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HF 677

3rd Engrossment - 88th Legislature (2013 - 2014) Posted on 04/24/2013 09:47pm

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A bill for an act
relating to financing of state and local government; making changes to individual
income, corporate franchise, property, sales and use, estate, mineral, liquor,
tobacco, aggregate materials, local, and other taxes and tax-related provisions;
restoring the school district current year aid payment shift percentage to 90;
conforming to federal section 179 expensing allowances; imposing an income
surcharge; allowing an up-front exemption for capital equipment; modifying
the definition of income for the property tax refund; decreasing the threshold
percentage for the homestead credit refund for homeowners and the property
tax refund for renters; increasing the maximum refunds for renters; changing
property tax aids and credits; imposing an insurance surcharge; modifying
pension aids; providing pension funding; changing provisions of the Sustainable
Forest Incentive Act; modifying definitions for property taxes; providing
exemptions; creating joint entertainment facilities coordination; imposing a
sports memorabilia gross receipts tax; changing tax rates on tobacco and liquor;
providing reimbursement for certain property tax abatement; modifying the small
business investment tax credit; expanding the definition of domestic corporation
to include foreign corporations incorporated in or doing business in tax havens;
making changes to additions and subtractions from federal taxable income;
changing rates for individuals, estates, and trusts; providing for charitable
contributions and veterans jobs tax credits; modifying estate tax exclusions for
qualifying small business and farm property; imposing a gift tax; expanding
the sales tax to include suite and box seat rentals; modifying the definition
of sales and purchase; changing the tax rate and modifying provisions for the
rental motor vehicle tax; modifying nexus provisions; providing for multiple
points of use certificates; modifying exemptions; authorizing local sales taxes;
authorizing economic development powers; providing authority, organization,
powers, and duties for development of a Destination Medical Center; authorizing
state infrastructure aid; imposing a tax on extraction and processing of fracturing
sand; providing a taconite production tax grant for water supply improvements;
authorizing taconite production tax bonds for grants to school districts; modifying
and providing provisions for public finance; modifying the definition of market
value for tax, debt, and other purposes; requiring labor peace agreements on
certain qualifying projects; making conforming, policy, and technical changes to
tax provisions; requiring studies and reports; appropriating money;amending
Minnesota Statutes 2012, sections 16A.152, subdivision 2; 16A.46; 38.18;
40A.15, subdivision 2; 69.011, subdivision 1; 69.021, subdivisions 7, 8, by
adding a subdivision; 88.51, subdivision 3; 103B.102, subdivision 3; 103B.245,
subdivision 3; 103B.251, subdivision 8; 103B.335; 103B.3369, subdivision 5;
103B.635, subdivision 2; 103B.691, subdivision 2; 103C.501, subdivision 4;
103D.905, subdivisions 2, 3, 8; 103F.405, subdivision 1; 116J.8737, subdivisions
1, 2, 8; 117.025, subdivision 7; 118A.04, subdivision 3; 118A.05, subdivision
5; 123A.455, subdivision 1; 123B.75, subdivision 5; 126C.48, subdivision 8;
127A.45, subdivision 2; 127A.48, subdivision 1; 138.053; 144F.01, subdivision
4; 162.07, subdivisions 3, 4; 163.04, subdivision 3; 163.051; 163.06, subdivision
6; 165.10, subdivision 1; 168.012, subdivision 9, by adding a subdivision;
216C.436, subdivision 7; 237.52, subdivision 3, by adding a subdivision;
270.077; 270.41, subdivision 5; 270B.01, subdivision 8; 270B.12, subdivision
4; 270C.34, subdivision 1; 270C.38, subdivision 1; 270C.42, subdivision 2;
270C.56, subdivision 1; 271.06, by adding a subdivision; 272.01, subdivision 2;
272.02, subdivisions 39, 97, by adding subdivisions; 272.03, subdivision 9, by
adding subdivisions; 273.032; 273.11, subdivision 1, by adding a subdivision;
273.114, subdivision 6; 273.124, subdivisions 3a, 13; 273.13, subdivisions
21b, 23, 25; 273.1398, subdivisions 3, 4; 273.19, subdivision 1; 273.372,
subdivision 4; 273.39; 275.011, subdivision 1; 275.077, subdivision 2; 275.71,
subdivision 4; 276.04, subdivision 2; 276A.01, subdivisions 10, 12, 13, 15;
276A.06, subdivision 10; 279.01, subdivision 1, by adding a subdivision; 279.02;
279.06, subdivision 1; 287.05, by adding a subdivision; 287.08; 287.20, by
adding a subdivision; 287.23, subdivision 1; 287.385, subdivision 7; 289A.02,
subdivision 7; 289A.08, subdivisions 1, 3, 7; 289A.10, subdivision 1, by adding
a subdivision; 289A.12, subdivision 14, by adding a subdivision; 289A.18, by
adding a subdivision; 289A.20, subdivisions 3, 4, by adding a subdivision;
289A.26, subdivisions 3, 4, 7, 9; 289A.55, subdivision 9; 289A.60, subdivision
4; 290.01, subdivisions 5, 19, as amended, 19a, 19b, 19c, 19d, 31, as amended,
by adding subdivisions; 290.06, subdivisions 2c, 2d, by adding subdivisions;
290.067, subdivisions 1, 2a; 290.0671, subdivision 1; 290.0675, subdivision 1;
290.0677, subdivision 2; 290.068, subdivisions 3, 6a; 290.0681, subdivisions 1,
3, 4, 5; 290.091, subdivision 2; 290.0921, subdivision 3; 290.0922, subdivision 1;
290.17, subdivision 4; 290.21, subdivision 4; 290.9705, subdivision 1; 290A.03,
subdivisions 3, 15, as amended; 290A.04, subdivisions 2, 2a, 4; 290B.04,
subdivision 2; 290C.02, subdivision 6; 290C.05; 290C.07; 291.005, subdivision
1; 291.03, subdivisions 1, 8, 9, 10, 11, by adding a subdivision; 296A.01,
subdivision 19, by adding a subdivision; 296A.22, subdivisions 1, 3; 297A.61,
subdivisions 3, 4, by adding a subdivision; 297A.64, subdivisions 1, 2; 297A.66,
by adding a subdivision; 297A.665; 297A.668, by adding a subdivision;
297A.67, subdivision 7; 297A.68, subdivision 5; 297A.70, subdivisions 4, 8, by
adding subdivisions; 297A.71, by adding subdivisions; 297A.75, subdivisions 1,
2, 3; 297A.815, subdivision 3; 297A.993, subdivisions 1, 2; 297B.11; 297E.021,
subdivision 2; 297E.14, subdivision 7; 297F.01, subdivisions 3, 19, 23, by
adding a subdivision; 297F.05, subdivisions 1, 3, 4, by adding a subdivision;
297F.09, subdivision 9; 297F.18, subdivision 7; 297F.24, subdivision 1; 297F.25,
subdivision 1; 297G.03, subdivision 1, by adding a subdivision; 297G.04;
297G.09, subdivision 8; 297G.17, subdivision 7; 297I.05, subdivisions 7, 11, 12;
297I.30, subdivisions 1, 2; 297I.80, subdivision 1; 298.01, subdivisions 3, 3b,
4; 298.018; 298.227, as amended; 298.24, subdivision 1; 298.28, subdivisions
4, 6, 10; 298.75, subdivision 2; 325D.32, subdivision 2; 353G.08, subdivision
2; 365.025, subdivision 4; 366.095, subdivision 1; 366.27; 368.01, subdivision
23; 368.47; 370.01; 373.01, subdivisions 1, 3; 373.40, subdivisions 1, 2, 4;
375.167, subdivision 1; 375.18, subdivision 3; 375.555; 383B.152; 383B.245;
383B.73, subdivision 1; 383D.41, by adding a subdivision; 383E.20; 383E.23;
385.31; 394.36, subdivision 1; 398A.04, subdivision 8; 401.05, subdivision 3;
403.02, subdivision 21, by adding subdivisions; 403.06, subdivision 1a; 403.11,
subdivision 1, by adding a subdivision; 410.32; 412.221, subdivision 2; 412.301;
428A.02, subdivision 1; 430.102, subdivision 2; 447.10; 450.19; 450.25;
458A.10; 458A.31, subdivision 1; 465.04; 469.033, subdivision 6; 469.034,
subdivision 2; 469.053, subdivisions 4, 4a, 6; 469.071, subdivision 5; 469.107,
subdivision 1; 469.169, by adding a subdivision; 469.176, subdivisions 4c, 4g,
6; 469.177, by adding a subdivision; 469.180, subdivision 2; 469.187; 469.190,
subdivision 7, by adding a subdivision; 469.206; 469.319, subdivision 4; 469.340,
subdivision 4; 471.24; 471.571, subdivisions 1, 2; 471.73; 473.325, subdivision
2; 473.39, by adding a subdivision; 473.629; 473.661, subdivision 3; 473.667,
subdivision 9; 473.671; 473.711, subdivision 2a; 473F.02, subdivisions 12, 14,
15, 23; 473F.08, subdivision 10, by adding a subdivision; 474A.04, subdivision
1a; 474A.062; 474A.091, subdivision 3a; 475.521, subdivisions 1, 2, 4; 475.53,
subdivisions 1, 3, 4; 475.58, subdivisions 2, 3b; 475.73, subdivision 1; 477A.011,
subdivisions 20, 30, 32, 34, 42, by adding subdivisions; 477A.0124, subdivision
2; 477A.013, subdivisions 8, 9, by adding a subdivision; 477A.015; 477A.03,
subdivisions 2a, 2b, by adding a subdivision; 641.23; 641.24; 645.44, by adding
a subdivision; Laws 1971, chapter 773, section 1, subdivision 2, as amended;
Laws 1988, chapter 645, section 3, as amended; Laws 1993, chapter 375, article
9, section 46, subdivisions 2, as amended, 5, as amended; Laws 1998, chapter
389, article 8, section 43, subdivisions 1, 3, as amended, 5, as amended; Laws
1999, chapter 243, article 6, section 11; Laws 2002, chapter 377, article 3, section
25, as amended; Laws 2005, First Special Session chapter 3, article 5, section
37, subdivisions 2, 4; Laws 2008, chapter 366, article 5, sections 26; 33; 34, as
amended; article 7, section 19, subdivision 3, as amended; Laws 2010, chapter
216, section 55; Laws 2010, chapter 389, article 1, section 12; article 5, section 6,
subdivisions 4, 6; Laws 2010, First Special Session chapter 1, article 13, section 4,
subdivision 1, as amended; proposing coding for new law in Minnesota Statutes,
chapters 116C; 287; 290; 290A; 292; 295; 297I; 403; 435; 469; proposing coding
for new law as Minnesota Statutes, chapter 297J; repealing Minnesota Statutes
2012, sections 16A.725; 256.9658; 272.69; 273.11, subdivisions 1a, 22; 276A.01,
subdivision 11; 289A.60, subdivision 31; 290.01, subdivision 6b; 290.06,
subdivision 22a; 290.0672; 290.0921, subdivision 7; 383A.80, subdivision 4;
383B.80, subdivision 4; 428A.101; 428A.21; 473F.02, subdivision 13; 477A.011,
subdivisions 2a, 19, 21, 29, 31, 32, 33, 36, 39, 40, 41, 42; 477A.013, subdivisions
11, 12; 477A.0133; 477A.0134; Laws 2006, chapter 259, article 11, section 3, as
amended; Laws 2009, chapter 88, article 4, section 23, as amended.

