2.

new text begin [290.0692] ANGEL INVESTMENT CREDIT; CREDIT ALLOWED;
LIMITATIONS; HOLDING PERIOD; AND CARRYOVER.
new text end

new text begin Subdivision 1. new text end

new text begin Credit allowed. new text end

new text begin A qualified taxpayer is allowed a credit against the
tax imposed under this chapter for investments made in the year in a qualified small
business as defined under section 116J.8737. The credit equals 25 percent of the qualified
taxpayer's investment in the business, but not to exceed the lesser of:
new text end

new text begin (1) the liability for tax under this chapter, including the applicable alternative
minimum tax, but excluding the minimum fee under section 290.0922; and
new text end

new text begin (2) the amount of the certificate provided to the qualified taxpayer under section
116J.8737.
new text end

new text begin Subd. 2. new text end

new text begin Limitations. new text end

new text begin No taxpayer may receive more than $125,000 in credits
under this section in any one year.
new text end

new text begin Subd. 3. new text end

new text begin Holding periods. new text end

new text begin The credit is allowed only for investments for which a
credit has been allocated by the commissioner of employment and economic development
under section 116J.8737. Any credit taken by a taxpayer must be repaid, and any unused
credits must be canceled, if the investment in the qualified small business is not held for at
least three years. The three-year holding period does not apply if:
new text end

new text begin (1) the investment by the qualified taxpayer becomes worthless before the end
of the three-year period;
new text end

new text begin (2) 80 percent or more of the assets of the qualified small business is sold before
the end of the three-year period;
new text end

new text begin (3) the qualified small business is sold before the end of the three-year period; or
new text end

new text begin (4) the qualified small business's common stock begins trading on a public exchange
before the end of the three-year period.
new text end

new text begin Subd. 4. new text end

new text begin Proportional credits. new text end

new text begin Each pass-through entity must provide each
investor a statement indicating the investor's share of the credit amount certified to the
pass-through entity based on its share of the pass-through entity's assets at the time of
the qualified investment.
new text end

new text begin Subd. 5. new text end

new text begin Carryover. new text end

new text begin If the amount of the credit under this subdivision for any
taxable year exceeds the liability for tax, the excess is a credit carryover to each of the ten
succeeding taxable years. The entire amount of the excess unused credit for the taxable
year must be carried first to the earliest of the taxable years to which the credit may be
carried. The amount of the unused credit that may be added under this subdivision may
not exceed the taxpayer's liability for tax less the credit for the taxable year.
new text end

new text begin Subd. 6. new text end

new text begin Transfer of credits. new text end

new text begin Any taxpayer who has not had liability under this
chapter for the immediate past three taxable years and does not have anticipated liability
for the current taxable year may transfer the entirety of the credit to any natural person of
net worth, as defined in the Code of Federal Regulations, title 17, section 230.501(a). No
person is entitled to a refund for the interest created under this subdivision. Only the full
credit for any one taxpayer may be transferred and the interest may be transferred only one
time. A credit acquired by transfer is subject to the limitations prescribed in this section.
Documentation of any credit acquired by transfer must be provided by the taxpayer in
the form required by the commissioner.
new text end

new text begin Subd. 7. new text end

new text begin Audit powers. new text end

new text begin Notwithstanding the certification eligibility issued by the
commissioner of employment and economic development under section 116J.8737, the
commissioner may utilize any audit and examination powers under chapters 270C or
289A to the extent necessary to verify that the taxpayer is eligible for the credit and to
assess for the amount of any improperly claimed credit.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for investments made after July
1, 2010, for taxable years beginning after December 31, 2009, and only applies to
investments for which a credit has been allocated by the commissioner of employment and
economic development.
new text end

ARTICLE 4

MINNESOTA BUSINESS INVESTMENT COMPANY CREDIT

Section 1.

new text begin [116J.665] MINNESOTA BUSINESS INVESTMENT COMPANY
CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms
have the meanings given.
new text end

new text begin (b) "Affiliate" means:
new text end

new text begin (1) any person who, directly or indirectly, beneficially owns, controls, or holds
power to vote 15 percent or more of the outstanding voting securities or other voting
ownership interest of a Minnesota business investment company or insurance company; or
new text end

new text begin (2) any person, 15 percent or more of whose outstanding voting securities or other
voting ownership interests are directly or indirectly beneficially owned, controlled, or held
with power to vote by a Minnesota business investment company or insurance company.
new text end

new text begin Notwithstanding this subdivision, an investment by a participating investor in a
Minnesota business investment company pursuant to an allocation of premium tax credits
under this section does not cause that Minnesota business investment company to become
an affiliate of that participating investor.
new text end

new text begin (c) "Allocation date" means the date on which credits under section 297I.23 are
allocated to the participating investors of a Minnesota business investment company
under this section.
new text end

new text begin (d) "Designated capital" means an amount of money that:
new text end

new text begin (1) is invested by a participating investor in a Minnesota business investment
company; and
new text end

new text begin (2) fully funds the purchase price of either or both participating investor's equity
interest in a Minnesota business investment company or a qualified debt instrument issued
by a Minnesota business investment company.
new text end

new text begin (e) "Minnesota business investment company" means a partnership, corporation,
trust, or limited liability company, organized on a for-profit basis, that:
new text end

new text begin (1) has its principal office located or is headquartered in Minnesota;
new text end

new text begin (2) has as its primary business activity the investment of cash in qualified businesses;
and
new text end

new text begin (3) is certified by the Department of Employment and Economic Development as
meeting the criteria in this section.
new text end

new text begin (f) "Participating investor" means any insurance company as defined in section
60A.02, subdivision 4, excluding health maintenance organizations, that contributes
designated capital pursuant to this section.
new text end

new text begin (g) "Person" means any natural person or entity, including, but not limited to, a
corporation, general or limited partnership, trust, or limited liability company.
new text end

new text begin (h)(1) "Qualified business" means a business that is independently owned and
operated and meets all of the following requirements:
new text end

new text begin (i) it is headquartered in Minnesota, its principal business operations are located in
this state, and at least 80 percent of its employees are located in Minnesota;
new text end

new text begin (ii) it has no more than 100 employees;
new text end

new text begin (iii) it is not engaged in:
new text end

new text begin (A) professional services provided by accountants, doctors, or lawyers;
new text end

new text begin (B) banking or lending;
new text end

new text begin (C) real estate development;
new text end

new text begin (D) insurance;
new text end

new text begin (E) oil and gas exploration;
new text end

new text begin (F) direct gambling activities;
new text end

new text begin (G) retail sales; or
new text end

new text begin (H) making loans to or investments in a Minnesota business investment company
or an affiliate; and
new text end

new text begin (iv) it is not a franchise of and has no financial relationship with a Minnesota business
investment company or any affiliate of a Minnesota business investment company prior to
a Minnesota business investment company's first qualified investment in the business;
new text end

new text begin (2) a business classified as a qualified business at the time of the first qualified
investment in the business remains classified as a qualified business and may receive
continuing qualified investments from any Minnesota business investment company.
Continuing investments constitute qualified investments even though the business may not
meet the definition of a qualified business at the time of the continuing investments.
new text end

new text begin (i) "Qualified debt instrument" means a debt instrument issued by a Minnesota
business investment company which meets all of the following criteria:
new text end

new text begin (1) it is issued at par value or a premium; and
new text end

new text begin (2) it has an original maturity date of at least four years from the date of issuance,
and a repayment schedule which is not faster than a level principal amortization over
four years.
new text end

new text begin (j) "Qualified distribution" means any distribution or payment made by a Minnesota
business investment company in connection with any of the following:
new text end

new text begin (1) costs and expenses of forming, syndicating, and organizing the Minnesota
business investment company, including fees paid for professional services, and the costs
of financing and insuring the obligations of a Minnesota business investment company,
provided no payment is made to a participating investor;
new text end

new text begin (2) an annual management fee not to exceed one percent of designated capital on
an annual basis to offset the costs and expenses of managing and operating a Minnesota
business investment company;
new text end

new text begin (3) reasonable and necessary fees in accordance with industry custom for ongoing
professional services, including, but not limited to, legal and accounting services related
to the operation of a Minnesota business investment company, not including lobbying or
governmental relations;
new text end

new text begin (4) any increase or projected increase in federal or state taxes, including penalties
and related interest of the equity owners of a Minnesota business investment company
resulting from the earnings or other tax liability of a Minnesota business investment
company to the extent that the increase is related to the ownership, management, or
operation of a Minnesota business investment company.
new text end

new text begin (5) Payments of principal and interest to holders of qualified debt instruments issued
by a Minnesota business investment company may be made without restriction whatsoever.
new text end

new text begin (k) "Qualified investment" means the investment of money by a Minnesota
business investment company in a qualified business for the purchase of any debt,
debt participation, equity, or hybrid security of any nature and description whatsoever,
including a debt instrument or security that has the characteristics of debt but that provides
for conversion into equity or equity participation instruments such as options or warrants.
Any repayment of a qualified investment prior to one year from the date of issuance shall
result in the amount of the qualified investment being reduced by 50 percent for purposes
of the cumulative investment requirement in subdivision 8, paragraph (d).
new text end

new text begin (l) "State premium tax liability" means any liability incurred by an insurance
company under chapter 297I or in the case of a repeal or a rate reduction by the state of
the liability imposed by chapter 297I, any other tax liability imposed upon an insurance
company by the state, other than the tax imposed on taxpayers under section 290.05.
new text end

new text begin Subd. 2. new text end

new text begin Certification. new text end

new text begin (a) The department must provide a standardized format for
applying for the business investment credit under section 297I.23, and for certification as a
Minnesota business investment company.
new text end

new text begin (b) An applicant for certification as a Minnesota business investment company
is required to:
new text end

new text begin (1) file an application with the department that includes, without limitation, a
statement that the applicant has read and understands the requirements of this chapter;
new text end

new text begin (2) pay a nonrefundable application fee of $7,500 at the time of filing the application;
new text end

new text begin (3) submit as part of its application an audited balance sheet that contains an
unqualified opinion of an independent certified public accountant issued not more than 35
days before the application date that states that the applicant has an equity capitalization
of $500,000 or more in the form of unencumbered cash, marketable securities, or other
liquid assets; and
new text end

new text begin (4) have at least two principals or persons, at least one of which is primarily located
in Minnesota, employed or engaged to manage the funds who each have a minimum of
five years of money management experience in the venture capital or business industry.
new text end

new text begin (c) The department may certify partnerships, corporations, trusts, or limited liability
companies, organized on a for-profit basis, which submit an application to be designated as
a Minnesota business investment company if the applicant is located, headquartered, and
licensed or registered to conduct business in Minnesota, has as its primary business activity
the investment of cash in qualified businesses, and meets the other criteria in this section.
new text end

new text begin (d) The department must review the organizational documents of each applicant
for certification and the business history of each applicant and determine whether the
applicant has satisfied the requirements of this section.
new text end

new text begin (e) Within 45 days after the receipt of an application, the department must issue the
certification or refuse the certification and communicate in detail to the applicant the
grounds for refusal, including suggestions for the removal of such grounds.
new text end

new text begin (f) The department must begin accepting applications to become a Minnesota
business investment company as defined under section 297I.23 by August 1, 2010.
new text end

new text begin (g) All certification fees collected by the department under this chapter are
appropriated to the commissioner to be used for personnel and administrative expenses
related to administering the program.
new text end

new text begin Subd. 3. new text end

new text begin Requirements. new text end

new text begin (a) A participating investor or affiliate of a participating
investor must not, directly or indirectly:
new text end

new text begin (1) beneficially own, whether through rights, options, convertible interest, or
otherwise, 15 percent or more of the voting securities or other voting ownership interest of
a Minnesota business investment company;
new text end

new text begin (2) manage a Minnesota business investment company; or
new text end

new text begin (3) control the direction of investments for a Minnesota business investment
company.
new text end

new text begin (b) A Minnesota business investment company may obtain one or more guaranties,
indemnities, bonds, insurance policies, or other payment undertakings for the benefit
of its participating investors from any entity, except that in no case can more than one
participating investor of a Minnesota business investment company on an aggregate
basis with all affiliates of the participating investor be entitled to provide the guaranties,
indemnities, bonds, insurance policies, or other payment undertakings in favor of the
participating investors of a Minnesota business investment company and its affiliates in
this state.
new text end

new text begin (c) This subdivision does not preclude a participating investor or other party
from exercising its legal rights and remedies, including, without limitation, interim
management of a Minnesota business investment company, in the event that a Minnesota
business investment company is in default of its statutory obligations or its contractual
obligations to the participating investor or other party, or from monitoring a Minnesota
business investment company to ensure its compliance with this section or disallowing
any investments that have not been approved by the department.
new text end

new text begin (d) The department may contract with an independent third party to review,
investigate, and certify that the applications comply with this section.
new text end

new text begin Subd. 4. new text end

new text begin Aggregate limitations on investment tax credits; allocation. new text end

new text begin (a)
The aggregate amount of investment tax credits to be allocated to all participating
investors of Minnesota business investment companies under this section shall not exceed
$100,000,000. No Minnesota business investment company, on an aggregate basis with its
affiliates, may file credit allocation claims that exceed $100,000,000.
new text end

new text begin (b) Credits must be allocated to participating investors in the order that the credit
allocation claims are filed with the department, provided that all credit allocation
claims filed with the department on the same day must be treated as having been filed
contemporaneously. Any credit allocation claims filed with the department prior to the
initial credit allocation claim filing date are deemed to have been filed on the initial credit
allocation claim filing date. The department must set the initial credit allocation claim
filing date not less than 120 days and not greater than 150 days after the department
begins accepting applications for certification.
new text end

new text begin (c) In the event that two or more Minnesota business investment companies file
credit allocation claims with the department on behalf of their respective participating
investors on the same day, and the aggregate amount of credit allocation claims exceeds
the aggregate limit of investment tax credits under this section or the lesser amount of
credits that remain unallocated on that day, then the department must allocate the credits
among the participating investors who filed on that day on a pro rata basis with respect
to the amounts claimed. The pro rata allocation for any one participating investor is the
product obtained by multiplying a fraction, the numerator of which is the amount of the
credit allocation claim filed on behalf of a participating investor and the denominator of
which is the total of all credit allocation claims filed on behalf of all participating investors
on that day, by the aggregate limit of credits under this section or the lesser amount of
credits that remain unallocated on that day.
new text end

