Engrossments
Introduction		Posted on 05/24/2019

ARTICLE 1

FEDERAL CONFORMITY

Section 1.

Minnesota Statutes 2018, section 270A.03, subdivision 5, is amended to read:

Subd. 5.

Debt; debtor.

(a) "Debt" means a legal obligation of a natural person to pay a
fixed and certain amount of money, which equals or exceeds $25 and which is due and
payable to a claimant agency. The term includes criminal fines imposed under section 609.10
or 609.125, fines imposed for petty misdemeanors as defined in section 609.02, subdivision
4a, and restitution. A debt may arise under a contractual or statutory obligation, a court
order, or other legal obligation, but need not have been reduced to judgment.

A debt includes any legal obligation of a current recipient of assistance which is based
on overpayment of an assistance grant where that payment is based on a client waiver or
an administrative or judicial finding of an intentional program violation; or where the debt
is owed to a program wherein the debtor is not a client at the time notification is provided
to initiate recovery under this chapter and the debtor is not a current recipient of food support,
transitional child care, or transitional medical assistance.

(b) A debt does not include any legal obligation to pay a claimant agency for medical
care, including hospitalization if the income of the debtor at the time when the medical care
was rendered does not exceed the following amount:

(1) for an unmarried debtor, an income of $12,560 or less;

(2) for a debtor with one dependent, an income of $16,080 or less;

(3) for a debtor with two dependents, an income of $19,020 or less;

(4) for a debtor with three dependents, an income of $21,580 or less;

(5) for a debtor with four dependents, an income of $22,760 or less; and

(6) for a debtor with five or more dependents, an income of $23,730 or less.

For purposes of this paragraph, "debtor" means the individual whose income, together
with the income of the individual's spouse, other than a separated spouse, brings the
individual within the income provisions of this paragraph. For purposes of this paragraph,
a spouse, other than a separated spouse, shall be considered a dependent.

(c) The commissioner shallnew text begin annuallynew text end adjust the deleted text begin incomedeleted text end amounts in paragraph (b) deleted text begin by the
percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue
Code, except that in section 1(f)(3)(B) the word "2014" shall be substituted for the word
"1992." For 2016, the commissioner shall then determine the percent change from the 12
months ending on August 31, 2014, to the 12 months ending on August 31, 2015, and in
each subsequent year, from the 12 months ending on August 31, 2014, to the 12 months
ending on August 31 of the year preceding the taxable year. The determination of the
commissioner pursuant to this subdivision shall not be considered a "rule" and shall not be
subject to the Administrative Procedure Act contained in chapter 14. The income amount
as adjusted must be rounded to the nearest $10 amount. If the amount ends in $5, the amount
is rounded up to the nearest $10 amountdeleted text end new text begin as provided in section 270C.22. The statutory year
is taxable year 2019new text end .

(d) Debt also includes an agreement to pay a MinnesotaCare premium, regardless of the
dollar amount of the premium authorized under section 256L.15, subdivision 1a.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for adjustments beginning with taxable
years beginning after December 31, 2019.
new text end

Sec. 2.

new text begin [270C.22] COST OF LIVING ADJUSTMENT.
new text end

new text begin Subdivision 1. new text end

new text begin Adjustment; definition; period; rounding. new text end

new text begin (a) The commissioner shall
annually make a cost of living adjustment to the dollar amounts noted in sections that
reference this section. The commissioner shall adjust the amounts based on the index as
provided in this section. For purposes of this section, "index" means the Chained Consumer
Price Index for All Urban Consumers published by the Bureau of Labor Statistics. The
values of the index used to determine the adjustments under this section are the latest
published values when the Bureau of Labor Statistics publishes the initial value of the index
for August of the year preceding the year to which the adjustment applies.
new text end

new text begin (b) For the purposes of this section, "statutory year" means the year preceding the first
year for which dollar amounts are to be adjusted for inflation under sections that reference
this section. For adjustments under chapter 290A, the statutory year refers to the year in
which a taxpayer's household income used to calculate refunds under chapter 290A was
earned and not the year in which refunds are payable. For all other adjustments, the statutory
year refers to the taxable year unless otherwise specified.
new text end

new text begin (c) To determine the dollar amounts for taxable year 2020, the commissioner shall
determine the percentage change in the index for the 12-month period ending on August
31, 2019, and increase each of the unrounded dollar amounts in the sections referencing
this section by that percentage change. For each subsequent taxable year, the commissioner
shall increase the dollar amounts by the percentage change in the index from August 31 of
the year preceding the statutory year to August 31 of the year preceding the taxable year.
new text end

new text begin (d) To determine the dollar amounts for refunds payable in 2020 under chapter 290A,
the commissioner shall determine the percentage change in the index for the 12-month
period ending on August 31, 2019, and increase each of the unrounded dollar amounts in
the sections referencing this section by that percentage change. For each subsequent year,
the commissioner shall increase the dollar amounts by the percentage change in the index
from August 31 of the year preceding the statutory year to August 31 of the year preceding
the year in which refunds are payable.
new text end

new text begin (e) Unless otherwise provided, the commissioner shall round the amounts as adjusted
to the nearest $10 amount. If an amount ends in $5, the amount is rounded up to the nearest
$10 amount.
new text end

new text begin Subd. 2. new text end

new text begin Publication. new text end

new text begin The commissioner shall announce and publish the adjusted dollar
amounts required by subdivision 1 on the Department of Revenue's website on or before
December 15 of each year.
new text end

new text begin Subd. 3. new text end

new text begin Special provision. new text end

new text begin The determination of the commissioner under this subdivision
is not a rule and is not subject to the Administrative Procedure Act under chapter 14,
including section 14.386.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for adjustments beginning with taxable
years beginning after December 31, 2019, calendar years beginning after December 31,
2019, and for refunds based on rent paid in 2019 and property taxes payable in 2020.
new text end

Sec. 3.

Minnesota Statutes 2018, section 289A.02, subdivision 7, is amended to read:

Subd. 7.

Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

Minnesota Statutes 2018, section 289A.08, subdivision 1, is amended to read:

Subdivision 1.

Generally; individuals.

(a) A taxpayer must file a return for each taxable
year the taxpayer is required to file a return under section 6012 of the Internal Revenue
Codenew text begin or meets the requirements under paragraph (d) to file a returnnew text end , except that:

(1) an individual who is not a Minnesota resident for any part of the year is not required
to file a Minnesota income tax return if the individual's gross income derived from Minnesota
sources as determined under sections 290.081, paragraph (a), and 290.17, is less than the
filing requirements for a single individual who is a full year resident of Minnesota; deleted text begin and
deleted text end

(2) an individual who is a Minnesota resident is not required to file a Minnesota income
tax return if the individual's gross income derived from Minnesota sources as determined
under section 290.17, less the subtractions allowed under section 290.0132, subdivisions
12 and 15, is less than the filing requirements for a single individual who is a full-year
resident of Minnesota.

(b) The decedent's final income tax return, and other income tax returns for prior years
where the decedent had gross income in excess of the minimum amount at which an
individual is required to file and did not file, must be filed by the decedent's personal
representative, if any. If there is no personal representative, the return or returns must be
filed by the transferees, as defined in section 270C.58, subdivision 3, who receive property
of the decedent.

(c) The term "gross income," as it is used in this section, has the same meaning given it
in section 290.01, subdivision 20.

new text begin (d) The commissioner of revenue must annually determine the gross income levels at
which individuals are required to file a return for each taxable year based on the amounts
allowed as a deduction under section 290.0123.
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, 2018.
new text end

Sec. 5.

Minnesota Statutes 2018, section 289A.08, subdivision 7, is amended to read:

Subd. 7.

Composite income tax returns for nonresident partners, shareholders, and
beneficiaries.

(a) The commissioner may allow a partnership with nonresident partners to
file a composite return and to pay the tax on behalf of nonresident partners who have no
other Minnesota source income. This composite return must include the names, addresses,
Social Security numbers, income allocation, and tax liability for the nonresident partners
electing to be covered by the composite return.

(b) The computation of a partner's tax liability must be determined by multiplying the
income allocated to that partner by the highest rate used to determine the tax liability for
individuals under section 290.06, subdivision 2c. Nonbusiness deductions, standard
deductions, or personal exemptions are not allowed.

(c) The partnership must submit a request to use this composite return filing method for
nonresident partners. The requesting partnership must file a composite return in the form
prescribed by the commissioner of revenue. The filing of a composite return is considered
a request to use the composite return filing method.

(d) The electing partner must not have any Minnesota source income other than the
income from the partnership and other electing partnerships. If it is determined that the
electing partner has other Minnesota source income, the inclusion of the income and tax
liability for that partner under this provision will not constitute a return to satisfy the
requirements of subdivision 1. The tax paid for the individual as part of the composite return
is allowed as a payment of the tax by the individual on the date on which the composite
return payment was made. If the electing nonresident partner has no other Minnesota source
income, filing of the composite return is a return for purposes of subdivision 1.

(e) This subdivision does not negate the requirement that an individual pay estimated
tax if the individual's liability would exceed the requirements set forth in section 289A.25.
The individual's liability to pay estimated tax is, however, satisfied when the partnership
pays composite estimated tax in the manner prescribed in section 289A.25.

(f) If an electing partner's share of the partnership's gross income from Minnesota sources
is less than the filing requirements for a nonresident under this subdivision, the tax liability
is zero. However, a statement showing the partner's share of gross income must be included
as part of the composite return.

(g) The election provided in this subdivision is only available to a partner who has no
other Minnesota source income and who is either (1) a full-year nonresident individual or
(2) a trust or estate that does not claim a deduction under either section 651 or 661 of the
Internal Revenue Code.

(h) A corporation defined in section 290.9725 and its nonresident shareholders may
make an election under this paragraph. The provisions covering the partnership apply to
the corporation and the provisions applying to the partner apply to the shareholder.

(i) Estates and trusts distributing current income only and the nonresident individual
beneficiaries of the estates or trusts may make an election under this paragraph. The
provisions covering the partnership apply to the estate or trust. The provisions applying to
the partner apply to the beneficiary.

(j) For the purposes of this subdivision, "income" means the partner's share of federal
adjusted gross income from the partnership modified by the additions provided in section
290.0131, subdivisions 8 to deleted text begin 11deleted text end new text begin 10 and 16new text end , and the subtractions provided in: (1) section
290.0132, subdivision 9, to the extent the amount is assignable or allocable to Minnesota
under section 290.17; and (2) section 290.0132, subdivision 14. The subtraction allowed
under section 290.0132, subdivision 9, is only allowed on the composite tax computation
to the extent the electing partner would have been allowed the subtraction.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 6.

Minnesota Statutes 2018, section 289A.12, subdivision 14, is amended to read:

Subd. 14.

Reporting exempt interest and exempt-interest dividends.

(a) A regulated
investment company paying $10 or more in exempt-interest dividends to an individual who
is a resident of Minnesota, or any person receiving $10 or more of exempt interest or
exempt-interest dividends and paying as nominee to an individual who is a resident of
Minnesota, must make a return indicating the amount of the exempt interest or
exempt-interest dividends, the name, address, and Social Security number of the recipient,
and any other information that the commissioner specifies. The return must be provided to
the recipient by February 15 of the year following the year of the payment. The return
provided to the recipient must include a clear statement, in the form prescribed by the
commissioner, that the exempt interest or exempt-interest dividends must be included in
the computation of Minnesota taxable income. By June 1 of each year, the payer must file
a copy of the return with the commissioner.

(b) For purposes of this subdivision, the following definitions apply.

(1) "Exempt-interest dividends" mean exempt-interest dividends as defined in section
852(b)(5) of the Internal Revenue Code, but does not include the portion of exempt-interest
dividends that are not required to be added to federal deleted text begin taxabledeleted text end new text begin adjusted grossnew text end income under
section 290.0131, subdivision 2, paragraph (b).

(2) "Regulated investment company" means regulated investment company as defined
in section 851(a) of the Internal Revenue Code or a fund of the regulated investment company
as defined in section 851(g) of the Internal Revenue Code.

(3) "Exempt interest" means income on obligations of any state other than Minnesota,
or a political or governmental subdivision, municipality, or governmental agency or
instrumentality of any state other than Minnesota, and exempt from federal income taxes
under the Internal Revenue Code or any other federal statute.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 7.

Minnesota Statutes 2018, section 289A.35, is amended to read:

289A.35 ASSESSMENTS ON RETURNS.

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

(b) Upon petition by a taxpayer, and when the commissioner determines that it is in the
best interest of the state, the commissioner may allow S corporations and partnerships to
receive orders of assessment issued under section 270C.33, subdivision 4, on behalf of their
owners, and to pay liabilities shown on such orders. In such cases, the owners' liability must
be calculated using the method provided in section 289A.08, subdivision 7, paragraph (b).

(c) A taxpayer may petition the commissioner for the use of the method described in
paragraph (b) after the taxpayer is notified that an audit has been initiated and before an
order of assessment has been issued.

(d) A determination of the commissioner under paragraph (b) to grant or deny the petition
of a taxpayer cannot be appealed to the Tax Court or any other court.

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

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 8.

Minnesota Statutes 2018, section 290.01, is amended by adding a subdivision to
read:

new text begin Subd. 3c. new text end

new text begin Determination of marital status. new text end

new text begin The determination of marital status is made
by section 7703 of the Internal Revenue Code.
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, 2018.
new text end

Sec. 9.

Minnesota Statutes 2018, section 290.01, is amended by adding a subdivision to
read:

new text begin Subd. 14a. new text end

new text begin Surviving spouse. new text end

new text begin The term "surviving spouse" means an individual who is
a surviving spouse under section 2(a) of the Internal Revenue Code for the taxable year.
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, 2018.
new text end

Sec. 10.

Minnesota Statutes 2018, section 290.01, subdivision 19, is amended to read:

Subd. 19.

Net income.

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

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

new text begin (c) new text end 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.

new text begin (d) new text end 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.

new text begin (e) new text end 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.

new text begin (f) new text end The Internal Revenue Code of 1986, as amended through deleted text begin December 16, 2016deleted text end new text begin
December 31, 2018new text end , shall be in effect for taxable years beginning after December 31, 1996.

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

new text begin EFFECTIVE DATE. new text end

new text begin (a) The amendments to paragraphs (a) and (b) are effective for
taxable years beginning after December 31, 2018.
new text end

new text begin (b) The amendment to paragraph (f) is effective the day following final enactment, except
the changes incorporated by federal changes are effective retroactively at the same time as
the changes became effective for federal purposes, but are subject to the application of
Minnesota Statutes, section 290.993.
new text end

Sec. 11.

Minnesota Statutes 2018, section 290.01, is amended by adding a subdivision to
read:

new text begin Subd. 19i. new text end

new text begin Deferred foreign income. new text end

new text begin "Deferred foreign income" means the income of
a domestic corporation that is included in net income under section 965 of the Internal
Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively at the same time as the
changes in Public Law 115-97 relating to deferred foreign income were effective for federal
purposes.
new text end

Sec. 12.

Minnesota Statutes 2018, section 290.01, is amended by adding a subdivision to
read:

new text begin Subd. 21a. new text end

new text begin Adjusted gross income; federal adjusted gross income. new text end

new text begin The terms "adjusted
gross income" and "federal adjusted gross income" mean adjusted gross income, as defined
in section 62 of the Internal Revenue Code, as amended through the date named in
subdivision 19, paragraph (f), incorporating the federal effective date of changes to the
Internal Revenue Code and any elections made by the taxpayer under the Internal Revenue
Code in determining federal adjusted gross income for federal income tax purposes.
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. 13.

Minnesota Statutes 2018, section 290.01, subdivision 29a, is amended to read:

Subd. 29a.

State itemized deduction.

"State itemized deleted text begin deductiondeleted text end new text begin deductionsnew text end " means
deleted text begin federal itemized deductions, as defined in section 63(d) of the Internal Revenue Code,
disregarding any limitation under section 68 of the Internal Revenue Code, and reduced by
the amount of the addition required under section 290.0131, subdivision 13deleted text end new text begin the itemized
deductions for individual income tax allowed under section 290.0122, subdivision 1, reduced
by the limit under section 290.0122, subdivision 2new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 14.

Minnesota Statutes 2018, 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 December
16, 2016deleted text end new text begin December 31, 2018new text end . Internal Revenue Code also includes any uncodified provision
in federal law that relates to provisions of the Internal Revenue Code that are incorporated
into Minnesota law.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment, except
the changes incorporated by the federal changes are effective retroactively at the same time
as the changes became effective for federal purposes, but are subject to the application of
Minnesota Statutes, section 290.993.
new text end

Sec. 15.

new text begin [290.0121] DEPENDENT EXEMPTION.
new text end

new text begin Subdivision 1. new text end

new text begin Exemption amount. new text end

new text begin (a) A taxpayer's dependent exemption equals:
new text end

new text begin (1) the exemption amount multiplied by the number of individuals who are dependents,
as defined in sections 151 and 152 of the Internal Revenue Code, of the taxpayer for the
taxable year; minus
new text end

new text begin (2) the disallowed exemption amount under subdivision 2, but the remainder may not
be less than zero.
new text end

new text begin (b) The exemption amount equals $4,250.
new text end

new text begin Subd. 2. new text end

new text begin Disallowed exemption amount. new text end

new text begin (a) The disallowed exemption amount equals
the dependent exemption allowed under subdivision 1, paragraph (a), clause (1), multiplied
by the applicable percentage.
new text end

new text begin (b) For a married individual filing a separate return, "applicable percentage" means two
percentage points for each $1,250, or fraction of that amount, by which the taxpayer's federal
adjusted gross income for the taxable year exceeds the threshold amount. For all other filers,
applicable percentage means two percentage points for each $2,500, or fraction of that
amount, by which the taxpayer's federal adjusted gross income for the taxable year exceeds
the threshold amount. The applicable percentage must not exceed 100 percent.
new text end

new text begin (c) "Threshold amount" means:
new text end

new text begin (1) $291,950 for a joint return or a surviving spouse;
new text end

new text begin (2) $243,300 for a head of a household;
new text end

new text begin (3) $194,650 for an individual who is not married and who is not a surviving spouse or
head of a household; and
new text end

new text begin (4) half the amount for a joint return for a married individual filing a separate return.
new text end

new text begin Subd. 3. new text end

new text begin Inflation adjustment. new text end

new text begin For taxable years beginning after December 31, 2019,
the commissioner must adjust for inflation the exemption amount in subdivision 1, paragraph
(a), clause (1), and the threshold amounts in subdivision 2, as provided in section 270C.22.
The statutory year is taxable year 2019. The amounts as adjusted must be rounded down to
the nearest $50 amount. If the amount ends in $25, the amount is rounded down to the
nearest $50 amount. The threshold amount for married individuals filing separate returns
must be one-half of the adjusted amount for married individuals filing joint returns.
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, 2018.
new text end

Sec. 16.