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

ARTICLE 1

ONE-TIME PROVISIONS

Section 1.

Minnesota Statutes 2012, section 16A.152, subdivision 2, is amended to read:


Subd. 2.

Additional revenues; priority.

(a) If on the basis of a forecast of general
fund revenues and expenditures, the commissioner of management and budget determines
that there will be a positive unrestricted budgetary general fund balance at the close of
the biennium, the commissioner of management and budget must allocate money to the
following accounts and purposes in priority order:

(1) the cash flow account established in subdivision 1 until that account reaches
$350,000,000;

(2) the budget reserve account established in subdivision 1a until that account
reaches $653,000,000;

(3) the amount necessary to increase the aid payment schedule for school district
aids and credits payments in section 127A.45 to not more than 90 percent rounded to the
nearest tenth of a percent without exceeding the amount available and with any remaining
funds deposited in the budget reserve;

(4) the amount necessary to restore all or a portion of the net aid reductions under
section 127A.441 and to reduce the property tax revenue recognition shift under section
123B.75, subdivision 5, by the same amount;

(5) to reduce the rate of the surcharge in section 290.06, subdivision 2g, for taxable
years beginning after December 31, 2013, and before January 1, 2015, to not less than
zero with the rate rounded to the nearest tenth of a percent, without exceeding the amount
available, and with any remaining funds deposited in the budget reserve;
and

(5) (6) to the state airports fund, the amount necessary to restore the amount
transferred from the state airports fund under Laws 2008, chapter 363, article 11, section
3, subdivision 5.

(b) The amounts necessary to meet the requirements of this section are appropriated
from the general fund within two weeks after the forecast is released or, in the case of
transfers under paragraph (a), clauses (3) and (4), as necessary to meet the appropriations
schedules otherwise established in statute.

(c) The commissioner of management and budget shall certify the total dollar
amount of the reductions under paragraph (a), clauses (3) and (4), to the commissioner of
education. The commissioner of education shall increase the aid payment percentage and
reduce the property tax shift percentage by these amounts and apply those reductions to
the current fiscal year and thereafter.

(d) The commissioner of management and budget shall certify the total dollar
amount available under paragraph (a), clause (5), to the commissioner of revenue. The
commissioner of revenue shall determine the percentage reduction in the surcharge rate
for taxable years beginning after December 31, 2013, and before January 1, 2015, and
shall reduce the surcharge rate.

Sec. 2.

Minnesota Statutes 2012, section 123B.75, subdivision 5, is amended to read:


Subd. 5.

Levy recognition.