new text begin (d) Within ten business days after the department receives a credit allocation claim
filed by a Minnesota business investment company on behalf of one or more of its
participating investors, the department must notify the Minnesota business investment
company of the amount of credits allocated to each of the participating investors of that
Minnesota business investment company. In the event a Minnesota business investment
company does not receive an investment of designated capital from each participating
investor required to earn the amount of credits allocated to the participating investor
within ten business days of the Minnesota business investment company's receipt of notice
of allocation, then it shall notify the department on or before the next business day, and
the credits allocated to the participating investor of the Minnesota business investment
company are forfeited. The department must then reallocate those forfeited credits among
the participating investors of the other Minnesota business investment companies on a pro
rata basis with respect to the credit allocation claims filed on behalf of the participating
investors. The commissioner is authorized, but not required, to levy a fine of not more than
$50,000 on any participating investor that does not invest the full amount of designated
capital required to fund the credits allocated to it by the department in accordance with the
credit allocation claim filed on its behalf.
new text end

new text begin (e) No participating investor, on an aggregate basis with its affiliates, may file an
allocation claim for more than 25 percent of the maximum amount of investment tax
credits authorized under this subdivision, regardless of whether the claim is made in
connection with one or more Minnesota business investment companies.
new text end

new text begin Subd. 5. new text end

new text begin Requirements for continuance of certification. new text end

new text begin (a) To maintain its
certification, a Minnesota business investment company must make qualified investments
as follows:
new text end

new text begin (1) within two years after the allocation date, a Minnesota business investment
company must invest an amount equal to at least 35 percent of its designated capital in
qualified investments; and
new text end

new text begin (2) within three years after the allocation date, a Minnesota business investment
company must invest an amount equal to at least 50 percent of its designated capital
in qualified investments.
new text end

new text begin (b) Prior to making a proposed qualified investment in a specific business, a
Minnesota business investment company must request from the department a written
determination that the proposed investment qualifies as a qualified investment in a
qualified business. The department must notify a Minnesota business investment company
within ten business days from the receipt of a request of its determination and an
explanation thereof. If the department fails to notify the Minnesota business investment
company of its determination within the ten-business-day period, the proposed investment
is deemed a qualified investment in a qualified business. If the department determines that
the proposed investment does not meet the definition of a qualified investment or qualified
business, or both, the department may nevertheless consider the proposed investment a
qualified investment and, if necessary, the business a qualified business, if the department
determines that the proposed investment furthers state economic development.
new text end

new text begin (c) All designated capital not invested in qualified investments by a Minnesota
business investment company shall be held or invested in such manner as the Minnesota
business investment company, in its discretion, deems appropriate. Designated capital
and proceeds of designated capital returned to a Minnesota business investment company
after being originally invested in qualified investments may be invested again in qualified
investments and the investment shall count toward the requirements of paragraph (a) with
respect to making investments of designated capital in qualified investments.
new text end

new text begin (d) If, within four years after its allocation date, a Minnesota business investment
company has not invested at least 60 percent of its designated capital in qualified
investments, the Minnesota business investment company must not be permitted to pay
management fees.
new text end

new text begin (e) If, within six years after its allocation date, a Minnesota business investment
company has not invested at least 100 percent of its designated capital in qualified
investments, the Minnesota business investment company must not be permitted to pay
management fees.
new text end

new text begin (f) A Minnesota business investment company may not invest more than 15 percent
of its designated capital in any one qualified business without the specific approval
of the department.
new text end

new text begin (g) For purposes of calculating the investment percentage thresholds of paragraph
(a), the cumulative amount of all qualified investments made by a Minnesota business
investment company from the allocation date must be considered.
new text end

new text begin Subd. 6. new text end

new text begin Minnesota business investment company reporting requirements. new text end

new text begin (a)
Each Minnesota business investment company must report the following to the department
in the form designated by the commissioner:
new text end

new text begin (1) as soon as practicable after the receipt of designated capital:
new text end

new text begin (i) the name of each participating investor from which the designated capital was
received, including such participating investor's insurance tax identification number;
new text end

new text begin (ii) the amount of each participating investor's investment of designated capital; and
new text end

new text begin (iii) the date on which the designated capital was received;
new text end

new text begin (2) on an annual basis, on or before January 31 of each year:
new text end

new text begin (i) the amount of the Minnesota business investment company's designated capital
that remains to be invested in qualified investments at the end of the immediately
preceding taxable year;
new text end

new text begin (ii) whether or not the Minnesota business investment company has invested more
than 15 percent of its total designated capital in any one business;
new text end

new text begin (iii) all qualified investments that the Minnesota business investment company has
made in the previous taxable year, including the number of employees of each qualified
business in which it has made investments at the time of such investment, and as of
December 1 of the preceding taxable year; and
new text end

new text begin (iv) for any qualified business where the Minnesota business investment company
no longer has an investment, the Minnesota business investment company must provide
employment figures for that company as of the last day before the investment was
terminated;
new text end

new text begin (3) other information that the department may reasonably request that helps the
department ascertain the impact of the Minnesota business investment company program
both directly and indirectly on the economy of the state including, but not limited to, the
number of jobs created by qualified businesses that have received qualified investments;
new text end

new text begin (4) within 90 days of the close of its fiscal year, annual audited financial statements
of the Minnesota business investment company, which must include the opinion of an
independent certified public accountant; and
new text end

new text begin (5) an agreed upon procedures report or equivalent regarding the operations of the
Minnesota business investment company.
new text end

new text begin (b) A Minnesota business investment company must pay to the department an
annual, nonrefundable certification fee of $5,000 on or before April 1, or $10,000 if later.
No annual certification fee is required if the payment date for the fee is within six months
of the date a Minnesota business investment company is first certified by the department.
new text end

new text begin (c) Upon satisfying the requirements of subdivision 5, paragraph (a), clause (2),
a Minnesota business investment company must provide the notice to the department
and the department shall, within 60 days of receipt of the notice, either confirm that the
Minnesota business investment company has satisfied the requirements of subdivision
5, paragraph (a), clause (2), as of such date or provide notice of noncompliance and an
explanation of any existing deficiencies. If the department does not provide notification
within 60 days, the Minnesota business investment company is deemed to have met the
requirements of subdivision 5, paragraph (a), clause (2).
new text end

new text begin Subd. 7. new text end

new text begin Distributions. new text end

new text begin (a) A Minnesota business investment company may
make qualified distributions at any time. In order for a Minnesota business investment
company to make a distribution other than a qualified distribution to its equity holders,
the cumulative amount of all qualified investments of the Minnesota business investment
company must equal or exceed 100 percent of its designated capital.
new text end

new text begin (b) The state shall receive ten percent of the net profits on qualified investments.
For purposes of this paragraph, "net profits on qualified investments" means the amount
of money returned to the Minnesota business investment company in exchange for or
repayment of its qualified investments in qualified businesses in excess of the amount
invested by the Minnesota business investment company in qualified investments. The
net profits on qualified investments are the aggregate of all of the Minnesota business
investment company's qualified investments where gains on qualified investments are
netted against losses on qualified investments.
new text end

new text begin Subd. 8. new text end

new text begin Decertification. new text end

new text begin (a) The department shall conduct an annual review of
each Minnesota business investment company to determine if a Minnesota business
investment company is abiding by the requirements of certification and to ensure that no
investment has been made in violation of this section. The cost of the annual review
must be paid by each Minnesota business investment company according to a reasonable
fee schedule adopted by the department.
new text end

new text begin (b) Any material violation of this section, including any material misrepresentation
made to the department in connection with the application process, is grounds for
decertification of a Minnesota business investment company and the disallowance of
credits under section 297I.23, provided that in all instances the department shall provide
notice to the Minnesota business investment company of the grounds of the proposed
decertification and the opportunity to cure the violation before any decertification becomes
effective.
new text end

new text begin (c) The department shall send written notice of decertification to the commissioner
of revenue and to the address of each participating investor whose tax credit is subject
to recapture or forfeiture, using the address shown on the last filing submitted to the
department.
new text end

new text begin (d) Once a Minnesota business investment company has invested an amount
cumulatively equal to 100 percent of its designated capital in qualified investments,
provided that the Minnesota business investment company has met all other requirements
under this section as of such date, the Minnesota business investment company is no
longer subject to regulation by the department or the reporting requirements under
subdivision 6. Upon receiving certification by a Minnesota business investment company
that it has invested an amount equal to 100 percent of its designated capital, the department
shall notify a Minnesota business investment company within 60 days that it has or has not
met the requirements, with a reason for the determination if it has not. If the department
does not provide notification of deregulation within 60 days, the Minnesota business
investment company is deemed to have met the requirements and is deemed to no longer
be subject to regulation by the department.
new text end

new text begin Subd. 9. new text end

new text begin Registration requirements. new text end

new text begin All investments by participating investors
for which tax credits are awarded under this section must be registered or specifically
exempt from registration.
new text end

new text begin Subd. 10. new text end

new text begin Rulemaking. new text end

new text begin The commissioner's actions in establishing procedures and
requirements and in making determinations and certifications to administer this section are
not a rule for purposes of chapter 14, are not subject to the Administrative Procedure Act
contained in chapter 14, and are not subject to section 14.386.
new text end

new text begin Subd. 11. new text end

new text begin Reports to governor and legislature. new text end

new text begin The department shall make an
annual report by March 15 of each year to the governor and the chairs and ranking
minority members of the legislative committees and divisions having jurisdiction over
taxes and economic development. The report must include:
new text end

new text begin (1) the number of Minnesota business investment companies holding designated
capital;
new text end

new text begin (2) the amount of designated capital invested in each Minnesota business investment
company;
new text end

new text begin (3) the cumulative amount that each Minnesota business investment company has
invested as of January 1, 2011, and the cumulative total each year thereafter;
new text end

new text begin (4) the cumulative amount of follow-on capital that the investments of each
Minnesota business investment company have created in terms of capital invested in
qualified businesses at the same time or subsequent to investments made by a Minnesota
business investment company in such businesses by sources other than Minnesota
business investment companies;
new text end

new text begin (5) the total amount of investment tax credits applied under this section for each year;
new text end

new text begin (6) the performance of each Minnesota business investment company with regard to
the requirements for continued certification;
new text end

new text begin (7) the classification of the companies in which each Minnesota business investment
company has invested according to industrial sector and size of company;
new text end

new text begin (8) the gross number of jobs created by investments made by each Minnesota
business investment company and the number of jobs retained;
new text end

new text begin (9) the location of the companies in which each Minnesota business investment
company has invested;
new text end

new text begin (10) those Minnesota business investment companies that have been decertified,
including the reasons for decertification; and
new text end

new text begin (11) other related information as necessary to evaluate the effect of this section on
economic development.
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

Sec. 2.

new text begin [297I.23] MINNESOTA BUSINESS INVESTMENT COMPANY CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Credit allowed. new text end

new text begin (a) A participating investor as defined under section
116J.665, subdivision 1, is allowed a credit against the tax imposed in this chapter equal to
80 percent of the participating investor's investment of designated capital in a Minnesota
business investment company. Beginning March 1, 2015, and ending with the tax return
due March 1, 2018, a participating investor may claim yearly an amount equal to 20
percent of the participating investor's investment of designated capital against the tax
liability under this chapter for the preceding calendar year.
new text end

new text begin (b) The credit for any calendar year must not exceed the liability for tax. If the
amount of the credit determined under this section for any calendar year exceeds the
liability for tax, the excess is an investment tax credit carryover to each of the succeeding
calendar years and must be carried forward to each succeeding calendar year until the
entire carryforward has been credited against the participating investor's liability for tax
under this chapter. Credits may be used only on an annual premium tax return filed by
a participating investor.
new text end

new text begin (c) A participating investor claiming a credit under this section is not required to pay
any additional retaliatory tax levied by Minnesota as a result of claiming the credit.
new text end

new text begin (d) A participating investor is not required to reduce the amount of tax passed to the
insured pursuant to the state premium tax liability included by the participating investor
in connection with ratemaking for any insurance contract written in this state because of
a reduction in the participating investor's tax liability based on the tax credit allowed
under this section.
new text end

new text begin (e) Decertification of a Minnesota business investment company under section
116J.665 may result in the disallowance and the recapture of the credit allowed under this
section. The amount disallowed and recaptured must be assessed as follows:
new text end

new text begin (1) decertification of a Minnesota business investment company within two years
of the allocation date of tax credits and prior to meeting the requirements of section
116J.665, subdivision 5, paragraph (a), clause (1), shall result in the disallowance of all
of the credits allowed under this section;
new text end

new text begin (2) decertification of a Minnesota business investment company after two years
of the allocation date of tax credits, but prior to meeting the requirements of section
116J.665, subdivision 5, paragraph (a), clause (1), results in the disallowance of one-half
of all the credits allowed under this section; and
new text end

new text begin (3) decertification of Minnesota business investment company that has already met
the requirements of section 116J.665, subdivision 5, paragraph (a), clause (1), does not
cause the disallowance of any credits allowed under this section nor the recapture of any
portion of the credits that was previously taken.
new text end

new text begin Subd. 2. new text end

new text begin Transfers. new text end

new text begin A participating investor must not transfer, agree to transfer,
sell, or agree to sell the credit under this section until 180 days from the date on which
the participating investor invested designated capital. After 180 days from the date of
investment, a participating investor, or subsequent transferee, may transfer credits to
another person who is subject to tax and must notify the department in the form prescribed
by the commissioner within 30 days of the transfer. A person must not transfer a credit
more than once in a 12-month period. No person is entitled to a refund for the interest
created under this subdivision. A credit acquired by transfer is subject to the limitations
prescribed in this section. Any transfer or sale of the credits does not affect the time
schedule for claiming the credit. Any tax credits recaptured under this section remain the
liability of the participating investor that actually applied the credit towards its tax liability.
new text end

new text begin Subd. 3. new text end

new text begin Repayment of tax benefits received. new text end

new text begin (a) Decertification of a Minnesota
business investment company or revocation of credits under section 116J.665, results
in the disallowance to certified investors of any credits for that calendar year or future
calendar years and the participating investor is required to repay any credits claimed for
the previous year. Repayment must be made within 60 days of the decertification or
the revocation of the certification.
new text end

new text begin (b) The provisions of chapters 270C and 297I relating to audit, assessment, refund,
collection, and appeals are applicable to the credits claimed and repayment required under
this section. The commissioner may impose civil penalties as provided in section 297I.85,
and additional tax and penalties are subject to interest at the rate provided in section
270C.40, from the date payment was due.
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, 2010.
new text end

ARTICLE 5

TECHZ

Section 1.

