HF 3603

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

1.1                                        A bill for an act
1.2     relating to taxation; conforming certain provisions to changes in the Internal 
1.3     Revenue Code; providing an income and corporate franchise tax credit for 
1.4     investments in dairy operations; providing an income tax credit for qualified 
1.5     citizenship expenditures; accelerating the sales-only apportionment phase-in; 
1.6     conforming to federal income tax marriage penalty relief; providing a subtraction 
1.7     from federal taxable income for military pensions; providing a sales tax refund 
1.8     for certain resort expenditures; imposing levy limits for taxes payable in 2007;
1.9     amending Minnesota Statutes 2004, sections 275.70, by adding a subdivision; 
1.10    275.71, subdivisions 2, 4, 5; 275.74, subdivision 2; 290.06, by adding a 
1.11    subdivision; 297A.71, by adding a subdivision; Minnesota Statutes 2005 
1.12    Supplement, sections 275.70, subdivision 5; 289A.02, subdivision 7; 290.01, 
1.13    subdivisions 19, 19a, 19b, 31; 290.06, subdivision 2c; 290.0675, subdivision 
1.14    1; 290.091, subdivision 2; 290.191, subdivision 2; 290A.03, subdivision 15; 
1.15    291.005, subdivision 1; 297A.75, subdivisions 1, 2, 3; proposing coding for new 
1.16    law in Minnesota Statutes, chapter 290.
1.17    BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.18        Section 1. Minnesota Statutes 2004, section 275.70, is amended by adding a 
1.19    subdivision to read:
1.20        Subd. 2a. Levy year. The phrase "levy year" or "taxes levied in" refers to the year 
1.21    in which the taxes voted by the local governmental unit are to be certified to the county 
1.22    auditor under section 275.07, subdivision 1, paragraph (a).
1.23    EFFECTIVE DATE.This section is effective the day following final enactment.

1.24        Sec. 2. Minnesota Statutes 2005 Supplement, section 275.70, subdivision 5, is 
1.25    amended to read:
1.26        Subd. 5. Special levies. "Special levies" means those portions of ad valorem taxes 
1.27    levied by a local governmental unit for the following purposes or in the following manner:
2.1     (1) to pay the costs of the principal and interest on bonded indebtedness or to 
2.2     reimburse for the amount of liquor store revenues used to pay the principal and interest 
2.3     due on municipal liquor store bonds in the year preceding the year for which the levy 
2.4     limit is calculated;
2.5     (2) to pay the costs of principal and interest on certificates of indebtedness issued for 
2.6     any corporate purpose except for the following:
2.7     (i) tax anticipation or aid anticipation certificates of indebtedness;
2.8     (ii) certificates of indebtedness issued under sections 298.28 and 298.282;
2.9     (iii) certificates of indebtedness used to fund current expenses or to pay the costs of 
2.10    extraordinary expenditures that result from a public emergency; or
2.11    (iv) certificates of indebtedness used to fund an insufficiency in tax receipts or 
2.12    an insufficiency in other revenue sources;
2.13    (3) to provide for the bonded indebtedness portion of payments made to another 
2.14    political subdivision of the state of Minnesota;
2.15    (4) to fund payments made to the Minnesota State Armory Building Commission 
2.16    under section 193.145, subdivision 2, to retire the principal and interest on armory 
2.17    construction bonds;
2.18    (5) property taxes approved by voters which are levied against the referendum 
2.19    market value as provided under section 275.61;
2.20    (6) to fund matching requirements needed to qualify for federal or state grants or 
2.21    programs to the extent that either (i) the matching requirement exceeds the matching 
2.22    requirement in calendar year 2001, or (ii) it is a new matching requirement that did not 
2.23    exist prior to 2002;
2.24    (7) (5) to pay the expenses reasonably and necessarily incurred in preparing for or 
2.25    repairing the effects of natural disaster including the occurrence or threat of widespread 
2.26    or severe damage, injury, or loss of life or property resulting from natural causes, in 
2.27    accordance with standards formulated by the Emergency Services Division of the state 
2.28    Department of Public Safety, as allowed by the commissioner of revenue under section 
2.29    275.74, subdivision 2;
2.30    (8) (6) pay amounts required to correct an error in the levy certified to the county 
2.31    auditor by a city or county in a levy year, but only to the extent that when added to the 
2.32    preceding year's levy it is not in excess of an applicable statutory, special law or charter 
2.33    limitation, or the limitation imposed on the governmental subdivision by sections 275.70 
2.34    to 275.74 in the preceding levy year;
2.35    (9) to pay an abatement under section 469.1815;
3.1     (10) to pay any costs attributable to increases in the employer contribution rates 
3.2     under chapter 353 that are effective after June 30, 2001;
3.3     (11) (7) to pay the operating or maintenance costs of a county jail as authorized in 
3.4     section 641.01 or 641.262, or of a correctional facility as defined in section 241.021, 
3.5     subdivision 1, paragraph (f), to the extent that the county can demonstrate to the 
3.6     commissioner of revenue that the amount has been included in the county budget as 
3.7     a direct result of a rule, minimum requirement, minimum standard, or directive of the 
3.8     Department of Corrections, or to pay the operating or maintenance costs of a regional jail 
3.9     as authorized in section 641.262. For purposes of this clause, a district court order is 
3.10    not a rule, minimum requirement, minimum standard, or directive of the Department of 
3.11    Corrections. If the county utilizes this special levy, except to pay operating or maintenance 
3.12    costs of a new regional jail facility under sections 641.262 to 641.264 which will not 
3.13    replace an existing jail facility, any amount levied by the county in the previous levy year 
3.14    for the purposes specified under this clause and included in the county's previous year's 
3.15    levy limitation computed under section 275.71, shall be deducted from the levy limit base 
3.16    under section 275.71, subdivision 2, when determining the county's current year levy 
3.17    limitation. The county shall provide the necessary information to the commissioner of 
3.18    revenue for making this determination;.
3.19    (12) to pay for operation of a lake improvement district, as authorized under section 
3.20    103B.555. If the county utilizes this special levy, any amount levied by the county in the 
3.21    previous levy year for the purposes specified under this clause and included in the county's 
3.22    previous year's levy limitation computed under section 275.71 shall be deducted from 
3.23    the levy limit base under section 275.71, subdivision 2, when determining the county's 
3.24    current year levy limitation. The county shall provide the necessary information to the 
3.25    commissioner of revenue for making this determination;
3.26    (13) to repay a state or federal loan used to fund the direct or indirect required 
3.27    spending by the local government due to a state or federal transportation project or other 
3.28    state or federal capital project. This authority may only be used if the project is not a 
3.29    local government initiative;
3.30    (14) to pay for court administration costs as required under section 273.1398, 
3.31    subdivision 4b, less the (i) county's share of transferred fines and fees collected by the 
3.32    district courts in the county for calendar year 2001 and (ii) the aid amount certified to be 
3.33    paid to the county in 2004 under section 273.1398, subdivision 4c; however, for taxes 
3.34    levied to pay for these costs in the year in which the court financing is transferred to the 
3.35    state, the amount under this clause is limited to the amount of aid the county is certified to 
3.36    receive under section 273.1398, subdivision 4a;
4.1     (15) to fund a police or firefighters relief association as required under section 69.77 
4.2     to the extent that the required amount exceeds the amount levied for this purpose in 2001;
4.3     (16) for purposes of a storm sewer improvement district under section 444.20; and
4.4     (17) to pay for the maintenance and support of a city or county society for the 
4.5     prevention of cruelty to animals under section 343.11. If the city or county uses this 
4.6     special levy, any amount levied by the city or county in the previous levy year for the 
4.7     purposes specified in this clause and included in the city's or county's previous year's levy 
4.8     limit computed under section 275.71, must be deducted from the levy limit base under 
4.9     section 275.71, subdivision 2, in determining the city's or county's current year levy limit.
4.10    EFFECTIVE DATE.This section is effective the day following final enactment.