new text begin [290.0122] ITEMIZED DEDUCTIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Itemized deductions. new text end

new text begin A taxpayer's itemized deductions equal the sum
of the amounts allowed as a deduction under this section, reduced by the amount calculated
under subdivision 2.
new text end

new text begin Subd. 2. new text end

new text begin Deductions limited; inflation adjustment. new text end

new text begin (a) The itemized deductions of a
taxpayer with adjusted gross income in excess of the applicable amount are reduced by the
lesser of:
new text end

new text begin (1) three percent of the excess of the taxpayer's federal adjusted gross income over the
applicable amount; or
new text end

new text begin (2) 80 percent of the amount of the taxpayer's itemized deductions.
new text end

new text begin (b) "Applicable amount" means $194,650, or $97,325 for a married individual filing a
separate return.
new text end

new text begin (c) For the purposes of this subdivision, "itemized deductions" means the itemized
deductions otherwise allowable to the taxpayer under subdivision 1, except itemized
deductions excludes:
new text end

new text begin (1) the portion of the deduction for interest under subdivision 5 that represents investment
interest;
new text end

new text begin (2) the deduction for medical expenses under subdivision 6; and
new text end

new text begin (3) the deduction for losses under subdivision 8.
new text end

new text begin (d) For taxable years beginning after December 31, 2019, the commissioner must adjust
for inflation the applicable amounts under paragraph (b) as provided in section 270C.22.
The statutory year is taxable year 2019. The amounts as adjusted must be rounded down to
the nearest $50 amount. The threshold amount for married individuals filing separate returns
must be one-half of the adjusted amount for married individuals filing joint returns.
new text end

new text begin Subd. 3. new text end

new text begin Taxes paid. new text end

new text begin (a) A taxpayer is allowed a deduction for taxes paid. The deduction
equals the sum of the following amounts for the taxable year:
new text end

new text begin (1) state and local personal property taxes and real property taxes, in a total amount for
both types not to exceed $10,000, or $5,000 for a married taxpayer filing a separate return;
new text end

new text begin (2) foreign income, war profits, and excess profits taxes to the extent not reduced by the
federal foreign tax credit; and
new text end

new text begin (3) 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, and to the extent not deducted
under clause (2).
new text end

new text begin (b) For purposes of this subdivision, the following terms have the meanings given them:
new text end

new text begin (1) "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;
new text end

new text begin (2) "federal foreign tax credit" means the credit allowed under section 27 of the Internal
Revenue Code; and
new text end

new text begin (3) "foreign, income, war profits, and excess profits taxes" and "state and local real and
personal property taxes" have the meanings given in section 164 of the Internal Revenue
Code.
new text end

new text begin Subd. 4. new text end

new text begin Charitable contributions. new text end

new text begin (a) A taxpayer is allowed a deduction for charitable
contributions. The deduction equals the amount of the charitable contribution deduction
allowable to the taxpayer under section 170 of the Internal Revenue Code, including the
denial of the deduction under section 408(d)(8), except that the provisions of section
170(b)(1)(G) apply regardless of the taxable year.
new text end

new text begin (b) For taxable years beginning after December 31, 2017, the determination of carryover
amounts must be made by applying the rules under section 170 of the Internal Revenue
Code based on the charitable contribution deductions claimed and allowable under this
section.
new text end

new text begin Subd. 5. new text end

new text begin Interest. new text end

new text begin A taxpayer is allowed a deduction for interest. The deduction equals
the amount allowed to the taxpayer as interest paid or accrued during the taxable year under
section 163 of the Internal Revenue Code with the following exceptions:
new text end

new text begin (1) qualified residence interest excludes home equity interest;
new text end

new text begin (2) acquisition indebtedness must not exceed $750,000, or $375,000 for a married
separate return, for indebtedness incurred on or after December 16, 2017; and
new text end

new text begin (3) mortgage insurance premiums treated as interest under section 163(h)(3)(E) are not
interest for the purposes of this subdivision.
new text end

new text begin Subd. 6. new text end

new text begin Medical expenses. new text end

new text begin A taxpayer is allowed a deduction for medical expenses.
The deduction equals the amount allowed under section 213 of the Internal Revenue Code,
except that the threshold percentage of adjusted gross income in paragraph (a) is ten percent
regardless of the federal percentage for the taxable year.
new text end

new text begin Subd. 7. new text end

new text begin Unreimbursed employee expenses. new text end

new text begin A taxpayer is allowed a deduction for
unreimbursed employee expenses. The deduction equals the amount of the taxpayer's trade
or business expenses incurred as an employee and allowed under section 162 of the Internal
Revenue Code in excess of two percent of the taxpayer's adjusted gross income, disregarding
the suspension of the deduction in section 67, paragraph (g), of the Internal Revenue Code.
new text end

new text begin Subd. 8. new text end

new text begin Losses. new text end

new text begin A taxpayer is allowed a deduction for losses. The deduction equals the
amount allowed under sections 165(d) and 165(h) of the Internal Revenue Code, disregarding
the limitation on personal casualty losses in paragraph (h)(5).
new text end

new text begin Subd. 9. new text end

new text begin Miscellaneous deduction. new text end

new text begin A taxpayer is allowed a miscellaneous deduction.
The deduction equals the sum of the following amounts for the taxable year:
new text end

new text begin (1) impairment-related work expenses allowed under section 67(d) of the Internal Revenue
Code;
new text end

new text begin (2) the deduction for estate tax under section 691(c) of the Internal Revenue Code;
new text end

new text begin (3) any deduction allowable in connection with personal property used in a short sale
as described under section 67(b)(8);
new text end

new text begin (4) the deduction under section 1341 of the Internal Revenue Code;
new text end

new text begin (5) the deduction under section 72(b)(3) of the Internal Revenue Code;
new text end

new text begin (6) the deduction under section 171 of the Internal Revenue Code; and
new text end

new text begin (7) the deduction under section 216 of the Internal Revenue Code.
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, 2018.
new text end

Sec. 17.

new text begin [290.0123] STANDARD DEDUCTION.
new text end

new text begin Subdivision 1. new text end

new text begin Standard deduction amount. new text end

new text begin A taxpayer's standard deduction equals:
new text end

new text begin (1) for a married joint filer or a surviving spouse, $24,400;
new text end

new text begin (2) for a head of household filer, $18,350; or
new text end

new text begin (3) for any other filer, one-half the amount in clause (1); plus
new text end

new text begin (4) the additional amount for the taxpayer under subdivision 2.
new text end

new text begin A taxpayer's standard deduction amount is reduced in accordance with subdivision 5.
new text end

new text begin Subd. 2. new text end

new text begin Additional amount for seniors or blind taxpayers. new text end

new text begin (a) The additional amount
equals the sum of the following amounts:
new text end

new text begin (1) $1,300 if the taxpayer has attained age 65 before the close of the taxable year or
$1,650 for such a taxpayer who is not married or a surviving spouse;
new text end

new text begin (2) $1,300 for the spouse of the taxpayer if the spouse has attained the age of 65 before
the close of the taxable year and qualifies for an exemption under section 151(b) of the
Internal Revenue Code;
new text end

new text begin (3) $1,300 if the taxpayer is blind at the close of the taxable year or $1,650 for such a
taxpayer who is not married or a surviving spouse; and
new text end

new text begin (4) $1,300 for the spouse of the taxpayer if the spouse is blind as of the close of the
taxable year and qualifies for an exemption under section 151(b) of the Internal Revenue
Code.
new text end

new text begin (b) The commissioner must disregard section 151(d)(5) of the Internal Revenue Code
when determining if the taxpayer's spouse is eligible for an exemption under paragraph (a).
new text end

new text begin Subd. 3. new text end

new text begin Amount for dependents. new text end

new text begin For an individual who is a dependent, as defined in
sections 151 and 152 of the Internal Revenue Code, of another taxpayer for a taxable year
beginning in the calendar year in which the individual's taxable year begins, the standard
deduction for that individual is limited to the greater of:
new text end

new text begin (1) $1,100; or
new text end

new text begin (2) the lesser of (i) the sum of $350 and that individual's earned income, as defined in
section 32(c) of the Internal Revenue Code; or (ii) the standard deduction amount allowed
under subdivision 1, clause (3).
new text end

new text begin Subd. 4. new text end

new text begin Deduction disallowed. new text end

new text begin The standard deduction is zero for: (1) a married
individual filing a separate return if either spouse itemizes deductions; (2) an individual
making a return for a period of less than twelve months on account of changes in the annual
accounting period; and (3) a nonresident alien individual, except as allowed under a United
States income tax treaty.
new text end

new text begin Subd. 5. new text end

new text begin Deduction limited. new text end

new text begin (a) The standard deduction of a taxpayer with adjusted
gross income in excess of the applicable amount is reduced by the lesser of:
new text end

new text begin (1) three percent of the excess of the taxpayer's federal adjusted gross income over the
applicable amount; or
new text end

new text begin (2) 80 percent of the standard deduction otherwise allowable under this section.
new text end

new text begin (b) "Applicable amount" means $194,650, or $97,325 for a married individual filing a
separate return.
new text end

new text begin Subd. 6. new text end

new text begin Inflation adjustment. new text end

new text begin For taxable years beginning after December 31, 2019,
the commissioner must adjust for inflation the standard deduction amounts in subdivision
1, the additional amounts in subdivision 2, the amounts in subdivision 3, and the applicable
amounts in subdivision 5 as provided in section 270C.22. The statutory year is taxable year
2019. The amounts as adjusted must be rounded down to the nearest $50 amount. The
standard deduction amount for married individuals filing separate returns is one-half of the
adjusted amount for married individuals filing joint returns.
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, 2018.
new text end

Sec. 18.

Minnesota Statutes 2018, section 290.0131, subdivision 1, is amended to read:

Subdivision 1.

Definition; scope.

(a) For the purposes of this section, "addition" means
an amount that must be added to federal taxable income new text begin for a trust or an estate or federal
adjusted gross income for an individual new text end in computing net income for the taxable year to
which the amounts relate.

(b) The additions in this section apply to individuals, estates, and trusts.

(c) Unless specifically indicated or unless the context clearly indicates otherwise, only
amounts that were deducted or excluded in computing federal taxable income new text begin for a trust or
an estate or federal adjusted gross income for individuals new text end are an addition under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 19.

Minnesota Statutes 2018, section 290.0131, subdivision 3, is amended to read:

Subd. 3.

Income, sales and use, motor vehicle sales, or excise taxes paid.

deleted text begin (a)deleted text end new text begin For trusts
and estates,new text end the amount of income, sales and use, motor vehicle sales, or excise taxes paid
or accrued within the taxable year under this chapter and the amount of taxes based on net
income, sales and use, motor vehicle sales, or excise taxes paid to any other state or to any
province or territory of Canada is an addition to the extent deducted under section 63(d) of
the Internal Revenue Code.

deleted text begin (b) The addition under paragraph (a) may not be more than the amount by which the
state itemized deduction exceeds the amount of the standard deduction as defined in section
63(c) of the Internal Revenue Code. For the purpose of this subdivision, income, sales and
use, motor vehicle sales, or excise taxes are the last itemized deductions disallowed under
subdivision 12.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 20.

Minnesota Statutes 2018, section 290.0131, is amended by adding a subdivision
to read:

new text begin Subd. 15. new text end

new text begin 529 plan addition. new text end

new text begin The lesser of the following amounts is an addition:
new text end

new text begin (1) the total distributions for the taxable year from a qualified plan under section 529 of
the Internal Revenue Code, owned by the taxpayer, that are expended for qualified higher
education expenses under section 529(c)(7) of the Internal Revenue Code (expenses for
tuition for elementary or secondary public, private, or religious school); or
new text end

new text begin (2) the total amount required to be reported to the taxpayer by any trustee of a qualified
tuition plan under section 529 of the Internal Revenue Code as earnings on Internal Revenue
Service Form 1099Q for the taxable year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2017.
new text end

Sec. 21.

Minnesota Statutes 2018, section 290.0131, is amended by adding a subdivision
to read:

new text begin Subd. 16. new text end

new text begin Section 199A addition. new text end

new text begin For trusts and estates, the amount deducted under
section 199A of the Internal Revenue Code in computing the trust or estate's federal taxable
income is an addition.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2017.
new text end

Sec. 22.

Minnesota Statutes 2018, section 290.0131, is amended by adding a subdivision
to read:

new text begin Subd. 17. new text end

new text begin Foreign-derived intangible income new text end

new text begin To the extent deducted from net income,
the amount of foreign-derived intangible income deducted under section 250 of the Internal
Revenue Code for the taxable year is an addition.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2017.
new text end

Sec. 23.

Minnesota Statutes 2018, section 290.0131, is amended by adding a subdivision
to read:

new text begin Subd. 18. new text end

new text begin Special deductions. new text end

new text begin For trusts and estates, the amount of any special deduction
under section 250 or 965 of the Internal Revenue Code is an addition, to the extent not
included in taxable income.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 24.

Minnesota Statutes 2018, section 290.0132, subdivision 1, is amended to read:

Subdivision 1.

Definition; scope.

(a) For the purposes of this section, "subtraction"
means an amount that shall be subtracted from federal taxable income new text begin for a trust or an estate
or federal adjusted gross income for an individual new text end in computing net income for the taxable
year to which the amounts relate.

(b) The subtractions in this section apply to individuals, estates, and trusts.

(c) Unless specifically indicated or unless the context clearly indicates otherwise, no
amount deducted, subtracted, or otherwise excluded in computing federal taxable income
new text begin for a trust or an estate or federal adjusted gross income for an individual new text end is a subtraction
under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 25.

Minnesota Statutes 2018, section 290.0132, subdivision 7, is amended to read:

Subd. 7.

Charitable contributions for taxpayers who do not itemize.

deleted text begin To the extent
not deducted or not deductible under section 408(d)(8)(E) of the Internal Revenue Code in
determining federal taxable income bydeleted text end new text begin Fornew text end an individual who does not itemize deductions
deleted text begin for federal income tax purposesdeleted text end new text begin under section 290.0132, subdivision 19,new text end 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 deleted text begin 170(a) of the Internal Revenue
Codedeleted text end new text begin 290.0122, subdivision 4,new text end is a subtraction.new text begin The subtraction under this subdivision must
not include a distribution that is excluded from federal adjusted gross income and that is
not deductible under section 408(d)(8)(E) of the Internal Revenue Code.
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, 2018.
new text end

Sec. 26.

Minnesota Statutes 2018, section 290.0132, subdivision 19, is amended to read:

Subd. 19.

deleted text begin Disalloweddeleted text end new text begin Standard ornew text end itemized deductions.

new text begin (a) The standard deduction
amount allowed under section 290.0123, subdivision 1, is a subtraction.
new text end

new text begin (b) A taxpayer may elect to claim a subtraction equal to new text end the amount of deleted text begin the limitation ondeleted text end
itemized deductions new text begin calculated new text end under section deleted text begin 68(b) of the Internal Revenue Code is a
subtractiondeleted text end new text begin 290.0122, subdivision 1, in lieu of the subtraction for the standard deduction in
paragraph (a)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, 2018.
new text end

Sec. 27.

Minnesota Statutes 2018, section 290.0132, subdivision 20, is amended to read:

Subd. 20.

deleted text begin Disallowed Personaldeleted text end new text begin Dependent new text end exemption.

deleted text begin The amount of the phaseout of
personal exemptions under section 151(d) of the Internal Revenue Code is a subtraction. deleted text end new text begin
The dependent exemption under section 290.0121, subdivision 1, paragraph (a), is a
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, 2018.
new text end

Sec. 28.

Minnesota Statutes 2018, section 290.0132, subdivision 21, is amended to read:

Subd. 21.

Military service pension; retirement pay.

To the extent included in federal
deleted text begin taxabledeleted text end new text begin adjusted grossnew text end income, compensation received from a pension or other retirement
pay from the federal government for service in the military, as computed under United
States Code, title 10, sections 1401 to 1414, 1447 to 1455, and 12733, is a subtraction. The
subtraction is limited to individuals who do not claim the credit under section 290.0677.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 29.

Minnesota Statutes 2018, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 27. new text end

new text begin Deferred foreign income. new text end

new text begin The amount of deferred foreign income recognized
because of section 965 of the Internal Revenue Code is a subtraction.
new text end

new text begin EFFECTIVE DATE. new text end

Sec. 30.

Minnesota Statutes 2018, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 28. new text end

new text begin Global intangible low-taxed income. new text end

new text begin The amount of global intangible
low-taxed income included in gross income under section 951A of the Internal Revenue
Code is a subtraction.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2017.
new text end

Sec. 31.

Minnesota Statutes 2018, section 290.0133, subdivision 6, is amended to read:

Subd. 6.

Special deductions.

The amount of any special deductions under sections 241
to 247new text begin , 250,new text end and 965 of the Internal Revenue Code is an addition.

new text begin EFFECTIVE DATE. new text end

Sec. 32.

Minnesota Statutes 2018, section 290.0134, is amended by adding a subdivision
to read:

new text begin Subd. 17. new text end

new text begin Global intangible low-taxed income. new text end

new text begin The amount of global intangible
low-taxed income included in gross income under section 951A of the Internal Revenue
Code is a subtraction.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2017.
new text end

Sec. 33.

Minnesota Statutes 2018, section 290.0134, is amended by adding a subdivision
to read:

new text begin Subd. 18. new text end

new text begin Deferred foreign income. new text end

new text begin The amount of deferred foreign income recognized
because of section 965 of the Internal Revenue Code is a subtraction.
new text end

new text begin EFFECTIVE DATE. new text end

Sec. 34.

Minnesota Statutes 2018, section 290.032, subdivision 2, is amended to read:

Subd. 2.

Computation.

The amount of tax imposed by subdivision 1 shall be computed
in the same way as the tax imposed under section 402(d) of the Internal Revenue Code of
1986, as amended through December 31, 1995, except that the initial separate tax shall be
an amount equal to five times the tax which would be imposed by section 290.06, subdivision
2c, if the recipient was an unmarried individual, and the taxable net income was an amount
equal to one-fifth of the excess of

(i) the total taxable amount of the lump-sum distribution for the year, over

(ii) the minimum distribution allowance, and except that references in section 402(d) of
the Internal Revenue Code of 1986, as amended through December 31, 1995, to paragraph
(1)(A) thereof shall instead be references to subdivision 1, and the excess, if any, of the
subtraction base amount over deleted text begin federaldeleted text end taxablenew text begin netnew text end income for a qualified individual as provided
under section 290.0802, subdivision 2.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 35.

Minnesota Statutes 2018, section 290.05, subdivision 3, is amended to read:

Subd. 3.

Taxes imposed on exempt entities.

(a) An organization exempt from taxation
under subdivision 2 shall, nevertheless, be subject to tax under this chapter to the extent
provided in the following provisions of the Internal Revenue Code:

(1) section 527 (dealing with political organizations);

(2) section 528 (dealing with certain homeowners associations);

(3) sections 511 to 515 (dealing with unrelated business income);

(4) section 521 (dealing with farmers' cooperatives); and

(5) section 6033(e)(2) (dealing with lobbying expense); but notwithstanding this
subdivision, shall be considered an organization exempt from income tax for the purposes
of any law which refers to organizations exempt from income taxes.

(b) The tax shall be imposed on the taxable income of political organizations or
homeowner associations or the unrelated business taxable income, as defined in section 512
of the Internal Revenue Code, of organizations defined in section 511 of the Internal Revenue
Code, provided that the tax is not imposed on:

(1) advertising revenues from a newspaper published by an organization described in
section 501(c)(4) of the Internal Revenue Code; deleted text begin or
deleted text end

(2) revenues from lawful gambling authorized under chapter 349 that are expended for
purposes that qualify for the deduction for charitable contributions under section 170 of the
Internal Revenue Code, disregarding the limitation under section 170(b)(2), but only to the
extent the contributions are not deductible in computing federal taxable incomenew text begin ; or
new text end

new text begin (3) amounts included in unrelated business taxable income under section 512(a)(7) of
the Internal Revenue Codenew text end .

The tax shall be at the corporate rates. The tax shall only be imposed on income and
deductions assignable to this state under sections 290.17 to 290.20. To the extent deducted
in computing federal taxable income, the deductions contained in section 290.21 shall not
be allowed in computing Minnesota taxable net income.