(a) For fiscal years 2009 and 2010, in June of each
year, the school district must recognize as revenue, in the fund for which the levy was
made, the lesser of:

(1) the sum of May, June, and July school district tax settlement revenue received in
that calendar year, plus general education aid according to section 126C.13, subdivision
4
, received in July and August of that calendar year; or

(2) the sum of:

(i) 31 percent of the referendum levy certified according to section 126C.17, in
calendar year 2000; and

(ii) the entire amount of the levy certified in the prior calendar year according to
section 124D.86, subdivision 4, for school districts receiving revenue under sections
124D.86, subdivision 3, clauses (1), (2), and (3); 126C.41, subdivisions 1, 2, paragraph (a),
and 3
, paragraphs (b), (c), and (d); 126C.43, subdivision 2; and 126C.48, subdivision 6; plus

(iii) zero percent of the amount of the levy certified in the prior calendar year for the
school district's general and community service funds, plus or minus auditor's adjustments,
not including the levy portions that are assumed by the state, that remains after subtracting
the referendum levy certified according to section 126C.17 and the amount recognized
according to item (ii).

(b) (a) For fiscal year 2011 and later years 2011, 2012, and 2013, in June of each
year, the school district must recognize as revenue, in the fund for which the levy was
made, the lesser of:

(1) the sum of May, June, and July school district tax settlement revenue received in
that calendar year, plus general education aid according to section 126C.13, subdivision
4
, received in July and August of that calendar year; or

(2) the sum of:

(i) the greater of 48.6 percent of the referendum levy certified according to section
126C.17 in the prior calendar year, or 31 percent of the referendum levy certified
according to section 126C.17 in calendar year 2000; plus

(ii) the entire amount of the levy certified in the prior calendar year according to
section 124D.4531, 124D.86, subdivision 4, for school districts receiving revenue under
sections 124D.86, subdivision 3, clauses (1), (2), and (3); 126C.41, subdivisions 1, 2,
paragraph (a), and 3, paragraphs (b), (c), and (d); 126C.43, subdivision 2; and 126C.48,
subdivision 6; plus

(iii) 48.6 percent of the amount of the levy certified in the prior calendar year for the
school district's general and community service funds, plus or minus auditor's adjustments,
that remains after subtracting the referendum levy certified according to section 126C.17
and the amount recognized according to item (ii).

(b) For fiscal year 2014 and later years, in June of each year, the school district must
recognize as revenue, in the fund for which the levy was made, the lesser of:

(1) the sum of May, June, and July school district tax settlement revenue received in
that calendar year, plus general education aid according to section 126C.13, subdivision
4
, received in July and August of that calendar year; or

(2) the sum of:

(i) 31 percent of the referendum levy certified according to section 126C.17 in
calendar year 2000;

(ii) the entire amount of the levy certified in the prior calendar year according to
section 124D.4531; 124D.86, subdivision 4, for school districts receiving revenue under
sections 124D.86, subdivision 3, clauses (1) to (3); 126C.41, subdivisions 1, 2, paragraph
(a), and 3, paragraphs (b), (c), and (d); 126C.43, subdivision 2; and 126C.48, subdivision
6; and

(iii) zero percent of the amount of the levy certified in the prior calendar year for the
school district's general and community service funds, plus or minus auditor's adjustments,
that remains after subtracting the referendum levy certified according to section 126C.17
and the amount recognized according to item (ii).

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 3.

Minnesota Statutes 2012, section 127A.45, subdivision 2, is amended to read:


Subd. 2.

Definitions.

(a) "Other district receipts" means payments by county
treasurers pursuant to section 276.10, apportionments from the school endowment fund
pursuant to section 127A.33, apportionments by the county auditor pursuant to section
127A.34, subdivision 2, and payments to school districts by the commissioner of revenue
pursuant to chapter 298.

(b) "Cumulative amount guaranteed" means the product of

(1) the cumulative disbursement percentage shown in subdivision 3; times

(2) the sum of

(i) the current year aid payment percentage of the estimated aid and credit
entitlements paid according to subdivision 13; plus

(ii) 100 percent of the entitlements paid according to subdivisions 11 and 12; plus

(iii) the other district receipts.

(c) "Payment date" means the date on which state payments to districts are made
by the electronic funds transfer method. If a payment date falls on a Saturday, a Sunday,
or a weekday which is a legal holiday, the payment shall be made on the immediately
preceding business day. The commissioner may make payments on dates other than
those listed in subdivision 3, but only for portions of payments from any preceding
payment dates which could not be processed by the electronic funds transfer method due
to documented extenuating circumstances.

(d) The current year aid payment percentage equals 73 in fiscal year 2010 and 70 in
fiscal year 2011, and 60
90 in fiscal years 2012 2014 and later.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 4.

Minnesota Statutes 2012, section 290.01, subdivision 19a, is amended to read:


Subd. 19a.

Additions to federal taxable income.

For individuals, estates, and
trusts, there shall be added to federal taxable income:

(1)(i) interest 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 exempt from federal income taxes under the Internal
Revenue Code or any other federal statute; and

(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
Code, except:

(A) the portion of the exempt-interest dividends exempt from state taxation under
the laws of the United States; and

(B) the portion of the exempt-interest dividends derived from interest income
on obligations of the state of Minnesota or its political or governmental subdivisions,
municipalities, governmental agencies or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to all shareholders represents
95 percent or more of the exempt-interest dividends, including any dividends exempt
under subitem (A), that are paid by the regulated investment company as defined in section
851(a) of the Internal Revenue Code, or the fund of the regulated investment company as
defined in section 851(g) of the Internal Revenue Code, making the payment; and

(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
government described in section 7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe is located;

(2) 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 paid, sales and use, motor vehicle sales, or excise taxes paid to any other state
or to any province or territory of Canada, to the extent allowed as a deduction under
section 63(d) of the Internal Revenue Code, but the addition may not be more than the
amount by which the itemized deductions as allowed under section 63(d) of the Internal
Revenue Code exceeds the amount of the standard deduction as defined in section 63(c) of
the Internal Revenue Code, disregarding the amounts allowed under sections 63(c)(1)(C)
and 63(c)(1)(E) of the Internal Revenue Code, minus any addition that would have been
required under clause (21) if the taxpayer had claimed the standard deduction. For the
purpose of this paragraph, the disallowance of itemized deductions under section 68 of
the Internal Revenue Code of 1986, income, sales and use, motor vehicle sales, or excise
taxes are the last itemized deductions disallowed;

(3) the capital gain amount of a lump-sum distribution to which the special tax under
section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the taxable year under this
chapter and taxes based on net income paid to any other state or any province or territory
of Canada, to the extent allowed as a deduction in determining federal adjusted gross
income. For the purpose of this paragraph, income taxes do not include the taxes imposed
by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
other than expenses or interest used in computing net interest income for the subtraction
allowed under subdivision 19b, clause (1);

(6) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(7) 80 percent of the depreciation deduction allowed under section 168(k) of the
Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
in the taxable year generates a deduction for depreciation under section 168(k) and the
activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
limited to excess of the depreciation claimed by the activity under section 168(k) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k) is allowed;