4.11        Sec. 3. Minnesota Statutes 2004, section 275.71, subdivision 2, is amended to read:
4.12        Subd. 2. Levy limit base. The levy limit base for a local governmental unit for 
4.13    taxes levied payable in 2003 2007 only is equal to its adjusted levy limit base in the 
4.14    previous year, subject to: (1) the sum of its total property tax levy for taxes payable in 
4.15    2006, including any levy of the local governmental unit required to be separately certified 
4.16    under section 275.07, subdivision 1, paragraph (b), or allowed to be separately certified 
4.17    under other law, and the total amount of aid it was certified to receive in 2006 under 
4.18    sections 298.28, 298.282, and 477A.011 to 477A.03; (2) less the sum of the amounts 
4.19    levied for taxes payable in 2006 that would have qualified as special levies under current 
4.20    law; and (3) including any adjustments under section  275.72, plus any aid amounts 
4.21    received in 2003 under section  273.138 or  273.166, minus the difference between its 
4.22    levy limit under subdivision 5 for taxes levied in 2002 and the amount it actually levied 
4.23    under that subdivision in that year, and certified property tax replacement aid payable 
4.24    in 2003 under section  174.242. 
4.25    EFFECTIVE DATE.This section is effective the day following final enactment.

4.26        Sec. 4. Minnesota Statutes 2004, section 275.71, subdivision 4, is amended to read:
4.27        Subd. 4. Adjusted levy limit base. (a) For taxes levied payable in 2003 2007 only, 
4.28    the adjusted levy limit base is equal to the levy limit base computed under subdivisions 
4.29    subdivision 2 and 3 or section  275.72, reduced by 40 percent of the difference between 
4.30    (1) the sum of 2003 certified aid payments, under sections  273.138,  273.1398 except for 
4.31    amounts certified under subdivision 4a, paragraph (b),  273.166,  477A.011 to  477A.03, 
4.32    477A.06, and  477A.07, before any reduction under Laws 2003, First Special Session 
4.33    chapter 21, articles 5 and 6, and (2) the sum of the aids paid in 2004 under those same 
5.1     sections, after any reductions in 2004 under Laws 2003, First Special Session chapter 21, 
5.2     articles 5 and 6. for taxes payable in 2007 multiplied by: 
5.3     (1) the sum of 100 plus a percentage equal to the percentage increase in the implicit 
5.4     price deflator divided by 100; and
5.5     (2) the sum of 100 plus a percentage equal to the positive percentage increase, if any, 
5.6     in the number of households in the local governmental unit for the most recent 12-month 
5.7     period for which data is available divided by 100.
5.8     (b) For taxes levied in 2003 only, the adjusted levy limit base is increased by 60 
5.9     percent of the difference between a jurisdiction's market value credit in 2003 before any 
5.10    reductions under Laws 2003, First Special Session chapter 21, articles 5 and 6, and its 
5.11    market value credit in 2004 after reductions in Laws 2003, First Special Session chapter 
5.12    21, articles 5 and 6.
5.13    EFFECTIVE DATE.This section is effective the day following final enactment.

5.14        Sec. 5. Minnesota Statutes 2004, section 275.71, subdivision 5, is amended to read:
5.15        Subd. 5. Property tax levy limit. For taxes levied payable in 2003 2007 only, the 
5.16    property tax levy limit for a local governmental unit is equal to its adjusted levy limit 
5.17    base determined for taxes payable in 2007 under subdivision 4 plus any additional levy 
5.18    authorized for taxes payable in 2007 under section  275.73, which is levied against net tax 
5.19    capacity, reduced by the sum of (i) the total amount of aids and reimbursements that 
5.20    the local governmental unit is certified to receive in 2007 under sections  477A.011 to  
5.21    477A.014, except for the increases in city aid bases in calendar year 2002 first effective 
5.22    for aid payable in 2007 under section  477A.011, subdivision 36, paragraphs (l), (n), and 
5.23    (o), (ii) homestead and agricultural aids it is certified to receive under section  273.1398, 
5.24    (iii) taconite aids under sections  298.28 and  298.282 including any aid which was required 
5.25    to be placed in a special fund for expenditure in the next succeeding year, (iv) temporary 
5.26    court aid under section  273.1398, subdivision 4a, and (v) (iii) estimated payments to 
5.27    the local governmental unit in 2007 under section  272.029, adjusted for any error in 
5.28    estimation in the preceding year. 
5.29    EFFECTIVE DATE.This section is effective the day following final enactment.

5.30        Sec. 6. Minnesota Statutes 2004, section 275.74, subdivision 2, is amended to read:
5.31        Subd. 2. Authorization for special levies. A local governmental unit may request 
5.32    authorization to levy for unreimbursed costs for natural disasters under section  275.70, 
5.33    subdivision 5, clause (7) (5). The local governmental unit shall submit a request to levy 
6.1     under section  275.70, subdivision 5, clause (7) (5), to the commissioner of revenue by 
6.2     September 30 of the levy year and the request must include information documenting the 
6.3     estimated unreimbursed costs. The commissioner of revenue may grant levy authority, 
6.4     up to the amount requested based on the documentation submitted. All decisions of the 
6.5     commissioner are final. 
6.6     EFFECTIVE DATE.This section is effective the day following final enactment.