(c) The tax shall be imposed on organizations subject to federal tax under section
6033(e)(2) of the Internal Revenue Code, in an amount equal to the corporate tax rate
multiplied by the amount of lobbying expenses taxed under section 6033(e)(2) which are
attributable to lobbying the Minnesota state government.

new text begin (d) In calculating unrelated business taxable income under section 512 of the Internal
Revenue Code, the amount of any net operating loss deduction claimed under section 172
of the Internal Revenue Code is an addition. Taxpayers making an addition under this
paragraph may deduct a net operating loss for the taxable year in the same manner as a
corporation under section 290.095, in a form and manner prescribed by the commissioner,
and may calculate the loss without the application of the limitation provided for under
section 512(a)(6) of the Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2017.
new text end

Sec. 36.

Minnesota Statutes 2018, section 290.06, subdivision 2d, is amended to read:

Subd. 2d.

Inflation adjustment of brackets.

deleted text begin (a) For taxable years beginning after
December 31, 2013,deleted text end new text begin The commissioner shall annually adjustnew text end the minimum and maximum
dollar amounts for each rate bracket for which a tax is imposed in subdivision 2c deleted text begin shall be
adjusted for inflation by the percentage determined under paragraph (b). For the purpose
of making the adjustment as provided in this subdivision all of the rate brackets provided
in subdivision 2c shall be the rate brackets as they existed for taxable years beginning after
December 31, 2012, and before January 1, 2014deleted text end new text begin as provided in section 270C.22. The statutory
year is taxable year 2019new text end . The rate applicable to any rate bracket must not be changed. The
dollar amounts setting forth the tax shall be adjusted to reflect the changes in the rate brackets.
The rate brackets as adjusted must be rounded to the nearest $10 amount. If the rate bracket
ends in $5, it must be rounded up to the nearest $10 amount.

deleted text begin (b) The commissioner shall adjust the rate brackets and by the percentage determined
pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section
1(f)(3)(B) the word "2012" shall be substituted for the word "1992." For 2014, the
commissioner shall then determine the percent change from the 12 months ending on August
31, 2012, to the 12 months ending on August 31, 2013, and in each subsequent year, from
the 12 months ending on August 31, 2012, to the 12 months ending on August 31 of the
year preceding the taxable year. The determination of the commissioner pursuant to this
subdivision shall not be considered a "rule" and shall not be subject to the Administrative
Procedure Act contained in chapter 14deleted text end .

deleted text begin No later than December 15 of each year, the commissioner shall announce the specific
percentage that will be used to adjust the tax rate brackets.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for adjustments beginning with taxable
years beginning after December 31, 2019.
new text end

Sec. 37.

Minnesota Statutes 2018, section 290.06, subdivision 2h, is amended to read:

Subd. 2h.

Section 529 plan recapture.

(a) For the purposes of this subdivision:

(1) the definitions under section 290.0684 apply;

(2) "account owner" means an individual who owns one or more qualified accounts;

(3) "credit ratio" means the ratio of (i) two times the total amount of credits that an
account owner claimed under section 290.0684 for contributions to the account owner's
qualified accounts to (ii) the total contributions in all taxable years to the account owner's
qualified accounts; deleted text begin and
deleted text end

(4)new text begin "qualified higher education expenses" has the meaning given in section 529(e)(3) of
the Internal Revenue Code, except section 529(c)(7) does not apply; and
new text end

new text begin (5)new text end "subtraction ratio" means the ratio of (i) the total amount of subtractions that an
account owner claimed under section 290.0132, subdivision 23, for contributions to the
account owner's qualified accounts to (ii) the total contributions in all taxable years to the
account owner's qualified accounts.

(b) If a distribution from a qualified account is used for a purpose other than to pay for
qualified higher education expenses, the account owner must pay an additional tax equal
to:

(1) 50 percent of the product of the credit ratio and the amount of the distribution; plus

(2) ten percent of the product of the subtraction ratio and the amount of the distribution.

(c) The additional tax under this subdivision does not apply to any portion of a distribution
that is subject to the additional tax under section 529(c)(6) of the Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2017.
new text end

Sec. 38.

Minnesota Statutes 2018, section 290.067, subdivision 2b, is amended to read:

Subd. 2b.

Inflation adjustment.

The commissioner shallnew text begin annuallynew text end adjust the dollar
amount of the income threshold at which the maximum credit begins to be reduced under
subdivision 1 deleted text begin by the percentage determined pursuant to the provisions of section 1(f) of the
Internal Revenue Code, except that in section 1(f)(3)(B) the word "2016" shall be substituted
for the word "1992." For 2018, the commissioner shall then determine the percent change
from the 12 months ending on August 31, 2016, to the 12 months ending on August 31,
2017, and in each subsequent year, from the 12 months ending on August 31, 2016, to the
12 months ending on August 31 of the year preceding the taxable year. The determination
of the commissioner pursuant to this subdivision must not be considered a "rule" and is not
subject to the Administrative Procedure Act contained in chapter 14. The threshold amount
as adjusted must be rounded to the nearest $10 amount. If the amount ends in $5, the amount
is rounded up to the nearest $10 amountdeleted text end new text begin as provided in section 270C.22. The statutory year
is taxable year 2019new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for adjustments beginning with taxable
years beginning after December 31, 2019.
new text end

Sec. 39.

Minnesota Statutes 2018, section 290.0671, subdivision 7, is amended to read:

Subd. 7.

Inflation adjustment.

Thenew text begin commissioner shall annually adjust thenew text end earned
income amounts used to calculate the credit and the deleted text begin incomedeleted text end new text begin phase-outnew text end thresholds deleted text begin at which
the maximum credit begins to be reduceddeleted text end in subdivision 1 deleted text begin must be adjusted for inflation.
The commissioner shall adjust by the percentage determined pursuant to the provisions of
section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) the word "2013"
shall be substituted for the word "1992." For 2015, the commissioner shall then determine
the percent change from the 12 months ending on August 31, 2013, to the 12 months ending
on August 31, 2014, and in each subsequent year, from the 12 months ending on August
31, 2013, to the 12 months ending on August 31 of the year preceding the taxable year. The
earned income thresholds as adjusted for inflation must be rounded to the nearest $10
amount. If the amount ends in $5, the amount is rounded up to the nearest $10 amount. The
determination of the commissioner under this subdivision is not a rule under the
Administrative Procedure Actdeleted text end new text begin as provided in section 270C.22. The statutory year is taxable
year 2019new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for adjustments for taxable years
beginning after December 31, 2019.
new text end

Sec. 40.

Minnesota Statutes 2018, section 290.0672, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

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

(b) "Long-term care insurance" means a policy that:

(1) qualifies for a deduction under section 213 of the Internal Revenue Code, disregarding
the adjusted gross income test; or meets the requirements given in section 62A.46; or provides
similar coverage issued under the laws of another jurisdiction; and

(2) has a lifetime long-term care benefit limit of not less than $100,000; and

(3) has been offered in compliance with the inflation protection requirements of section
62S.23.

(d) "Premiums deducted in determining deleted text begin federal taxabledeleted text end new text begin netnew text end income" means the lesser of
(1) long-term care insurance premiums that qualify as deductions under section 213 of the
Internal Revenue Code; and (2) the total amount deleted text begin deductibledeleted text end new text begin deductednew text end for medical care under
deleted text begin section 213 of the Internal Revenue Codedeleted text end new text begin section 290.0122, subdivision 6new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 41.

Minnesota Statutes 2018, section 290.0672, subdivision 2, is amended to read:

Subd. 2.

Credit.

A taxpayer is allowed a credit against the tax imposed by this chapter
for long-term care insurance policy premiums paid during the tax year. The credit for each
policy equals 25 percent of premiums paid to the extent not deducted in determining deleted text begin federaldeleted text end
taxablenew text begin netnew text end income. A taxpayer may claim a credit for only one policy for each qualified
beneficiary. A maximum of $100 applies to each qualified beneficiary. The maximum total
credit allowed per year is $200 for married couples filing joint returns and $100 for all other
filers. For a nonresident or part-year resident, the credit determined under this section must
be allocated based on the percentage calculated under section 290.06, subdivision 2c,
paragraph (e).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 42.

Minnesota Statutes 2018, section 290.0675, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this section the following terms have
the meanings given.

(b) "Earned income" means the sum of the following, to the extent included in Minnesota
taxable income:

(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;

(2) income received from a retirement pension, profit-sharing, stock bonus, or annuity
plan; and

(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue Code.

(d) "Earned income of lesser-earning spouse" means the earned income of the spouse
with the lesser amount of earned income as defined in paragraph (b) for the taxable year
minus deleted text begin the sum of (i) the amount for one exemption under section 151(d) of the Internal
Revenue Code and (ii)deleted text end one-half the amount of the standard deduction under section
deleted text begin 63(c)(2)(A) and (4) of the Internal Revenue Codedeleted text end new text begin 290.0123, subdivision 1, clause (1)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, 2018.
new text end

Sec. 43.

Minnesota Statutes 2018, section 290.0681, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

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

(b) "Account" means the historic credit administration account in the special revenue
fund.

(d) "Project" means rehabilitation of a certified historic structure, as defined in section
47(c)(3)(A) of the Internal Revenue Code, that is located in Minnesota and is allowed a
federal credit.

(e) "Federal credit" means the credit allowed under section deleted text begin 47(a)(2)deleted text end new text begin 47(a)new text end of the Internal
Revenue Codenew text begin , except that the amount allowed is deemed to be allocated in the taxable year
that the project is placed in servicenew text end .

(f) "Placed in service" has the meaning used in section 47 of the Internal Revenue Code.

(g) "Qualified rehabilitation expenditures" has the meaning given in section 47 of the
Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for applications for allocation
certificates submitted after December 31, 2017.
new text end

Sec. 44.

Minnesota Statutes 2018, section 290.0681, subdivision 2, is amended to read:

Subd. 2.

Credit or grant allowed; certified historic structure.

(a) A credit is allowed
against the tax imposed under this chapter equal to not more than 100 percent of the credit
allowed under section deleted text begin 47(a)(2)deleted text end new text begin 47(a)new text end of the Internal Revenue Code for a project. new text begin The credit
is payable in five equal yearly installments beginning with the year the project is placed in
service. new text end To qualify for the credit:

(1) the project must receive Part 3 certification and be placed in service during the taxable
year; and

(2) the taxpayer must be allowed the federal credit and be issued a credit certificate for
the taxable year as provided in subdivision 4.

(b) The commissioner of administration may pay a grant in lieu of the credit. The grant
equals 90 percent of the credit that would be allowed for the project.new text begin The grant is payable
in five equal yearly installments beginning with the year the project is placed in service.
new text end

(c) In lieu of the credit under paragraph (a), an insurance company may claim a credit
against the insurance premiums tax imposed under chapter 297I.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for applications for allocation
certificates submitted after December 31, 2017.
new text end

Sec. 45.

Minnesota Statutes 2018, section 290.0681, subdivision 3, is amended to read:

Subd. 3.

Applications; allocations.

(a) To qualify for a credit or grant under this section,
the developer of a project must apply to the office before the rehabilitation begins. The
application must contain the information and be in the form prescribed by the office. The
office may collect a fee for application of up to 0.5 percent of qualified rehabilitation
expenditures, up to $40,000, based on estimated qualified rehabilitation expenditures, to
offset costs associated with personnel and administrative expenses related to administering
the credit and preparing the economic impact report in subdivision 9. Application fees are
deposited in the account. The application must indicate if the application is for a credit or
a grant in lieu of the credit or a combination of the two and designate the taxpayer qualifying
for the credit or the recipient of the grant.

(b) Upon approving an application for credit, the office shall issue allocation certificates
that:

(1) verify eligibility for the credit or grant;

(2) state the amount of credit or grant anticipated with the project, with the credit amount
equal to 100 percent and the grant amount equal to 90 percent of the federal credit anticipated
in the application;

(3) state that the credit or grant allowed may increase or decrease if the federal credit
the project receives at the time it is placed in service is different than the amount anticipated
at the time the allocation certificate is issued; and

(4) state the fiscal year in which the credit or grant is allocated, and that the taxpayer or
grant recipient is entitled to receive new text begin one-fifth of the total amount of either new text end the credit or new text begin the
new text end grant at the time the project is placed in service, provided that date is within three calendar
years following the issuance of the allocation certificate.

(c) The office, in consultation with the commissioner, shall determine if the project is
eligible for a credit or a grant under this section and must notify the developer in writing
of its determination. Eligibility for the credit is subject to review and audit by the
commissioner.

(d) The federal credit recapture and repayment requirements under section 50 of the
Internal Revenue Code do not apply to the credit allowed under this section.

(e) Any decision of the office under paragraph (c) may be challenged as a contested case
under chapter 14. The contested case proceeding must be initiated within 45 days of the
date of written notification by the office.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for applications for allocation
certificates submitted after December 31, 2017.
new text end

Sec. 46.

Minnesota Statutes 2018, section 290.0681, subdivision 4, is amended to read:

Subd. 4.

Credit certificates; grants.

(a)(1) The developer of a project for which the
office has issued an allocation certificate must notify the office when the project is placed
in service. Upon verifying that the project has been placed in service, and was allowed a
federal credit, the office must issue a credit certificate to the taxpayer designated in the
application or must issue a grant to the recipient designated in the application. The credit
certificate must state the amount of the credit.

(2) The credit amount equals the federal credit allowed for the project.

(3) The grant amount equals 90 percent of the federal credit allowed for the project.

(b) The recipient of a credit certificate may assign the certificate to another taxpayernew text begin
before the first one-fifth payment is claimednew text end , which is then allowed the credit under this
section or section 297I.20, subdivision 3. An assignment is not valid unless the assignee
notifies the commissioner within 30 days of the date that the assignment is made. The
commissioner shall prescribe the forms necessary for notifying the commissioner of the
assignment of a credit certificate and for claiming a credit by assignment.

(c) Credits passed through to partners, members, shareholders, or owners pursuant to
subdivision 5 are not an assignment of a credit certificate under this subdivision.

(d) A grant agreement between the office and the recipient of a grant may allow the
grant to be issued to another individual or entity.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for applications for allocation
certificates submitted after December 31, 2017.
new text end

Sec. 47.

Minnesota Statutes 2018, section 290.0684, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have
the meanings given them.

(b) "Contribution" means the amount contributed to one or more qualified accounts
except that the amount:

(1) is reduced by any withdrawals or distributions, other than transfers or rollovers to
another qualified account, from a qualified account during the taxable year; and

(2) excludes the amount of any transfers or rollovers from a qualified account made
during the taxable year.

(d) "Qualified account" means an account qualifying under section 529 of the Internal
Revenue Code.

deleted text begin (e) "Qualified higher education expenses" has the meaning given in section 529 of the
Internal Revenue Code.
deleted 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. 48.

Minnesota Statutes 2018, section 290.0684, subdivision 2, is amended to read:

Subd. 2.

Credit allowed.

(a) An individual who is a resident of Minnesota is allowed a
credit against the tax imposed by this chapter. The credit is not allowed to an individual
who is eligible to be claimed as a dependent, as defined in sections 151 and 152 of the
Internal Revenue Code. The credit may not exceed the liability for tax under this chapter.

(b) The amount of the credit allowed equals 50 percent of contributions for the taxable
year. The maximum credit is $500, subject to the phaseout in paragraphs (c) and (d). In no
case is the credit less than zero.

(d) For married couples filing a joint return, the maximum credit is phased out as follows:

(1) for married couples with adjusted gross income in excess of $75,000, but not more
than $100,000, the maximum credit is reduced by one percent of adjusted gross income in
excess of $75,000;

(2) for married couples with adjusted gross income in excess of $100,000, but not more
than $135,000, the maximum credit is $250; and

(3) for married couples with adjusted gross income in excess of $135,000, the maximum
credit is $250, reduced by one percent of adjusted gross income in excess of $135,000.

(e) Thenew text begin commissioner shall annually adjust thenew text end income thresholds in paragraphs (c) and
(d) deleted text begin used to calculate the maximum credit must be adjusted for inflation. The commissioner
shall adjust the income thresholds by the percentage determined under the provisions of
section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) the word "2016"
is substituted for the word "1992." For 2018, the commissioner shall then determine the
percent change from the 12 months ending on August 31, 2016, to the 12 months ending
on August 31, 2017, and in each subsequent year, from the 12 months ending on August
31, 2016, to the 12 months ending on August 31 of the year preceding the taxable year. The
income thresholds as adjusted for inflation must be rounded to the nearest $10 amount. If
the amount ends in $5, the amount is rounded up to the nearest $10 amount. The
determination of the commissioner under this subdivision is not subject to chapter 14,
including section 14.386deleted text end new text begin as provided in section 270C.22. The statutory year is taxable year
2019new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for adjustments beginning with taxable
years beginning after December 31, 2019.
new text end

Sec. 49.

Minnesota Statutes 2018, section 290.0802, subdivision 2, is amended to read:

Subd. 2.

Subtraction.

(a) A qualified individual is allowed a subtraction from federal
deleted text begin taxabledeleted text end new text begin adjusted grossnew text end income of the individual's subtraction base amount. The excess of
the subtraction base amount over the taxable net income computed without regard to the
subtraction for the elderly or disabled under section 290.0132, subdivision 5, may be used
to reduce the amount of a lump sum distribution subject to tax under section 290.032.

(b)(1) The initial subtraction base amount equals

(i) $12,000 for a married taxpayer filing a joint return if a spouse is a qualified individual,

(ii) $9,600 for a single taxpayer, and

(iii) $6,000 for a married taxpayer filing a separate federal return.

(2) The qualified individual's initial subtraction base amount, then, must be reduced by
the sum of nontaxable retirement and disability benefits and one-half of the amount of
adjusted gross income in excess of the following thresholds:

(i) $18,000 for a married taxpayer filing a joint return if both spouses are qualified
individuals,

(ii) $14,500 for a single taxpayer or for a married couple filing a joint return if only one
spouse is a qualified individual, and

(iii) $9,000 for a married taxpayer filing a separate federal return.

(3) In the case of a qualified individual who is under the age of 65, the maximum amount
of the subtraction base may not exceed the taxpayer's disability income.

(4) The resulting amount is the subtraction base amount.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 50.

Minnesota Statutes 2018, 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 290.0131, subdivision 2; deleted text begin and
deleted text end

(6) the amount of addition required by section 290.0131, subdivisions 9 deleted text begin to 11;deleted text end new text begin , 10, and
16;
new text end

new text begin (7) the deduction allowed under section 199A of the Internal Revenue Code, to the extent
not included in the addition required under clause (6); and
new text end

new text begin (8) to the extent not included in federal alternative minimum taxable income, the amount
of foreign-derived intangible income deducted under section 250 of the Internal Revenue
Code;
new text end

less the sum of the amounts determined under the following:

(i) interest income as defined in section 290.0132, subdivision 2;

(ii) an overpayment of state income tax as provided by section 290.0132, subdivision
3, to the extent included in federal alternative minimum taxable income;

(iii) 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;

(iv) amounts subtracted from federal taxable new text begin or adjusted grossnew text end income as provided by
section 290.0132, subdivisions 7, 9 to 15, 17, 21, 24, and 26new text begin to 29new text end ; deleted text begin and
deleted text end

(v) the amount of the net operating loss allowed under section 290.095, subdivision 11,
paragraph (c)new text begin ; and
new text end

new text begin (vi) the amount allowable as a Minnesota itemized deduction under section 290.0122,
subdivision 7new 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 Codenew text begin , except alternative minimum
taxable income must be increased by the addition in section 290.0131, subdivision 16new text end .

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

(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 6.75 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, 2018.
new text end

Sec. 51.