(8) for taxable years beginning before January 1, 2013, 80 percent of the amount by
which the deduction allowed by section 179 of the Internal Revenue Code exceeds the
deduction allowable by section 179 of the Internal Revenue Code of 1986, as amended
through December 31, 2003;

(9) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code;

(10) for taxable years beginning before January 1, 2013, the exclusion allowed under
section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;

(11) the amount of expenses disallowed under section 290.10, subdivision 2;

(12) for taxable years beginning before January 1, 2010, the amount deducted for
qualified tuition and related expenses under section 222 of the Internal Revenue Code, to
the extent deducted from gross income;

(13) for taxable years beginning before January 1, 2010, the amount deducted for
certain expenses of elementary and secondary school teachers under section 62(a)(2)(D)
of the Internal Revenue Code, to the extent deducted from gross income;

(14) the additional standard deduction for property taxes payable that is allowable
under section 63(c)(1)(C) of the Internal Revenue Code;

(15) the additional standard deduction for qualified motor vehicle sales taxes
allowable under section 63(c)(1)(E) of the Internal Revenue Code;

(16) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code;

(17) the amount of unemployment compensation exempt from tax under section
85(c) of the Internal Revenue Code;

(18) changes to federal taxable income attributable to a net operating loss that the
taxpayer elected to carry back for more than two years for federal purposes but for which
the losses can be carried back for only two years under section 290.095, subdivision
11, paragraph (c);

(19) to the extent included in the computation of federal taxable income in taxable
years beginning after December 31, 2010, the amount of disallowed itemized deductions,
but the amount of disallowed itemized deductions plus the addition required under clause
(2) may not be more than the amount by which the itemized deductions as allowed under
section 63(d) of the Internal Revenue Code exceeds the amount of the standard deduction
as defined in section 63(c) of the Internal Revenue Code, disregarding the amounts
allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code, and
reduced by any addition that would have been required under clause (21) if the taxpayer
had claimed the standard deduction:

(i) the amount of disallowed itemized deductions is equal to the lesser of:

(A) three percent of the excess of the taxpayer's federal adjusted gross income
over the applicable amount; or

(B) 80 percent of the amount of the itemized deductions otherwise allowable to the
taxpayer under the Internal Revenue Code for the taxable year;

(ii) the term "applicable amount" means $100,000, or $50,000 in the case of a
married individual filing a separate return. Each dollar amount shall be increased by
an amount equal to:

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof;

(iii) the term "itemized deductions" does not include:

(A) the deduction for medical expenses under section 213 of the Internal Revenue
Code;

(B) any deduction for investment interest as defined in section 163(d) of the Internal
Revenue Code; and

(C) the deduction under section 165(a) of the Internal Revenue Code for casualty or
theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue
Code or for losses described in section 165(d) of the Internal Revenue Code;

(20) to the extent included in federal taxable income in taxable years beginning after
December 31, 2010, the amount of disallowed personal exemptions for taxpayers with
federal adjusted gross income over the threshold amount:

(i) the disallowed personal exemption amount is equal to the dollar amount of the
personal exemptions claimed by the taxpayer in the computation of federal taxable income
multiplied by the applicable percentage;

(ii) "applicable percentage" means two percentage points for each $2,500 (or
fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable
year exceeds the threshold amount. In the case of a married individual filing a separate
return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In
no event shall the applicable percentage exceed 100 percent;

(iii) the term "threshold amount" means:

(A) $150,000 in the case of a joint return or a surviving spouse;

(B) $125,000 in the case of a head of a household;

(C) $100,000 in the case of an individual who is not married and who is not a
surviving spouse or head of a household; and

(D) $75,000 in the case of a married individual filing a separate return; and

(iv) the thresholds shall be increased by an amount equal to:

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; and

(21) to the extent deducted in the computation of federal taxable income, for taxable
years beginning after December 31, 2010, and before January 1, 2013, the difference
between the standard deduction allowed under section 63(c) of the Internal Revenue Code
and the standard deduction allowed for 2011 and 2012 under the Internal Revenue Code
as amended through December 1, 2010.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 5.

Minnesota Statutes 2012, section 290.01, subdivision 19c, is amended to read:


Subd. 19c.

Corporations; additions to federal taxable income.

For corporations,
there shall be added to federal taxable income:

(1) the amount of any deduction taken for federal income tax purposes for income,
excise, or franchise taxes based on net income or related minimum taxes, including but not
limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
another state, a political subdivision of another state, the District of Columbia, or any
foreign country or possession of the United States;

(2) interest not subject to federal tax upon obligations of: the United States, its
possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
state, any of its political or governmental subdivisions, any of its municipalities, or any
of its governmental agencies or instrumentalities; the District of Columbia; or Indian
tribal governments;

(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
Revenue Code;

(4) the amount of any net operating loss deduction taken for federal income tax
purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
deduction under section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal income tax purposes
under sections 241 to 247 and 965 of the Internal Revenue Code;

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

(7) the amount of any capital losses deducted for federal income tax purposes under
sections 1211 and 1212 of the Internal Revenue Code;

(8) the exempt foreign trade income of a foreign sales corporation under sections
921(a) and 291 of the Internal Revenue Code;

(9) the amount of percentage depletion deducted under sections 611 through 614 and
291 of the Internal Revenue Code;

(10) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, the amount of the amortization deduction allowed in computing federal taxable
income for those facilities;

(11) the amount of any deemed dividend from a foreign operating corporation
determined pursuant to section 290.17, subdivision 4, paragraph (g). The deemed dividend
shall be reduced by the amount of the addition to income required by clauses (20), (21),
(22), and (23);

(12) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(13) the amount of net income excluded under section 114 of the Internal Revenue
Code;

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

(15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A)
and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer
has an activity that in the taxable year generates a deduction for depreciation under
section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year
that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed
under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the
depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k)(1)(A) and (k)(4)(A) is allowed;

(16) for taxable years beginning before January 1, 2013, 80 percent of the amount by
which the deduction allowed by section 179 of the Internal Revenue Code exceeds the
deduction allowable by section 179 of the Internal Revenue Code of 1986, as amended
through December 31, 2003;

(17) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code;

(18) for taxable years beginning before January 1, 2013, the exclusion allowed under
section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;

(19) the amount of expenses disallowed under section 290.10, subdivision 2;

(20) an amount equal to the interest and intangible expenses, losses, and costs paid,
accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit
of a corporation that is a member of the taxpayer's unitary business group that qualifies
as a foreign operating corporation. For purposes of this clause, intangible expenses and
costs include:

(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
use, maintenance or management, ownership, sale, exchange, or any other disposition of
intangible property;

(ii) losses incurred, directly or indirectly, from factoring transactions or discounting
transactions;

(iii) royalty, patent, technical, and copyright fees;

(iv) licensing fees; and

(v) other similar expenses and costs.

For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.