6.7         Sec. 7. Minnesota Statutes 2005 Supplement, section 289A.02, subdivision 7, is 
6.8     amended to read:
6.9         Subd. 7. Internal Revenue Code. Unless specifically defined otherwise, "Internal 
6.10    Revenue Code" means the Internal Revenue Code of 1986, as amended through April 
6.11    15 December 31, 2005.
6.12    EFFECTIVE DATE.This section is effective the day following final enactment.

6.13        Sec. 8. Minnesota Statutes 2005 Supplement, section 290.01, subdivision 19, is 
6.14    amended to read:
6.15        Subd. 19. Net income. The term "net income" means the federal taxable income, 
6.16    as defined in section 63 of the Internal Revenue Code of 1986, as amended through the 
6.17    date named in this subdivision, incorporating the federal effective dates of changes to the 
6.18    Internal Revenue Code and any elections made by the taxpayer in accordance with the 
6.19    Internal Revenue Code in determining federal taxable income for federal income tax 
6.20    purposes, and with the modifications provided in subdivisions 19a to 19f.
6.21    In the case of a regulated investment company or a fund thereof, as defined in section 
6.22    851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment 
6.23    company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, 
6.24    except that:
6.25    (1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal 
6.26    Revenue Code does not apply;
6.27    (2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal 
6.28    Revenue Code must be applied by allowing a deduction for capital gain dividends and 
6.29    exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal 
6.30    Revenue Code; and
6.31    (3) the deduction for dividends paid must also be applied in the amount of any 
6.32    undistributed capital gains which the regulated investment company elects to have treated 
6.33    as provided in section 852(b)(3)(D) of the Internal Revenue Code.
7.1     The net income of a real estate investment trust as defined and limited by section 
7.2     856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust 
7.3     taxable income as defined in section 857(b)(2) of the Internal Revenue Code.
7.4     The net income of a designated settlement fund as defined in section 468B(d) of 
7.5     the Internal Revenue Code means the gross income as defined in section 468B(b) of the 
7.6     Internal Revenue Code.
7.7     The Internal Revenue Code of 1986, as amended through April 15 December 31, 
7.8     2005, shall be in effect for taxable years beginning after December 31, 1996.
7.9     Except as otherwise provided, references to the Internal Revenue Code in 
7.10    subdivisions 19 to 19f mean the code in effect for purposes of determining net income for 
7.11    the applicable year.
7.12    EFFECTIVE DATE.This section is effective the day following final enactment.

7.13        Sec. 9. Minnesota Statutes 2005 Supplement, section 290.01, subdivision 19a, is 
7.14    amended to read:
7.15        Subd. 19a. Additions to federal taxable income. For individuals, estates, and 
7.16    trusts, there shall be added to federal taxable income:
7.17    (1)(i) interest income on obligations of any state other than Minnesota or a political 
7.18    or governmental subdivision, municipality, or governmental agency or instrumentality 
7.19    of any state other than Minnesota exempt from federal income taxes under the Internal 
7.20    Revenue Code or any other federal statute; and
7.21    (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue 
7.22    Code, except the portion of the exempt-interest dividends derived from interest income 
7.23    on obligations of the state of Minnesota or its political or governmental subdivisions, 
7.24    municipalities, governmental agencies or instrumentalities, but only if the portion of the 
7.25    exempt-interest dividends from such Minnesota sources paid to all shareholders represents 
7.26    95 percent or more of the exempt-interest dividends that are paid by the regulated 
7.27    investment company as defined in section 851(a) of the Internal Revenue Code, or the 
7.28    fund of the regulated investment company as defined in section 851(g) of the Internal 
7.29    Revenue Code, making the payment; and
7.30    (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal 
7.31    government described in section 7871(c) of the Internal Revenue Code shall be treated as 
7.32    interest income on obligations of the state in which the tribe is located;
7.33    (2) the amount of income or sales and use taxes paid or accrued within the taxable 
7.34    year under this chapter and the amount of taxes based on net income paid or sales and 
7.35    use taxes paid to any other state or to any province or territory of Canada, to the extent 
8.1     allowed as a deduction under section 63(d) of the Internal Revenue Code, but the addition 
8.2     may not be more than the amount by which the itemized deductions as allowed under 
8.3     section 63(d) of the Internal Revenue Code exceeds the amount of the standard deduction 
8.4     as defined in section 63(c) of the Internal Revenue Code minus the addition which would 
8.5     have been required under clause (10) if the taxpayer had claimed the standard deduction. 
8.6     For the purpose of this paragraph, the disallowance of itemized deductions under section 
8.7     68 of the Internal Revenue Code of 1986, income or sales and use tax is the last itemized 
8.8     deduction disallowed;
8.9     (3) the capital gain amount of a lump sum distribution to which the special tax under 
8.10    section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
8.11    (4) the amount of income taxes paid or accrued within the taxable year under this 
8.12    chapter and taxes based on net income paid to any other state or any province or territory 
8.13    of Canada, to the extent allowed as a deduction in determining federal adjusted gross 
8.14    income. For the purpose of this paragraph, income taxes do not include the taxes imposed 
8.15    by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
8.16    (5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10 
8.17    other than expenses or interest used in computing net interest income for the subtraction 
8.18    allowed under subdivision 19b, clause (1);
8.19    (6) the amount of a partner's pro rata share of net income which does not flow 
8.20    through to the partner because the partnership elected to pay the tax on the income under 
8.21    section 6242(a)(2) of the Internal Revenue Code;
8.22    (7) 80 percent of the depreciation deduction allowed under section 168(k) of the 
8.23    Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that 
8.24    in the taxable year generates a deduction for depreciation under section 168(k) and the 
8.25    activity generates a loss for the taxable year that the taxpayer is not allowed to claim for 
8.26    the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is 
8.27    limited to excess of the depreciation claimed by the activity under section 168(k) over the 
8.28    amount of the loss from the activity that is not allowed in the taxable year. In succeeding 
8.29    taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
8.30    under section 168(k) is allowed;
8.31    (8) 80 percent of the amount by which the deduction allowed by section 179 of the 
8.32    Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 
8.33    Revenue Code of 1986, as amended through December 31, 2003;
8.34    (9) to the extent deducted in computing federal taxable income, the amount of the 
8.35    deduction allowable under section 199 of the Internal Revenue Code; and
9.1     (10) for tax years beginning after December 31, 2004, to the extent deducted in 
9.2     computing federal taxable income, the amount by which the standard deduction allowed 
9.3     under section 63(c) of the Internal Revenue Code exceeds the standard deduction 
9.4     allowable under section 63(c) of the Internal Revenue Code of 1986, as amended through 
9.5     December 31, 2003; and
9.6     (11) (10) the exclusion allowed under section 139A of the Internal Revenue Code 
9.7     for federal subsidies for prescription drug plans.
9.8     EFFECTIVE DATE.This section is effective for tax years beginning after 
9.9     December 31, 2005.