Minnesota Statutes 2008, section 268.19, subdivision 1, is amended to read:

Subdivision 1.

Use of data.

(a) Except as provided by this section, data gathered
from any person under the administration of the Minnesota Unemployment Insurance Law
are private data on individuals or nonpublic data not on individuals as defined in section
13.02, subdivisions 9 and 12, and may not be disclosed except according to a district court
order or section 13.05. A subpoena is not considered a district court order. These data
may be disseminated to and used by the following agencies without the consent of the
subject of the data:

(1) state and federal agencies specifically authorized access to the data by state
or federal law;

(2) any agency of any other state or any federal agency charged with the
administration of an unemployment insurance program;

(3) any agency responsible for the maintenance of a system of public employment
offices for the purpose of assisting individuals in obtaining employment;

(4) the public authority responsible for child support in Minnesota or any other
state in accordance with section 256.978;

(5) human rights agencies within Minnesota that have enforcement powers;

(6) the Department of Revenue to the extent necessary for its duties under Minnesota
laws;

(7) public and private agencies responsible for administering publicly financed
assistance programs for the purpose of monitoring the eligibility of the program's
recipients;

(8) the Department of Labor and Industry and the Division of Insurance Fraud
Prevention in the Department of Commerce for uses consistent with the administration of
their duties under Minnesota law;

(9) local and state welfare agencies for monitoring the eligibility of the data subject
for assistance programs, or for any employment or training program administered by those
agencies, whether alone, in combination with another welfare agency, or in conjunction
with the department or to monitor and evaluate the statewide Minnesota family investment
program by providing data on recipients and former recipients of food stamps or food
support, cash assistance under chapter 256, 256D, 256J, or 256K, child care assistance
under chapter 119B, or medical programs under chapter 256B, 256D, or 256L;

(10) local and state welfare agencies for the purpose of identifying employment,
wages, and other information to assist in the collection of an overpayment debt in an
assistance program;

(11) local, state, and federal law enforcement agencies for the purpose of ascertaining
the last known address and employment location of an individual who is the subject of
a criminal investigation;

(12) the United States Citizenship and Immigration Services has access to data on
specific individuals and specific employers provided the specific individual or specific
employer is the subject of an investigation by that agency;

(13) the Department of Health for the purposes of epidemiologic investigations;

(14) the Department of Corrections for the purpose of preconfinement and
postconfinement employment tracking of committed offenders for the purpose of case
planning; deleted text begin and
deleted text end

(15) the state auditor to the extent necessary to conduct audits of job opportunity
building zones new text begin and TECHZ businesses new text end as required under deleted text begin section deleted text end new text begin sections new text end 469.3201 deleted text begin . deleted text end new text begin and
469.3701; and
new text end

new text begin (16) any agency responsible for monitoring compliance with job opportunity
building zones or TECHZ business subsidy agreements.
new text end

(b) Data on individuals and employers that are collected, maintained, or used by
the department in an investigation under section 268.182 are confidential as to data
on individuals and protected nonpublic data not on individuals as defined in section
13.02, subdivisions 3 and 13, and must not be disclosed except under statute or district
court order or to a party named in a criminal proceeding, administrative or judicial, for
preparation of a defense.

(c) Data gathered by the department in the administration of the Minnesota
unemployment insurance program must not be made the subject or the basis for any
suit in any civil proceedings, administrative or judicial, unless the action is initiated by
the department.

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2008, section 270B.14, subdivision 3, is amended to read:

Subd. 3.

Administration of enterprise, job opportunity, deleted text begin and deleted text end biotechnology
and health sciences industry zone new text begin , and TECHZ new text end programs.

The commissioner may
disclose return information relating to the taxes imposed by chapters 290 and 297A to
the Department of Employment and Economic Development or a municipality receiving
an enterprise zone designation under section 469.169 but only as necessary to administer
the funding limitations under section 469.169, subdivision 7, or to the Department
of Employment and Economic Development and appropriate officials from the local
government units in which a qualified business is located but only as necessary to enforce
the job opportunity building zone benefits under section 469.315, deleted text begin or deleted text end biotechnology and
health sciences industry zone benefits under section 469.336 new text begin , or the TECHZ benefits
under section 469.365 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

Sec. 3.

Minnesota Statutes 2008, section 270B.15, is amended to read:

270B.15 DISCLOSURE TO LEGISLATIVE AUDITOR AND STATE
AUDITOR.

(a) Returns and return information must be disclosed to the legislative auditor to the
extent necessary for the legislative auditor to carry out sections 3.97 to 3.979.

(b) The commissioner must disclose return information, including the report required
under section 289A.12, subdivision 15, to the state auditor to the extent necessary to
conduct audits of job opportunity building zones as required under section 469.3201 new text begin and
audits of TECHZ businesses and business subsidy agreements under section 469.3701 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

Sec. 4.

Minnesota Statutes 2008, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 95. new text end

new text begin TECHZ property. new text end

new text begin (a) Improvements to real property and personal
property classified under section 273.13, subdivision 24, by a qualified TECHZ business
at a TECHZ location are exempt from ad valorem taxes levied under chapter 275. The
exemption applies only to improvements to the property made within two years after the
later of the signing of the business subsidy agreement required under section 469.360,
subdivision 7, or the date of approval by the commissioner of employment and economic
development under section 469.362, or to any improvements if the property was not
owned or occupied by the business or by a related party prior to the signing of the business
subsidy agreement.
new text end

new text begin (b) For property to qualify for the exemption under paragraph (a), the occupant must
be a qualified TECHZ business, as defined in section 469.360, subdivision 7.
new text end

new text begin (c) For property located outside the metropolitan area as defined in section 473.121,
subdivision 2, this exemption applies to property taxes payable in the year after the later of
the signing of the business subsidy agreement required under section 469.360, subdivision
7, or the date of approval by the commissioner of employment and economic development
under section 469.362 and for the taxes payable in the ten following years. For property
located within the metropolitan area as defined in section 473.121, subdivision 2, this
exemption applies to property taxes payable in the year after the later of the signing of the
business subsidy agreement required under section 469.360, subdivision 7, or the date of
approval by the commissioner of employment and economic development under section
469.362 and for the taxes payable in the five following years.
new text end

new text begin To be exempt, the property must be occupied by July 1 of the assessment year
by a qualified TECHZ business that has signed the business subsidy agreement by July
1 of the assessment year.
new text end

new text begin A qualified TECHZ business must notify the county assessor in writing of eligibility
under this subdivision by July 1 in order to begin receiving the exemption under this
subdivision for taxes payable in the following year. The business need not annually notify
the county assessor of its continued exemption under this subdivision, but must notify the
county assessor immediately if the exemption no longer applies.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning for property taxes assessed
in 2011 and payable in 2012.
new text end

Sec. 5.

Minnesota Statutes 2008, section 289A.12, is amended by adding a subdivision
to read:

new text begin Subd. 17. new text end

new text begin Report of TECHZ benefits; penalty for failure to file report. new text end

new text begin (a)
By October 15 of each year, every qualified TECHZ business, as defined under section
469.360, subdivision 7, must file with the commissioner, on a form prescribed by the
commissioner, a report listing the tax benefits under section 469.365 received by the
business for the previous year.
new text end

new text begin (b) The commissioner shall send notice to each business that fails to timely submit
the report required under paragraph (a). The notice shall demand that the business
submit the report within 60 days. Where good cause exists, the commissioner may
extend the period for submitting the report as long as a request for extension is filed by
the business before the expiration of the 60-day period. The commissioner shall notify
the commissioner of employment and economic development and the appropriate local
government unit whenever notice is sent to a business under this paragraph.
new text end

new text begin (c) A business that fails to submit the report as required under paragraph (b) is no
longer a qualified business under section 469.360, subdivision 7, and is subject to the
repayment provisions of section 469.369.
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

Sec. 6.

Minnesota Statutes 2009 Supplement, section 290.01, subdivision 19b, is
amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For individuals, estates,
and trusts, there shall be subtracted from federal taxable income:

(1) net interest income on obligations of any authority, commission, or
instrumentality of the United States to the extent includable in taxable income for federal
income tax purposes but exempt from state income tax under the laws of the United States;

(2) if included in federal taxable income, the amount of any overpayment of income
tax to Minnesota or to any other state, for any previous taxable year, whether the amount
is received as a refund or as a credit to another taxable year's income tax liability;

(3) the amount paid to others, less the amount used to claim the credit allowed under
section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
transportation of each qualifying child in attending an elementary or secondary school
situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
resident of this state may legally fulfill the state's compulsory attendance laws, which
is not operated for profit, and which adheres to the provisions of the Civil Rights Act
of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and equipment purchased
or leased for use in elementary and secondary schools in teaching only those subjects
legally and commonly taught in public elementary and secondary schools in this state.
Equipment expenses qualifying for deduction includes expenses as defined and limited in
section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
books and materials used in the teaching of religious tenets, doctrines, or worship, the
purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
or materials for, or transportation to, extracurricular activities including sporting events,
musical or dramatic events, speech activities, driver's education, or similar programs. No
deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
the qualifying child's vehicle to provide such transportation for a qualifying child. For
purposes of the subtraction provided by this clause, "qualifying child" has the meaning
given in section 32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross income, income realized on
disposition of property exempt from tax under section 290.491;

(6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
of the Internal Revenue Code in determining federal taxable income by an individual
who does not itemize deductions for federal income tax purposes for the taxable year, an
amount equal to 50 percent of the excess of charitable contributions over $500 allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and
under the provisions of Public Law 109-1;

(7) for taxable years beginning before January 1, 2008, the amount of the federal
small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
which is included in gross income under section 87 of the Internal Revenue Code;

(8) for individuals who are allowed a federal foreign tax credit for taxes that do not
qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
of subnational foreign taxes for the taxable year, but not to exceed the total subnational
foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
"federal foreign tax credit" means the credit allowed under section 27 of the Internal
Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
the extent they exceed the federal foreign tax credit;

(9) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the
positive value of any net operating loss under section 172 of the Internal Revenue Code
generated for the tax year of the addition. The resulting delayed depreciation cannot be
less than zero;

(10) job opportunity building zone income as provided under section 469.316;

(11) to the extent included in federal taxable income, the amount of compensation
paid to members of the Minnesota National Guard or other reserve components of the
United States military for active service performed in Minnesota, excluding compensation
for services performed under the Active Guard Reserve (AGR) program. For purposes of
this clause, "active service" means (i) state active service as defined in section 190.05,
subdivision 5a, clause (1); (ii) federally funded state active service as defined in section
190.05, subdivision 5b; or (iii) federal active service as defined in section 190.05,
subdivision 5c, but "active service" excludes service performed in accordance with section
190.08, subdivision 3;

(12) to the extent included in federal taxable income, the amount of compensation
paid to Minnesota residents who are members of the armed forces of the United States or
United Nations for active duty performed outside Minnesota under United States Code,
title 10, section 101(d); United States Code, title 32, section 101(12); or the authority of
the United Nations;

(13) an amount, not to exceed $10,000, equal to qualified expenses related to a
qualified donor's donation, while living, of one or more of the qualified donor's organs
to another person for human organ transplantation. For purposes of this clause, "organ"
means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
"human organ transplantation" means the medical procedure by which transfer of a human
organ is made from the body of one person to the body of another person; "qualified
expenses" means unreimbursed expenses for both the individual and the qualified donor
for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
may be subtracted under this clause only once; and "qualified donor" means the individual
or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
individual may claim the subtraction in this clause for each instance of organ donation for
transplantation during the taxable year in which the qualified expenses occur;

(14) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
case of a shareholder of a corporation that is an S corporation, minus the positive value of
any net operating loss under section 172 of the Internal Revenue Code generated for the
tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
subtraction is not allowed under this clause;

(15) to the extent included in federal taxable income, compensation paid to a service
member as defined in United States Code, title 10, section 101(a)(5), for military service
as defined in the Servicemembers Civil Relief Act, Public Law 108-189, section 101(2);

(16) international economic development zone income as provided under section
469.325;

(17) to the extent included in federal taxable income, the amount of national service
educational awards received from the National Service Trust under United States Code,
title 42, sections 12601 to 12604, for service in an approved Americorps National Service
program; deleted text begin and
deleted text end

(18) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19a, clause (16) deleted text begin . deleted text end new text begin ; and
new text end

new text begin (19) TECHZ income as provided under section 469.366.
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, 2010.
new text end

Sec. 7.

Minnesota Statutes 2008, section 290.01, subdivision 29, is amended to read:

Subd. 29.

Taxable income.

The term "taxable income" means:

(1) for individuals, estates, and trusts, the same as taxable net income;

(2) for corporations, the taxable net income less

(i) the net operating loss deduction under section 290.095;

(ii) the dividends received deduction under section 290.21, subdivision 4;

(iii) the exemption for operating in a job opportunity building zone under section
469.317;

(iv) the exemption for operating in a biotechnology and health sciences industry
zone under section 469.337; deleted text begin and
deleted text end

(v) the exemption for operating in an international economic development zone
under section 469.326 deleted text begin . deleted text end new text begin ; and
new text end

new text begin (vi) the exemption for TECHZ income under section 469.367.
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, 2010.
new text end

Sec. 8.