Minnesota Statutes 2018, section 290.091, subdivision 3, is amended to read:

Subd. 3.

Exemption amount.

(a) For purposes of computing the alternative minimum
tax, the exemption amount isdeleted text begin , for taxable years beginning after December 31, 2005,deleted text end $60,000
for married couples filing joint returns, $30,000 for married individuals filing separate
returns, estates, and trusts, and $45,000 for unmarried individuals.

(b) The exemption amount determined under this subdivision is subject to the phase out
under section deleted text begin 55(d)(3)deleted text end new text begin 55(d)(2)new text end of the Internal Revenue Code, except that alternative
minimum taxable income as determined under this section must be substituted in the
computation of the phase outnew text begin , and section 55(d)(4) of the Internal Revenue Code does not
applynew text end .

(c) deleted text begin For taxable years beginning after December 31, 2006,deleted text end new text begin The commissioner shall
annually adjustnew text end the deleted text begin exemption amount underdeleted text end new text begin amounts innew text end paragraph (a) deleted text begin must be adjusted for
inflation. The commissioner shall adjust the exemption amount by the percentage determined
pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section
1(f)(3)(B) the word "2005" shall be substituted for the word "1992." For 2007, the
commissioner shall then determine the percent change from the 12 months ending on August
31, 2005, to the 12 months ending on August 31, 2006, and in each subsequent year, from
the 12 months ending on August 31, 2005, to the 12 months ending on August 31 of the
year preceding the taxable year. The exemption amount as adjusted must be rounded to the
nearest $10. If the amount ends in $5, it must be rounded up to the nearest $10 amount. The
determination of the commissioner under this subdivision is not a rule under the
Administrative Procedure Actdeleted text end new text begin as provided in section 270C.22. The statutory year is taxable
year 2019new text end .

new text begin EFFECTIVE DATE. new text end

new text begin (a) The amendment to paragraph (b) is effective the day following
final enactment.
new text end

new text begin (b) The amendment to paragraph (c) is effective for taxable years beginning after
December 31, 2019.
new text end

Sec. 52.

Minnesota Statutes 2018, section 290.0921, subdivision 2, is amended to read:

Subd. 2.

Definitions.

(a) For purposes of this section, the following terms have the
meanings given them.

(b) "Alternative minimum taxable net income" is alternative minimum taxable income,

(1) less the exemption amount, and

(2) apportioned or allocated to Minnesota under section 290.17, 290.191, or 290.20.

(c) The "exemption amount" is $40,000, reduced, but not below zero, by 25 percent of
the excess of alternative minimum taxable income over $150,000.

(d) "Minnesota alternative minimum taxable income" is alternative minimum taxable
net income, less the deductions for alternative tax net operating loss under subdivision 4;
and dividends received under subdivision 6. The sum of the deductions under this paragraph
may not exceed 90 percent of alternative minimum taxable net income. This limitation does
not apply to:

(1) a deduction for dividends paid to or received from a corporation which is subject to
tax under section 290.36 and which is a member of an affiliated group of corporations as
defined by the Internal Revenue Code; or

(2) a deduction for dividends received from a property and casualty insurer as defined
under section 60A.60, subdivision 8, which is a member of an affiliated group of corporations
as defined by the Internal Revenue Code and either: (i) the dividend is eliminated in
consolidation under Treasury Regulation 1.1502-14(a), as amended through December 31,
1989; or (ii) the dividend is deducted under an election under section 243(b) of the Internal
Revenue Code.

new text begin (e) "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
through December 16, 2016.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 53.

Minnesota Statutes 2018, 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) 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 290.0133, subdivision 11, is disallowed in determining alternative minimum taxable
income.

(2) The subtraction for depreciation allowed under section 290.0134, subdivision 13, is
allowed as a depreciation deduction in determining alternative minimum taxable income.

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

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

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

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

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

(8) 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.

(9) 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 290.0134, subdivision 2, or (ii) the amount of refunds of
income, excise, or franchise taxes subtracted as provided in section 290.0134, subdivision
8.

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

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

new text begin (11) The subtraction for disallowed section 280E expenses under section 290.0134,
subdivision 19, is allowed as a deduction in determining alternative minimum taxable
income.
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, 2018.
new text end

Sec. 54.

Minnesota Statutes 2018, section 290.0922, subdivision 1, is amended to read:

Subdivision 1.

Imposition.

(a) In addition to the tax imposed by this chapter without
regard to this section, the franchise tax imposed on a corporation required to file under
section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation under
section 290.9725 for the taxable year includes a tax equal to the following amounts:

If the sum of the corporation's Minnesota property, payrolls, and sales or receipts is:						the tax equals:
		less than		$	930,000	$	0
	$	930,000	to	$	1,869,999	$	190
	$	1,870,000	to	$	9,339,999	$	560
	$	9,340,000	to	$	18,679,999	$	1,870
	$	18,680,000	to	$	37,359,999	$	3,740
	$	37,360,000	or	more		$	9,340

(b) A tax is imposed for each taxable year on a corporation required to file a return under
section 289A.12, subdivision 3, that is treated as an "S" corporation under section 290.9725
and on a partnership required to file a return under section 289A.12, subdivision 3, other
than a partnership that derives over 80 percent of its income from farming. The tax imposed
under this paragraph is due on or before the due date of the return for the taxpayer due under
section 289A.18, subdivision 1. The commissioner shall prescribe the return to be used for
payment of this tax. The tax under this paragraph is equal to the following amounts:

If the sum of the S corporation's or partnership's Minnesota property, payrolls, and sales or receipts is:						the tax equals:
		less than		$	930,000	$	0
	$	930,000	to	$	1,869,999	$	190
	$	1,870,000	to	$	9,339,999	$	560
	$	9,340,000	to	$	18,679,999	$	1,870
	$	18,680,000	to	$	37,359,999	$	3,740
	$	37,360,000	or	more		$	9,340

(c) The commissioner shall new text begin annually new text end adjust the dollar amounts of both the tax and the
property, payrolls, and sales or receipts thresholds in paragraphs (a) and (b) deleted text begin by the percentage
determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except
that in section 1(f)(3)(B) the word "2012" must be substituted for the word "1992." For
2014, the commissioner shall determine the percentage change from the 12 months ending
on August 31, 2012, to the 12 months ending on August 31, 2013, and in each subsequent
year, from the 12 months ending on August 31, 2012, to the 12 months ending on August
31 of the year preceding the taxable year. The determination of the commissioner pursuant
to this subdivision is not a "rule" subject to the Administrative Procedure Act contained in
chapter 14deleted text end new text begin as provided in section 270C.22. The statutory year is taxable year 2019new text end . The tax
amounts as adjusted must be rounded to the nearest $10 amount and the threshold amounts
must be adjusted to the nearest $10,000 amount. For tax amounts that end in $5, the amount
is rounded up to the nearest $10 amount and for the threshold amounts that end in $5,000,
the amount is rounded up to the nearest $10,000.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for adjustments beginning with taxable
years beginning after December 31, 2019.
new text end

Sec. 55.

Minnesota Statutes 2018, section 290.095, subdivision 2, is amended to read:

Subd. 2.

Defined and limited.

(a) The term "net operating loss" as used in this section
shall mean a net operating loss as defined in section 172(c) of the Internal Revenue Code,
with the modifications specified in subdivision 4. The deductions provided in section 290.21
cannot be used in the determination of a net operating loss.

(b) The term "net operating loss deduction" as used in this section means the aggregate
of the net operating loss carryovers to the taxable year, computed in accordance with
subdivision 3. The provisions of section 172(b) of the Internal Revenue Code relating to
the carryback of net operating losses, do not apply.

new text begin (c) The amount of net operating loss deduction under this section must not exceed 80
percent of taxable net income in a single taxable year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2017.
new text end

Sec. 56.

Minnesota Statutes 2018, section 290.17, subdivision 2, is amended to read:

Subd. 2.

Income not derived from conduct of a trade or business.

The income of a
taxpayer subject to the allocation rules that is not derived from the conduct of a trade or
business must be assigned in accordance with paragraphs (a) to (f):

(a)(1) Subject to paragraphs (a)(2) and (a)(3), income from wages as defined in section
3401(a) deleted text begin anddeleted text end new text begin ,new text end (f)new text begin , and (i)new text end of the Internal Revenue Code is assigned to this state if, and to the
extent that, the work of the employee is performed within it; all other income from such
sources is treated as income from sources without this state.

Severance pay shall be considered income from labor or personal or professional services.

(2) In the case of an individual who is a nonresident of Minnesota and who is an athlete
or entertainer, income from compensation for labor or personal services performed within
this state shall be determined in the following manner:

(i) the amount of income to be assigned to Minnesota for an individual who is a
nonresident salaried athletic team employee shall be determined by using a fraction in which
the denominator contains the total number of days in which the individual is under a duty
to perform for the employer, and the numerator is the total number of those days spent in
Minnesota. For purposes of this paragraph, off-season training activities, unless conducted
at the team's facilities as part of a team imposed program, are not included in the total number
of duty days. Bonuses earned as a result of play during the regular season or for participation
in championship, play-off, or all-star games must be allocated under the formula. Signing
bonuses are not subject to allocation under the formula if they are not conditional on playing
any games for the team, are payable separately from any other compensation, and are
nonrefundable; and

(ii) the amount of income to be assigned to Minnesota for an individual who is a
nonresident, and who is an athlete or entertainer not listed in item (i), for that person's athletic
or entertainment performance in Minnesota shall be determined by assigning to this state
all income from performances or athletic contests in this state.

(3) For purposes of this section, amounts received by a nonresident as "retirement income"
as defined in section (b)(1) of the State Income Taxation of Pension Income Act, Public
Law 104-95, are not considered income derived from carrying on a trade or business or
from wages or other compensation for work an employee performed in Minnesota, and are
not taxable under this chapter.

(b) Income or gains from tangible property located in this state that is not employed in
the business of the recipient of the income or gains must be assigned to this state.

(c) Income or gains from intangible personal property not employed in the business of
the recipient of the income or gains must be assigned to this state if the recipient of the
income or gains is a resident of this state or is a resident trust or estate.

Gain on the sale of a partnership interest is allocable to this state in the ratio of the
original cost of partnership tangible property in this state to the original cost of partnership
tangible property everywhere, determined at the time of the sale. If more than 50 percent
of the value of the partnership's assets consists of intangibles, gain or loss from the sale of
the partnership interest is allocated to this state in accordance with the sales factor of the
partnership for its first full tax period immediately preceding the tax period of the partnership
during which the partnership interest was sold.

Gain on the sale of an interest in a single member limited liability company that is
disregarded for federal income tax purposes is allocable to this state as if the single member
limited liability company did not exist and the assets of the limited liability company are
personally owned by the sole member.

Gain on the sale of goodwill or income from a covenant not to compete that is connected
with a business operating all or partially in Minnesota is allocated to this state to the extent
that the income from the business in the year preceding the year of sale was allocable to
Minnesota under subdivision 3.

When an employer pays an employee for a covenant not to compete, the income allocated
to this state is in the ratio of the employee's service in Minnesota in the calendar year
preceding leaving the employment of the employer over the total services performed by the
employee for the employer in that year.

(d) Income from winnings on a bet made by an individual while in Minnesota is assigned
to this state. In this paragraph, "bet" has the meaning given in section 609.75, subdivision
2, as limited by section 609.75, subdivision 3, clauses (1), (2), and (3).

(e) All items of gross income not covered in paragraphs (a) to (d) and not part of the
taxpayer's income from a trade or business shall be assigned to the taxpayer's domicile.

(f) For the purposes of this section, working as an employee shall not be considered to
be conducting a trade or business.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for wages paid after
December 31, 2017.
new text end

Sec. 57.

Minnesota Statutes 2018, section 290.21, is amended by adding a subdivision to
read:

new text begin Subd. 9. new text end

new text begin Controlled foreign corporations. new text end

new text begin The net income of a domestic corporation
that is included pursuant to section 951 of the Internal Revenue Code is dividend income.
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. 58.

Minnesota Statutes 2018, section 290.34, is amended by adding a subdivision to
read:

new text begin Subd. 5. new text end

new text begin Interest limitation. new text end

new text begin The interest expense limitation under section 163(j) of the
Internal Revenue Code must be computed using the combined report entities included in
the unitary group under section 290.17, subdivision 4. The limitation must be aggregated
between combined report entities consistent with the application to a consolidated group
for federal income tax purposes.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2017.
new text end

Sec. 59.

Minnesota Statutes 2018, section 290.92, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(1) Wages. For purposes of this section, the term "wages"
means the same as that term is defined in section 3401(a) deleted text begin anddeleted text end new text begin ,new text end (f)new text begin , and (i)new text end of the Internal
Revenue Code.

(2) Payroll period. For purposes of this section the term "payroll period" means a period
for which a payment of wages is ordinarily made to the employee by the employee's
employer, and the term "miscellaneous payroll period" means a payroll period other than a
daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual, or annual payroll
period.

(3) Employee. For purposes of this section the term "employee" means any resident
individual performing services for an employer, either within or without, or both within and
without the state of Minnesota, and every nonresident individual performing services within
the state of Minnesota, the performance of which services constitute, establish, and determine
the relationship between the parties as that of employer and employee. As used in the
preceding sentence, the term "employee" includes an officer of a corporation, and an officer,
employee, or elected official of the United States, a state, or any political subdivision thereof,
or the District of Columbia, or any agency or instrumentality of any one or more of the
foregoing.

(4) Employer. For purposes of this section the term "employer" means any person,
including individuals, fiduciaries, estates, trusts, partnerships, limited liability companies,
and corporations transacting business in or deriving any income from sources within the
state of Minnesota for whom an individual performs or performed any service, of whatever
nature, as the employee of such person, except that if the person for whom the individual
performs or performed the services does not have control of the payment of the wages for
such services, the term "employer," except for purposes of paragraph (1), means the person
having control of the payment of such wages. As used in the preceding sentence, the term
"employer" includes any corporation, individual, estate, trust, or organization which is
exempt from taxation under section 290.05 and further includes, but is not limited to, officers
of corporations who have control, either individually or jointly with another or others, of
the payment of the wages.

(5) Number of withholding exemptions claimed. For purposes of this section, the term
"number of withholding exemptions claimed" means the number of withholding exemptions
claimed in a withholding exemption certificate in effect under subdivision 5, except that if
no such certificate is in effect, the number of withholding exemptions claimed shall be
considered to be zero.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2017.
new text end

Sec. 60.

Minnesota Statutes 2018, section 290.92, subdivision 5, is amended to read:

Subd. 5.

Exemptions.

(1) Entitlement. An employee receiving wages shall on any day
be entitled to claim withholding exemptions in a number not to exceed the number of
withholding exemptions that the employee claims and that are allowable pursuant to section
3402(f)(1), (m), and (n) of the Internal Revenue Code for federal withholding purposesnew text begin ,
except:
new text end

new text begin (i) the standard deduction amount for the purposes of section 3402(f)(1)(E) of the Internal
Revenue Code shall be the amount calculated under section 290.0123, subdivision 1; and
new text end

new text begin (ii) the exemption amount for the purposes of section 3402(f)(1)(A) of the Internal
Revenue Code shall be the amount calculated under section 290.0121, subdivision 1new text end .

(2) Withholding exemption certificate. The provisions concerning exemption certificates
contained in section 3402(f)(2) and (3) of the Internal Revenue Code shall apply.

(3) Form of certificate. Withholding exemption certificates shall be in such form and
contain such information as the commissioner may by rule prescribe.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 61.

new text begin [290.993] SPECIAL LIMITED ADJUSTMENT.
new text end

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

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

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

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

new text begin EFFECTIVE DATE. new text end

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

Sec. 62.

Minnesota Statutes 2018, section 290A.03, subdivision 3, is amended to read:

Subd. 3.

Income.

(a) "Income" means the sum of the following:

(1) federal adjusted gross income as defined in the Internal Revenue Code; and

(2) the sum of the following amounts to the extent not included in clause (1):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not disallowed as a result of section 469,
paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity loss
carryover allowed under section 469(b) of the Internal Revenue Code;

(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a
solvent individual excluded from gross income under section 108(g) of the Internal Revenue
Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement benefits, all payments received
under the federal Social Security Act, Supplemental Security Income, and veterans benefits),
which was not exclusively funded by the claimant or spouse, or which was funded exclusively
by the claimant or spouse and which funding payments were excluded from federal adjusted
gross income in the years when the payments were made;

(vi) interest received from the federal or a state government or any instrumentality or
political subdivision thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature of disability income or sick
pay as a result of accident, sickness, or other disability, whether funded through insurance
or otherwise;

(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of
1986, as amended through December 31, 1995;

(xi) contributions made by the claimant to an individual retirement account, including
a qualified voluntary employee contribution; simplified employee pension plan;
self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of
the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal
Revenue Code, to the extent the sum of amounts exceeds the retirement base amount for
the claimant and spouse;

(xii) to the extent not included in federal adjusted gross income, distributions received
by the claimant or spouse from a traditional or Roth style retirement account or plan;

(xiii) nontaxable scholarship or fellowship grants;

(xiv) deleted text begin the amount of deduction allowed under section 199 of the Internal Revenue Codedeleted text end new text begin
alimony received to the extent not included in the recipient's incomenew text end ;

(xv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue
Code;

(xvi) the amount deducted for tuition expenses under section 222 of the Internal Revenue
Code; and

(xvii) the amount deducted for certain expenses of elementary and secondary school
teachers under section 62(a)(2)(D) of the Internal Revenue Code.

In the case of an individual who files an income tax return on a fiscal year basis, the
term "federal adjusted gross income" shall mean federal adjusted gross income reflected in
the fiscal year ending in the calendar year. Federal adjusted gross income shall not be reduced
by the amount of a net operating loss carryback or carryforward or a capital loss carryback
or carryforward allowed for the year.

(b) "Income" does not include:

(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;

(2) amounts of any pension or annuity which was exclusively funded by the claimant
or spouse and which funding payments were not excluded from federal adjusted gross
income in the years when the payments were made;

(3) to the extent included in federal adjusted gross income, amounts contributed by the
claimant or spouse to a traditional or Roth style retirement account or plan, but not to exceed
the retirement base amount reduced by the amount of contributions excluded from federal
adjusted gross income, but not less than zero;

(4) surplus food or other relief in kind supplied by a governmental agency;

(5) relief granted under this chapter;

(6) child support payments received under a temporary or final decree of dissolution or
legal separation; deleted text begin or
deleted text end

(7) restitution payments received by eligible individuals and excludable interest as
defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001,
Public Law 107-16deleted text begin .deleted text end new text begin ; or
new text end

new text begin (8) alimony paid.
new text end

(1) for the claimant's first dependent, the exemption amount multiplied by 1.4;

(2) for the claimant's second dependent, the exemption amount multiplied by 1.3;

(3) for the claimant's third dependent, the exemption amount multiplied by 1.2;

(4) for the claimant's fourth dependent, the exemption amount multiplied by 1.1;

(5) for the claimant's fifth dependent, the exemption amount; and

(6) if the claimant or claimant's spouse was disabled or attained the age of 65 on or
before December 31 of the year for which the taxes were levied or rent paid, the exemption
amount.