9.10        Sec. 10. Minnesota Statutes 2005 Supplement, section 290.01, subdivision 19b, 
9.11    is amended to read:
9.12        Subd. 19b. Subtractions from federal taxable income. For individuals, estates, 
9.13    and trusts, there shall be subtracted from federal taxable income:
9.14    (1) net interest income on obligations of any authority, commission, or 
9.15    instrumentality of the United States to the extent includable in taxable income for federal 
9.16    income tax purposes but exempt from state income tax under the laws of the United States;
9.17    (2) if included in federal taxable income, the amount of any overpayment of income 
9.18    tax to Minnesota or to any other state, for any previous taxable year, whether the amount 
9.19    is received as a refund or as a credit to another taxable year's income tax liability;
9.20    (3) the amount paid to others, less the amount used to claim the credit allowed under 
9.21    section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten 
9.22    to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and 
9.23    transportation of each qualifying child in attending an elementary or secondary school 
9.24    situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a 
9.25    resident of this state may legally fulfill the state's compulsory attendance laws, which 
9.26    is not operated for profit, and which adheres to the provisions of the Civil Rights Act 
9.27    of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or 
9.28    tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause, 
9.29    "textbooks" includes books and other instructional materials and equipment purchased 
9.30    or leased for use in elementary and secondary schools in teaching only those subjects 
9.31    legally and commonly taught in public elementary and secondary schools in this state. 
9.32    Equipment expenses qualifying for deduction includes expenses as defined and limited in 
9.33    section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional 
9.34    books and materials used in the teaching of religious tenets, doctrines, or worship, the 
9.35    purpose of which is to instill such tenets, doctrines, or worship, nor does it include books 
10.1    or materials for, or transportation to, extracurricular activities including sporting events, 
10.2    musical or dramatic events, speech activities, driver's education, or similar programs. For 
10.3    purposes of the subtraction provided by this clause, "qualifying child" has the meaning 
10.4    given in section 32(c)(3) of the Internal Revenue Code;
10.5    (4) income as provided under section 290.0802;
10.6    (5) to the extent included in federal adjusted gross income, income realized on 
10.7    disposition of property exempt from tax under section 290.491;
10.8    (6) to the extent not deducted in determining federal taxable income by an individual 
10.9    who does not itemize deductions for federal income tax purposes for the taxable year, an 
10.10   amount equal to 50 percent of the excess of charitable contributions over $500 allowable 
10.11   as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and 
10.12   under the provisions of Public Law 109-1;
10.13   (7) for taxable years beginning before January 1, 2008, the amount of the federal 
10.14   small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code 
10.15   which is included in gross income under section 87 of the Internal Revenue Code;
10.16   (8) for individuals who are allowed a federal foreign tax credit for taxes that do not 
10.17   qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover 
10.18   of subnational foreign taxes for the taxable year, but not to exceed the total subnational 
10.19   foreign taxes reported in claiming the foreign tax credit. For purposes of this clause, 
10.20   "federal foreign tax credit" means the credit allowed under section 27 of the Internal 
10.21   Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed 
10.22   under section 904(c) of the Internal Revenue Code minus national level foreign taxes to 
10.23   the extent they exceed the federal foreign tax credit;
10.24   (9) in each of the five tax years immediately following the tax year in which an 
10.25   addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case 
10.26   of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth 
10.27   of the delayed depreciation. For purposes of this clause, "delayed depreciation" means 
10.28   the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or 
10.29   subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the 
10.30   positive value of any net operating loss under section 172 of the Internal Revenue Code 
10.31   generated for the tax year of the addition. The resulting delayed depreciation cannot be 
10.32   less than zero;
10.33   (10) job opportunity building zone income as provided under section 469.316;
10.34   (11) the amount of compensation paid to members of the Minnesota National Guard 
10.35   or other reserve components of the United States military for active service performed 
10.36   in Minnesota, excluding compensation for services performed under the Active Guard 
11.1    Reserve (AGR) program. For purposes of this clause, "active service" means (i) state 
11.2    active service as defined in section 190.05, subdivision 5a, clause (1); (ii) federally 
11.3    funded state active service as defined in section 190.05, subdivision 5b; or (iii) federal 
11.4    active service as defined in section 190.05, subdivision 5c, but "active service" excludes 
11.5    services performed exclusively for purposes of basic combat training, advanced individual 
11.6    training, annual training, and periodic inactive duty training; special training periodically 
11.7    made available to reserve members; and service performed in accordance with section 
11.8    190.08, subdivision 3;
11.9    (12) the amount of compensation paid to Minnesota residents who are members 
11.10   of the armed forces of the United States or United Nations for active duty performed 
11.11   outside Minnesota;
11.12   (13) an amount, not to exceed $10,000, equal to qualified expenses related to a 
11.13   qualified donor's donation, while living, of one or more of the qualified donor's organs 
11.14   to another person for human organ transplantation. For purposes of this clause, "organ" 
11.15   means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow; 
11.16   "human organ transplantation" means the medical procedure by which transfer of a human 
11.17   organ is made from the body of one person to the body of another person; "qualified 
11.18   expenses" means unreimbursed expenses for both the individual and the qualified donor 
11.19   for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses 
11.20   may be subtracted under this clause only once; and "qualified donor" means the individual 
11.21   or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An 
11.22   individual may claim the subtraction in this clause for each instance of organ donation for 
11.23   transplantation during the taxable year in which the qualified expenses occur;
11.24   (14) in each of the five tax years immediately following the tax year in which an 
11.25   addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a 
11.26   shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the 
11.27   addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the 
11.28   case of a shareholder of a corporation that is an S corporation, minus the positive value of 
11.29   any net operating loss under section 172 of the Internal Revenue Code generated for the 
11.30   tax year of the addition. If the net operating loss exceeds the addition for the tax year, a 
11.31   subtraction is not allowed under this clause;
11.32   (15) to the extent included in federal taxable income, compensation paid to a 
11.33   nonresident who is a service member as defined in United States Code, title 10, section 
11.34   101(a)(5), for military service as defined in the Service Member Civil Relief Act, Public 
11.35   Law 108-189, section 101(2); and
12.1    (16) international economic development zone income as provided under section 
12.2    469.325.; and
12.3    (17) to the extent included in federal taxable income, a percentage of compensation 
12.4    received from a pension or other retirement pay from the government for service in the 
12.5    armed forces of the United States, up to a maximum amount. For taxable years beginning 
12.6    after December 31, 2005, and before January 1, 2007, the percentage is 25 percent and 
12.7    the maximum amount is $7,500; for taxable years beginning after December 31, 2006, 
12.8    and before January 1, 2008, the percentage is 50 percent and the maximum amount is 
12.9    $15,000; for taxable years beginning after December 31, 2007, and before January 1, 
12.10   2009, the percentage is 75 percent and the maximum amount is $22,500; and for taxable 
12.11   years beginning after December 31, 2008, the percentage is 100 percent and there is no 
12.12   maximum amount.
12.13   EFFECTIVE DATE.This section is effective for tax years beginning after 
12.14   December 31, 2005.