Minnesota Statutes 2009 Supplement, section 290.06, subdivision 2c, is
amended to read:

Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

(a) The income
taxes imposed by this chapter upon married individuals filing joint returns and surviving
spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
applying to their taxable net income the following schedule of rates:

(1) On the first $25,680, 5.35 percent;

(2) On all over $25,680, but not over $102,030, 7.05 percent;

(3) On all over $102,030, 7.85 percent.

Married individuals filing separate returns, estates, and trusts must compute their
income tax by applying the above rates to their taxable income, except that the income
brackets will be one-half of the above amounts.

(b) The income taxes imposed by this chapter upon unmarried individuals must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $17,570, 5.35 percent;

(2) On all over $17,570, but not over $57,710, 7.05 percent;

(3) On all over $57,710, 7.85 percent.

(c) The income taxes imposed by this chapter upon unmarried individuals qualifying
as a head of household as defined in section 2(b) of the Internal Revenue Code must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $21,630, 5.35 percent;

(2) On all over $21,630, but not over $86,910, 7.05 percent;

(3) On all over $86,910, 7.85 percent.

(d) In lieu of a tax computed according to the rates set forth in this subdivision, the
tax of any individual taxpayer whose taxable net income for the taxable year is less than
an amount determined by the commissioner must be computed in accordance with tables
prepared and issued by the commissioner of revenue based on income brackets of not
more than $100. The amount of tax for each bracket shall be computed at the rates set
forth in this subdivision, provided that the commissioner may disregard a fractional part of
a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the entire year must compute
the individual's Minnesota income tax as provided in this subdivision. After the
application of the nonrefundable credits provided in this chapter, the tax liability must
then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income
as defined in section 62 of the Internal Revenue Code and increased by the additions
required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12),
(13), (16), and (17), and reduced by the Minnesota assignable portion of the subtraction
for United States government interest under section 290.01, subdivision 19b, clause (1),
and the subtractions under section 290.01, subdivision 19b, clauses (9), (10), (14), (15),
(16), deleted text begin and deleted text end (18), new text begin and (19), new text end after applying the allocation and assignability provisions of
section 290.081, clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted gross income as defined in
section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), (13), (16), and (17),
and reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1), (9),
(10), (14), (15), (16), deleted text begin and deleted text end (18) new text begin , and (19) 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, 2010.
new text end

Sec. 9.

Minnesota Statutes 2008, section 290.06, is amended by adding a subdivision
to read:

new text begin Subd. 36. new text end

new text begin TECHZ new job creation credit. new text end

new text begin A taxpayer that is a qualified TECHZ
business, as defined in section 469.360, subdivision 7, is allowed a credit as determined
under section 469.368 against the tax imposed by this chapter.
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, 2010.
new text end

Sec. 10.

Minnesota Statutes 2009 Supplement, section 290.091, subdivision 2, is
amended to read:

Subd. 2.

Definitions.

For purposes of the tax imposed by this section, the following
terms have the meanings given:

(a) "Alternative minimum taxable income" means the sum of the following for
the taxable year:

(1) the taxpayer's federal alternative minimum taxable income as defined in section
55(b)(2) of the Internal Revenue Code;

(2) the taxpayer's itemized deductions allowed in computing federal alternative
minimum taxable income, but excluding:

(i) the charitable contribution deduction under section 170 of the Internal Revenue
Code;

(ii) the medical expense deduction;

(iii) the casualty, theft, and disaster loss deduction; and

(iv) the impairment-related work expenses of a disabled person;

(3) for depletion allowances computed under section 613A(c) of the Internal
Revenue Code, with respect to each property (as defined in section 614 of the Internal
Revenue Code), to the extent not included in federal alternative minimum taxable income,
the excess of the deduction for depletion allowable under section 611 of the Internal
Revenue Code for the taxable year over the adjusted basis of the property at the end of the
taxable year (determined without regard to the depletion deduction for the taxable year);

(4) to the extent not included in federal alternative minimum taxable income, the
amount of the tax preference for intangible drilling cost under section 57(a)(2) of the
Internal Revenue Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative minimum taxable income, the
amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and

(6) the amount of addition required by section 290.01, subdivision 19a, clauses (7)
to (9), (12), (13), (16), and (17);

less the sum of the amounts determined under the following:

(1) interest income as defined in section 290.01, subdivision 19b, clause (1);

(2) an overpayment of state income tax as provided by section 290.01, subdivision
19b, clause (2), to the extent included in federal alternative minimum taxable income;

(3) the amount of investment interest paid or accrued within the taxable year on
indebtedness to the extent that the amount does not exceed net investment income, as
defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include
amounts deducted in computing federal adjusted gross income; and

(4) amounts subtracted from federal taxable income as provided by section 290.01,
subdivision 19b, clauses (6), (9) to (16), deleted text begin and deleted text end (18) new text begin , and (19) new text end .

In the case of an estate or trust, alternative minimum taxable income must be
computed as provided in section 59(c) of the Internal Revenue Code.

(b) "Investment interest" means investment interest as defined in section 163(d)(3)
of the Internal Revenue Code.

(c) "Net minimum tax" means the minimum tax imposed by this section.

(d) "Regular tax" means the tax that would be imposed under this chapter (without
regard to this section and section 290.032), reduced by the sum of the nonrefundable
credits allowed under this chapter.

(e) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable
income after subtracting the exemption amount determined under subdivision 3.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

Sec. 11.

Minnesota Statutes 2008, section 290.0921, subdivision 3, is amended to read:

Subd. 3.

Alternative minimum taxable income.

"Alternative minimum taxable
income" is Minnesota net income as defined in section 290.01, subdivision 19, and
includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e),
(f), and (h) of the Internal Revenue Code. If a corporation files a separate company
Minnesota tax return, the minimum tax must be computed on a separate company basis.
If a corporation is part of a tax group filing a unitary return, the minimum tax must be
computed on a unitary basis. The following adjustments must be made.

(1) For purposes of the depreciation adjustments under section 56(a)(1) and
56(g)(4)(A) of the Internal Revenue Code, the basis for depreciable property placed in
service in a taxable year beginning before January 1, 1990, is the adjusted basis for federal
income tax purposes, including any modification made in a taxable year under section
290.01, subdivision 19e, or Minnesota Statutes 1986, section 290.09, subdivision 7,
paragraph (c).

For taxable years beginning after December 31, 2000, the amount of any remaining
modification made under section 290.01, subdivision 19e, or Minnesota Statutes 1986,
section 290.09, subdivision 7, paragraph (c), not previously deducted is a depreciation
allowance in the first taxable year after December 31, 2000.

(2) The portion of the depreciation deduction allowed for federal income tax
purposes under section 168(k) of the Internal Revenue Code that is required as an
addition under section 290.01, subdivision 19c, clause (15), is disallowed in determining
alternative minimum taxable income.

(3) The subtraction for depreciation allowed under section 290.01, subdivision 19d,
clause (18), is allowed as a depreciation deduction in determining alternative minimum
taxable income.

(4) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d)
of the Internal Revenue Code does not apply.

(5) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal
Revenue Code does not apply.

(6) The special rule for dividends from section 936 companies under section
56(g)(4)(C)(iii) does not apply.

(7) The tax preference for depletion under section 57(a)(1) of the Internal Revenue
Code does not apply.

(8) The tax preference for intangible drilling costs under section 57(a)(2) of the
Internal Revenue Code must be calculated without regard to subparagraph (E) and the
subtraction under section 290.01, subdivision 19d, clause (4).

(9) The tax preference for tax exempt interest under section 57(a)(5) of the Internal
Revenue Code does not apply.

(10) The tax preference for charitable contributions of appreciated property under
section 57(a)(6) of the Internal Revenue Code does not apply.

(11) For purposes of calculating the tax preference for accelerated depreciation or
amortization on certain property placed in service before January 1, 1987, under section
57(a)(7) of the Internal Revenue Code, the deduction allowable for the taxable year is the
deduction allowed under section 290.01, subdivision 19e.

For taxable years beginning after December 31, 2000, the amount of any remaining
modification made under section 290.01, subdivision 19e, not previously deducted is a
depreciation or amortization allowance in the first taxable year after December 31, 2004.

(12) For purposes of calculating the adjustment for adjusted current earnings in
section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable
income" as it is used in section 56(g) of the Internal Revenue Code, means alternative
minimum taxable income as defined in this subdivision, determined without regard to the
adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.

(13) For purposes of determining the amount of adjusted current earnings under
section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section
56(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend
gross-up subtracted as provided in section 290.01, subdivision 19d, clause (1), (ii) the
amount of refunds of income, excise, or franchise taxes subtracted as provided in section
290.01, subdivision 19d, clause (9), or (iii) the amount of royalties, fees or other like
income subtracted as provided in section 290.01, subdivision 19d, clause (10).

(14) Alternative minimum taxable income excludes the income from operating in a
job opportunity building zone as provided under section 469.317.

(15) Alternative minimum taxable income excludes the income from operating in a
biotechnology and health sciences industry zone as provided under section 469.337.

(16) Alternative minimum taxable income excludes the income from operating in an
international economic development zone as provided under section 469.326.

new text begin (17) Alternative minimum taxable income excludes the income from operating a
TECHZ business as provided under section 469.367.
new text end

Items of tax preference must not be reduced below zero as a result of the
modifications in this subdivision.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

Sec. 12.

Minnesota Statutes 2008, section 297A.68, is amended by adding a
subdivision to read:

new text begin Subd. 42. new text end

new text begin TECHZ businesses. new text end

new text begin (a) Purchases of tangible personal property or
taxable services by a qualified TECHZ business, as defined in section 469.360, subdivision
7, are exempt if the property or services are primarily used or consumed by the business
in furtherance of activities described in section 469.360, subdivision 7, paragraph (d), at
a location which has been approved for benefits in section 469.362. This exemption
applies if the purchase was made and delivery was received within two years after the
later of the signing of the business subsidy agreement required under section 469.360,
subdivision 7, or the date of approval by the commissioner of employment and economic
development under section 469.362.
new text end

new text begin (b) Purchase and use of construction materials and supplies used or consumed in,
and equipment incorporated into, the construction of improvements to real property
at a location which has been approved for benefits under section 469.362 are exempt
if the improvements after completion of construction are to be used by a qualified
TECHZ business, in furtherance of activities described in section 469.360, subdivision
7, paragraph (d). This exemption applies regardless of whether the purchases are made
by the business or a contractor. This exemption applies to items purchased and delivered
to the location within three years after the later of the signing of the business subsidy
agreement required under section 469.360, subdivision 7, or the date of approval by the
commissioner of employment and economic development under section 469.362.
new text end

new text begin (c) The exemptions under this subdivision apply to a local sales and use tax
regardless of whether the local sales and use tax is imposed on the sales taxable as defined
under this chapter.
new text end

new text begin (d) For purposes of this subdivision, the tax must be imposed and collected as if the
applicable rate under section 297A.62 applied and then refunded in the manner provided in
section 297A.75. The taxpayer must attach to the claim for refund information sufficient
for the commissioner to be able to determine that the improvements are being occupied by
a business that has signed a business subsidy agreement. The commissioner shall not pay
any refunds on taxes collected under this subdivision until after June 30, 2011.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases made after December
31, 2010.
new text end

Sec. 13.

Minnesota Statutes 2009 Supplement, section 297A.75, subdivision 1, is
amended to read:

Subdivision 1.

Tax collected.

The tax on the gross receipts from the sale of the
following exempt items must be imposed and collected as if the sale were taxable and the
rate under section 297A.62, subdivision 1, applied. The exempt items include:

(1) capital equipment exempt under section 297A.68, subdivision 5;

(2) building materials for an agricultural processing facility exempt under section
297A.71, subdivision 13;

(3) building materials for mineral production facilities exempt under section
297A.71, subdivision 14;

(4) building materials for correctional facilities under section 297A.71, subdivision
3;

(5) building materials used in a residence for disabled veterans exempt under section
297A.71, subdivision 11;

(6) elevators and building materials exempt under section 297A.71, subdivision 12;

(7) building materials for the Long Lake Conservation Center exempt under section
297A.71, subdivision 17;

(8) materials and supplies for qualified low-income housing under section 297A.71,
subdivision 23;

(9) materials, supplies, and equipment for municipal electric utility facilities under
section 297A.71, subdivision 35;

(10) equipment and materials used for the generation, transmission, and distribution
of electrical energy and an aerial camera package exempt under section 297A.68,
subdivision 37;

(11) tangible personal property and taxable services and construction materials,
supplies, and equipment exempt under section 297A.68, subdivision 41;

(12) commuter rail vehicle and repair parts under section 297A.70, subdivision
3, clause (11);

(13) materials, supplies, and equipment for construction or improvement of projects
and facilities under section 297A.71, subdivision 40; deleted text begin and
deleted text end

(14) materials, supplies, and equipment for construction or improvement of a meat
processing facility exempt under section 297A.71, subdivision 41 deleted text begin . deleted text end new text begin ; and
new text end

new text begin (15) tangible personal property and taxable services and construction materials,
supplies, and equipment exempt under section 297A.68, subdivision 42.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for goods or services purchased
after December 31, 2010.
new text end

Sec. 14.

Minnesota Statutes 2009 Supplement, section 297A.75, subdivision 2, is
amended to read:

Subd. 2.

Refund; eligible persons.