(d) For purposes of this subdivision, thenew text begin following terms have the meanings given:
new text end

new text begin (1) new text end "exemption amount" means the exemption amount under section deleted text begin 151(d) of the Internal
Revenue Codedeleted text end new text begin 290.0121, subdivision 1, paragraph (b),new text end for the taxable year for which the
income is reported;

new text begin (2)new text end "retirement base amount" means the deductible amount for the taxable year for the
claimant and spouse under section 219(b)(5)(A) of the Internal Revenue Code, adjusted for
inflation as provided in section 219(b)(5)(C) of the Internal Revenue Code, without regard
to whether the claimant or spouse claimed a deduction; and

new text begin (3)new text end "traditional or Roth style retirement account or plan" means retirement plans under
sections 401, 403, 408, 408A, and 457 of the Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with refunds based on property
taxes payable in 2020 and rent paid in 2019.
new text end

Sec. 63.

Minnesota Statutes 2018, section 290A.03, subdivision 12, is amended to read:

Subd. 12.

Gross rent.

(a) "Gross rent" means rental paid for the right of occupancy, at
arm's length, of a homestead, exclusive of charges for any medical services furnished by
the landlord as a part of the rental agreement, whether expressly set out in the rental
agreement or not.

(b) The gross rent of a resident of a nursing home or intermediate care facility is $350
per month. The gross rent of a resident of an adult foster care home is $550 per month.
deleted text begin Beginning for rent paid in 2002,deleted text end The commissioner shall annually adjust deleted text begin for inflationdeleted text end the
deleted text begin gross rentdeleted text end amounts deleted text begin stateddeleted text end in this paragraphdeleted text begin . The adjustment must be made in accordance
with section 1(f) of the Internal Revenue Code, except that for purposes of this paragraph
the percentage increase shall be determined from the year ending on June 30, 2001, to the
year ending on June 30 of the year in which the rent is paid. The commissioner shall round
the gross rents to the nearest $10 amount. If the amount ends in $5, the commissioner shall
round it up to the next $10 amount. The determination of the commissioner under this
paragraph is not a rule under the Administrative Procedure Actdeleted text end new text begin as provided in section
270C.22. The statutory year is 2018new text end .

(c) If the landlord and tenant have not dealt with each other at arm's length and the
commissioner determines that the gross rent charged was excessive, the commissioner may
adjust the gross rent to a reasonable amount for purposes of this chapter.

(d) Any amount paid by a claimant residing in property assessed pursuant to section
273.124, subdivision 3, 4, 5, or 6 for occupancy in that property shall be excluded from
gross rent for purposes of this chapter. However, property taxes imputed to the homestead
of the claimant or the dwelling unit occupied by the claimant that qualifies for homestead
treatment pursuant to section 273.124, subdivision 3, 4, 5, or 6 shall be included within the
term "property taxes payable" as defined in subdivision 13, notwithstanding the fact that
ownership is not in the name of the claimant.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for adjustments beginning with refunds
based on rent paid in 2019.
new text end

Sec. 64.

Minnesota Statutes 2018, 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 December 16, 2016deleted text end new text begin December 31, 2018new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with refunds based on property
taxes payable in 2020 and rent paid in 2019.
new text end

Sec. 65.

Minnesota Statutes 2018, section 290A.04, subdivision 4, is amended to read:

Subd. 4.

Inflation adjustment.

deleted text begin (a) Beginning for property tax refunds payable in calendar
year 2002,deleted text end The commissioner shall annually adjust the dollar amounts of the income
thresholds and the maximum refunds under subdivisions 2 and 2a deleted text begin for inflation. The
commissioner shall make the inflation adjustments in accordance with section 1(f) of the
Internal Revenue Code, except that for purposes of this subdivision the percentage increase
shall be determined as provided in this subdivisiondeleted text end new text begin as provided in section 270C.22. The
statutory year is 2018new text end .

deleted text begin (b) In adjusting the dollar amounts of the income thresholds and the maximum refunds
under subdivision 2 for inflation, the percentage increase shall be determined from the year
ending on June 30, 2013, to the year ending on June 30 of the year preceding that in which
the refund is payable.
deleted text end

deleted text begin (c) In adjusting the dollar amounts of the income thresholds and the maximum refunds
under subdivision 2a for inflation, the percentage increase shall be determined from the
year ending on June 30, 2013, to the year ending on June 30 of the year preceding that in
which the refund is payable.
deleted text end

deleted text begin (d) The commissioner shall use the appropriate percentage increase to annually adjust
the income thresholds and maximum refunds under subdivisions 2 and 2a for inflation
without regard to whether or not the income tax brackets are adjusted for inflation in that
year. The commissioner shall round the thresholds and the maximum amounts, as adjusted
to the nearest $10 amount. If the amount ends in $5, the commissioner shall round it up to
the next $10 amount.
deleted text end

deleted text begin (e)deleted text end deleted text begin The commissioner shall annually announce the adjusted refund schedule at the same
time provided under section 290.06. The determination of the commissioner under this
subdivision is not a rule under the Administrative Procedure Act.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for adjustments for refunds based on
rent paid in 2019 and property taxes payable in 2020.
new text end

Sec. 66.

Minnesota Statutes 2018, section 291.005, subdivision 1, is amended to read:

Subdivision 1.

Scope.

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

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

(2) "Federal gross estate" means the gross estate of a decedent as required to be valued
and otherwise determined for federal estate tax purposes under the Internal Revenue Code,
increased by the value of any property in which the decedent had a qualifying income interest
for life and for which an election was made under section 291.03, subdivision 1d, for
Minnesota estate tax purposes, but was not made for federal estate tax purposes.

(3) "Internal Revenue Code" means the United States Internal Revenue Code of 1986,
as amended through deleted text begin December 16, 2016deleted text end new text begin December 31, 2018new text end .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(iv) a trust to the extent the property is deleted text begin includibledeleted text end new text begin includablenew text end in the decedent's federal
gross estate; but excludes

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

new text begin EFFECTIVE DATE. new text end

Sec. 67.

Minnesota Statutes 2018, section 297A.68, subdivision 25, is amended to read:

Subd. 25.

Sale of property used in a trade or business.

(a) The sale of tangible personal
property primarily used in a trade or business is exempt if the sale is not made in the normal
course of business of selling that kind of property and if one of the following conditions is
satisfied:

(1) the sale occurs in a transaction subject to or described in section 118, 331, 332, 336,
337, 338, 351, 355, 368, 721, 731, 1031, or 1033 of the Internal Revenue Codenew text begin , as amended
through December 16, 2016new text end ;

(2) the sale is between members of a controlled group as defined in section 1563(a) of
the Internal Revenue Code;

(3) the sale is a sale of farm machinery;

(4) the sale is a farm auction sale;

(5) the sale is a sale of substantially all of the assets of a trade or business; or

(6) the total amount of gross receipts from the sale of trade or business property made
during the calendar month of the sale and the preceding 11 calendar months does not exceed
$1,000.

The use, storage, distribution, or consumption of tangible personal property acquired as
a result of a sale exempt under this subdivision is also exempt.

(b) For purposes of this subdivision, the following terms have the meanings given.

(1) A "farm auction" is a public auction conducted by a licensed auctioneer if substantially
all of the property sold consists of property used in the trade or business of farming and
property not used primarily in a trade or business.

(2) "Trade or business" includes the assets of a separate division, branch, or identifiable
segment of a trade or business if, before the sale, the income and expenses attributable to
the separate division, branch, or identifiable segment could be separately ascertained from
the books of account or record (the lease or rental of an identifiable segment does not qualify
for the exemption).

(3) A "sale of substantially all of the assets of a trade or business" must occur as a single
transaction or a series of related transactions within the 12-month period beginning on the
date of the first sale of assets intended to qualify for the exemption provided in paragraph
(a), clause (5).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for sales and purchases
made after December 31, 2017.
new text end

Sec. 68.

Minnesota Statutes 2018, section 297B.03, is amended to read:

297B.03 EXEMPTIONS.

There is specifically exempted from the provisions of this chapter and from computation
of the amount of tax imposed by it the following:

(1) purchase or use, including use under a lease purchase agreement or installment sales
contract made pursuant to section 465.71, of any motor vehicle by the United States and its
agencies and instrumentalities and by any person described in and subject to the conditions
provided in section 297A.67, subdivision 11;

(2) purchase or use of any motor vehicle by any person who was a resident of another
state or country at the time of the purchase and who subsequently becomes a resident of
Minnesota, provided the purchase occurred more than 60 days prior to the date such person
began residing in the state of Minnesota and the motor vehicle was registered in the person's
name in the other state or country;

(3) purchase or use of any motor vehicle by any person making a valid election to be
taxed under the provisions of section 297A.90;

(4) purchase or use of any motor vehicle previously registered in the state of Minnesota
when such transfer constitutes a transfer within the meaning of section 118, 331, 332, 336,
337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 1563(a) of the Internal Revenue Codenew text begin ,
as amended through December 16, 2016new text end ;

(5) purchase or use of any vehicle owned by a resident of another state and leased to a
Minnesota-based private or for-hire carrier for regular use in the transportation of persons
or property in interstate commerce provided the vehicle is titled in the state of the owner or
secured party, and that state does not impose a sales tax or sales tax on motor vehicles used
in interstate commerce;

(6) purchase or use of a motor vehicle by a private nonprofit or public educational
institution for use as an instructional aid in automotive training programs operated by the
institution. "Automotive training programs" includes motor vehicle body and mechanical
repair courses but does not include driver education programs;

(7) purchase of a motor vehicle by an ambulance service licensed under section 144E.10
when that vehicle is equipped and specifically intended for emergency response or for
providing ambulance service;

(8) purchase of a motor vehicle by or for a public library, as defined in section 134.001,
subdivision 2, as a bookmobile or library delivery vehicle;

(9) purchase of a ready-mixed concrete truck;

(10) purchase or use of a motor vehicle by a town for use exclusively for road
maintenance, including snowplows and dump trucks, but not including automobiles, vans,
or pickup trucks;

(11) purchase or use of a motor vehicle by a corporation, society, association, foundation,
or institution organized and operated exclusively for charitable, religious, or educational
purposes, except a public school, university, or library, but only if the vehicle is:

(i) a truck, as defined in section 168.002, a bus, as defined in section 168.002, or a
passenger automobile, as defined in section 168.002, if the automobile is designed and used
for carrying more than nine persons including the driver; and

(ii) intended to be used primarily to transport tangible personal property or individuals,
other than employees, to whom the organization provides service in performing its charitable,
religious, or educational purpose;

(12) purchase of a motor vehicle for use by a transit provider exclusively to provide
transit service is exempt if the transit provider is either (i) receiving financial assistance or
reimbursement under section 174.24 or 473.384, or (ii) operating under section 174.29,
473.388, or 473.405;

(13) purchase or use of a motor vehicle by a qualified business, as defined in section
469.310, located in a job opportunity building zone, if the motor vehicle is principally
garaged in the job opportunity building zone and is primarily used as part of or in direct
support of the person's operations carried on in the job opportunity building zone. The
exemption under this clause applies to sales, if the purchase was made and delivery received
during the duration of the job opportunity building zone. The exemption under this clause
also applies to any local sales and use tax;

(14) purchase of a leased vehicle by the lessee who was a participant in a lease-to-own
program from a charitable organization that is:

(i) described in section 501(c)(3) of the Internal Revenue Code; and

(ii) licensed as a motor vehicle lessor under section 168.27, subdivision 4; and

(15) purchase of a motor vehicle used exclusively as a mobile medical unit for the
provision of medical or dental services by a federally qualified health center, as defined
under title 19 of the Social Security Act, as amended by Section 4161 of the Omnibus Budget
Reconciliation Act of 1990.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for sales and purchases
made after December 31, 2017.
new text end

Sec. 69.

Minnesota Statutes 2018, section 462D.06, subdivision 1, is amended to read:

Subdivision 1.

Subtraction.

(a) As provided in section 290.0132, subdivision 25, an
account holder is allowed a subtraction from deleted text begin thedeleted text end federal deleted text begin taxabledeleted text end new text begin adjusted grossnew text end income equal
to interest or dividends earned on the first-time home buyer savings account during the
taxable year.

(b) The subtraction under paragraph (a) is allowed each year for the taxable years
including and following the taxable year in which the account was established. No person
other than the account holder is allowed a subtraction under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 70.

Minnesota Statutes 2018, section 462D.06, subdivision 2, is amended to read:

Subd. 2.

Addition.

(a) As provided in section 290.0131, subdivision 14, an account
holder must add to federal deleted text begin taxabledeleted text end new text begin adjusted grossnew text end income the following amounts:

(1) the amount in excess of the total contributions for all taxable years that is withdrawn
and used for other than eligible costs, or for a transfer permitted under section 462D.04,
subdivision 2; and

(2) the amount remaining in the first-time home buyer savings account at the close of
the tenth taxable year that exceeds the total contributions to the account for all taxable years.

(b) For an account that received a transfer under section 462D.04, subdivision 2, the
ten-year period under paragraph (a), clause (2), ends at the close of the earliest taxable year
that applies to either account under that clause.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 71.

Minnesota Statutes 2018, section 469.316, subdivision 1, is amended to read:

Subdivision 1.

Application.

An individual, estate, or trust operating a trade or business
in a job opportunity building zone, and an individual, estate, or trust making a qualifying
investment in a qualified business operating in a job opportunity building zone qualifies for
the exemptions from taxes imposed under chapter 290, as provided in this section. The
exemptions provided under this section apply only to the extent that the income otherwise
would be taxable under chapter 290. Subtractions under this section from new text begin federal adjusted
gross income, new text end federal taxable income, alternative minimum taxable income, or any other
base subject to tax are limited to the amount that otherwise would be included in the tax
base absent the exemption under this section. This section applies only to taxable years
beginning during the duration of the job opportunity building zone.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 72. new text begin SPECIAL PROVISION FOR TAX YEAR 2017.
new text end

new text begin Notwithstanding any law to the contrary or other provision of this article, sections 40202
and 40203 of Public Law 115-123 shall not apply for the purpose of calculating net income
under Minnesota Statutes, section 290.01, subdivision 6, for taxable years beginning after
December 31, 2016, and before January 1, 2018.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2016, and before January 1, 2018.
new text end

Sec. 73. new text begin REVISOR INSTRUCTION.
new text end

new text begin The commissioner of revenue must promptly notify the revisor of statutes in writing of
the adjusted statutory year amounts for each of the statutory sections that are indexed for
inflation under Minnesota Statutes, section 270C.22. The revisor shall publish the updated
statutory amounts in the 2019 Supplement of Minnesota Statutes.
new text end

Sec. 74. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2018, sections 290.0131, subdivisions 7, 11, 12, and 13; 290.0132,
subdivision 8; 290.0133, subdivisions 13 and 14; and 290.10, subdivision 2, new text end new text begin are repealed.
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, 2018.
new text end

ARTICLE 2

INDIVIDUAL INCOME, CORPORATE FRANCHISE, AND ESTATE TAXES

Section 1.

Minnesota Statutes 2018, section 116J.8737, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

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

(b) "Qualified small business" means a business that has been certified by the
commissioner under subdivision 2.

(d) "Qualified fund" means a pooled angel investment network fund that has been certified
by the commissioner under subdivision 4.

(e) "Qualified investment" means a cash investment in a qualified small business of a
minimum of:

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

new text begin (2) $7,500 in a calendar year by a qualified investor in qualified greater Minnesota
businesses, or veteran-owned, minority-owned, or women-owned businesses in Minnesota;
or
new text end

deleted text begin (2)deleted text end new text begin (3)new text end $30,000 in a calendar year by a qualified fund.

A qualified investment must be made 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.

(f) "Family" means a family member within the meaning of the Internal Revenue Code,
section 267(c)(4).

(g) "Pass-through entity" means a corporation that for the applicable taxable year is
treated as an S corporation or a general partnership, limited partnership, limited liability
partnership, trust, or limited liability company and which for the applicable taxable year is
not taxed as a corporation under chapter 290.

(h) "Intern" means a student of an accredited institution of higher education, or a former
student who has graduated in the past six months from an accredited institution of higher
education, who is employed by a qualified small business in a nonpermanent position for
a duration of nine months or less that provides training and experience in the primary
business activity of the business.

(i) "Liquidation event" means a conversion of qualified investment for cash, cash and
other consideration, or any other form of equity or debt interest.

(j) "Qualified greater Minnesota business" means a qualified small business that is also
certified by the commissioner as a qualified greater Minnesota business under subdivision
2, paragraph (h).

(k) "Minority group member" means a United States citizen who is Asian, Pacific
Islander, Black, Hispanic, or Native American.

(l) "Minority-owned business" means a business for which one or more minority group
members:

(1) own at least 50 percent of the business, or, in the case of a publicly owned business,
own at least 51 percent of the stock; and

(2) manage the business and control the daily business operations.

(m) "Women" means persons of the female gender.

(n) "Women-owned business" means a business for which one or more women:

(1) own at least 50 percent of the business, or, in the case of a publicly owned business,
own at least 51 percent of the stock; and

(2) manage the business and control the daily business operations.

new text begin (o) "Veteran" has the meaning given in section 197.447.
new text end

new text begin (p) "Veteran-owned business" means a business for which one or more veterans:
new text end

new text begin (1) own at least 50 percent of the business, or, in the case of a publicly owned business,
own at least 51 percent of the stock; and
new text end

new text begin (2) manage the business and control the daily business operations.
new text end

deleted text begin (o)deleted text end new text begin (q)new text end "Officer" means a person elected or appointed by the board of directors to manage
the daily operations of the qualified small business.

deleted text begin (p)deleted text end new text begin (r)new text end "Principal" means a person having authority to act on behalf of the qualified small
business.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 2.

Minnesota Statutes 2018, section 116J.8737, subdivision 2, is amended to read:

Subd. 2.

Certification of qualified small businesses.

(a) Businesses may apply to the
commissioner for certification as a qualified small business or qualified greater Minnesota
small business for a calendar year. The application must be in the form and be made under
the procedures specified by the commissioner, accompanied by an application fee of $150.
Application fees are deposited in the small business investment tax credit administration
account in the special revenue fund. deleted text begin The application for certification for 2010 must be made
available on the department's website by August 1, 2010.deleted text end Applications for deleted text begin subsequent years'deleted text end
certification must be made available on the department's website by November 1 of the
preceding year.

(b) Within 30 days of receiving an application for certification under this subdivision,
the commissioner must either certify the business as satisfying the conditions required of a
qualified small business or qualified greater Minnesota small business, request additional
information from the business, or reject the application for certification. If the commissioner
requests additional information from the business, the commissioner must either certify the
business or reject the application within 30 days of receiving the additional information. If
the commissioner neither certifies the business nor rejects the application within 30 days
of receiving the original application or within 30 days of receiving the additional information
requested, whichever is later, then the application is deemed rejected, and the commissioner
must refund the $150 application fee. A business that applies for certification and is rejected
may reapply.

(1) the business has its headquarters in Minnesota;

(2) at least: (i) 51 percent of the business's employees are employed in Minnesota; (ii)
51 percent of the business's total payroll is paid or incurred in the state; and (iii) 51 percent
of the total value of all contractual agreements to which the business is a party in connection
with its primary business activity is for services performed under contract in Minnesota,
unless the business obtains a waiver under paragraph (i);

(3) the business is engaged in, or is committed to engage in, innovation in Minnesota in
one of the following as its primary business activity:

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

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

(iii) researching or developing a proprietary product, process, or service in the fields of
agriculture, tourism, forestry, mining, manufacturing, or transportation; or

(iv) researching, developing, or producing a new proprietary technology for use in the
fields of agriculture, tourism, forestry, mining, manufacturing, or transportation;

(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;

(5) the business has fewer than 25 employees;

(6) the business must pay its employees annual wages of at least 175 percent of the
federal poverty guideline for the year for a family of four and must pay its interns annual
wages of at least 175 percent of the federal minimum wage used for federally covered
employers, except that this requirement must be reduced proportionately for employees and
interns who work less than full-time, and does not apply to an executive, officer, or member
of the board of the business, or to any employee who owns, controls, or holds power to vote
more than 20 percent of the outstanding securities of the business;

(7) the business has (i) not been in operation for more than ten years, or (ii) not been in
operation for more than 20 years if the business is engaged in the research, development,
or production of medical devices or pharmaceuticals for which United States Food and Drug
Administration approval is required for use in the treatment or diagnosis of a disease or
condition;

(8) the business has not previously received private equity investments of more than
$4,000,000;

(9) the business is not an entity disqualified under section 80A.50, paragraph (b), clause
(3); and

(10) the business has not issued securities that are traded on a public exchange.