12.15       Sec. 11. Minnesota Statutes 2005 Supplement, section 290.01, subdivision 31, is 
12.16   amended to read:
12.17       Subd. 31. Internal Revenue Code. Unless specifically defined otherwise, "Internal 
12.18   Revenue Code" means the Internal Revenue Code of 1986, as amended through April 
12.19   15 December 31, 2005.
12.20   EFFECTIVE DATE.This section is effective the day following final enactment 
12.21   except the changes incorporated by federal changes are effective at the same times as the 
12.22   changes were effective for federal purposes.

12.23       Sec. 12. Minnesota Statutes 2005 Supplement, section 290.06, subdivision 2c, is 
12.24   amended to read:
12.25       Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income 
12.26   taxes imposed by this chapter upon married individuals filing joint returns and surviving 
12.27   spouses as defined in section 2(a) of the Internal Revenue Code must be computed by 
12.28   applying to their taxable net income the following schedule of rates:
12.29   (1) On the first $25,680, 5.35 percent;
12.30   (2) On all over $25,680, but not over $102,030, 7.05 percent;
12.31   (3) On all over $102,030, 7.85 percent.
13.1    Married individuals filing separate returns, estates, and trusts must compute their 
13.2    income tax by applying the above rates to their taxable income, except that the income 
13.3    brackets will be one-half of the above amounts.
13.4    (b) The income taxes imposed by this chapter upon unmarried individuals must be 
13.5    computed by applying to taxable net income the following schedule of rates:
13.6    (1) On the first $17,570, 5.35 percent;
13.7    (2) On all over $17,570, but not over $57,710, 7.05 percent;
13.8    (3) On all over $57,710, 7.85 percent.
13.9    (c) The income taxes imposed by this chapter upon unmarried individuals qualifying 
13.10   as a head of household as defined in section 2(b) of the Internal Revenue Code must be 
13.11   computed by applying to taxable net income the following schedule of rates:
13.12   (1) On the first $21,630, 5.35 percent;
13.13   (2) On all over $21,630, but not over $86,910, 7.05 percent;
13.14   (3) On all over $86,910, 7.85 percent.
13.15   (d) In lieu of a tax computed according to the rates set forth in this subdivision, the 
13.16   tax of any individual taxpayer whose taxable net income for the taxable year is less than 
13.17   an amount determined by the commissioner must be computed in accordance with tables 
13.18   prepared and issued by the commissioner of revenue based on income brackets of not 
13.19   more than $100. The amount of tax for each bracket shall be computed at the rates set 
13.20   forth in this subdivision, provided that the commissioner may disregard a fractional part of 
13.21   a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
13.22   (e) An individual who is not a Minnesota resident for the entire year must compute 
13.23   the individual's Minnesota income tax as provided in this subdivision. After Before the 
13.24   application of the nonrefundable credits provided in this chapter, the tax liability must 
13.25   then be multiplied by a fraction in which:
13.26   (1) the numerator is the individual's Minnesota source federal adjusted gross 
13.27   income as defined in section 62 of the Internal Revenue Code and increased by the 
13.28   additions required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), 
13.29   and (9), and reduced by the Minnesota assignable portion of the subtraction for United 
13.30   States government interest under section 290.01, subdivision 19b, clause (1), and the 
13.31   subtractions under section 290.01, subdivision 19b, clauses (9), (10), (14), (15), and (16), 
13.32   and 17, after applying the allocation and assignability provisions of section 290.081, 
13.33   clause (a), or 290.17; and
13.34   (2) the denominator is the individual's federal adjusted gross income as defined in 
13.35   section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in 
13.36   section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), and (9), and reduced by the 
14.1    amounts specified in section 290.01, subdivision 19b, clauses (1), (9), (10), (14), (15), 
14.2    and (16), and (17).
14.3    EFFECTIVE DATE.This section is effective for tax years beginning after 
14.4    December 31, 2005.