This clause does not apply to any item of interest or intangible expenses or costs paid,
accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect
to such item of income to the extent that the income to the foreign operating corporation
is income from sources without the United States as defined in subtitle A, chapter 1,
subchapter N, part 1, of the Internal Revenue Code;

(21) except as already included in the taxpayer's taxable income pursuant to clause
(20), any interest income and income generated from intangible property received or
accrued by a foreign operating corporation that is a member of the taxpayer's unitary
group. For purposes of this clause, income generated from intangible property includes:

(i) income related to the direct or indirect acquisition, use, maintenance or
management, ownership, sale, exchange, or any other disposition of intangible property;

(ii) income from factoring transactions or discounting transactions;

(iii) royalty, patent, technical, and copyright fees;

(iv) licensing fees; and

(v) other similar income.

For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.

This clause does not apply to any item of interest or intangible income received or accrued
by a foreign operating corporation with respect to such item of income to the extent that
the income is income from sources without the United States as defined in subtitle A,
chapter 1, subchapter N, part 1, of the Internal Revenue Code;

(22) the dividends attributable to the income of a foreign operating corporation that
is a member of the taxpayer's unitary group in an amount that is equal to the dividends
paid deduction of a real estate investment trust under section 561(a) of the Internal
Revenue Code for amounts paid or accrued by the real estate investment trust to the
foreign operating corporation;

(23) the income of a foreign operating corporation that is a member of the taxpayer's
unitary group in an amount that is equal to gains derived from the sale of real or personal
property located in the United States;

(24) for taxable years beginning before January 1, 2010, the additional amount
allowed as a deduction for donation of computer technology and equipment under section
170(e)(6) of the Internal Revenue Code, to the extent deducted from taxable income; and

(25) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 6.

Minnesota Statutes 2012, section 290.06, is amended by adding a subdivision
to read:


Subd. 2g.

Income surcharge.

(a) In addition to the tax computed under subdivision
2c and section 290.091, for taxable years beginning after December 31, 2012, and
before January 1, 2015, there is a surcharge imposed on individuals, estates, and trusts.
The surcharge equals four percent of taxable net income over a threshold. For married
individuals filing separately, estates, and trusts, the threshold is $250,000. For all other
filers, the threshold is $500,000.

(b) For a nonresident or part-year resident, the surcharge must be allocated based on
the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 7.

Minnesota Statutes 2012, section 297A.68, subdivision 5, is amended to read:


Subd. 5.

Capital equipment.

(a) Capital equipment is exempt. The tax must be
imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and
then refunded in the manner provided in section 297A.75.

"Capital equipment" means machinery and equipment purchased or leased, and used
in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining,
or refining tangible personal property to be sold ultimately at retail if the machinery and
equipment are essential to the integrated production process of manufacturing, fabricating,
mining, or refining. Capital equipment also includes machinery and equipment
used primarily to electronically transmit results retrieved by a customer of an online
computerized data retrieval system.

(b) Capital equipment includes, but is not limited to:

(1) machinery and equipment used to operate, control, or regulate the production
equipment;

(2) machinery and equipment used for research and development, design, quality
control, and testing activities;

(3) environmental control devices that are used to maintain conditions such as
temperature, humidity, light, or air pressure when those conditions are essential to and are
part of the production process;

(4) materials and supplies used to construct and install machinery or equipment;

(5) repair and replacement parts, including accessories, whether purchased as spare
parts, repair parts, or as upgrades or modifications to machinery or equipment;

(6) materials used for foundations that support machinery or equipment;

(7) materials used to construct and install special purpose buildings used in the
production process;

(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed
as part of the delivery process regardless if mounted on a chassis, repair parts for
ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and

(9) machinery or equipment used for research, development, design, or production
of computer software.

(c) Capital equipment does not include the following:

(1) motor vehicles taxed under chapter 297B;

(2) machinery or equipment used to receive or store raw materials;

(3) building materials, except for materials included in paragraph (b), clauses (6)
and (7);

(4) machinery or equipment used for nonproduction purposes, including, but not
limited to, the following: plant security, fire prevention, first aid, and hospital stations;
support operations or administration; pollution control; and plant cleaning, disposal of
scrap and waste, plant communications, space heating, cooling, lighting, or safety;

(5) farm machinery and aquaculture production equipment as defined by section
297A.61, subdivisions 12 and 13;

(6) machinery or equipment purchased and installed by a contractor as part of an
improvement to real property;

(7) machinery and equipment used by restaurants in the furnishing, preparing, or
serving of prepared foods as defined in section 297A.61, subdivision 31;

(8) machinery and equipment used to furnish the services listed in section 297A.61,
subdivision 3
, paragraph (g), clause (6), items (i) to (vi) and (viii);

(9) machinery or equipment used in the transportation, transmission, or distribution
of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines,
tanks, mains, or other means of transporting those products. This clause does not apply to
machinery or equipment used to blend petroleum or biodiesel fuel as defined in section
239.77; or

(10) any other item that is not essential to the integrated process of manufacturing,
fabricating, mining, or refining.

(d) For purposes of this subdivision:

(1) "Equipment" means independent devices or tools separate from machinery but
essential to an integrated production process, including computers and computer software,
used in operating, controlling, or regulating machinery and equipment; and any subunit or
assembly comprising a component of any machinery or accessory or attachment parts of
machinery, such as tools, dies, jigs, patterns, and molds.

(2) "Fabricating" means to make, build, create, produce, or assemble components or
property to work in a new or different manner.

(3) "Integrated production process" means a process or series of operations through
which tangible personal property is manufactured, fabricated, mined, or refined. For
purposes of this clause, (i) manufacturing begins with the removal of raw materials
from inventory and ends when the last process prior to loading for shipment has been
completed; (ii) fabricating begins with the removal from storage or inventory of the
property to be assembled, processed, altered, or modified and ends with the creation
or production of the new or changed product; (iii) mining begins with the removal of
overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
ends when the last process before stockpiling is completed; and (iv) refining begins with
the removal from inventory or storage of a natural resource and ends with the conversion
of the item to its completed form.

(4) "Machinery" means mechanical, electronic, or electrical devices, including
computers and computer software, that are purchased or constructed to be used for the
activities set forth in paragraph (a), beginning with the removal of raw materials from
inventory through completion of the product, including packaging of the product.

(5) "Machinery and equipment used for pollution control" means machinery and
equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
described in paragraph (a).

(6) "Manufacturing" means an operation or series of operations where raw materials
are changed in form, composition, or condition by machinery and equipment and which
results in the production of a new article of tangible personal property. For purposes of
this subdivision, "manufacturing" includes the generation of electricity or steam to be
sold at retail.

(7) "Mining" means the extraction of minerals, ores, stone, or peat.

(8) "Online data retrieval system" means a system whose cumulation of information
is equally available and accessible to all its customers.

(9) "Primarily" means machinery and equipment used 50 percent or more of the time
in an activity described in paragraph (a).

(10) "Refining" means the process of converting a natural resource to an intermediate
or finished product, including the treatment of water to be sold at retail.

(11) This subdivision does not apply to telecommunications equipment as
provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit
for telecommunications services.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 8.

Minnesota Statutes 2012, section 297A.75, subdivision 1, is amended to read:


Subdivision 1.

Tax collected.