(d) In applying the limit under paragraph (c), clause (5), the employees in all members
of the unitary business, as defined in section 290.17, subdivision 4, must be included.

(e) In order for a qualified investment in a business to be eligible for tax credits:

(1) the business must have applied for and received certification for the calendar year
in which the investment was made prior to the date on which the qualified investment was
made;

(2) the business must not have issued securities that are traded on a public exchange;

(3) the business must not issue securities that are traded on a public exchange within
180 days after the date on which the qualified investment was made; and

(4) the business must not have a liquidation event within 180 days after the date on
which the qualified investment was made.

(f) The commissioner must maintain a list of qualified small businesses and qualified
greater Minnesota businesses certified under this subdivision for the calendar year and make
the list accessible to the public on the department's website.

(g) For purposes of this subdivision, the following terms have the meanings given:

(1) "qualified high-technology field" includes aerospace, agricultural processing,
renewable energy, energy efficiency and conservation, environmental engineering, food
technology, cellulosic ethanol, information technology, materials science technology,
nanotechnology, telecommunications, biotechnology, medical device products,
pharmaceuticals, diagnostics, biologicals, chemistry, veterinary science, and similar fields;

(2) "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; and

(3) "greater Minnesota" means the area of Minnesota located outside of the metropolitan
area as defined in section 473.121, subdivision 2.

(h) To receive certification as a qualified greater Minnesota business, a business must
satisfy all of the requirements of paragraph (c) and must satisfy the following conditions:

(1) the business has its headquarters in greater Minnesota; and

(2) at least: (i) 51 percent of the business's employees are employed in greater Minnesota;
(ii) 51 percent of the business's total payroll is paid or incurred in greater Minnesota; and
(iii) 51 percent of the total value of all contractual agreements to which the business is a
party in connection with its primary business activity is for services performed under contract
in greater Minnesota, unless the business obtains a waiver under paragraph (i).

(i) The commissioner must exempt a business from the requirement under paragraph
(c), clause (2), item (iii), if the business certifies to the commissioner that the services
required under a contract in connection with the primary business activity cannot be
performed in Minnesota if the business otherwise qualifies as a qualified small business, or
in greater Minnesota if the business otherwise qualifies as a qualified greater Minnesota
business. The business must submit the certification required under this paragraph every
six months from the month the exemption was granted. The exemption allowed under this
paragraph must be submitted in a form and manner prescribed by the commissioner.

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 2018, section 116J.8737, subdivision 3, is amended to read:

Subd. 3.

Certification of qualified investors.

(a) Investors may apply to the
commissioner for certification as a qualified investor for a taxable year. The application
must be in the form and be made under the procedures specified by the commissioner,
accompanied by an application fee of $350. Application fees are deposited in the small
business investment tax credit administration account in the special revenue fund. deleted text begin The
application for certification for 2010 must be made available on the department's website
by August 1, 2010.deleted text end Applications for deleted text begin subsequent years'deleted text end certification must be made available
on the department's website by November 1 of the preceding year.

(b) Within 30 days of receiving an application for certification under this subdivision,
the commissioner must either certify the investor as satisfying the conditions required of a
qualified investor, request additional information from the investor, or reject the application
for certification. If the commissioner requests additional information from the investor, the
commissioner must either certify the investor or reject the application within 30 days of
receiving the additional information. If the commissioner neither certifies the investor nor
rejects the application within 30 days of receiving the original application or within 30 days
of receiving the additional information requested, whichever is later, then the application
is deemed rejected, and the commissioner must refund the $350 application fee. An investor
who applies for certification and is rejected may reapply.

(c) To receive certification, an investor must (1) be a natural person; and (2) certify to
the commissioner that the investor will only invest in a transaction that is exempt under
section 80A.46, clause (13) or (14), in a security exempt under section 80A.461, or in a
security registered under section 80A.50, paragraph (b).

(d) In order for a qualified investment in a qualified small business to be eligible for tax
credits, a qualified investor who makes the investment must have applied for and received
certification for the calendar year prior to making the qualified investment, except in the
case of an investor who is not an accredited investor, within the meaning of Regulation D
of the Securities and Exchange Commission, Code of Federal Regulations, title 17, section
230.501, paragraph (a), application for certification may be made within 30 days after
making the qualified investment.

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 2018, section 116J.8737, subdivision 4, is amended to read:

Subd. 4.

Certification of qualified funds.

(a) A pass-through entity may apply to the
commissioner for certification as a qualified fund for a calendar year. 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. Application fees are deposited in the small business
investment tax credit administration account in the special revenue fund. deleted text begin The application
for certification for 2010 of qualified funds must be made available on the department's
website by August 1, 2010.deleted text end Applications for deleted text begin subsequent years'deleted text end certification must be made
available by November 1 of the preceding year.

(b) Within 30 days of receiving an application for certification under this subdivision,
the commissioner must either certify the fund as satisfying the conditions required of a
qualified fund, request additional information from the fund, or reject the application for
certification. If the commissioner requests additional information from the fund, the
commissioner must either certify the fund or reject the application within 30 days of receiving
the additional information. If the commissioner neither certifies the fund nor rejects the
application within 30 days of receiving the original application or within 30 days of receiving
the additional information requested, whichever is later, then the application is deemed
rejected, and the commissioner must refund the $1,000 application fee. A fund that applies
for certification and is rejected may reapply.

(1) invest or intend to invest in qualified small businesses;

(2) be organized as a pass-through entity; and

(3) have at least three separate investors, of whom at least three whose investment is
made in the certified business and who seek a tax credit allocation satisfy the conditions in
subdivision 3, paragraph (c).

(d) Investments in the fund may consist of equity investments or notes that pay interest
or other fixed amounts, or any combination of both.

(e) In order for a qualified investment in a qualified small business to be eligible for tax
credits, a qualified fund that makes the investment must have applied for and received
certification for the calendar year prior to making the qualified investment.

new text begin EFFECTIVE DATE. new text end

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

Sec. 5.

Minnesota Statutes 2018, section 116J.8737, subdivision 5, is amended to read:

Subd. 5.

Credit allowed.

(a)deleted text begin (1)deleted text end A qualified investor or qualified fund is eligible for a
credit equal to 25 percent of the qualified investment in a qualified small business.
Investments made by a pass-through entity qualify for a credit only if the entity is a qualified
fund. The commissioner must not allocate more than deleted text begin $15,000,000deleted text end new text begin $10,000,000new text end in credits
to qualified investors or qualified funds for new text begin the new text end taxable years deleted text begin beginning after December 31,
2013, and before January 1, 2017, and must not allocate more than $10,000,000 in credits
to qualified investors or qualified funds for taxable years beginning after December 31,
2016, and before January 1, 2018; and (2) for taxable years beginning after December 31,
2014, and before January 1, 2018,deleted text end new text begin listed in paragraph (i). For each taxable year,new text end 50 percent
must be allocated to credits for qualifying investments in qualified greater Minnesota
businesses and minority- or women-owned qualified small businesses in Minnesota. Any
portion of a taxable year's credits that is reserved for qualifying investments in greater
Minnesota businesses and minority- or women-owned qualified small businesses in
Minnesota that is not allocated by September 30 of the taxable year is available for allocation
to other credit applications beginning on October 1. Any portion of a taxable year's credits
that is not allocated by the commissioner does not cancel and may be carried forward to
subsequent taxable years until all credits have been allocated.

(b) The commissioner may not allocate more than a total maximum amount in credits
for a taxable year to a qualified investor for the investor's cumulative qualified investments
as an individual qualified investor and as an investor in a qualified fund; for married couples
filing joint returns the maximum is $250,000, and for all other filers the maximum is
$125,000. The commissioner may not allocate more than a total of $1,000,000 in credits
over all taxable years for qualified investments in any one qualified small business.

(c) The commissioner may not allocate a credit to a qualified investor either as an
individual qualified investor or as an investor in a qualified fund if, at the time the investment
is proposed:

(1) the investor is an officer or principal of the qualified small business; or

(2) the investor, either individually or in combination with one or more members of the
investor's family, owns, controls, or holds the power to vote 20 percent or more of the
outstanding securities of the qualified small business.

A member of the family of an individual disqualified by this paragraph is not eligible for a
credit under this section. For a married couple filing a joint return, the limitations in this
paragraph apply collectively to the investor and spouse. For purposes of determining the
ownership interest of an investor under this paragraph, the rules under section 267(c) and
267(e) of the Internal Revenue Code apply.

(d) Applications for tax credits for 2010 must be made available on the department's
website 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.

(e) Qualified investors and qualified funds must apply to the commissioner for tax credits.
Tax credits must be allocated to qualified investors or qualified funds in the order that the
tax credit request applications are filed with the department. The commissioner must approve
or reject tax credit request applications within 15 days of receiving the application. 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 credit allocation is canceled
and available for reallocation. A qualified investor or qualified fund that fails to invest as
specified in the application, within 60 days of allocation of the credits, must notify the
commissioner of the failure to invest within five business days of the expiration of the
60-day investment period.

(f) All tax credit request applications filed with the department on the same day must
be treated as having been filed contemporaneously. If two or more qualified investors or
qualified funds file tax credit request applications on the same day, and the aggregate amount
of credit allocation claims exceeds the aggregate limit of credits under this section or the
lesser amount of credits that remain unallocated on that day, then the credits must be allocated
among the qualified investors or qualified 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 investor
or qualified 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 investor 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
taxable year.

(g) A qualified investor or qualified fund, or a qualified small business acting on their
behalf, must notify the commissioner when an investment for which credits were allocated
has been made, and the taxable year in which the investment was made. A qualified fund
must also provide the commissioner with a statement indicating the amount invested by
each investor in the qualified fund based on each investor's share of the assets of the qualified
fund at the time of the qualified investment. After receiving notification that the investment
was made, the commissioner must issue credit certificates for the taxable year in which the
investment was made to the qualified investor or, for an investment made by a qualified
fund, to each qualified investor who is an investor in the fund. The certificate must state
that the credit is subject to revocation if the qualified investor or qualified fund does not
hold the investment in the qualified small business for at least three years, consisting of the
calendar year in which the investment was made and the two following years. The three-year
holding period does not apply if:

(1) the investment by the qualified investor or qualified fund becomes worthless before
the end of the three-year period;

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

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

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

(5) the qualified investor dies before the end of the three-year period.

(h) The commissioner must notify the commissioner of revenue of credit certificates
issued under this section.

new text begin (i) The credit allowed under this subdivision is effective for each of the following taxable
years:
new text end

new text begin (1) taxable years beginning after December 31, 2018, and before January 1, 2020; and
new text end

new text begin (2) taxable years beginning after December 31, 2020, and before January 1, 2022.
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, 2018.
new text end

Sec. 6.

Minnesota Statutes 2018, section 116J.8737, subdivision 6, is amended to read:

Subd. 6.

Annual reports.

(a) By February 1 of each year each qualified small business
that received an investment that qualified for a credit, and each qualified investor and
qualified fund that made an investment that qualified for a credit, must submit an annual
report to the commissioner and pay a filing fee of $100 as required under this subdivision.
Each qualified investor and qualified fund must submit reports for three years following
each year in which it made an investment that qualified for a credit, and each qualified small
business must submit reports for five years following the year in which it received an
investment qualifying for a credit. Reports must be made in the form required by the
commissioner. All filing fees collected are deposited in the small business investment tax
credit administration account in the special revenue fund.

(b) A report from a qualified small business must certify that the business satisfies the
following requirements:

(1) the business has its headquarters in Minnesota;

(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;

(3) that the business is engaged in, or is committed to engage in, innovation in Minnesota
as defined under subdivision 2; and

(4) that the business meets the payroll requirements in subdivision 2, paragraph (c),
clause (6).

(c) Reports from qualified investors must certify that the investor remains invested in
the qualified small business as required by subdivision 5, paragraph (g).

(d) Reports from qualified funds must certify that the fund remains invested in the
qualified small business as required by subdivision 5, paragraph (g).

(e) A qualified small business that ceases all operations and becomes insolvent must file
a final annual report in the form required by the commissioner documenting its insolvency.
In following years the business is exempt from the annual reporting requirement, the report
filing fee, and the fine for failure to file a report.

(f) A qualified small business, qualified investor, or qualified fund that fails to file an
annual reportnew text begin by February 1new text end as required under this subdivision is subject to a deleted text begin $500deleted text end new text begin $100new text end
fine.

new text begin (g) A qualified investor or qualified fund that fails to file an annual report by April 1
may, at the commissioner's discretion, have any credit allocated and certified to the investor
or fund revoked and such credit must be repaid by the investor.
new text end

new text begin (h) A qualified business that fails to file an annual report by April 1 may, at the
commissioner's discretion, be subject to the credit repayment provisions in subdivision 7,
paragraph (b).
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, 2018.
new text end

Sec. 7.

Minnesota Statutes 2018, section 116J.8737, subdivision 12, is amended to read:

Subd. 12.

Sunset.

This section expires for taxable years beginning after December 31,
deleted text begin 2017deleted text end new text begin 2021new text end , except that reporting requirements under subdivision 6 and revocation of credits
under subdivision 7 remain in effect through deleted text begin 2019deleted text end new text begin 2023new text end for qualified investors and qualified
funds, and through deleted text begin 2021deleted text end new text begin 2025new text end for qualified small businesses, reporting requirements under
subdivision 9 remain in effect through deleted text begin 2022deleted text end new text begin 2021new text end , and the appropriation in subdivision 11
remains in effect through deleted text begin 2021deleted text end new text begin 2025new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 8.

Minnesota Statutes 2018, section 256J.02, subdivision 2, is amended to read:

Subd. 2.

Use of money.

State money appropriated for purposes of this section and TANF
block grant money must be used for:

(1) financial assistance to or on behalf of any minor child who is a resident of this state
under section 256J.12;

(2) the health care and human services training and retention program under chapter
116L, for costs associated with families with children with incomes below 200 percent of
the federal poverty guidelines;

(3) the pathways program under section 116L.04, subdivision 1a;

(4) welfare to work transportation authorized under Public Law 105-178;

(5) reimbursements for the federal share of child support collections passed through to
the custodial parent;

(6) deleted text begin reimbursements for the working family credit under section 290.0671;
deleted text end

deleted text begin (7)deleted text end program administration under this chapter;

deleted text begin (8)deleted text end new text begin (7)new text end the diversionary work program under section 256J.95;

deleted text begin (9)deleted text end new text begin (8)new text end the MFIP consolidated fund under section 256J.626; and

deleted text begin (10)deleted text end new text begin (9)new text end the Minnesota Department of Health consolidated fund under Laws 2001, First
Special Session chapter 9, article 17, section 3, subdivision 2.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2019.
new text end

Sec. 9.

Minnesota Statutes 2018, section 289A.31, subdivision 2, is amended to read:

Subd. 2.

Joint income tax returns.

(a) If a joint income tax return is made by a husband
and wife, the liability for the tax is joint and several. A spouse who qualifies for relief from
a liability attributable to an underpayment under section 6015new text begin subsection new text end (b)new text begin of the Internal
Revenue Code, or determined by the commissioner of internal revenue for relief under
section 6015 subsection (f)new text end of the Internal Revenue Codenew text begin ,new text end is relieved of the state income
tax liability on the underpayment.

(b) In the case of individuals who were a husband and wife prior to the dissolution of
their marriage or their legal separation, or prior to the death of one of the individuals, for
tax liabilities reported on a joint or combined return, the liability of each person is limited
to the proportion of the tax due on the return that equals that person's proportion of the total
tax due if the husband and wife filed separate returns for the taxable year. This provision
is effective only when the commissioner receives written notice of the marriage dissolution,
legal separation, or death of a spouse from the husband or wife. No refund may be claimed
by an ex-spouse, legally separated or widowed spouse for any taxes paid more than 60 days
before receipt by the commissioner of the written notice.

(c) deleted text begin A request for calculation of separate liability pursuant to paragraph (b) for taxes
reported on a return must be made within six years after the due date of the return. For
calculation of separate liability for taxes assessed by the commissioner under section 289A.35
or 289A.37, the request must be made within six years after the date of assessment.deleted text end The
commissioner is not required to calculate separate liabilitynew text begin pursuant to paragraph (b)new text end if the
remaining unpaid liability for which recalculation is requested is $100 or less.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns first due for taxable years
beginning after December 31, 2018.
new text end

Sec. 10.

Minnesota Statutes 2018, section 290.01, subdivision 4a, is amended to read:

Subd. 4a.

Financial institution.

(a) "Financial institution" means:

(1) any corporation or other business entity registered (i) under state law as a bank
holding company; (ii) under the federal Bank Holding Company Act of 1956, as amended;
or (iii) as a savings and loan holding company under the federal National Housing Act, as
amended;

(2) a national bank organized and existing as a national bank association pursuant to the
provisions of United States Code, title 12, chapter 2;

(3) a savings association or federal savings bank as defined in United States Code, title
12, section 1813(b)(1);

(4) any bank or thrift institution incorporated or organized under the laws of any state;

(5) any corporation organized under United States Code, title 12, sections 611 to 631;

(6) any agency or branch of a foreign depository as defined under United States Code,
title 12, section 3101;

(7) any corporation or other business entity that is more than 50 percent owned, directly
or indirectly, by any person or business entity described in clauses (1) to (6), other than an
insurance company taxable under chapter 297I;

(8) a corporation or other business entity that derives more than 50 percent of its total
gross income for financial accounting purposes from finance leases. For the purposes of
this clause, "gross income" means the average from the current tax year and immediately
preceding two years and excludes gross income from incidental or occasional transactions.
For purposes of this clause, "finance lease" means any lease transaction that is the functional
equivalent of an extension of credit and that transfers substantially all the benefits and risks
incident to the ownership of property, including any direct financing lease or leverage lease
that meets the criteria of Financial Accounting Standards Board Statement No. 13, accounting
for leases, or any other lease that is accounted for as financing by a lessor under generally
accepted accounting principles; or

(9) any other person or business entity, other than an insurance company deleted text begin taxable under
chapter 297Ideleted text end , that derives more than 50 percent of its gross income from activities that an
entity described in clauses (2) to (6) or (8) is authorized to transact. For the purposes of this
clause, gross income does not include income from nonrecurring, extraordinary items.

(b) The commissioner is authorized to exclude any person from the application of
paragraph (a), clause (9), if the person proves by clear and convincing evidence that the
person's income-producing activity is not in substantial competition with any person described
in paragraph (a), clauses (2) to (6) or (8).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2016.
new text end

Sec. 11.