14.5        Sec. 13. Minnesota Statutes 2004, section 290.06, is amended by adding a subdivision 
14.6    to read:
14.7        Subd. 33. Dairy investment credit. (a) A dairy investment credit is allowed against 
14.8    the tax due under this chapter equal to ten percent of the amount paid or incurred by the 
14.9    taxpayer, on the first $500,000 of qualifying expenditures made in the qualifying period.
14.10   (b) "Qualifying expenditures" means for purposes of this subdivision the amount 
14.11   spent for the acquisition, construction, or improvement of buildings or facilities, or the 
14.12   acquisition of equipment, for dairy animal housing, confinement, animal feeding, milk 
14.13   production, and waste management, including the following, if related to dairy animals in 
14.14   this state:
14.15   (1) freestall barns;
14.16   (2) fences;
14.17   (3) watering facilities;
14.18   (4) feed storage and handling equipment;
14.19   (5) milking parlors;
14.20   (6) robotic equipment;
14.21   (7) scales;
14.22   (8) milk storage and cooling facilities;
14.23   (9) bulk tanks;
14.24   (10) manure pumping and storage facilities;
14.25   (11) digesters; and 
14.26   (12) equipment used to produce energy.
14.27   Qualified expenditures only include amounts that are capitalized and deducted 
14.28   under either section 167 or 179 of the Internal Revenue Code in computing federal 
14.29   taxable income.
14.30   (c) The credit is limited to the liability for tax, as computed under this chapter for the 
14.31   taxable year.  If the amount of the credit determined under this section for any taxable year 
14.32   exceeds this limitation, the excess is a dairy investment credit carryover to each of the 15 
14.33   succeeding taxable years.  The entire amount of the excess unused credit for the taxable 
14.34   year is carried first to the earliest of the taxable years to which the credit may be carried 
14.35   and then to each successive year to which the credit may be carried.  The amount of the 
15.1    unused credit which may be added under this paragraph shall not exceed the taxpayer's 
15.2    liability for tax less the dairy investment credit for the taxable year.
15.3    (d) The qualifying period is that time after December 31, 2005, and before January 
15.4    1, 2012.
15.5    (e) The $50,000 maximum credit applies at the entity level for partnerships, S 
15.6    corporations, trusts, and estates as well as at the individual level.  In the case of married 
15.7    individuals, the credit is limited to $50,000 for a married couple.
15.8    EFFECTIVE DATE.This section is effective for tax years beginning after 
15.9    December 31, 2005.

15.10       Sec. 14. Minnesota Statutes 2005 Supplement, section 290.0675, subdivision 1, 
15.11   is amended to read:
15.12       Subdivision 1. Definitions. (a) For purposes of this section the following terms 
15.13   have the meanings given.
15.14   (b) "Earned income" means the sum of the following, to the extent included in 
15.15   Minnesota taxable income:
15.16   (1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
15.17   (2) income received from a retirement pension, profit-sharing, stock bonus, or 
15.18   annuity plan; and
15.19   (3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue 
15.20   Code.
15.21   (c) "Taxable income" means net income as defined in section 290.01, subdivision 19.
15.22   (d) "Earned income of lesser-earning spouse" means the earned income of the 
15.23   spouse with the lesser amount of earned income as defined in paragraph (b) for the taxable 
15.24   year minus the sum of (i) the amount for one exemption under section 151(d) of the 
15.25   Internal Revenue Code and (ii) one-half the amount of the standard deduction under 
15.26   section 63(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition 
15.27   required under section 290.01, subdivision 19a, clause (10), and one-half of the addition 
15.28   which would have been required under section 290.01, subdivision 19a, clause (10), if the 
15.29   taxpayer had claimed the standard deduction.
15.30   EFFECTIVE DATE.This section is effective for tax years beginning after 
15.31   December 31, 2005.

15.32       Sec. 15. [290.0677] CITIZENSHIP CREDIT.
16.1        Subdivision 1. Credit allowed. A taxpayer who is not a dependent, as defined in 
16.2    Internal Revenue Code, sections 151 and 152, is allowed a credit against the tax imposed 
16.3    by this chapter in the amount of qualified citizenship expenses incurred for a qualified 
16.4    individual.
16.5        Subd. 2. Limitations on credit. The maximum credit allowed a taxpayer and the 
16.6    taxpayer's spouse under this section is $300 per year. The credit is not allowed if the 
16.7    sum of the taxpayer's and taxpayer's spouse's income, as defined in section 290.067, 
16.8    subdivision 2a, exceeds $30,000. For a taxpayer who is not a Minnesota resident for the 
16.9    entire year, the maximum credit must be allocated using the percentage calculated in 
16.10   section 290.06, subdivision 2c, paragraph (e).
16.11       Subd. 3. Qualified individual. A "qualified individual" is the taxpayer, the 
16.12   taxpayer's spouse, or an individual who qualifies as a dependent of the taxpayer under 
16.13   sections 151 and 152 of the Internal Revenue Code. These individuals are only qualified 
16.14   individuals from the time the individual submits an I-485 Application to Register 
16.15   Permanent Residence or at the time the individual enters the United States on an immigrant 
16.16   visa, to the time the individual becomes a naturalized United States citizen.
16.17       Subd. 4. Qualified citizenship expense.  Qualified citizenship expenses are limited 
16.18   to: 
16.19   (1) filing fees, both application and biometric fingerprint fees, paid to United 
16.20   States Citizenship and Immigration Services in connection with an N-400 naturalization 
16.21   application for a qualified individual; and 
16.22   (2) amounts paid for enrollment of a qualified individual over the age of 18 at the 
16.23   beginning of the year in an English language class offered by a school district in Minnesota 
16.24   or a school that has been approved as a licensed school by the state of Minnesota.
16.25       Subd. 5. Credit to be refundable. If the amount of credit that the taxpayer is 
16.26   eligible to receive under this section exceeds the taxpayer's tax liability under this chapter, 
16.27   the commissioner shall refund the excess to the taxpayer.
16.28       Subd. 6. Appropriation. An amount sufficient to pay the refunds required by this 
16.29   section is appropriated to the commissioner from the general fund.
16.30   EFFECTIVE DATE.This section is effective for tax years beginning after 
16.31   December 31, 2005.