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

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

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

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

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

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

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

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

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

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

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

(11) (10) commuter rail vehicle and repair parts under section 297A.70, subdivision
3, paragraph (a), clause (10);

(12) (11) materials, supplies, and equipment for construction or improvement of
projects and facilities under section 297A.71, subdivision 40;

(13) (12) materials, supplies, and equipment for construction or improvement of a
meat processing facility exempt under section 297A.71, subdivision 41;

(14) (13) materials, supplies, and equipment for construction, improvement, or
expansion of an aerospace defense manufacturing facility exempt under section 297A.71,
subdivision 42;

(15) (14) enterprise information technology equipment and computer software for
use in a qualified data center exempt under section 297A.68, subdivision 42; and

(16) (15) materials, supplies, and equipment for qualifying capital projects under
section 297A.71, subdivision 44.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 9.

Minnesota Statutes 2012, section 297A.75, subdivision 2, is amended to read:


Subd. 2.

Refund; eligible persons.

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

(1) for subdivision 1, clauses (1) to (3) and (2), the applicant must be the purchaser;

(2) for subdivision 1, clauses (4) (3) and (7) (6), the applicant must be the
governmental subdivision;

(3) for subdivision 1, clause (5) (4), the applicant must be the recipient of the
benefits provided in United States Code, title 38, chapter 21;

(4) for subdivision 1, clause (6) (5), the applicant must be the owner of the
homestead property;

(5) for subdivision 1, clause (8) (7), the owner of the qualified low-income housing
project;

(6) for subdivision 1, clause (9) (8), the applicant must be a municipal electric utility
or a joint venture of municipal electric utilities;

(7) for subdivision 1, clauses (10) (9), (12), (13), and (14), and (15), the owner
of the qualifying business; and

(8) for subdivision 1, clauses (10), (11), (12), and (16) (15), the applicant must be
the governmental entity that owns or contracts for the project or facility.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 10.

Minnesota Statutes 2012, section 297A.75, subdivision 3, is amended to read:


Subd. 3.

Application.

(a) The application must include sufficient information
to permit the commissioner to verify the tax paid. If the tax was paid by a contractor,
subcontractor, or builder, under subdivision 1, clause (3), (4), (5), (6), (7), (8), (9), (10),
(11), (12), (13), (14), or (15), or (16), the contractor, subcontractor, or builder must
furnish to the refund applicant a statement including the cost of the exempt items and the
taxes paid on the items unless otherwise specifically provided by this subdivision. The
provisions of sections 289A.40 and 289A.50 apply to refunds under this section.

(b) An applicant may not file more than two applications per calendar year for
refunds for taxes paid on capital equipment exempt under section 297A.68, subdivision 5.

(c) Total refunds for purchases of items in section 297A.71, subdivision 40, must not
exceed $5,000,000 in fiscal years 2010 and 2011. Applications for refunds for purchases
of items in sections 297A.70, subdivision 3, paragraph (a), clause (11), and 297A.71,
subdivision 40, must not be filed until after June 30, 2009.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 11. ESTIMATED TAXES; EXCEPTIONS.

No addition to tax, penalties, or interest may be made under Minnesota Statutes,
section 289A.25, for any period before July 1, 2013, with respect to an underpayment
of estimated tax, to the extent that the underpayment was created or increased by the
surcharge imposed under this article.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 12. APPROPRIATIONS.

(a) The amount necessary to increase the aid payment percentage in section 3 to 90
percent, estimated to be $262,600,000, is appropriated in fiscal year 2014 from the general
fund to the commissioner of education.

(b) The amount necessary to reduce the percentage of levy recognized in the prior
calendar year in section 2 from 48.6 percent to zero percent, estimated to be $569,900,000,
is appropriated in fiscal year 2014 from the general fund to the commissioner of education.

(c) The amount paid in additional state general education aids and other school aids
as a result of reducing the percentage of levy recognized in the prior calendar year in
Minnesota Statutes, section 123B.75, subdivision 5, from 48.6 percent to zero percent,
estimated to be $21,700,000, is appropriated in fiscal year 2015 from the general fund to
the commissioner of education.

EFFECTIVE DATE.

This section is effective the day following final enactment.

ARTICLE 2

HOMESTEAD CREDIT REFUND AND RENTER PROPERTY TAX REFUND

Section 1.

Minnesota Statutes 2012, section 290A.03, subdivision 3, is amended to read:


Subd. 3.

Income.

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

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

(b) the sum of the following amounts to the extent not included in clause (a):

(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;

(xiii) (xiv) the amount of deduction allowed under section 199 of the Internal
Revenue Code;

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

(xv) (xvi) the amount of deducted for tuition expenses required to be added to
income under section 290.01, subdivision 19a, clause (12);
under section 222 of the
Internal Revenue Code; and

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

(xvii) unemployment compensation.

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.

(2) "Income" does not include:

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

(b) 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;

(c) 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;

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

(d) (e) relief granted under this chapter;

(e) (f) child support payments received under a temporary or final decree of
dissolution or legal separation; or

(f) (g) 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 107-16.

(3) The sum of the following amounts may be subtracted from income:

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

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

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

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

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

(f) 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.

For purposes of this subdivision, the "exemption amount" means the exemption
amount under section 151(d) of the Internal Revenue Code for the taxable year for which
the income is reported; and "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)(D) of the Internal
Revenue Code, without regard to whether the claimant or spouse claimed a deduction
.

EFFECTIVE DATE.

This section is effective beginning with refunds based on
property taxes payable in 2014 and rent paid in 2013.

Sec. 2.

Minnesota Statutes 2012, section 290A.04, subdivision 2, is amended to read:


Subd. 2.

Homeowners; homestead credit refund.

A claimant whose property
taxes payable are in excess of the percentage of the household income stated below shall
pay an amount equal to the percent of income shown for the appropriate household
income level along with the percent to be paid by the claimant of the remaining amount
of property taxes payable. The state refund equals the amount of property taxes payable
that remain, up to the state refund amount shown below.