Upon application on forms prescribed by the
commissioner, a refund equal to the tax paid on the gross receipts of the exempt items
must be paid to the applicant. Only the following persons may apply for the refund:

(1) for subdivision 1, clauses (1) to (3) new text begin and (15) new text end , the applicant must be the purchaser;

(2) for subdivision 1, clauses (4) and (7), the applicant must be the governmental
subdivision;

(3) for subdivision 1, clause (5), the applicant must be the recipient of the benefits
provided in United States Code, title 38, chapter 21;

(4) for subdivision 1, clause (6), the applicant must be the owner of the homestead
property;

(5) for subdivision 1, clause (8), the owner of the qualified low-income housing
project;

(6) for subdivision 1, clause (9), the applicant must be a municipal electric utility or
a joint venture of municipal electric utilities;

(7) for subdivision 1, clauses (10), (11), and (14), the owner of the qualifying
business; and

(8) for subdivision 1, clauses (12) and (13), the applicant must be the governmental
entity that owns or contracts for the project or facility.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for goods or services purchased
after December 31, 2010.
new text end

Sec. 15.

new text begin [469.360] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin For purposes of sections 469.360 to 469.3693, the following
terms have the meanings given.
new text end

new text begin Subd. 2. new text end

new text begin Payroll growth percentage. new text end

new text begin "Payroll growth percentage" means payroll
attributable to new employees divided by Minnesota payroll as defined in section 290.191,
subdivision 12.
new text end

new text begin Subd. 3. new text end

new text begin New employee. new text end

new text begin A new employee is an individual who:
new text end

new text begin (1) is an employee as defined in section 290.92, subdivision 3, who works for the
entire tax year at the TECHZ location of a qualified business;
new text end

new text begin (2) performs services that are primarily in furtherance of an activity included in
subdivision 7, paragraph (d);
new text end

new text begin (3) was not employed in this state by the qualified TECHZ business or a related
business on the later of the date of the signing of the business subsidy agreement required
under subdivision 7, or the date of approval by the commissioner of employment and
economic development under section 469.362, unless the employee's former position
was filled by another person; and
new text end

new text begin (4) did not replace an individual who was an employee of the qualified business at
the TECHZ business location on the later of the signing of the business subsidy agreement
required under subdivision 7, or the date of approval by the commissioner of employment
and economic development under section 469.362.
new text end

new text begin Subd. 4. new text end

new text begin Commissioner. new text end

new text begin "Commissioner" means the commissioner of employment
and economic development.
new text end

new text begin Subd. 5. new text end

new text begin Local government unit. new text end

new text begin "Local government unit" means a statutory or
home rule charter city, county, town, Iron Range resources and rehabilitation agency,
regional development commission, or a federally designated economic development
district.
new text end

new text begin Subd. 6. new text end

new text begin Person. new text end

new text begin "Person" includes an individual, corporation, partnership, limited
liability company, association, or any other entity with its primary headquarters in this
state.
new text end

new text begin Subd. 7. new text end

new text begin Qualified TECHZ business. new text end

new text begin (a) A person carrying on a trade or business
is a qualified TECHZ business for purposes of sections 469.360 to 469.3701 if the criteria
in paragraphs (b) to (h) are met.
new text end

new text begin (b) A person is a qualified TECHZ business only at the TECHZ business location
for which it has been approved by the commissioner of employment and economic
development.
new text end

new text begin (c) Prior to execution of the business subsidy agreement, the local government
unit must consider the following factors:
new text end

new text begin (1) how wages compare to the regional industry average;
new text end

new text begin (2) the number of jobs that will be provided relative to overall employment in the
community;
new text end

new text begin (3) the economic outlook for the industry the business will engage in;
new text end

new text begin (4) sales that will be generated from outside Minnesota;
new text end

new text begin (5) how the business will build on existing regional strengths or diversify the
regional economy; and
new text end

new text begin (6) any other criteria the commissioner deems necessary.
new text end

new text begin (d) A person must be:
new text end

new text begin (1) predominantly engaged in one or more of the following industry sectors:
new text end

new text begin (i) manufacturing;
new text end

new text begin (ii) software or Internet publishing, computer systems design and related services,
architectural, engineering, and related services, or scientific research and development; or
new text end

new text begin (iii) a global, national, divisional, or regional headquarters operation that manages
business operations for a minimum of a multistate territory; and
new text end

new text begin (2) a business conducting expanded business operations in at least one of the
industry sectors in clause (1), by the later of the date of the signing of the business subsidy
agreement, or the date of the approval by the commissioner of employment and economic
development under section 469.362, in a business facility that is:
new text end

new text begin (i) a new expansion to a business facility owned by the business prior to the date
of the signing of the business subsidy agreement, or the date of the approval by the
commissioner of employment and economic development under section 469.362;
new text end

new text begin (ii) not owned by the business prior to the date of the signing of the business subsidy
agreement, or the date of the approval by the commissioner of employment and economic
development under section 469.362; or
new text end

new text begin (iii) newly constructed for the business's expansion of operations.
new text end

new text begin (e) A person must increase full-time employment in the first full year of operation
at the TECHZ business location by a minimum of five jobs or 20 percent, whichever is
greater, measured relative to the business operations prior to the expansion and maintain
the required level of employment for each year the business is designated as a TECHZ
business.
new text end

new text begin (f) A person must pay each employee compensation, including benefits not mandated
by law, that on an annualized basis is equal to at least 110 percent of the federal poverty
level for a family of four.
new text end

new text begin (g) A person must pay the prevailing wage for construction, installation, remodeling,
and repair as required by section 116J.871.
new text end

new text begin (h) A person must enter a binding written business subsidy agreement with the
commissioner that:
new text end

new text begin (1) pledges the business will meet the requirements of paragraphs (b) and (d) to (g);
new text end

new text begin (2) provides for repayment of all tax benefits enumerated under section 469.365
to the business under the procedures in section 469.369, if the requirements of this
subdivision are not met for the taxable year or for taxes payable during the year in which
the requirements were not met; and
new text end

new text begin (3) contains any other terms the commissioner determines appropriate.
new text end

new text begin Subd. 8. new text end

new text begin TECHZ location. new text end

new text begin "TECHZ location" means the property described in a
business subsidy agreement that is approved by the commissioner under section 469.362
and that is occupied by the qualified TECHZ business that is a party to the agreement.
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

Sec. 16.

new text begin [469.361] TECHZ; LIMITATIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Duration limit. new text end

new text begin (a) The maximum duration that a qualified TECHZ
business may receive a tax benefit is determined under the section that authorizes the tax
benefit. The local government unit may request a shorter duration than is authorized. The
commissioner may specify a shorter duration, regardless of the authorized duration, in
order to ensure that benefits to the state outweigh the costs.
new text end

new text begin (b) The commissioner may not approve any business subsidy agreements after
December 31, 2015.
new text end

new text begin Subd 2. new text end

new text begin Border city development zones. new text end

new text begin (a) A qualified TECHZ business may
not operate in a TECHZ location if it is receiving benefits under sections 469.3171 to
469.1735 for being located at that location in a border city development zone.
new text end

new text begin (b) A city must not provide tax incentives under sections 469.1731 to 469.1735 to a
qualified TECHZ business operating in a TECHZ location in the city.
new text end

new text begin Subd. 3. new text end

new text begin Job opportunity building zones. new text end

new text begin A TECHZ location cannot be located in
a job opportunity building zone.
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

Sec. 17.

new text begin [469.362] APPLICATION FOR DESIGNATION.
new text end

new text begin Subdivision 1. new text end

new text begin Eligibility. new text end

new text begin One or more local government units, or a joint powers
board under section 471.59, acting on behalf of two or more units, may apply to the
commissioner for a business to be designated as a qualified TECHZ business.
new text end

new text begin Subd. 2. new text end

new text begin Application. new text end

new text begin In order for a business to receive designation as a qualified
TECHZ business, a local government unit must submit an application to the commissioner.
In the application, the local government unit and the qualified TECHZ business must
provide the commissioner with the information that the commissioner needs to review
a business subsidy agreement under section 469.360, subdivision 7, paragraph (c). The
application must be in the form and manner required by the commissioner.
new text end

new text begin Subd. 3. new text end

new text begin State review criteria. new text end

new text begin (a) The commissioner may only approve an
application after considering:
new text end

new text begin (1) whether the business has local or Minnesota competitors that will be significantly
and adversely affected by the business subsidy agreement;
new text end

new text begin (2) whether the proposed job creation, job retention, and capital investment is
commensurate with the estimated tax benefits provided to the business by participating as
a qualified TECHZ business; and
new text end

new text begin (3) whether other financial assistance is available.
new text end

new text begin (b) Additionally, the commissioner may only approve a business subsidy agreement
after considering if, without the estimated tax benefits, the business:
new text end

new text begin (1) would not have expanded operations within Minnesota;
new text end

new text begin (2) would not have relocated from outside the state to Minnesota;
new text end

new text begin (3) would have moved to another state or expanded in another state rather than
remaining or expanding in Minnesota; or
new text end

new text begin (4) would not have opened a new facility in Minnesota.
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

Sec. 18.

new text begin [469.363] BUSINESS SUBSIDY AGREEMENTS; REPORTS.
new text end

new text begin Subdivision 1. new text end

new text begin TECHZ business subsidy agreement. new text end

new text begin A business subsidy
agreement required under section 469.360, subdivision 7, paragraph (h), must comply
with this section.
new text end

new text begin Subd. 2. new text end

new text begin Business subsidy agreement requirements. new text end

new text begin A business subsidy
agreement is not effective until the commissioner has approved the agreement in writing.
The commissioner may not approve an agreement that violates sections 116J.993 to
116J.995 or 469.360 to 469.3701. The commissioner may not approve an agreement
unless:
new text end

new text begin (1) the qualified TECHZ business is required to create or retain a minimum number
of jobs;
new text end

new text begin (2) the agreement defines "jobs" for purposes of determining compliance with wage
and job goals as all jobs that constitute "employment" for purposes of state unemployment
insurance;
new text end

new text begin (3) the qualified TECHZ business is required to report all jobs created or retained
because of the separate business location, if any, for purposes of section 268.044; and
new text end

new text begin (4) the qualified TECHZ business agrees to provide the appropriate data practices
release so that the commissioner of revenue and the commissioner of employment and
economic development can monitor compliance with the terms of the agreement.
new text end

new text begin Subd. 3. new text end

new text begin Standard agreement. new text end

new text begin The commissioner must develop and require the
use of a standard business subsidy agreement that imposes definitive and enforceable
obligations on the qualified TECHZ business.
new text end

new text begin Subd. 4. new text end

new text begin Business subsidy reports. new text end

new text begin (a) A local government unit must report to the
commissioner on the two-year anniversary date of the business subsidy agreement on the
progress of the qualified TECHZ business in meeting the goals listed in the business
subsidy agreement.
new text end

new text begin (b) A local government unit must annually report to the commissioner on the
progress of the qualified TECHZ business in meeting the goals listed in the business
subsidy agreement as required under section 116J.994, subdivisions 7 and 8.
new text end

new text begin (c) The commissioner must hold a qualified TECHZ business out of compliance or
remove the business from the program if the qualified TECHZ business fails to provide
the information requested by the local government unit for the report under paragraph (a)
within 30 days of written notice that the information is overdue.
new text end

new text begin Subd. 5. new text end

new text begin Public notice and hearing. new text end

new text begin A local government unit must provide public
notice and hearing as required under section 116J.994, subdivision 5, before approving a
business subsidy agreement. Public notice of a proposed business subsidy agreement must
be published in a local newspaper of general circulation. The public hearing must be held
in a location specified by the local government unit. Notwithstanding the requirements of
section 116J.994, subdivision 5, the commissioner is not required to provide an additional
public notice and hearing when entering into a business subsidy agreement with a local
government unit and a qualified business.
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

Sec. 19.

new text begin [469.365] TAX INCENTIVES AVAILABLE TO TECHZ BUSINESS.
new text end

new text begin A qualified TECHZ business, and certain property used by a qualified TECHZ
business, qualifies for:
new text end

new text begin (1) exemption from individual income taxes as provided under section 469.366;
new text end

new text begin (2) exemption from corporate franchise taxes as provided under section 469.367;
new text end

new text begin (3) exemption from the state sales and use tax and any local sales and use taxes on
qualifying purchases as provided in section 297A.68, subdivision 42;
new text end

new text begin (4) exemption from the property tax as provided in section 272.02, subdivision
95; and
new text end

new text begin (5) the new job creation credit allowed under section 469.368.
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

Sec. 20.

new text begin [469.366] TECHZ INCOME TAX EXEMPTION.
new text end

new text begin (a) An individual, estate, or trust is exempt from the taxes imposed under chapter
290 on net income from the operation of a qualified TECHZ business. This exemption
is determined by multiplying its net income for the operation of the qualified TECHZ
business by its payroll growth percentage and subtracting the result in determining taxable
income. For a resident of Minnesota, the payroll growth percentage is calculated by using
total payroll under section 290.191 rather than Minnesota payroll.
new text end

new text begin (b) No subtraction is allowed under this section in excess of 20 percent of the sum of
the Minnesota payroll and Minnesota property of the qualified business.
new text end

new text begin (c) For a qualified TECHZ business located outside the metropolitan area as defined
in section 473.121, subdivision 2, this exemption applies to income earned in the year that
the business enters into the business subsidy agreement as required under section 469.360,
subdivision 7, and the ten following taxable years. For a business located within the
metropolitan area, this exemption applies to income earned in the year that the business
enters into the business subsidy agreement required under section 469.360, subdivision 7,
and the five following taxable years.
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, 2010.
new text end

Sec. 21.

new text begin [469.367] CORPORATE FRANCHISE TAX EXEMPTION.
new text end

new text begin (a) A qualified TECHZ business is exempt from taxation under section 290.02 and
from the alternative minimum tax under section 290.0921 for the portion of its income
attributable to operations conducted at the TECHZ business location approved by the
commissioner. This exemption is determined as follows:
new text end

new text begin (1) for purposes of the tax imposed under section 290.02, by multiplying its taxable
net income by its payroll growth percentage and subtracting the result from taxable net
income in determining taxable income; and
new text end

new text begin (2) for purposes of the alternative minimum tax under section 290.0921, by
multiplying its alternative minimum taxable net income by its payroll growth factor and
subtracting the result from alternative minimum taxable net income.
new text end

new text begin (b) No subtraction is allowed under this section in excess of 20 percent of the sum of
Minnesota payroll and Minnesota property of the corporation.
new text end

new text begin (c) For a qualified TECHZ business located outside the metropolitan area as defined
in section 273.121, subdivision 2, this exemption applies to income earned in the year
that the business enters into the business subsidy agreement as required under section
469.360, subdivision 7, and the ten following taxable years for a business located within
the metropolitan area this exemption applies to income earned in the year that the business
enters into the business subsidy agreement required under section 469.360, subdivision 7,
and the five following taxable years.
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, 2010.
new text end