16.32       Sec. 16. Minnesota Statutes 2005 Supplement, section 290.091, subdivision 2, is 
16.33   amended to read:
16.34       Subd. 2. Definitions. For purposes of the tax imposed by this section, the following 
16.35   terms have the meanings given:
17.1    (a) "Alternative minimum taxable income" means the sum of the following for 
17.2    the taxable year:
17.3    (1) the taxpayer's federal alternative minimum taxable income as defined in section 
17.4    55(b)(2) of the Internal Revenue Code;
17.5    (2) the taxpayer's itemized deductions allowed in computing federal alternative 
17.6    minimum taxable income, but excluding:
17.7    (i) the charitable contribution deduction under section 170 of the Internal Revenue 
17.8    Code:
17.9    (A) for taxable years beginning before January 1, 2006, to the extent that the 
17.10   deduction exceeds 1.0 percent of adjusted gross income;
17.11   (B) for taxable years beginning after December 31, 2005, to the full extent of the 
17.12   deduction.
17.13   For purposes of this clause, "adjusted gross income" has the meaning given in 
17.14   section 62 of the Internal Revenue Code;
17.15   (ii) the medical expense deduction;
17.16   (iii) the casualty, theft, and disaster loss deduction; and
17.17   (iv) the impairment-related work expenses of a disabled person;
17.18   (3) for depletion allowances computed under section 613A(c) of the Internal 
17.19   Revenue Code, with respect to each property (as defined in section 614 of the Internal 
17.20   Revenue Code), to the extent not included in federal alternative minimum taxable income, 
17.21   the excess of the deduction for depletion allowable under section 611 of the Internal 
17.22   Revenue Code for the taxable year over the adjusted basis of the property at the end of the 
17.23   taxable year (determined without regard to the depletion deduction for the taxable year);
17.24   (4) to the extent not included in federal alternative minimum taxable income, the 
17.25   amount of the tax preference for intangible drilling cost under section 57(a)(2) of the 
17.26   Internal Revenue Code determined without regard to subparagraph (E);
17.27   (5) to the extent not included in federal alternative minimum taxable income, the 
17.28   amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and
17.29   (6) the amount of addition required by section 290.01, subdivision 19a, clauses 
17.30   (7), (8), and (9);
17.31   less the sum of the amounts determined under the following:
17.32   (1) interest income as defined in section 290.01, subdivision 19b, clause (1);
17.33   (2) an overpayment of state income tax as provided by section 290.01, subdivision 
17.34   19b, clause (2), to the extent included in federal alternative minimum taxable income;
17.35   (3) the amount of investment interest paid or accrued within the taxable year on 
17.36   indebtedness to the extent that the amount does not exceed net investment income, as 
18.1    defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include 
18.2    amounts deducted in computing federal adjusted gross income; and
18.3    (4) amounts subtracted from federal taxable income as provided by section 290.01, 
18.4    subdivision 19b, clauses (9) to (16) (17).
18.5    In the case of an estate or trust, alternative minimum taxable income must be 
18.6    computed as provided in section 59(c) of the Internal Revenue Code.
18.7    (b) "Investment interest" means investment interest as defined in section 163(d)(3) 
18.8    of the Internal Revenue Code.
18.9    (c) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable 
18.10   income after subtracting the exemption amount determined under subdivision 3.
18.11   (d) "Regular tax" means the tax that would be imposed under this chapter (without 
18.12   regard to this section and section 290.032), reduced by the sum of the nonrefundable 
18.13   credits allowed under this chapter.
18.14   (e) "Net minimum tax" means the minimum tax imposed by this section.
18.15   EFFECTIVE DATE.This section is effective for tax years beginning after 
18.16   December 31, 2005.

18.17       Sec. 17. Minnesota Statutes 2005 Supplement, section 290.191, subdivision 2, is 
18.18   amended to read:
18.19       Subd. 2. Apportionment formula of general application. (a) Except for those 
18.20   trades or businesses required to use a different formula under subdivision 3 or section 
18.21   290.36, and for those trades or businesses that receive permission to use some other 
18.22   method under section 290.20 or under subdivision 4, a trade or business required to 
18.23   apportion its net income must apportion its income to this state on the basis of the 
18.24   percentage obtained by taking the sum of:
18.25   (1) the percent for the sales factor under paragraph (b) of the percentage which 
18.26   the sales made within this state in connection with the trade or business during the tax 
18.27   period are of the total sales wherever made in connection with the trade or business during 
18.28   the tax period;
18.29   (2) the percent for the property factor under paragraph (b) of the percentage which 
18.30   the total tangible property used by the taxpayer in this state in connection with the trade or 
18.31   business during the tax period is of the total tangible property, wherever located, used by 
18.32   the taxpayer in connection with the trade or business during the tax period; and
18.33   (3) the percent for the payroll factor under paragraph (b) of the percentage which 
18.34   the taxpayer's total payrolls paid or incurred in this state or paid in respect to labor 
18.35   performed in this state in connection with the trade or business during the tax period are 
19.1    of the taxpayer's total payrolls paid or incurred in connection with the trade or business 
19.2    during the tax period.
19.3    (b) For purposes of paragraph (a) and subdivision 3, the following percentages apply 
19.4    for the taxable years specified:
19.5    Taxable years                                                         
19.6    beginning                  Sales             Property         Payroll 
19.7    during                     factor            factor           factor  
19.8    calendar year              percent           percent          percent 
19.9         2007                   78 80              11 10           11 10  
19.10        2008                   81 85             9.5 7.5         9.5 7.5 
19.11        2009                   84 90               8 5             8 5   
19.12        2010                   87 95             6.5 2.5         6.5 2.5 
19.13        2011                  90 100              5 0             50   
19.14        2012                    93                3.5             3.5   
19.15        2013                    96                 2               2    
19.16   2014 and later                                                        
19.17   calendar years               100                 0               0    
19.18   EFFECTIVE DATE.This section is effective for tax years beginning after 
19.19   December 31, 2006.

19.20       Sec. 18. Minnesota Statutes 2005 Supplement, section 290A.03, subdivision 15, 
19.21   is amended to read:
19.22       Subd. 15. Internal Revenue Code. "Internal Revenue Code" means the Internal 
19.23   Revenue Code of 1986, as amended through April 15 December 31, 2005.
19.24   EFFECTIVE DATE.This section is effective for property tax refunds based on 
19.25   property taxes payable on or after December 31, 2005, and rent paid on or after December 
19.26   31, 2004.

19.27       Sec. 19. Minnesota Statutes 2005 Supplement, section 291.005, subdivision 1, is 
19.28   amended to read:
19.29       Subdivision 1. Scope. Unless the context otherwise clearly requires, the following 
19.30   terms used in this chapter shall have the following meanings:
20.1    (1) "Federal gross estate" means the gross estate of a decedent as valued and 
20.2    otherwise determined for federal estate tax purposes by federal taxing authorities pursuant 
20.3    to the provisions of the Internal Revenue Code.
20.4    (2) "Minnesota gross estate" means the federal gross estate of a decedent after (a) 
20.5    excluding therefrom any property included therein which has its situs outside Minnesota, 
20.6    and (b) including therein any property omitted from the federal gross estate which is 
20.7    includable therein, has its situs in Minnesota, and was not disclosed to federal taxing 
20.8    authorities.
20.9    (3) "Personal representative" means the executor, administrator or other person 
20.10   appointed by the court to administer and dispose of the property of the decedent. If there 
20.11   is no executor, administrator or other person appointed, qualified, and acting within this 
20.12   state, then any person in actual or constructive possession of any property having a situs in 
20.13   this state which is included in the federal gross estate of the decedent shall be deemed 
20.14   to be a personal representative to the extent of the property and the Minnesota estate tax 
20.15   due with respect to the property.
20.16   (4) "Resident decedent" means an individual whose domicile at the time of death 
20.17   was in Minnesota.
20.18   (5) "Nonresident decedent" means an individual whose domicile at the time of 
20.19   death was not in Minnesota.
20.20   (6) "Situs of property" means, with respect to real property, the state or country in 
20.21   which it is located; with respect to tangible personal property, the state or country in which 
20.22   it was normally kept or located at the time of the decedent's death; and with respect to 
20.23   intangible personal property, the state or country in which the decedent was domiciled 
20.24   at death.
20.25   (7) "Commissioner" means the commissioner of revenue or any person to whom the 
20.26   commissioner has delegated functions under this chapter.
20.27   (8) "Internal Revenue Code" means the United States Internal Revenue Code of 
20.28   1986, as amended through April 15 December 31, 2005.
20.29   (9) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as 
20.30   defined by section 2011(b)(3) of the Internal Revenue Code, increased by the amount of 
20.31   deduction for state death taxes allowed under section 2058 of the Internal Revenue Code.
20.32   EFFECTIVE DATE.This section is effective for estates of decedents dying after 
20.33   December 31, 2005.