Household Income
Percent of Income
Percent Paid by
Claimant
Maximum
State
Refund
$0 to 1,549
1.0 percent
15 percent
$
2,460
1,550 to 3,089
1.1 percent
15 percent
$
2,460
3,090 to 4,669
1.2 percent
15 percent
$
2,460
4,670 to 6,229
1.3 percent
20 percent
$
2,460
6,230 to 7,769
1.4 percent
20 percent
$
2,460
7,770 to 10,879
1.5 percent
20 percent
$
2,460
10,880 to 12,429
1.6 percent
20 percent
$
2,460
12,430 to 13,989
1.7 percent
20 percent
$
2,460
13,990 to 15,539
1.8 percent
20 percent
$
2,460
15,540 to 17,079
1.9 percent
25 percent
$
2,460
17,080 to 18,659
2.0 percent
25 percent
$
2,460
18,660 to 21,759
2.1 percent
25 percent
$
2,460
21,760 to 23,309
2.2 percent
30 percent
$
2,460
23,310 to 24,859
2.3 percent
30 percent
$
2,460
24,860 to 26,419
2.4 percent
30 percent
$
2,460
26,420 to 32,629
2.5 percent
35 percent
$
2,460
32,630 to 37,279
2.6 percent
35 percent
$
2,460
37,280 to 46,609
2.7 percent
35 percent
$
2,000
46,610 to 54,369
2.8 percent
35 percent
$
2,000
54,370 to 62,139
2.8 percent
40 percent
$
1,750
62,140 to 69,909
3.0 percent
40 percent
$
1,440
69,910 to 77,679
3.0 percent
40 percent
$
1,290
77,680 to 85,449
3.0 percent
40 percent
$
1,130
85,450 to 90,119
3.5 percent
45 percent
$
960
90,120 to 93,239
3.5 percent
45 percent
$
790
93,240 to 97,009
3.5 percent
50 percent
$
650
97,010 to 100,779
3.5 percent
50 percent
$
480
Household Income
Percent of Income
Percent Paid by
Claimant
Maximum
State
Refund
$0 to 1,619
1.0 percent
15 percent
$
2,580
1,620 to 3,229
1.1 percent
15 percent
$
2,580
3,230 to 4,889
1.2 percent
15 percent
$
2,580
4,890 to 6,519
1.3 percent
20 percent
$
2,580
6,520 to 8,129
1.4 percent
20 percent
$
2,580
8,130 to 11,389
1.5 percent
20 percent
$
2,580
11,390 to 13,009
1.6 percent
20 percent
$
2,580
13,010 to 14,649
1.7 percent
20 percent
$
2,580
14,650 to 16,269
1.8 percent
20 percent
$
2,580
16,270 to 17,879
1.9 percent
25 percent
$
2,580
17,880 to 22,779
2.0 percent
25 percent
$
2,580
22,780 to 24,399
2.0 percent
30 percent
$
2,580
24,400 to 27,659
2.0 percent
30 percent
$
2,580
27,660 to 39,029
2.0 percent
35 percent
$
2,580
39,030 to 56,919
2.0 percent
35 percent
$
2,090
56,920 to 65,049
2.0 percent
40 percent
$
1,830
65,050 to 73,189
2.1 percent
40 percent
$
1,510
73,190 to 81,319
2.2 percent
40 percent
$
1,350
81,320 to 89,449
2.3 percent
40 percent
$
1,180
89,450 to 94,339
2.4 percent
45 percent
$
1,000
94,340 to 97,609
2.5 percent
45 percent
$
830
97,610 to 101,559
2.5 percent
50 percent
$
680
101,560 to 105,499
2.5 percent
50 percent
$
500

The payment made to a claimant shall be the amount of the state refund calculated
under this subdivision. No payment is allowed if the claimant's household income is
$100,780 $105,500 or more.

EFFECTIVE DATE.

This section is effective for refund claims based on taxes
payable in 2014 and thereafter.

Sec. 3.

Minnesota Statutes 2012, section 290A.04, subdivision 2a, is amended to read:


Subd. 2a.

Renters.

A claimant whose rent constituting property taxes exceeds the
percentage of the household income stated below must pay an amount equal to the percent
of income shown for the appropriate household income level along with the percent to
be paid by the claimant of the remaining amount of rent constituting property taxes. The
state refund equals the amount of rent constituting property taxes that remain, up to the
maximum state refund amount shown below.

Household Income
Percent of Income
Percent Paid by
Claimant
Maximum
State
Refund
$0 to 3,589
1.0 percent
5 percent
$
1,190
3,590 to 4,779
1.0 percent
10 percent
$
1,190
4,780 to 5,969
1.1 percent
10 percent
$
1,190
5,970 to 8,369
1.2 percent
10 percent
$
1,190
8,370 to 10,759
1.3 percent
15 percent
$
1,190
10,760 to 11,949
1.4 percent
15 percent
$
1,190
11,950 to 13,139
1.4 percent
20 percent
$
1,190
13,140 to 15,539
1.5 percent
20 percent
$
1,190
15,540 to 16,729
1.6 percent
20 percent
$
1,190
16,730 to 17,919
1.7 percent
25 percent
$
1,190
17,920 to 20,319
1.8 percent
25 percent
$
1,190
20,320 to 21,509
1.9 percent
30 percent
$
1,190
21,510 to 22,699
2.0 percent
30 percent
$
1,190
22,700 to 23,899
2.2 percent
30 percent
$
1,190
23,900 to 25,089
2.4 percent
30 percent
$
1,190
25,090 to 26,289
2.6 percent
35 percent
$
1,190
26,290 to 27,489
2.7 percent
35 percent
$
1,190
27,490 to 28,679
2.8 percent
35 percent
$
1,190
28,680 to 29,869
2.9 percent
40 percent
$
1,190
29,870 to 31,079
3.0 percent
40 percent
$
1,190
31,080 to 32,269
3.1 percent
40 percent
$
1,190
32,270 to 33,459
3.2 percent
40 percent
$
1,190
33,460 to 34,649
3.3 percent
45 percent
$
1,080
34,650 to 35,849
3.4 percent
45 percent
$
960
35,850 to 37,049
3.5 percent
45 percent
$
830
37,050 to 38,239
3.5 percent
50 percent
$
720
38,240 to 39,439
3.5 percent
50 percent
$
600
38,440 to 40,629
3.5 percent
50 percent
$
360
40,630 to 41,819
3.5 percent
50 percent
$
120
$0 to 4,909
1.0 percent
5 percent
$
2,000
4,910 to 6,529
1.0 percent
10 percent
$
2,000
6,530 to 8,159
1.1 percent
10 percent
$
1,950
8,160 to 11,439
1.2 percent
10 percent
$
1,900
11,440 to 14,709
1.3 percent
15 percent
$
1,850
14,710 to 16,339
1.4 percent
15 percent
$
1,800
16,340 to 17,959
1.4 percent
20 percent
$
1,750
17,960 to 21,239
1.5 percent
20 percent
$
1,700
21,240 to 22,869
1.6 percent
20 percent
$
1,650
22,870 to 24,499
1.7 percent
25 percent
$
1,650
24,500 to 27,779
1.8 percent
25 percent
$
1,650
27,780 to 29,399
1.9 percent
30 percent
$
1,650
29,400 to 34,299
2.0 percent
30 percent
$
1,650
34,300 to 39,199
2.0 percent
35 percent
$
1,650
39,200 to 45,739
2.0 percent
40 percent
$
1,650
45,740 to 47,369
2.0 percent
45 percent
$
1,500
47,370 to 49,009
2.0 percent
45 percent
$
1,350
49,010 to 50,649
2.0 percent
45 percent
$
1,150
50,650 to 52,269
2.0 percent
50 percent
$
1,000
52,270 to 53,909
2.0 percent
50 percent
$
900
53,910 to 55,539
2.0 percent
50 percent
$
500
55,540 to 57,169
2.0 percent
50 percent
$
200

The payment made to a claimant is the amount of the state refund calculated under
this subdivision. No payment is allowed if the claimant's household income is $41,820
$57,170 or more.

EFFECTIVE DATE.

This section is effective for claims based on rent paid in
2013 and following years.

Sec. 4.

Minnesota Statutes 2012, section 290A.04, subdivision 4, is amended to read:


Subd. 4.