Minnesota Statutes 2018, section 290.01, is amended by adding a subdivision to
read:

new text begin Subd. 5c. new text end

new text begin Disqualified captive insurance company. new text end

new text begin (a) "Captive insurance company"
means a company that:
new text end

new text begin (1) is licensed as a captive insurance company under the laws of any state or foreign
country; or
new text end

new text begin (2) derives less than 50 percent of its total premiums for the taxable year from sources
outside of the unitary business, as that term is used in section 290.17.
new text end

new text begin (b) A captive insurance company is a "disqualified captive insurance company" if the
company:
new text end

new text begin (1) pays less than 0.5 percent of its total premiums for the taxable year in tax under
chapter 297I or a comparable tax of another state; or
new text end

new text begin (2) receives less than 50 percent of its gross receipts for the taxable year from premiums.
new text end

new text begin (c) For purposes of this subdivision, "premiums" means amounts paid for arrangements
that constitute insurance for federal income tax purposes, but excludes return premiums,
premiums for reinsurance assumed from other insurance companies, and any other premiums
that are or would be exempt from taxation under section 297I.05 as a result of their type or
character, if the insurance was for business in Minnesota.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2016.
new text end

Sec. 12.

Minnesota Statutes 2018, section 290.0132, subdivision 26, is amended to read:

Subd. 26.

Social Security benefits.

(a) A portion ofnew text begin taxablenew text end Social Security benefits is
allowed as a subtraction. The subtraction equals the lesser ofnew text begin taxablenew text end Social Security benefits
or a maximum subtraction subject to the limits under paragraphs (b), (c), and (d).

(b) For married taxpayers filing a joint return and surviving spouses, the maximum
subtraction equals deleted text begin $4,500deleted text end new text begin $5,150new text end . The maximum subtraction is reduced by 20 percent of
provisional income over deleted text begin $77,000deleted text end new text begin $78,180new text end . In no case is the subtraction less than zero.

(c) For single or head-of-household taxpayers, the maximum subtraction equals deleted text begin $3,500deleted text end new text begin
$4,020new text end . The maximum subtraction is reduced by 20 percent of provisional income over
deleted text begin $60,200deleted text end new text begin $61,080new text end . In no case is the subtraction less than zero.

(d) For married taxpayers filing separate returns, the maximum subtraction equals deleted text begin $2,250deleted text end new text begin
one-half the maximum subtraction for joint returns under paragraph (b)new text end . The maximum
subtraction is reduced by 20 percent of provisional income over deleted text begin $38,500deleted text end new text begin one-half the
threshold amount specified in paragraph (b)new text end . In no case is the subtraction less than zero.

(e) For purposes of this subdivision, "provisional income" means modified adjusted
gross income as defined in section 86(b)(2) of the Internal Revenue Code, plus one-half of
thenew text begin taxablenew text end Social Security benefits received during the taxable year, and "Social Security
benefits" has the meaning given in section 86(d)(1) of the Internal Revenue Code.

(f) The commissioner shall adjust the maximum subtraction and threshold amounts in
paragraphs (b) to (d) deleted text begin by the percentage determined pursuant to the provisions of section
1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) of the Internal Revenue
Code the word "2016" shall be substituted for the word "1992." For 2018, the commissioner
shall then determine the percentage change from the 12 months ending on August 31, 2016,
to the 12 months ending on August 31, 2017, and in each subsequent year, from the 12
months ending on August 31, 2016, to the 12 months ending on August 31 of the year
preceding the taxable year. The determination of the commissioner pursuant to this
subdivision must not be considered a rule and is not subject to the Administrative Procedure
Act contained in chapter 14, including section 14.386deleted text end new text begin as provided in section 270C.22. The
statutory year is taxable year 2019new text end . The maximum subtraction and threshold amounts as
adjusted must be rounded to the nearest $10 amount. If the amount ends in $5, the amount
is rounded up to the nearest $10 amount.

new text begin EFFECTIVE DATE. new text end

new text begin (a) The amendments to paragraphs (b), (c), and (d) are effective
for taxable years beginning after December 31, 2018.
new text end

new text begin (b) The amendments to paragraphs (a) and (e) are effective retroactively for taxable
years beginning after December 31, 2017.
new text end

new text begin (c) The amendments to paragraph (f) are effective for adjustments beginning with taxable
years beginning after December 31, 2019.
new text end

Sec. 13.

Minnesota Statutes 2018, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 29. new text end

new text begin Disallowed section 280E expenses; medical cannabis manufacturers. new text end

new text begin The
amount of expenses of a medical cannabis manufacturer, as defined under section 152.22,
subdivision 7, related to the business of medical cannabis under sections 152.21 to 152.37,
and not allowed for federal income tax purposes under section 280E of the Internal Revenue
Code is a 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, 2018.
new text end

Sec. 14.

Minnesota Statutes 2018, section 290.0134, is amended by adding a subdivision
to read:

new text begin Subd. 19. new text end

new text begin Disallowed section 280E expenses; medical cannabis manufacturers. 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, 2018.
new text end

Sec. 15.

Minnesota Statutes 2018, section 290.05, subdivision 1, is amended to read:

Subdivision 1.

Exempt entities.

The following corporations, individuals, estates, trusts,
and organizations shall be exempted from taxation under this chapter, provided that every
such person or corporation claiming exemption under this chapter, in whole or in part, must
establish to the satisfaction of the commissioner the taxable status of any income or activity:

(a) corporations, individuals, estates, and trusts engaged in the business of mining or
producing iron ore and mining, producing, or refining other ores, metals, and minerals, the
mining, production, or refining of which is subject to the occupation tax imposed by section
298.01; but if any such corporation, individual, estate, or trust engages in any other business
or activity or has income from any property not used in such business it shall be subject to
this tax computed on the net income from such property or such other business or activity.
Royalty shall not be considered as income from the business of mining or producing iron
ore within the meaning of this section;

(b) the United States of America, the state of Minnesota or any political subdivision of
either agencies or instrumentalities, whether engaged in the discharge of governmental or
proprietary functions; and

(c) any insurance company, deleted text begin as defined in section 290.17, subdivision 4, paragraph (j),
but including any insurance company licensed and domiciled in another state that grants,
on a reciprocal basis, exemption from retaliatory taxesdeleted text end new text begin other than a disqualified captive
insurance companynew text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2016.
new text end

Sec. 16.

Minnesota Statutes 2018, 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 deleted text begin $35,480deleted text end new text begin $38,770new text end , 5.35 percent;

(2) On all over deleted text begin $35,480deleted text end new text begin $38,770new text end , but not over deleted text begin $140,960deleted text end new text begin $154,020new text end , deleted text begin 7.05deleted text end new text begin 6.8new text end percent;

(3) On all over deleted text begin $140,960deleted text end new text begin $154,020new text end , but not over deleted text begin $250,000deleted text end new text begin $269,010new text end , 7.85 percent;

(4) On all over deleted text begin $250,000deleted text end new text begin $269,010new text end , 9.85 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 deleted text begin $24,270deleted text end new text begin $26,520new text end , 5.35 percent;

(2) On all over deleted text begin $24,270deleted text end new text begin $26,520new text end , but not over deleted text begin $79,730deleted text end new text begin $87,110new text end , deleted text begin 7.05deleted text end new text begin 6.8new text end percent;

(3) On all over deleted text begin $79,730deleted text end new text begin $87,110new text end , but not over deleted text begin $150,000deleted text end new text begin $161,720new text end , 7.85 percent;

(4) On all over deleted text begin $150,000deleted text end new text begin $161,720new text end , 9.85 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 deleted text begin $29,880deleted text end new text begin $32,650new text end , 5.35 percent;

(2) On all over deleted text begin $29,880deleted text end new text begin $32,650new text end , but not over deleted text begin $120,070deleted text end new text begin $131,190new text end , deleted text begin 7.05deleted text end new text begin 6.8new text end percent;

(3) On all over deleted text begin $120,070deleted text end new text begin $131,190new text end , but not over deleted text begin $200,000deleted text end new text begin $214,980new text end , 7.85 percent;

(4) On all over deleted text begin $200,000deleted text end new text begin $214,980new text end , 9.85 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 290.0131, subdivisions 2 deleted text begin anddeleted text end new text begin ,new text end 6new text begin , 8new text end to deleted text begin 11deleted text end new text begin 10new text end ,new text begin 16, and 17,new text end and reduced by the
Minnesota assignable portion of the subtraction for United States government interest under
section 290.0132, subdivision 2, and the subtractions under section 290.0132, subdivisions
9, 10, 14, 15, 17, deleted text begin anddeleted text end 18,new text begin and 27,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, increased by the amounts specified in section 290.0131,
subdivisions 2 deleted text begin anddeleted text end new text begin ,new text end 6new text begin , 8new text end to deleted text begin 11deleted text end new text begin 10new text end ,new text begin 16, and 17,new text end and reduced by the amounts specified in section
290.0132, subdivisions 2, 9, 10, 14, 15, 17, deleted text begin anddeleted text end 18new text begin , and 27new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 17.

Minnesota Statutes 2018, section 290.0671, subdivision 1, is amended to read:

Subdivision 1.

Credit allowed.

(a) An individual who is a resident of Minnesota is
allowed a credit against the tax imposed by this chapter equal to a percentage of earned
income. To receive a credit, a taxpayer must be eligible for a credit under section 32 of the
Internal Revenue Code, except thatnew text begin :
new text end

new text begin (1)new text end a taxpayer with no qualifying children who has attained the age of 21, but not attained
age 65 before the close of the taxable year and is otherwise eligible for a credit under section
32 of the Internal Revenue Code may also receive a creditdeleted text begin .deleted text end new text begin ; and
new text end

new text begin (2) a taxpayer who is otherwise eligible for a credit under section 32 of the Internal
Revenue Code remains eligible for the credit even if the taxpayer's earned income or adjusted
gross income exceeds the income limitation under section 32 of the Internal Revenue Code.
new text end

(b) For individuals with no qualifying children, the credit equals deleted text begin 2.10deleted text end new text begin 3.9new text end percent of the
first deleted text begin $6,180deleted text end new text begin $7,150new text end of earned income. The credit is reduced by deleted text begin 2.01deleted text end new text begin 2.0new text end percent of earned
income or adjusted gross income, whichever is greater, in excess of deleted text begin $8,130deleted text end new text begin the phaseout
thresholdnew text end , but in no case is the credit less than zero.

(c) For individuals with one qualifying child, the credit equals 9.35 percent of the first
deleted text begin $11,120deleted text end new text begin $11,950 new text end of earned income. The credit is reduced by deleted text begin 6.02deleted text end new text begin 6.0new text end percent of earned
income or adjusted gross income, whichever is greater, in excess of deleted text begin $21,190deleted text end new text begin the phaseout
thresholdnew text end , but in no case is the credit less than zero.

(d) For individuals with two deleted text begin or moredeleted text end qualifying children, the credit equals 11 percent
of the first deleted text begin $18,240deleted text end new text begin $19,600new text end of earned income. The credit is reduced by deleted text begin 10.82deleted text end new text begin 10.5new text end percent
of earned income or adjusted gross income, whichever is greater, in excess of deleted text begin $25,130deleted text end new text begin the
phaseout thresholdnew text end , but in no case is the credit less than zero.

(e)new text begin For individuals with three or more qualifying children, the credit equals 12.5 percent
of the first $20,000 of earned income. The credit is reduced by 10.5 percent of earned income
or adjusted gross income, whichever is greater, in excess of the phaseout threshold, but in
no case is the credit less than zero.
new text end

new text begin (f)new text end For a part-year resident, the credit must be allocated based on the percentage calculated
under section 290.06, subdivision 2c, paragraph (e).

deleted text begin (f)deleted text end new text begin (g)new text end For a person who was a resident for the entire tax year and has earned income
not subject to tax under this chapter, including income excluded under section 290.0132,
subdivision 10, the credit must be allocated based on the ratio of federal adjusted gross
income reduced by the earned income not subject to tax under this chapter over federal
adjusted gross income. For purposes of this paragraph, the following clauses are not
considered "earned income not subject to tax under this chapter":

(1) the subtractions for military pay under section 290.0132, subdivisions 11 and 12;

(2) the exclusion of combat pay under section 112 of the Internal Revenue Code; and

(3) income derived from an Indian reservation by an enrolled member of the reservation
while living on the reservation.

deleted text begin (g) For tax years beginning after December 31, 2013, the $8,130 in paragraph (b), the
$21,190 in paragraph (c), and the $25,130 in paragraph (d), after being adjusted for inflation
under subdivision 7, are each increased by $5,000 for married taxpayers filing joint returns.
For tax years beginning after December 31, 2013, the commissioner shall annually adjust
the $5,000 by the percentage determined pursuant to the provisions of section 1(f) of the
Internal Revenue Code, except that in section 1(f)(3)(B), the word "2008" shall be substituted
for the word "1992." For 2014, the commissioner shall then determine the percent change
from the 12 months ending on August 31, 2008, to the 12 months ending on August 31,
2013, and in each subsequent year, from the 12 months ending on August 31, 2008, to the
12 months ending on August 31 of the year preceding the taxable year. The earned income
thresholds as adjusted for inflation must be rounded to the nearest $10. If the amount ends
in $5, the amount is rounded up to the nearest $10. The determination of the commissioner
under this subdivision is not a rule under the Administrative Procedure Act.
deleted text end

(h)new text begin For the purposes of this section, the phaseout threshold equals:
new text end

new text begin (1) $14,570 for married taxpayers filing joint returns with no qualifying children;
new text end

new text begin (2) $8,730 for all other taxpayers with no qualifying children;
new text end

new text begin (3) $28,610 for married taxpayers filing joint returns with one qualifying child;
new text end

new text begin (4) $22,770 for all other taxpayers with one qualifying child;
new text end

new text begin (5) $32,840 for married taxpayers filing joint returns with two qualifying children;
new text end

new text begin (6) $27,000 for all other taxpayers with two qualifying children;
new text end

new text begin (7) $33,140 for married taxpayers filing joint returns with three or more qualifying
children; and
new text end

new text begin (8) $27,300 for all other taxpayers with three or more qualifying children.
new text end

new text begin (i)new text end The commissioner shall construct tables showing the amount of the credit at various
income levels and make them available to taxpayers. The tables shall follow the schedule
contained in this subdivision, except that the commissioner may graduate the transition
between income brackets.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 18.

Minnesota Statutes 2018, section 290.0671, subdivision 6, is amended to read:

Subd. 6.

Appropriation.

An amount sufficient to pay the refunds required by this section
is appropriated to the commissioner from the general fund. deleted text begin This amount includes any amounts
appropriated to the commissioner of human services from the federal Temporary Assistance
for Needy Families (TANF) block grant funds for transfer to the commissioner of revenue.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2019.
new text end

Sec. 19.

Minnesota Statutes 2018, section 290.0684, subdivision 2, is amended to read:

Subd. 2.

Credit allowed.

(d) For married couples filing a joint return, the maximum credit is phased out as follows:

(1) for married couples with adjusted gross income in excess of $75,000, but not more
than deleted text begin $100,000deleted text end new text begin $135,000new text end , the maximum credit is reduced by one percent of adjusted gross
income in excess of $75,000new text begin until the maximum credit amount equals $250new text end ;new text begin and
new text end

deleted text begin (2) for married couples with adjusted gross income in excess of $100,000, but not more
than $135,000, the maximum credit is $250; and
deleted text end

deleted text begin (3)deleted text end new text begin (2)new text end for married couples with adjusted gross income in excess of $135,000, the
maximum credit is $250, reduced by one percent of adjusted gross income in excess of
$135,000.

(e) The income thresholds in paragraphs (c) and (d) used to calculate the maximum
credit must be adjusted for inflation. The commissioner shall adjust the income thresholds
by the percentage determined under the provisions of section 1(f) of the Internal Revenue
Code, except that in section 1(f)(3)(B) the word "2016" is substituted for the word "1992."
For 2018, the commissioner shall then determine the percent change from the 12 months
ending on August 31, 2016, to the 12 months ending on August 31, 2017, and in each
subsequent year, from the 12 months ending on August 31, 2016, to the 12 months ending
on August 31 of the year preceding the taxable year. The income thresholds as adjusted for
inflation must be rounded to the nearest $10 amount. If the amount ends in $5, the amount
is rounded up to the nearest $10 amount. The determination of the commissioner under this
subdivision is not subject to chapter 14, including section 14.386.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2019.
new text end

Sec. 20.

Minnesota Statutes 2018, section 290.17, subdivision 4, is amended to read:

Subd. 4.

Unitary business principle.

(a) If a trade or business conducted wholly within
this state or partly within and partly without this state is part of a unitary business, the entire
income of the unitary business is subject to apportionment pursuant to section 290.191.
Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary business is
considered to be derived from any particular source and none may be allocated to a particular
place except as provided by the applicable apportionment formula. The provisions of this
subdivision do not apply to business income subject to subdivision 5, income of an insurance
company, or income of an investment company determined under section 290.36.

(b) The term "unitary business" means business activities or operations which result in
a flow of value between them. The term may be applied within a single legal entity or
between multiple entities and without regard to whether each entity is a sole proprietorship,
a corporation, a partnership or a trust.

(c) Unity is presumed whenever there is unity of ownership, operation, and use, evidenced
by centralized management or executive force, centralized purchasing, advertising,
accounting, or other controlled interaction, but the absence of these centralized activities
will not necessarily evidence a nonunitary business. Unity is also presumed when business
activities or operations are of mutual benefit, dependent upon or contributory to one another,
either individually or as a group.

(d) Where a business operation conducted in Minnesota is owned by a business entity
that carries on business activity outside the state different in kind from that conducted within
this state, and the other business is conducted entirely outside the state, it is presumed that
the two business operations are unitary in nature, interrelated, connected, and interdependent
unless it can be shown to the contrary.

(e) Unity of ownership does not exist when two or more corporations are involved unless
more than 50 percent of the voting stock of each corporation is directly or indirectly owned
by a common owner or by common owners, either corporate or noncorporate, or by one or
more of the member corporations of the group. For this purpose, the term "voting stock"
shall include membership interests of mutual insurance holding companies formed under
section 66A.40.

(f) The net income and apportionment factors under section 290.191 or 290.20 of foreign
corporations and other foreign entitiesnew text begin , but excluding a disqualified captive insurance
company,new text end which are part of a unitary business shall not be included in the net income or
the apportionment factors of the unitary business; except that the income and apportionment
factors of a foreign entity, other than an entity treated as a C corporation for federal income
tax purposes, that are included in the federal taxable income, as defined in section 63 of the
Internal Revenue Code as amended through the date named in section 290.01, subdivision
19, of a domestic corporation, domestic entity, or individual must be included in determining
net income and the factors to be used in the apportionment of net income pursuant to section
290.191 or 290.20. A foreign corporation or other foreign entity which is not included on
a combined report and which is required to file a return under this chapter shall file on a
separate return basis.

(g) For purposes of determining the net income of a unitary business and the factors to
be used in the apportionment of net income pursuant to section 290.191 or 290.20, there
must be included only the income and apportionment factors of domestic corporations or
other domestic entities that are determined to be part of the unitary business pursuant to this
subdivision, notwithstanding that foreign corporations or other foreign entities might be
included in the unitary business; except that the income and apportionment factors of a
foreign entity, other than an entity treated as a C corporation for federal income tax purposes,
that is included in the federal taxable income, as defined in section 63 of the Internal Revenue
Code as amended through the date named in section 290.01, subdivision 19, of a domestic
corporation, domestic entity, or individual must be included in determining net income and
the factors to be used in the apportionment of net income pursuant to section 290.191 or
290.20.

(h) Each corporation or other entity, except a sole proprietorship, that is part of a unitary
business must file combined reports as the commissioner determines. On the reports, all
intercompany transactions between entities included pursuant to paragraph (g) must be
eliminated and the entire net income of the unitary business determined in accordance with
this subdivision is apportioned among the entities by using each entity's Minnesota factors
for apportionment purposes in the numerators of the apportionment formula and the total
factors for apportionment purposes of all entities included pursuant to paragraph (g) in the
denominators of the apportionment formula. Except as otherwise provided by paragraph
(f), all sales of the unitary business made within this state pursuant to section 290.191 or
290.20 must be included on the combined report of a corporation or other entity that is a
member of the unitary business and is subject to the jurisdiction of this state to impose tax
under this chapter.