20.34       Sec. 20. Minnesota Statutes 2004, section 297A.71, is amended by adding a 
20.35   subdivision to read:
21.1        Subd. 37. Construction materials and supplies; certain resorts. Construction 
21.2    materials and supplies used or consumed in physically expanding or making capital 
21.3    improvements to a resort classified as class 1c or 4c, under section 273.13, subdivision 22 
21.4    or 25, including any portion of a 1c or 4c resort classified as class 3 under section 273.13, 
21.5    subdivision 24, are exempt, up to a maximum refund of $10,000 in each calendar year for 
21.6    each resort. The tax must be imposed and collected as if the rate under section 297A.62, 
21.7    subdivision 1, applied, and then refunded in the manner provided in section 297A.75.
21.8    EFFECTIVE DATE.This section is effective for sales and purchases made after 
21.9    June 30, 2006.

21.10       Sec. 21. Minnesota Statutes 2005 Supplement, section 297A.75, subdivision 1, is 
21.11   amended to read:
21.12       Subdivision 1. Tax collected. The tax on the gross receipts from the sale of the 
21.13   following exempt items must be imposed and collected as if the sale were taxable and the 
21.14   rate under section 297A.62, subdivision 1, applied. The exempt items include:
21.15   (1) capital equipment exempt under section 297A.68, subdivision 5;
21.16   (2) building materials for an agricultural processing facility exempt under section 
21.17   297A.71, subdivision 13;
21.18   (3) building materials for mineral production facilities exempt under section 
21.19   297A.71, subdivision 14;
21.20   (4) building materials for correctional facilities under section 297A.71, subdivision 
21.21   3;
21.22   (5) building materials used in a residence for disabled veterans exempt under section 
21.23   297A.71, subdivision 11;
21.24   (6) elevators and building materials exempt under section 297A.71, subdivision 12;
21.25   (7) building materials for the Long Lake Conservation Center exempt under section 
21.26   297A.71, subdivision 17;
21.27   (8) materials, supplies, fixtures, furnishings, and equipment for a county law 
21.28   enforcement and family service center under section 297A.71, subdivision 26;
21.29   (9) materials and supplies for qualified low-income housing under section 297A.71, 
21.30   subdivision 23; and
21.31   (10) materials, supplies, and equipment for municipal electric utility facilities under 
21.32   section 297A.71, subdivision 35; and
21.33   (11) materials and supplies for qualified resorts under section 297A.71, subdivision 
21.34   37.
22.1    EFFECTIVE DATE.This section is effective for sales and purchases made after 
22.2    June 30, 2006.

22.3        Sec. 22. Minnesota Statutes 2005 Supplement, section 297A.75, subdivision 2, is 
22.4    amended to read:
22.5        Subd. 2. Refund; eligible persons. Upon application on forms prescribed by the 
22.6    commissioner, a refund equal to the tax paid on the gross receipts of the exempt items 
22.7    must be paid to the applicant. Only the following persons may apply for the refund:
22.8    (1) for subdivision 1, clauses (1) to (3), the applicant must be the purchaser;
22.9    (2) for subdivision 1, clauses (4), (7), and (8), the applicant must be the governmental 
22.10   subdivision;
22.11   (3) for subdivision 1, clause (5), the applicant must be the recipient of the benefits 
22.12   provided in United States Code, title 38, chapter 21;
22.13   (4) for subdivision 1, clause (6), the applicant must be the owner of the homestead 
22.14   property;
22.15   (5) for subdivision 1, clause (9), the owner of the qualified low-income housing 
22.16   project; and
22.17   (6) for subdivision 1, clause (10), the applicant must be a municipal electric utility or 
22.18   a joint venture of municipal electric utilities; and
22.19   (7) for subdivision 1, clause (11), the owner of the resort.
22.20   EFFECTIVE DATE.This section is effective for sales and purchases made after 
22.21   June 30, 2006.

22.22       Sec. 23. Minnesota Statutes 2005 Supplement, section 297A.75, subdivision 3, is 
22.23   amended to read:
22.24       Subd. 3. Application. (a) The application must include sufficient information 
22.25   to permit the commissioner to verify the tax paid. If the tax was paid by a contractor, 
22.26   subcontractor, or builder, under subdivision 1, clause (4), (5), (6), (7), (8), (9), or (10), 
22.27   or (11), the contractor, subcontractor, or builder must furnish to the refund applicant a 
22.28   statement including the cost of the exempt items and the taxes paid on the items unless 
22.29   otherwise specifically provided by this subdivision. The provisions of sections 289A.40 
22.30   and 289A.50 apply to refunds under this section.
22.31   (b) An applicant may not file more than two applications per calendar year for 
22.32   refunds for taxes paid on capital equipment exempt under section 297A.68, subdivision 5.
23.1    EFFECTIVE DATE.This section is effective for sales and purchases made after 
23.2    June 30, 2006.

23.3        Sec. 24. NET INCOME; FEDERAL CONFORMITY.
23.4    For tax years beginning after December 31, 2004, and before December 31, 2006, 
23.5    the definition of "net income" in Minnesota Statutes, section 290.01, subdivision 19, 
23.6    must be interpreted by the Department of Revenue to conform to the position taken by 
23.7    the Internal Revenue Service in Revenue Notice 2005-68.