Sec. 22.

new text begin [469.368] NEW JOB CREATION CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Credit allowed. new text end

new text begin A qualified TECHZ business is allowed a credit
against the taxes imposed under chapter 290. The credit equals $1,500 times the number
of new employees employed by the qualified TECHZ business at the TECHZ business
location.
new text end

new text begin Subd. 2. new text end

new text begin Duration. new text end

new text begin The credit is available for the first five full taxable years that
begin after the day the business enters into the business subsidy agreement as required
under section 469.360, subdivision 7.
new text end

new text begin Subd. 3. new text end

new text begin Refundable. new text end

new text begin If the amount of the credit exceeds the liability for tax under
chapter 290, the commissioner of revenue shall refund the excess to the qualified business.
new text end

new text begin Subd. 4. new text end

new text begin Appropriation. new text end

new text begin An amount sufficient to pay the refunds authorized by this
section is appropriated to the commissioner of revenue from the general fund.
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, 2010.
new text end

Sec. 23.

new text begin [469.369] REPAYMENT OF TAX BENEFITS.
new text end

new text begin Subdivision 1. new text end

new text begin Repayment obligation. new text end

new text begin A business must repay the total tax benefits
listed in section 469.365 received during the two years immediately before it ceased
to be a qualified TECHZ business. The commissioner of employment and economic
development may extend for up to one year the period for meeting any goals provided in
the business subsidy agreement.
new text end

new text begin Subd. 2. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have
the meanings given.
new text end

new text begin (b) "Business" means any person that received tax benefits enumerated in section
469.365.
new text end

new text begin (c) "Commissioner" means the commissioner of revenue.
new text end

new text begin Subd. 3. new text end

new text begin Disposition of repayment. new text end

new text begin The repayment must be paid to the state to
the extent it represents a state tax reduction and to the county to the extent it represents a
property tax reduction. Any amount repaid to the state must be deposited in the general
fund. Any amount repaid to the county for the property tax exemption must be distributed
to the taxing authorities with authority to levy taxes in the zone in the same manner
provided for distribution of payment of delinquent property taxes. Any repayment of
local sales taxes must be repaid to the commissioner for distribution to the city or county
imposing the local sales tax.
new text end

new text begin Subd. 4. new text end

new text begin Repayment procedures. new text end

new text begin (a) For the repayment of taxes imposed under
chapter 290 or 297A or local taxes collected pursuant to section 297A.99, a business
must file an amended return with the commissioner of revenue and pay an taxes required
to be repaid within 30 days after becoming subject to repayment under this section.
The amount required to be repaid is determined by calculating the tax for the period or
periods for which repayment is required without regard to the exemptions and credits
allowed under section 469.365.
new text end

new text begin (b) For the repayment of property taxes, the county auditor shall prepare a tax
statement for the business, applying the applicable tax extension rates for each payable
year and provide a copy to the business and to the taxpayer of record. The business must
pay the taxes to the county treasurer within 30 days after receipt of the tax statement. The
business or the taxpayer of record may appeal the valuation and determination of the
property tax to the tax court within 30 days after receipt of the tax statement.
new text end

new text begin (c) The provisions of chapters 270C and 289A relating to the commissioner's
authority to audit, assess, and collect the tax and to hear appeals are applicable to the
repayment under paragraphs (a) and (b). The commissioner may impose civil penalties as
provided in chapter 289A, and the additional tax and penalties are subject to interest at the
rate provided in section 270C.40, from 30 days after becoming subject to repayment under
this section until the date the tax is paid.
new text end

new text begin (d) If a property tax is not repaid under paragraph (b), the county treasurer shall
add the amount required to be repaid to the property taxes assessed against the property
for payment in the year following the year in which the auditor provided the statement
under paragraph (b).
new text end

new text begin (e) For determining the tax required to be repaid, a reduction of a state or local
sales or use tax is deemed to have been received on the date that the good or service was
purchased or first put to a taxable use. In the case of an income tax or franchise tax,
including the credit payable under section 469.368, a reduction of tax is deemed to have
been received for the two most recent tax years that have ended prior to the date that the
business became subject to repayment under this section. In the case of a property tax, a
reduction of tax is deemed to have been received for the taxes payable in the year that
the business was subject to repayment under this section and for the taxes payable in
the prior year.
new text end

new text begin (f) The commissioner may assess the repayment of taxes under paragraph (c) any
time within two years after the business becomes subject to repayment under subdivision
1, or within any period of limitations for the assessment of tax under section 289A.38,
whichever period is later. The county auditor may send the statement under paragraph
(b) any time within three years after the business becomes subject to repayment under
subdivision 1.
new text end

new text begin (g) A business is not entitled to any income tax or franchise tax benefits, including
refundable credits, for any part of the year in which the business becomes subject to
repayment under this section nor for any year thereafter. Property is not exempt from tax
under section 272.02, subdivision 95, for any taxes payable in the year following the year
in which the property became subject to repayment under this section nor for any year
thereafter. A business is not eligible for any sales tax benefits beginning with goods
or services purchases or first put to a taxable use on the day that the business becomes
subject to repayment under this section.
new text end

new text begin Subd. 5. new text end

new text begin Waiver authority. new text end

new text begin The commissioner may waive all or part of a repayment
required under subdivision 1, if the commissioner, in consultation with the commissioner
of employment and economic development and appropriate officials from the local
government units in which the qualified TECHZ business is located, determines that
requiring repayment of the tax is not in the best interest of the state or the local government
units and the business ceased operating as a qualified TECHZ business as a result of
circumstances beyond its control including, but not limited to:
new text end

new text begin (1) a natural disaster;
new text end

new text begin (2) unforeseen industry trends; or
new text end

new text begin (3) loss of a major supplier or customer.
new text end

new text begin Subd. 6. new text end

new text begin Reconciliation. new text end

new text begin Where this section is inconsistent with section 116J.994,
subdivision 3, paragraph (e), or 6, or any other provisions of sections 116J.993 to
116J.995, this section prevails.
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

Sec. 24.

new text begin [469.3692] PROHIBITION AGAINST AMENDMENTS TO BUSINESS
SUBSIDY AGREEMENT.
new text end

new text begin Under no circumstance shall terms of any agreement required as a condition for
eligibility for benefits listed under section 469.365 be amended to change job creation, job
retention, or wage goals included in the agreement.
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

Sec. 25.

new text begin [469.3693] CERTIFICATION OF CONTINUING ELIGIBILITY FOR
TECHZ BENEFITS.
new text end

new text begin (a) By October 15 of each year, every qualified TECHZ business must certify to
the commissioner of revenue, on a form prescribed by the commissioner of revenue,
whether it is in compliance with any agreement required as a condition for eligibility for
benefits listed under section 469.365. A qualified TECHZ business that fails to submit
the certification, or any qualified TECHZ business that submits a certification that
the commissioner of revenue later determines materially misrepresents the business's
compliance with the agreement, is subject to the repayment provisions under section
469.369 from January 1 of the year in which the report is due or the date that the business
became subject to section 469.369, whichever is earlier. Any such business is permanently
barred from obtaining benefits under section 469.365. For purposes of this section, the bar
applies to an entity and also applies to any individuals or entities that have an ownership
interest of at least 20 percent of the entity.
new text end

new text begin (b) Before the sanctions under paragraph (a) apply to a qualified TECHZ business
that fails to submit the certification, the commissioner of revenue shall send notice to the
business, demanding that the certification be submitted within 30 days and advising the
business of the consequences for failing to do so. The commissioner of revenue shall
notify the commissioner of employment and economic development and the appropriate
local government unit whenever notice is sent to a business under this paragraph.
new text end

new text begin (c) The certification required under this section is public.
new text end

new text begin (d) The commissioner of revenue shall promptly notify the commissioner of
employment and economic development of all qualified TECHZ businesses that certify
that they are not in compliance with the terms of their business subsidy agreement and all
qualified TECHZ businesses that fail to file the certification.
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

Sec. 26.

new text begin [469.3701] STATE AUDITOR; AUDITS OF TECHZ BUSINESSES AND
BUSINESS SUBSIDY AGREEMENTS.
new text end

new text begin The Office of the State Auditor may annually audit the creation and operation of all
TECHZ businesses and business subsidy agreements entered into under sections 469.360
to 469.3693. To the extent necessary to perform this audit, the state auditor may request
from the commissioner of revenue tax return information of taxpayers who are eligible to
receive tax benefits authorized under section 469.365. To the extent necessary to perform
this audit, the state auditor may request from the commissioner of employment and
economic development wage detail report information required under section 268.044 of
taxpayers eligible to receive tax benefits authorized under section 469.365.
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

ARTICLE 6

PROPERTY TAXES, AIDS, AND PAYMENTS

Section 1.

Minnesota Statutes 2008, section 97A.061, is amended by adding a
subdivision to read:

new text begin Subd. 6. new text end

new text begin Reduction. new text end

new text begin Beginning in 2010, the amount of an annual payment to a
county under this section is the amount determined under subdivisions 1 to 5, reduced
by six percent.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for payment made to counties in
2010 and thereafter.
new text end

Sec. 2.

Minnesota Statutes 2008, section 272.02, subdivision 42, is amended to read:

Subd. 42.

Property leased to deleted text begin school districts deleted text end new text begin schools new text end .

new text begin (a) new text end Property that is leased or
rented to a school district is exempt from taxation if it meets the following requirements:

(1) the lease must be for a period of at least 12 consecutive months;

(2) the terms of the lease must require the school district to pay a nominal
consideration for use of the building;

(3) the school district must use the property to provide direct instruction in any
grade from kindergarten through grade 12; special education for disabled children; adult
basic education as described in section 124D.52; preschool and early childhood family
education; or community education programs, including provision of administrative
services directly related to the educational program at that site; and

(4) the lease must provide that the school district has the exclusive use of the
property during the lease period.

new text begin (b) Property that is leased or rented to a charter school formed and operated under
section 124D.10 is exempt from taxation if it meets all of the following requirements:
new text end

new text begin (1) the lease is for a period of at least 12 consecutive months;
new text end

new text begin (2) the charter school must use the property to provide direct instruction in any grade
from kindergarten through grade 12, to provide special education for disabled children,
or to provide administrative services directly related to the educational program at that
site; and
new text end

new text begin (3) except for lease provisions that allow for the shared use of the property by the
charter school and another public or private school, by the charter school and a church,
or by the charter school and the state or a political subdivision of the state, the lease
must provide that the charter school has the exclusive right to use the property during
the lease period.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2011 and
thereafter.
new text end

Sec. 3.

Minnesota Statutes 2008, section 273.1384, is amended by adding a subdivision
to read:

new text begin Subd. 6. new text end

new text begin Credit reduction. new text end

new text begin In 2011 and thereafter, the annual market value credit
reimbursement amount for each taxing jurisdiction determined under subdivisions 1 to 5 is
reduced by the dollar amount of the reduction in market value credit reimbursements for
that taxing jurisdiction in 2010 due to allotment reductions under section 16A.152 and
the reductions under section 477A.0133. No taxing jurisdiction's market value credit
reimbursements are reduced to less than zero under this subdivision. The commissioner of
revenue shall pay the annual market value credit reimbursement amounts, after reduction
under this subdivision, to the affected taxing jurisdictions as provided in this section.
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

Sec. 4.

Minnesota Statutes 2009 Supplement, section 275.70, subdivision 5, is
amended to read:

Subd. 5.

Special levies.

"Special levies" means those portions of ad valorem taxes
levied by a local governmental unit for the following purposes or in the following manner:

(1) to pay the costs of the principal and interest on bonded indebtedness or to
reimburse for the amount of liquor store revenues used to pay the principal and interest
due on municipal liquor store bonds in the year preceding the year for which the levy
limit is calculated;

(2) to pay the costs of principal and interest on certificates of indebtedness issued for
any corporate purpose except for the following:

(i) tax anticipation or aid anticipation certificates of indebtedness;

(ii) certificates of indebtedness issued under sections 298.28 and 298.282;

(iii) certificates of indebtedness used to fund current expenses or to pay the costs of
extraordinary expenditures that result from a public emergency; or

(iv) certificates of indebtedness used to fund an insufficiency in tax receipts or
an insufficiency in other revenue sources;

(3) to provide for the bonded indebtedness portion of payments made to another
political subdivision of the state of Minnesota;

(4) to fund payments made to the Minnesota State Armory Building Commission
under section 193.145, subdivision 2, to retire the principal and interest on armory
construction bonds;

(5) property taxes approved by voters which are levied against the referendum
market value as provided under section 275.61;

(6) to fund matching requirements needed to qualify for federal or state grants or
programs to the extent that either (i) the matching requirement exceeds the matching
requirement in calendar year 2001, or (ii) it is a new matching requirement that did not
exist prior to 2002;

(7) to pay the expenses reasonably and necessarily incurred in preparing for or
repairing the effects of natural disaster including the occurrence or threat of widespread
or severe damage, injury, or loss of life or property resulting from natural causes, in
accordance with standards formulated by the Emergency Services Division of the state
Department of Public Safety, as allowed by the commissioner of revenue under section
275.74, subdivision 2;

(8) pay amounts required to correct an error in the levy certified to the county
auditor by a city or county in a levy year, but only to the extent that when added to the
preceding year's levy it is not in excess of an applicable statutory, special law or charter
limitation, or the limitation imposed on the governmental subdivision by sections 275.70
to 275.74 in the preceding levy year;

(9) to pay an abatement under section 469.1815;

(10) to pay any costs attributable to increases in the employer contribution rates
under chapter 353, or locally administered pension plans, that are effective after June
30, 2001;