(i) If a corporation has been divested from a unitary business and is included in a
combined report for a fractional part of the common accounting period of the combined
report:

(1) its income includable in the combined report is its income incurred for that part of
the year determined by proration or separate accounting; and

(2) its sales, property, and payroll included in the apportionment formula must be prorated
or accounted for separately.

(j) For purposes of this subdivision, "insurance company" means an insurance company,
as defined in section 290.01, subdivision 5b, that isdeleted text begin :
deleted text end

deleted text begin (1) licensed to engage in the business of insurance in Minnesota pursuant to chapter
60A; or
deleted text end

deleted text begin (2) domiciled and licensed to engage in the business of insurance in another state or
country that imposes retaliatory taxes, fines, deposits, penalties, licenses, or fees and that
does not grant, on a reciprocal basis, exemption from such retaliatory taxes to insurance
companies or their agents domiciled in Minnesota.
deleted text end

deleted text begin (k) For purposes of this subdivision, "retaliatory taxes" means taxes imposed on insurance
companies organized in another state or country that result from the fact that an insurance
company organized in the taxing jurisdiction and doing business in the other jurisdiction is
subject to taxes, fines, deposits, penalties, licenses, or fees in an amount exceeding that
imposed by the taxing jurisdiction upon an insurance company organized in the other state
or country and doing business to the same extent in the taxing jurisdictiondeleted text end new text begin not a disqualified
captive insurance companynew text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2016.
new text end

Sec. 21.

Minnesota Statutes 2018, section 290.191, subdivision 5, is amended to read:

Subd. 5.

Determination of sales factor.

For purposes of this section, the following rules
apply in determining the sales factor.

(a) The sales factor includes all sales, gross earnings, or receipts received in the ordinary
course of the business, except that the following types of income are not included in the
sales factor:

(1) interest;

(2) dividends;

(3) sales of capital assets as defined in section 1221 of the Internal Revenue Code;

(4) sales of property used in the trade or business, except sales of leased property of a
type which is regularly sold as well as leased; and

(5) sales of debt instruments as defined in section 1275(a)(1) of the Internal Revenue
Code or sales of stock.

(b) Sales of tangible personal property are made within this state if the property is
received by a purchaser at a point within this state, regardless of the f.o.b. point, other
conditions of the sale, or the ultimate destination of the property.

(c) Tangible personal property delivered to a common or contract carrier or foreign
vessel for delivery to a purchaser in another state or nation is a sale in that state or nation,
regardless of f.o.b. point or other conditions of the sale.

(d) Notwithstanding paragraphs (b) and (c), when intoxicating liquor, wine, fermented
malt beverages, cigarettes, or tobacco products are sold to a purchaser who is licensed by
a state or political subdivision to resell this property only within the state of ultimate
destination, the sale is made in that state.

(e) Sales made by or through a corporation that is qualified as a domestic international
sales corporation under section 992 of the Internal Revenue Code are not considered to have
been made within this state.

(f) Sales, rents, royalties, and other income in connection with real property is attributed
to the state in which the property is located.

(g) Receipts from the lease or rental of tangible personal property, including finance
leases and true leases, must be attributed to this state if the property is located in this state
and to other states if the property is not located in this state. Receipts from the lease or rental
of moving property including, but not limited to, motor vehicles, rolling stock, aircraft,
vessels, or mobile equipment are included in the numerator of the receipts factor to the
extent that the property is used in this state. The extent of the use of moving property is
determined as follows:

(1) A motor vehicle is used wholly in the state in which it is registered.

(2) The extent that rolling stock is used in this state is determined by multiplying the
receipts from the lease or rental of the rolling stock by a fraction, the numerator of which
is the miles traveled within this state by the leased or rented rolling stock and the denominator
of which is the total miles traveled by the leased or rented rolling stock.

(3) The extent that an aircraft is used in this state is determined by multiplying the
receipts from the lease or rental of the aircraft by a fraction, the numerator of which is the
number of landings of the aircraft in this state and the denominator of which is the total
number of landings of the aircraft.

(4) The extent that a vessel, mobile equipment, or other mobile property is used in the
state is determined by multiplying the receipts from the lease or rental of the property by a
fraction, the numerator of which is the number of days during the taxable year the property
was in this state and the denominator of which is the total days in the taxable year.

(h) Royalties and other income received for the use of or for the privilege of using
intangible property, including patents, know-how, formulas, designs, processes, patterns,
copyrights, trade names, service names, franchises, licenses, contracts, customer lists, or
similar items, must be attributed to the state in which the property is used by the purchaser.
If the property is used in more than one state, the royalties or other income must be
apportioned to this state pro rata according to the portion of use in this state. If the portion
of use in this state cannot be determined, the royalties or other income must be excluded
from both the numerator and the denominator. Intangible property is used in this state if the
purchaser uses the intangible property or the rights therein in the regular course of its business
operations in this state, regardless of the location of the purchaser's customers.

(i) Sales of intangible property are made within the state in which the property is used
by the purchaser. If the property is used in more than one state, the sales must be apportioned
to this state pro rata according to the portion of use in this state. If the portion of use in this
state cannot be determined, the sale must be excluded from both the numerator and the
denominator of the sales factor. Intangible property is used in this state if the purchaser used
the intangible property in the regular course of its business operations in this state.

(j) Receipts from the performance of services must be attributed to the state where the
services are received. For the purposes of this section, receipts from the performance of
services provided to a corporation, partnership, or trust may only be attributed to a state
where it has a fixed place of doing business. If the state where the services are received is
not readily determinable or is a state where the corporation, partnership, or trust receiving
the service does not have a fixed place of doing business, the services shall be deemed to
be received at the location of the office of the customer from which the services were ordered
in the regular course of the customer's trade or business. If the ordering office cannot be
determined, the services shall be deemed to be received at the office of the customer to
which the services are billed.

(k) For the purposes of this subdivision and subdivision 6, paragraph (l), receipts from
management, distribution, or administrative services performed by a new text begin person or new text end corporation
deleted text begin or trustdeleted text end for a fund of a new text begin person or new text end corporation deleted text begin or trustdeleted text end regulated under United States Code,
title 15, deleted text begin sections 80a-1 through 80a-64deleted text end new text begin chapter 2D, subchapter Inew text end , must be attributed to the
state where the shareholder of the fund resides. Under this paragraph, receipts for services
attributed to shareholders are determined on the basis of the ratio of: (1) the average of the
outstanding shares in the fund owned by shareholders residing within Minnesota at the
beginning and end of each year; and (2) the average of the total number of outstanding
shares in the fund at the beginning and end of each year. Residence of the shareholder, in
the case of an individual, is determined by the mailing address furnished by the shareholder
to the fund. Residence of the shareholder, when the shares are held by an insurance company
as a depositor for the insurance company policyholders, is the mailing address of the
policyholders. In the case of an insurance company holding the shares as a depositor for
the insurance company policyholders, if the mailing address of the policyholders cannot be
determined by the taxpayer, the receipts must be excluded from both the numerator and
denominator. Residence of other shareholders is the mailing address of the shareholder.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 22.

Minnesota Statutes 2018, section 290.21, subdivision 4, is amended to read:

Subd. 4.

Dividends received from another corporation.

(a)(1) Eighty percent of
dividends received by a corporation during the taxable year from another corporation, in
which the recipient owns 20 percent or more of the stock, by vote and value, not including
stock described in section 1504(a)(4) of the Internal Revenue Code when the corporate
stock with respect to which dividends are paid does not constitute the stock in trade of the
taxpayer or would not be included in the inventory of the taxpayer, or does not constitute
property held by the taxpayer primarily for sale to customers in the ordinary course of the
taxpayer's trade or business, or when the trade or business of the taxpayer does not consist
principally of the holding of the stocks and the collection of the income and gains therefrom;
and

(2)(i) the remaining 20 percent of dividends if the dividends received are the stock in
an affiliated company transferred in an overall plan of reorganization and the dividend is
eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as amended
through December 31, 1989;

(ii) the remaining 20 percent of dividends if the dividends are received from a corporation
which is subject to tax under section 290.36 and which is a member of an affiliated group
of corporations as defined by the Internal Revenue Code and the dividend is eliminated in
consolidation under Treasury Department Regulation 1.1502-14(a), as amended through
December 31, 1989, or is deducted under an election under section 243(b) of the Internal
Revenue Code; or

(iii) the remaining 20 percent of the dividends if the dividends are received from a
property and casualty insurer as defined under section 60A.60, subdivision 8, which is a
member of an affiliated group of corporations as defined by the Internal Revenue Code and
either: (A) the dividend is eliminated in consolidation under Treasury Regulation
1.1502-14(a), as amended through December 31, 1989; or (B) the dividend is deducted
under an election under section 243(b) of the Internal Revenue Code.

(b) Seventy percent of dividends received by a corporation during the taxable year from
another corporation in which the recipient owns less than 20 percent of the stock, by vote
or value, not including stock described in section 1504(a)(4) of the Internal Revenue Code
when the corporate stock with respect to which dividends are paid does not constitute the
stock in trade of the taxpayer, or does not constitute property held by the taxpayer primarily
for sale to customers in the ordinary course of the taxpayer's trade or business, or when the
trade or business of the taxpayer does not consist principally of the holding of the stocks
and the collection of income and gain therefrom.

(c) The dividend deduction provided in this subdivision shall be allowed only with
respect to dividends that are included in a corporation's Minnesota taxable net income for
the taxable year.

The dividend deduction provided in this subdivision does not apply to a dividend from
a corporation which, for the taxable year of the corporation in which the distribution is made
or for the next preceding taxable year of the corporation, is a corporation exempt from tax
under section 501 of the Internal Revenue Code.

The dividend deduction provided in this subdivision does not apply to a dividend received
from a real estate investment trust as defined in section 856 of the Internal Revenue Code.

The dividend deduction provided in this subdivision applies to the amount of regulated
investment company dividends only to the extent determined under section 854(b) of the
Internal Revenue Code.

The dividend deduction provided in this subdivision shall not be allowed with respect
to any dividend for which a deduction is not allowed under the provisions of section 246(c)new text begin
or 246Anew text end of the Internal Revenue Code.

(d) If dividends received by a corporation that does not have nexus with Minnesota under
the provisions of Public Law 86-272 are included as income on the return of an affiliated
corporation permitted or required to file a combined report under section 290.17, subdivision
4, or 290.34, subdivision 2, then for purposes of this subdivision the determination as to
whether the trade or business of the corporation consists principally of the holding of stocks
and the collection of income and gains therefrom shall be made with reference to the trade
or business of the affiliated corporation having a nexus with Minnesota.

(e) The deduction provided by this subdivision does not apply if the dividends are paid
by a FSC as defined in section 922 of the Internal Revenue Code.

(f) If one or more of the members of the unitary group whose income is included on the
combined report received a dividend, the deduction under this subdivision for each member
of the unitary business required to file a return under this chapter is the product of: (1) 100
percent of the dividends received by members of the group; (2) the percentage allowed
pursuant to paragraph (a) or (b); and (3) the percentage of the taxpayer's business income
apportionable to this state for the taxable year under section 290.191 or 290.20.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2018.
new text end

Sec. 23.

Minnesota Statutes 2018, section 291.03, subdivision 9, is amended to read:

Subd. 9.

Qualified small business property.

Property satisfying all of the following
requirements is qualified small business property:

(1) The value of the property was included in the federal adjusted taxable estate.

(2) The property consists of the assets of a trade or business or shares of stock or other
ownership interests in a corporation or other entity engaged in a trade or business. Shares
of stock in a corporation or an ownership interest in another type of entity do not qualify
under this subdivision if the shares or ownership interests are traded on a public stock
exchange at any time during the three-year period ending on the decedent's date of death.
For purposes of this subdivision, an ownership interest includes the interest the decedent is
deemed to own under sections 2036, 2037, deleted text begin anddeleted text end 2038new text begin , 2040, or 2044new text end of the Internal Revenue
Code.

(3) During the taxable year that ended before the decedent's death, the trade or business
must not have been a passive activity within the meaning of section 469(c) of the Internal
Revenue Code, and the decedent or the decedent's spouse must have materially participated
in the trade or business within the meaning of section 469(h) of the Internal Revenue Code,
excluding section 469(h)(3) of the Internal Revenue Code and any other provision provided
by United States Treasury Department regulation that substitutes material participation in
prior taxable years for material participation in the taxable year that ended before the
decedent's death.

(4) The gross annual sales of the trade or business were $10,000,000 or less for the last
taxable year that ended before the date of the death of the decedent.

(5) The property does not include:

(i) cash;

(ii) cash equivalents;

(iii) publicly traded securities; or

(iv) any assets not used in the operation of the trade or business.

(6) For property consisting of shares of stock or other ownership interests in an entity,
the value of items described in clause (5) must be excluded in the valuation of the decedent's
interest in the entity.

(7) The decedentnew text begin or the decedent's spousenew text end continuously owned the property,new text begin or an
undivided or joint interest in the property,new text end including property the decedentnew text begin or the decedent's
spousenew text end is deemed to own under sections 2036, 2037, deleted text begin anddeleted text end 2038new text begin , 2040, or 2044new text end of the Internal
Revenue Code,new text begin or under subdivision 1d,new text end for the three-year period ending on the date of
death of the decedent. In the case of a sole proprietor, if the property replaced similar property
within the three-year period, the replacement property will be treated as having been owned
for the three-year period ending on the date of death of the decedent.new text begin For the purposes of
the three-year holding period under this clause, any ownership by the decedent's spouse,
whether the spouse predeceases or survives the decedent, is attributed to the decedent.
new text end

(8) For three years following the date of death of the decedent, the trade or business is
not a passive activity within the meaning of section 469(c) of the Internal Revenue Code,
and a family member materially participates in the operation of the trade or business within
the meaning of section 469(h) of the Internal Revenue Code, excluding section 469(h)(3)
of the Internal Revenue Code and any other provision provided by United States Treasury
Department regulation that substitutes material participation in prior taxable years for
material participation in the three years following the date of death of the decedent.

(9) The estate and the qualified heir elect to treat the property as qualified small business
property and agree, in the form prescribed by the commissioner, to pay the recapture tax
under subdivision 11, if applicable.

new text begin EFFECTIVE DATE. new text end

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

Sec. 24.

Minnesota Statutes 2018, section 291.03, subdivision 10, is amended to read:

Subd. 10.

Qualified farm property.

Property satisfying all of the following requirements
is qualified farm property:

(1) The value of the property was included in the federal adjusted taxable estate.

(2) The property consists of agricultural land and is owned by a person or entity that is
either not subject to or is in compliance with section 500.24.

(3) For property taxes payable in the taxable year of the decedent's death, the property
is classified as class 2a property under section 273.13, subdivision 23, and is classified as
agricultural homestead, agricultural relative homestead, or special agricultural homestead
under section 273.124.

(4) The decedentnew text begin or the decedent's spousenew text end continuously owned the property,new text begin or an
undivided or joint interest in the property,new text end including property the decedentnew text begin or the decedent's
spousenew text end is deemed to own under sections 2036, 2037, deleted text begin anddeleted text end 2038new text begin , 2040, or 2044new text end of the Internal
Revenue Code,new text begin or under subdivision 1d,new text end for the three-year period ending on the date of
death of the decedent either by ownership of the agricultural land or pursuant to holding an
interest in an entity that is not subject to or is in compliance with section 500.24.new text begin For the
purposes of the three-year holding period under this clause, any ownership by the decedent's
spouse, whether the spouse predeceases or survives the decedent, is attributed to the decedent.
new text end

(5) The property is classified for property tax purposes as class 2a property under section
273.13, subdivision 23, for three years following the date of death of the decedent.

(6) The estate and the qualified heir elect to treat the property as qualified farm property
and agree, in a form prescribed by the commissioner, to pay the recapture tax under
subdivision 11, if applicable.

new text begin EFFECTIVE DATE. new text end

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

Sec. 25. new text begin SPECIAL WAIVER OF INCOME TAX PENALTIES FOR TAX YEARS
2017 AND 2018.
new text end

new text begin For taxable years beginning after December 31, 2016, and before January 1, 2019, no
addition to tax is imposed under Minnesota Statutes, sections 289A.25, subdivision 2, and

HF 5

Bill Text Versions

Current Version - as introduced

ARTICLE 1

FEDERAL CONFORMITY

Section 1.

Subd. 5.

Debt; debtor.

new text begin EFFECTIVE DATE. new text end

Sec. 2.

new text begin [270C.22] COST OF LIVING ADJUSTMENT. new text end

new text begin Subdivision 1. new text end

new text begin Adjustment; definition; period; rounding. new text end

new text begin Subd. 2. new text end

new text begin Publication. new text end

new text begin Subd. 3. new text end

new text begin Special provision. new text end

new text begin EFFECTIVE DATE. new text end

Sec. 3.

Subd. 7.

Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

Sec. 4.

Subdivision 1.

Generally; individuals.

new text begin EFFECTIVE DATE. new text end

Sec. 5.

Subd. 7.

Composite income tax returns for nonresident partners, shareholders, and beneficiaries.

new text begin EFFECTIVE DATE. new text end

Sec. 6.

Subd. 14.

Reporting exempt interest and exempt-interest dividends.

new text begin EFFECTIVE DATE. new text end

Sec. 7.

289A.35 ASSESSMENTS ON RETURNS.

new text begin EFFECTIVE DATE. new text end

Sec. 8.

new text begin Subd. 3c. new text end

new text begin Determination of marital status. new text end

new text begin EFFECTIVE DATE. new text end

Sec. 9.

new text begin Subd. 14a. new text end

new text begin Surviving spouse. new text end

new text begin EFFECTIVE DATE. new text end

Sec. 10.

Subd. 19.

Net income.

new text begin EFFECTIVE DATE. new text end

Sec. 11.

new text begin Subd. 19i. new text end

new text begin Deferred foreign income. new text end

new text begin EFFECTIVE DATE. new text end

Sec. 12.

new text begin Subd. 21a. new text end

new text begin Adjusted gross income; federal adjusted gross income. new text end

new text begin EFFECTIVE DATE. new text end

Sec. 13.

Subd. 29a.

State itemized deduction.

new text begin EFFECTIVE DATE. new text end

Sec. 14.

Subd. 31.

Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

Sec. 15.

new text begin [290.0121] DEPENDENT EXEMPTION. new text end

new text begin Subdivision 1. new text end

new text begin Exemption amount. new text end

new text begin Subd. 2. new text end

new text begin Disallowed exemption amount. new text end

new text begin Subd. 3. new text end

new text begin Inflation adjustment. new text end

new text begin EFFECTIVE DATE. new text end

Sec. 16.

new text begin [290.0122] ITEMIZED DEDUCTIONS. new text end

new text begin Subdivision 1. new text end

new text begin Itemized deductions. new text end

new text begin Subd. 2. new text end

new text begin Deductions limited; inflation adjustment. new text end

new text begin [270C.22] COST OF LIVING ADJUSTMENT.
new text end

Composite income tax returns for nonresident partners, shareholders, and
beneficiaries.

new text begin [290.0121] DEPENDENT EXEMPTION.
new text end

new text begin [290.0122] ITEMIZED DEDUCTIONS.
new text end

new text begin [290.0123] STANDARD DEDUCTION.
new text end