(11) to pay the operating or maintenance costs of a county jail as authorized in
section 641.01 or 641.262, or of a correctional facility as defined in section 241.021,
subdivision 1, paragraph (f), to the extent that the county can demonstrate to the
commissioner of revenue that the amount has been included in the county budget as
a direct result of a rule, minimum requirement, minimum standard, or directive of the
Department of Corrections, or to pay the operating or maintenance costs of a regional jail
as authorized in section 641.262. For purposes of this clause, a district court order is
not a rule, minimum requirement, minimum standard, or directive of the Department of
Corrections. If the county utilizes this special levy, except to pay operating or maintenance
costs of a new regional jail facility under sections 641.262 to 641.264 which will not
replace an existing jail facility, any amount levied by the county in the previous levy year
for the purposes specified under this clause and included in the county's previous year's
levy limitation computed under section 275.71, shall be deducted from the levy limit
base under section 275.71, subdivision 2, when determining the county's current year
levy limitation. The county shall provide the necessary information to the commissioner
of revenue for making this determination;

(12) to pay for operation of a lake improvement district, as authorized under section
103B.555. If the county utilizes this special levy, any amount levied by the county in the
previous levy year for the purposes specified under this clause and included in the county's
previous year's levy limitation computed under section 275.71 shall be deducted from
the levy limit base under section 275.71, subdivision 2, when determining the county's
current year levy limitation. The county shall provide the necessary information to the
commissioner of revenue for making this determination;

(13) to repay a state or federal loan used to fund the direct or indirect required
spending by the local government due to a state or federal transportation project or other
state or federal capital project. This authority may only be used if the project is not a
local government initiative;

(14) to pay for court administration costs as required under section 273.1398,
subdivision 4b, less the (i) county's share of transferred fines and fees collected by the
district courts in the county for calendar year 2001 and (ii) the aid amount certified to be
paid to the county in 2004 under section 273.1398, subdivision 4c; however, for taxes
levied to pay for these costs in the year in which the court financing is transferred to the
state, the amount under this clause is limited to the amount of aid the county is certified to
receive under section 273.1398, subdivision 4a;

(15) to fund a police or firefighters relief association as required under section 69.77
to the extent that the required amount exceeds the amount levied for this purpose in 2001;

(16) for purposes of a storm sewer improvement district under section 444.20;

(17) to pay for the maintenance and support of a city or county society for the
prevention of cruelty to animals under section 343.11, but not to exceed in any year
$4,800 or the sum of $1 per capita based on the county's or city's population as of the most
recent federal census, whichever is greater. If the city or county uses this special levy, any
amount levied by the city or county in the previous levy year for the purposes specified
in this clause and included in the city's or county's previous year's levy limit computed
under section 275.71, must be deducted from the levy limit base under section 275.71,
subdivision 2, in determining the city's or county's current year levy limit;

(18) for counties, to pay for the increase in their share of health and human service
costs caused by reductions in federal health and human services grants effective after
September 30, 2007;

(19) for a city, for the costs reasonably and necessarily incurred for securing,
maintaining, or demolishing foreclosed or abandoned residential properties, as allowed by
the commissioner of revenue under section 275.74, subdivision 2. A city must have either
(i) a foreclosure rate of at least 1.4 percent in 2007, or (ii) a foreclosure rate in 2007 in
the city or in a zip code area of the city that is at least 50 percent higher than the average
foreclosure rate in the metropolitan area, as defined in section 473.121, subdivision 2,
to use this special levy. For purposes of this paragraph, "foreclosure rate" means the
number of foreclosures, as indicated by sheriff sales records, divided by the number of
households in the city in 2007;

(20) for a city, for the unreimbursed costs of redeployed traffic-control agents and
lost traffic citation revenue due to the collapse of the Interstate 35W bridge, as certified
to the Federal Highway Administration;

(21) to pay costs attributable to wages and benefits for sheriff, police, and fire
personnel. If a local governmental unit did not use this special levy in the previous year its
levy limit base under section 275.71 shall be reduced by the amount equal to the amount it
levied for the purposes specified in this clause in the previous year;

(22) an amount equal to new text begin 50 percent of new text end any reductions in the certified aids or credits
payable under sections 477A.011 to 477A.014, and section 273.1384, due to unallotment
under section 16A.152 new text begin or 477A.0133 new text end . new text begin In the case of an unallotment, new text end the amount of
the levy allowed under this clause is equal to the amount unallotted new text begin or reduced new text end in the
calendar year in which the tax is levied unless the unallotment amount is not known by
September 1 of the levy year, and the local government has not adjusted its levy under
section 275.065, subdivision 6, or 275.07, subdivision 6, in which case the unallotment
amount may be levied in the following year;

(23) to pay for the difference between one-half of the costs of confining sex offenders
undergoing the civil commitment process and any state payments for this purpose pursuant
to section 253B.185, subdivision 5;

(24) for a county to pay the costs of the first year of maintaining and operating a new
facility or new expansion, either of which contains courts, corrections, dispatch, criminal
investigation labs, or other public safety facilities and for which all or a portion of the
funding for the site acquisition, building design, site preparation, construction, and related
equipment was issued or authorized prior to the imposition of levy limits in 2008. The
levy limit base shall then be increased by an amount equal to the new facility's first full
year's operating costs as described in this clause; and

(25) for new text begin 50 percent of new text end the estimated amount of reduction to credits under section
273.1384 for credits payable in the year in which the levy is payable.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2011 and
thereafter.
new text end

Sec. 5.

Minnesota Statutes 2008, section 275.71, subdivision 5, is amended to read:

Subd. 5.

Property tax levy limit.

deleted text begin For taxes levied in 2008 through 2010, deleted text end new text begin (a) new text end The
property tax levy limit for a local governmental unit is equal to its adjusted levy limit
base determined under subdivision 4 plus any additional levy authorized under section
275.73, which is levied against net tax capacity, reduced by the sum of (i) the total amount
of aids and reimbursements that the local governmental unit is certified to receive under
sections 477A.011 to 477A.014, (ii) taconite aids under sections 298.28 and 298.282
including any aid which was required to be placed in a special fund for expenditure in
the next succeeding year, (iii) estimated payments to the local governmental unit under
section 272.029, adjusted for any error in estimation in the preceding year, and (iv) aids
under section 477A.16.

new text begin (b) If an aid, payment, or other amount used in paragraph (a) to reduce a local
government unit's levy limit is reduced by allotment reduction under section 16A.152,
the amount of the aid, payment, or other amount prior to unallotment is used in the
computations in paragraph (a). In order for a local government unit to levy outside of its
limit to offset a reduction attributable to unallotment, it must do so under, and to the extent
authorized by, a special levy authority. If any amount in paragraph (a), items (i) to (iv),
has decreased from the corresponding amount for the prior year other than because of an
allotment reduction under section 16A.152, an amount equal to one-half of that decrease
must be subtracted from the result obtained under paragraph (a).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2011 and
thereafter.
new text end

Sec. 6.

Minnesota Statutes 2009 Supplement, section 290C.07, is amended to read:

290C.07 CALCULATION OF INCENTIVE PAYMENT.

An approved claimant under the sustainable forest incentive program is eligible to
receive an annual payment. The payment shall equal the greater of:

(1) the difference between the property tax that would be paid on the land using the
previous year's statewide average total township tax rate and a class rate of one percent, if
the land were valued at (i) the average statewide managed forest land market value per
acre calculated under section 290C.06, and (ii) the average statewide managed forest land
current use value per acre calculated under section 290C.02, subdivision 5; or

(2) two-thirds of the property tax amount determined by using the previous year's
statewide average total township tax rate, the estimated market value per acre as calculated
in section 290C.06, and a class rate of one percent, provided that the payment shall be no
less than $7 per acre for each acre enrolled in the sustainable forest incentive program new text begin and
the maximum payment per each Social Security Number or state or federal business tax
identification number shall not exceed $100,000 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for payments made after June 30,
2011, based on certifications due in 2011 and thereafter.
new text end

Sec. 7.

Minnesota Statutes 2008, section 477A.013, subdivision 9, is amended to read:

Subd. 9.

City aid distribution.

(a) deleted text begin In calendar year 2009 and thereafter, deleted text end Each
city shall receive an aid distribution equal to the sum of (1) the city formula aid under
subdivision 8, and (2) its city aid base.

(b) For aids payable in deleted text begin 2009 deleted text end new text begin 2011 new text end only, the total aid for any city shall not exceed
the sum of (1) 35 percent of the city's net levy for the year prior to the aid distribution,
plus (2) its total aid in the previous year. new text begin For aid payable in 2011 only, the total aid for
any city with a population of 2,500 or more may not be less than its total aid under this
section in the previous year minus the lesser of $125 multiplied by its population, or 50
percent of its net levy in the year prior to the aid distribution. The total aid for a city with
a population less than 2,500 must not be less than the amount it was certified to receive
in the previous year minus the lesser of $125 multiplied by its population, or 40 percent
of its 2003 certified aid amount.
new text end

(c) For aids payable in deleted text begin 2010 deleted text end new text begin 2012 new text end and thereafter, the total aid for any city shall
not exceed the sum of (1) ten percent of the city's net levy for the year prior to the aid
distribution plus (2) its total aid in the previous year. For aids payable in deleted text begin 2009 deleted text end new text begin 2012 new text end and
thereafter, the total aid for any city with a population of 2,500 or more may not be less
than its total aid under this section in the previous year minus the lesser of $10 multiplied
by its population, or ten percent of its net levy in the year prior to the aid distribution.

(d) For aids payable in deleted text begin 2010 deleted text end new text begin 2012 new text end and thereafter, the total aid for a city with a
population less than 2,500 must not be less than the amount it was certified to receive in
the previous year minus the lesser of $10 multiplied by its population, or five percent of its
2003 certified aid amount. deleted text begin For aids payable in 2009 only, the total aid for a city with a
population less than 2,500 must not be less than what it received under this section in the
previous year unless its total aid in calendar year 2008 was aid under section 477A.011,
subdivision 36, paragraph (s), in which case its minimum aid is zero.
deleted text end

(e) new text begin For aid payable in 2012 and thereafter, new text end a city's aid loss under this section may
not exceed $300,000 in any year in which the total city aid appropriation under section
477A.03, subdivision 2a, is equal or greater than the appropriation under that subdivision
in the previous year, unless the city has an adjustment in its city net tax capacity under
the process described in section 469.174, subdivision 28.

(f) If a city's net tax capacity used in calculating aid under this section has decreased
in any year by more than 25 percent from its net tax capacity in the previous year due to
property becoming tax-exempt Indian land, the city's maximum allowed aid increase
under paragraph (c) shall be increased by an amount equal to (1) the city's tax rate in the
year of the aid calculation, multiplied by (2) the amount of its net tax capacity decrease
resulting from the property becoming tax exempt.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aid payable in 2011 and thereafter.
new text end

Sec. 8.

new text begin [477A.0133] ADDITIONAL 2010 AID AND REDUCTIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the following terms
have the meanings given them in this subdivision.
new text end

new text begin (b) The "2010 revenue base" for a county is the sum of the county's certified property
tax levy for taxes payable in 2010, plus the amount of county program aid under section
477A.0124 that the county was certified to receive in 2010, plus the amount of taconite
aids under sections 298.28 and 298.282 that the county was certified to receive in 2010
including any amounts required to be placed in a special fund for distribution in a later year.
new text end

new text begin (c) The "2010 revenue base" for a statutory or home rule charter city is the sum of
the city's certified property tax levy for taxes payable in 2010, plus the amount of local
government aid under section 477A.013, subdivision 9, that the city was certified to
receive in 2010, plus the amount of taconite aids under sections 298.28 and 298.282 that
the city was certified to receive in 2010 including any amounts required to be placed in a
special fund for distribution in a later year.
new text end

new text begin Subd. 2. new text end

new text begin 2010 reductions; counties, cities, and towns. new text end

new text begin After implementing any
reduction of county program aid under section 477A.0124, local government aid under
section 477A.013, or market value credit reimbursements under section 273.1384, for
amounts payable in 2010 to reflect the reduction of allotments under section 16A.152, the
commissioner of revenue must compute the additional aid reduction amounts for each
county and city provided under this section.
new text end

new text begin The additional reduction amounts under this section are limited to the sum of the
amount of county program aid under section 477A.0124, local government aid under
section 477A.013, and market value credit reimbursements under section 273.1384
payable to the county or city in 2010 before the reductions in this section, but after the
reductions for unallotments.
new text end

new text begin The reduction amount under this section is applied first to reduce the amount payable
as either county program aid under section 477A.0124, in the case of a county, or local
government aid under section 477A.013, in the case of a city, and then, if necessary,
to reduce the amount payable to the county or city in 2010 as market value credit
reimbursements under section 273.1384.
new text end

new text begin No aid or reimbursement amount is reduced to less than zero under this section.
new text end

new text begin The additional 2010 aid reduction amount for a county is equal to 4.354 percent of
the county's 2010 revenue base. The additional 2010 aid reduction amount for a city is
equal to 8.158 percent of the city's 2010 revenue base.
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

Sec. 9.

Minnesota Statutes 2008, section 477A.03, subdivision 2a, is amended to read:

Subd. 2a.

Cities.

For aids payable in deleted text begin 2009 deleted text end new text begin 2011 new text end and thereafter, the total aid
paid under section 477A.013, subdivision 9, is deleted text begin $526,148,487, subject to adjustment in
subdivision 5 deleted text end new text begin $337,640,792 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2011 and
thereafter.
new text end

Sec. 10.

Minnesota Statutes 2008, section 477A.03, subdivision 2b, is amended to read:

Subd. 2b.

Counties.

(a) For aids payable in deleted text begin 2009 deleted text end new text begin 2011 new text end and thereafter, the total aid
payable under section 477A.0124, subdivision 3, is deleted text begin $111,500,000 minus one-half of the
total aid amount determined under section 477A.0124, subdivision 5, paragraph (b),
subject to adjustment in subdivision 5 deleted text end new text begin $33,059,086 new text end . Each calendar year, $500,000 shall be
retained by the commissioner of revenue to make reimbursements to the commissioner of
management and budget for payments made under section 611.27. For calendar year 2004,
the amount shall be in addition to the payments authorized under section 477A.0124,
subdivision 1. For calendar year 2005 and subsequent years, the amount shall be deducted
from the appropriation under this paragraph. The reimbursements shall be to defray the
additional costs associated with court-ordered counsel under section 611.27. Any retained
amounts not used for reimbursement in a year shall be included in the next distribution
of county need aid that is certified to the county auditors for the purpose of property tax
reduction for the next taxes payable year.

(b) For aids payable in deleted text begin 2009 deleted text end new text begin 2011 new text end and thereafter, the total aid under section
477A.0124, subdivision 4, is deleted text begin $116,132,923 minus one-half of the total aid amount
determined under section 477A.0124, subdivision 5, paragraph (b), subject to adjustment
in subdivision 5 deleted text end new text begin $34,082,538 new text end . The commissioner of management and budget shall bill the
commissioner of revenue for the cost of preparation of local impact notes as required by
section 3.987, not to exceed $207,000 in fiscal year 2004 and thereafter. The commissioner
of education shall bill the commissioner of revenue for the cost of preparation of local
impact notes for school districts as required by section 3.987, not to exceed $7,000 in fiscal
year 2004 and thereafter. The commissioner of revenue shall deduct the amounts billed
under this paragraph from the appropriation under this paragraph. The amounts deducted
are appropriated to the commissioner of management and budget and the commissioner of
education for the preparation of local impact notes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2011 and
thereafter.
new text end

Sec. 11.

Minnesota Statutes 2008, section 477A.12, is amended by adding a
subdivision to read:

new text begin Subd. 4. new text end

new text begin Reduction. new text end

new text begin Beginning in 2010, the amount of an annual payment to
a county under this section is the amount determined under subdivision 1 to 3, reduced
by six percent.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for payment made to counties in
2010 and thereafter.
new text end

Sec. 12.

Minnesota Statutes 2008, section 477A.14, is amended by adding a
subdivision to read:

new text begin Subd. 3. new text end

new text begin Reduction. new text end

new text begin Beginning in 2010, the monetary amounts per acre specified in
subdivisions 1 and 2, are reduced by six percent.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for payment and distributions made
in 2010 and thereafter.
new text end

Sec. 13.

Laws 2008, chapter 366, article 3, section 3, the effective date, is amended to
read:

EFFECTIVE DATE.

This section is effective for levies certified in calendar years
2008 deleted text begin through 2010 deleted text end , payable in 2009 deleted text begin through 2011 deleted text end new text begin , and thereafter 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

Sec. 14.

Laws 2008, chapter 366, article 3, section 4, the effective date, is amended to
read:

EFFECTIVE DATE.

This section is effective for levies certified in 2008 deleted text begin through
2010 deleted text end , payable in 2009 deleted text begin through 2011 deleted text end new text begin , and thereafter 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

Sec. 15. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2008, section 477A.03, subdivision 5, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2011 and
thereafter.
new text end

ARTICLE 7

REFUNDS

Section 1.

Minnesota Statutes 2008, section 270A.03, subdivision 7, is amended to
read:

Subd. 7.

Refund.

"Refund" means an individual income tax refund deleted text begin or political
contribution refund deleted text end , pursuant to chapter 290, or a property tax credit or refund, pursuant to
chapter 290A, or a sustainable forest tax payment to a claimant under chapter 290C.

For purposes of this chapter, lottery prizes, as set forth in section 349A.08,
subdivision 8, and amounts granted to persons by the legislature on the recommendation
of the joint senate-house of representatives Subcommittee on Claims shall be treated
as refunds.

In the case of a joint property tax refund payable to spouses under chapter 290A,
the refund shall be considered as belonging to each spouse in the proportion of the total
refund that equals each spouse's proportion of the total income determined under section
290A.03, subdivision 3. In the case of a joint income tax refund under chapter 289A, the
refund shall be considered as belonging to each spouse in the proportion of the total
refund that equals each spouse's proportion of the total taxable income determined under
section 290.01, subdivision 29. The commissioner shall remit the entire refund to the
claimant agency, which shall, upon the request of the spouse who does not owe the debt,
determine the amount of the refund belonging to that spouse and refund the amount to
that spouse. For court fines, fees, and surcharges and court-ordered restitution under
section 611A.04, subdivision 2, the notice provided by the commissioner of revenue under
section 270A.07, subdivision 2, paragraph (b), serves as the appropriate legal notice
to the spouse who does not owe the debt.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for political contribution refund
claims based on contributions that are made after June 30, 2011.
new text end

Sec. 2.

Minnesota Statutes 2008, 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, 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. deleted text begin The refund allowed by section 290.06, subdivision 23, is also
considered an overpayment. deleted text end 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.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for political contribution refund
claims based on contributions that are made after June 30, 2011.
new text end

Sec. 3.

Minnesota Statutes 2008, section 290.01, subdivision 6, is amended to read:

Subd. 6.

Taxpayer.

The term "taxpayer" means any person or corporation subject to
a tax imposed by this chapter. deleted text begin For purposes of section 290.06, subdivision 23, the term
"taxpayer" means an individual eligible to vote in Minnesota under section 201.014. deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for political contribution refund
claims based on contributions that are made after June 30, 2011.
new text end

Sec. 4.

Minnesota Statutes 2008, section 290A.03, subdivision 11, is amended to read:

Subd. 11.

Rent constituting property taxes.

"Rent constituting property taxes"
means deleted text begin 19 deleted text end new text begin 15 new text end percent of the gross rent actually paid in cash, or its equivalent, or the portion
of rent paid in lieu of property taxes, in any calendar year by a claimant for the right
of occupancy of the claimant's Minnesota homestead in the calendar year, and which
rent constitutes the basis, in the succeeding calendar year of a claim for relief under this
chapter by the claimant.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property tax refunds based on
rent paid after December 31, 2009.
new text end

Sec. 5.

Minnesota Statutes 2008, section 290A.03, subdivision 13, is amended to read:

Subd. 13.

Property taxes payable.

"Property taxes payable" means the property tax
exclusive of special assessments, penalties, and interest payable on a claimant's homestead
after deductions made under sections 273.135, 273.1384, 273.1391, 273.42, subdivision 2,
and any other state paid property tax credits in any calendar year, and after any refund
claimed and allowable under section 290A.04, subdivision 2h, that is first payable in
the year that the property tax is payable. In the case of a claimant who makes ground
lease payments, "property taxes payable" includes the amount of the payments directly
attributable to the property taxes assessed against the parcel on which the house is located.
No apportionment or reduction of the "property taxes payable" shall be required for the
use of a portion of the claimant's homestead for a business purpose if the claimant does not
deduct any business depreciation expenses for the use of a portion of the homestead in the
determination of federal adjusted gross income. For homesteads which are manufactured
homes as defined in section 273.125, subdivision 8, and for homesteads which are park
trailers taxed as manufactured homes under section 168.012, subdivision 9, "property
taxes payable" shall also include deleted text begin 19 deleted text end new text begin 15 new text end percent of the gross rent paid in the preceding
year for the site on which the homestead is located. When a homestead is owned by
two or more persons as joint tenants or tenants in common, such tenants shall determine
between them which tenant may claim the property taxes payable on the homestead. If
they are unable to agree, the matter shall be referred to the commissioner of revenue
whose decision shall be final. Property taxes are considered payable in the year prescribed
by law for payment of the taxes.

In the case of a claim relating to "property taxes payable," the claimant must have
owned and occupied the homestead on January 2 of the year in which the tax is payable
and (i) the property must have been classified as homestead property pursuant to section
273.124, on or before December 15 of the assessment year to which the "property taxes
payable" relate; or (ii) the claimant must provide documentation from the local assessor
that application for homestead classification has been made on or before December 15
of the year in which the "property taxes payable" were payable and that the assessor has
approved the application.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property tax refunds based upon
rent paid after December 31, 2009, and upon property taxes payable in 2011 and thereafter.
new text end

Sec. 6. new text begin REPEALER.
new text end

new text begin (a) new text end new text begin Minnesota Statutes 2008, sections 10A.322, subdivision 4; and 13.4967,
subdivision 2, new text end new text begin are repealed.
new text end

new text begin (b) new text end new text begin Minnesota Statutes 2008, section 290.06, subdivision 23, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Paragraph (a) is effective the day following final enactment.
Paragraph (b) is effective for refund claims based on contributions made after June 30,
2011.
new text end

ARTICLE 8

MISCELLANEOUS

Section 1.

new text begin [270C.311] FAILURE TO PRODUCE RECORDS.
new text end

new text begin (a) A taxpayer who fails to produce records or documents that support items on a
return is subject to a penalty equal to the greater of $500 or 25 percent of the amount of
the additional tax on any assessment made by the commissioner that results from the
failure to produce the documents or records.
new text end

new text begin (b) The penalty cannot be imposed unless the commissioner:
new text end

new text begin (1) makes a preliminary written request for the records or documents that gives the
taxpayer at least 30 days to comply; and
new text end

new text begin (2) makes a final written request, after the deadline provided in the preliminary
written request, for records or documents that gives the taxpayer at least 30 days to
comply. This request must notify the taxpayer of the consequences for failing to provide
the records or documents.
new text end

new text begin (c) The penalty may not be imposed, and if imposed, may be abated, if the taxpayer
shows that the response, or failure to respond, was due to reasonable cause.
new text end

new text begin (d) Records or documents submitted after the deadline provided in the request made
under paragraph (b) may be used to determine the correct tax. However, the late records or
documents must not reduce any penalty assessed under this section unless the penalty is
abated under paragraph (c).
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

Sec. 2.

Minnesota Statutes 2008, section 270C.52, subdivision 2, is amended to read:

Subd. 2.

Payment agreements.

(a) When any portion of any tax payable to the
commissioner together with interest and penalty thereon, if any, has not been paid, the
commissioner may extend the time for payment for a further period. When the authority
of this section is invoked, the extension shall be evidenced by written agreement signed by
the taxpayer and the commissioner, stating the amount of the tax with penalty and interest,
if any, and providing for the payment of the amount in installments.

(b) The agreement may contain a confession of judgment for the amount and for any
unpaid portion thereof. If the agreement contains a confession of judgment, the confession
of judgment must provide that the commissioner may enter judgment against the taxpayer
in the district court of the county of residence as shown upon the taxpayer's tax return for
the unpaid portion of the amount specified in the extension agreement.

(c) The agreement shall provide that it can be terminated, after notice by the
commissioner, if information provided by the taxpayer prior to the agreement was
inaccurate or incomplete, collection of the tax covered by the agreement is in jeopardy,
there is a subsequent change in the taxpayer's financial condition, the taxpayer has failed
to make a payment due under the agreement, or the taxpayer has failed to pay any other
tax or file a tax return coming due after the agreement.

(d) The notice must be given at least 14 calendar days prior to termination, and shall
advise the taxpayer of the right to request a reconsideration from the commissioner of
whether termination is reasonable and appropriate under the circumstances. A request for
reconsideration does not stay collection action beyond the 14-day notice period. If the
commissioner has reason to believe that collection of the tax covered by the agreement
is in jeopardy, the commissioner may proceed under section 270C.36 and terminate the
agreement without regard to the 14-day period.

(e) The commissioner may accept other collateral the commissioner considers
appropriate to secure satisfaction of the tax liability. The principal sum specified in the
agreement shall bear interest at the rate specified in section 270C.40 on all unpaid portions
thereof until the same has been fully paid or the unpaid portion thereof has been entered as
a judgment. The judgment shall bear interest at the rate specified in section 270C.40.

(f) If it appears to the commissioner that the tax reported by the taxpayer is in excess
of the amount actually owing by the taxpayer, the extension agreement or the judgment
entered pursuant thereto shall be corrected. If after making the extension agreement
or entering judgment with respect thereto, the commissioner determines that the tax as
reported by the taxpayer is less than the amount actually due, the commissioner shall
assess a further tax in accordance with the provisions of law applicable to the tax.

(g) The authority granted to the commissioner by this section is in addition to any
other authority granted to the commissioner by law to extend the time of payment or the
time for filing a return and shall not be construed in limitation thereof.

new text begin (h) The commissioner shall charge a fee for entering into payment agreements
that reflects the commissioner's costs for entering into payment agreements. The fee is
initially set at $25 and is adjusted annually as necessary. The fee is charged for entering
into a payment agreement, for entering into a new payment agreement after the taxpayer
has defaulted on a prior agreement, and for entering into a new payment agreement as
a result of renegotiation of the terms of an existing agreement. The fee is paid to the
commissioner before the payment agreement becomes effective and does not reduce
the amount of the liability.
new text end

new text begin By June 1 of each year, the commissioner shall determine the cost to the
commissioner for entering into payment agreements during the fiscal year and adjust the
payment agreement fee as necessary to most nearly equal those costs. Determination
of the fee for payment agreements under this section is not subject to the fee setting
requirements of section 16A.1283.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for payment agreements entered
into or renegotiated after June 30, 2010.
new text end

Sec. 3.

Minnesota Statutes 2009 Supplement, section 289A.08, subdivision 16, is
amended to read:

Subd. 16.

Tax refund or return preparers; electronic filing; paper filing fee
imposed.

(a) A "tax refund or return preparer," as defined in section 289A.60, subdivision
13, paragraph (f), who deleted text begin prepared deleted text end new text begin is a tax return preparer for purposes of section 6011(e)
of the Internal Revenue Code, and who reasonably expects to prepare new text end more than deleted text begin 100 deleted text end new text begin
ten new text end Minnesota individual income tax returns for the deleted text begin prior deleted text end calendar year must file all
Minnesota individual income tax returns prepared for deleted text begin the current deleted text end new text begin that new text end calendar year by
electronic means.

(b) Paragraph (a) does not apply to a return if the taxpayer has indicated on the return
that the taxpayer did not want the return filed by electronic means.

(c) For each return that is not filed electronically by a tax refund or return preparer
under this subdivision, including returns filed under paragraph (b), a paper filing fee
of $5 is imposed upon the preparer. The fee is collected from the preparer in the same
manner as income tax. The fee does not apply to returns that the commissioner requires
to be filed in paper form.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax returns filed after December
31, 2010.
new text end

Sec. 4. new text begin REPEALER.
new text end

new text begin Laws 2009, chapter 88, article 12, section 21, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively from July 1, 2009.
new text end