Inflation adjustment.

(a) Beginning for property tax refunds payable in
calendar year 2002, the commissioner shall annually adjust the dollar amounts of the
income thresholds and the maximum refunds under subdivisions 2 and 2a 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 subdivision.

(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, 2011 2013, to the year ending on June 30 of the year
preceding that in which the refund is payable.

(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, 2000 2013, to the year ending on June 30 of the year
preceding that in which the refund is payable.

(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.

(e) 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.

EFFECTIVE DATE.

This section is effective for refund claims based on taxes
payable in 2014 and rent paid in 2013 and following years.

Sec. 5.

[290A.28] NOTIFICATION OF POTENTIAL ELIGIBILITY.

Subdivision 1.

Notification of eligibility.

(a) By August 1, 2014, the commissioner
shall notify, in writing or electronically, individual homeowners whom the commissioner
determines likely will be eligible for a homestead credit refund under this chapter for
that property taxes payable year. In determining whether to notify a homeowner, the
commissioner shall consider the property tax information available to the commissioner
under paragraph (b) and the most recent income information available to the commissioner
from filing under this chapter for the prior year or under chapter 290 for the current or
prior year. The notification must include information on how to file for the homestead
credit refund and the range of potential homestead credit refunds that the homeowner
could qualify to receive. The notification requirement under this section does not apply
to a homeowner who has already filed for the homestead credit refund for the current
or prior year.

(b) By May 15, 2014, each county auditor shall transmit to the commissioner
of revenue the following information for each property classified as a residential or
agricultural homestead under section 273.13, subdivision 22 or 23:

(1) the property taxes payable;

(2) the name and address of the owner;

(3) the Social Security number or numbers of the owners; and

(4) any other information the commissioner deems necessary or useful to carry
out the provisions of this section.

The information must be provided in the form and manner prescribed by the commissioner.

Subd. 2.

Report.

By March 15, 2015, the commissioner must provide written
reports to the chairs and ranking minority members of the legislative committees with
jurisdiction over taxes, in compliance with Minnesota Statutes, sections 3.195 and 3.197.
The report must provide information on the number and dollar amount of homeowner
property tax refund claims based on taxes payable in 2014, including:

(i) the number and dollar amount of claims projected for homestead credit refunds
based on taxes payable in 2014 prior to enactment of the notification requirement in
this section;

(ii) the number of notifications issued as provided in this section, including the
number issued by county;

(iii) the number and dollar amount of claims for homestead credit refunds based on
taxes payable in 2014 processed through December 31, 2014; and

(iv) a description of any outreach efforts undertaken by the commissioner for
homestead credit refunds based on taxes payable in 2014, in addition to the notification
required in this section.

EFFECTIVE DATE.

This section is effective for refund claims based on property
taxes payable in 2014.

ARTICLE 3

PROPERTY TAX AIDS AND CREDITS

Section 1.

Minnesota Statutes 2012, section 69.021, is amended by adding a
subdivision to read:


Subd. 12.

Surcharge aid accounts.

(a) A surcharge fire pension aid account is
established in the special revenue fund to receive amounts as provided under section
297I.07, subdivision 3, clause (1). The commissioner shall administer the account and
allocate money in the account as follows:

(1) 17.342 percent as supplemental state pension funding paid to the executive
director of the Public Employees Retirement Association for deposit in the public
employees police and fire retirement fund established by section 353.65, subdivision 1;

(2) 8.658 percent to municipalities employing firefighters with retirement coverage
by the public employees police and fire retirement plan, allocated in proportion to the
relationship that the preceding December 31 number of firefighters employed by each
municipality who have public employees police and fire retirement plan coverage bears to
the total preceding December 31 number of municipal firefighters covered by the public
employees police and fire retirement plan; and

(3) 74 percent for municipalities other than the municipalities receiving a
disbursement under clause (2) which qualified to receive fire state aid in that calendar year,
allocated in proportion to the most recent amount of fire state aid paid under subdivision 7
for the municipality bears to the most recent total fire state aid for all municipalities other
than the municipalities receiving a disbursement under clause (2) paid under subdivision
7, with the allocated amount for fire departments participating in the voluntary statewide
lump-sum volunteer firefighter retirement plan paid to the executive director of the Public
Employees Retirement Association for deposit in the fund established by section 353G.02,
subdivision 3, and credited to the respective account and with the balance paid to the
treasurer of each municipality for transmittal within 30 days of receipt to the treasurer of
the applicable volunteer firefighter relief association for deposit in its special fund.

(b) A surcharge police pension aid account is established in the special revenue
fund to receive amounts as provided by section 297I.07, subdivision 3, clause (2). The
commissioner shall administer the account and allocate money in the account as follows:

(1) one-third to be distributed as police state aid as provided under subdivision 7a; and

(2) two-thirds to be apportioned, on the basis of the number of active police officers
certified for police state aid receipt under section 69.011, subdivisions 2 and 2b, between:

(i) the executive director of the Public Employees Retirement Association for
deposit as a supplemental state pension funding aid in the public employees police and fire
retirement fund established by section 353.65, subdivision 1; and

(ii) the executive director of the Minnesota State Retirement System for deposit as a
supplemental state pension funding aid in the state patrol retirement fund.

(c) On or before September 1, annually, the executive director of the Public
Employees Retirement Association shall report to the commissioner the following:

(1) the municipalities which employ firefighters with retirement coverage by the
public employees police and fire retirement plan;

(2) the number of firefighters with public employees police and fire retirement plan
employed by each municipality;

(3) the fire departments covered by the voluntary statewide lump-sum volunteer
firefighter retirement plan; and

(4) any other information requested by the commissioner to administer the surcharge
fire pension aid account.

(d) For this subdivision, (i) the number of firefighters employed by a municipality
who have public employees police and fire retirement plan coverage means the number
of firefighters with public employees police and fire retirement plan coverage that were
employed by the municipality for not less than 30 hours per week for a minimum of six
months prior to December 31 preceding the date of the payment under this section and, if
the person was employed for less than the full year, prorated to the number of full months
employed; and, (ii) the number of active police officers certified for police state aid receipt
under section 69.011, subdivisions 2 and 2b means, for each municipality, the number of
police officers meeting the definition of peace officer in section 69.011, subdivision 1,
counted as provided and limited by section 69.011, subdivisions 2 and 2b.

(e) The payments under this section shall be made on October 1 each year, based
on the amount in the surcharge fire pension aid account and the amount in the surcharge
police pension aid account on the preceding June 30, with interest at 1 percent for each
month, or portion of a month, that the amount remains unpaid after October 1. The
amounts necessary to make the payments under this subdivision are annually appropriated
to the commissioner from the surcharge fire and police pension aid accounts. Any
necessary adjustments shall be made to subsequent payments.

(f) The provisions of this chapter that prevent municipalities and relief associations
from being eligible for, or receiving state aid under this chapter until the applicable
financial reporting requirements have been complied with, apply to the amounts payable
to municipalities and relief associations under this subdivision.

(g) The amounts necessary to make the payments under this subdivision are
appropriated to the commissioner from the respective accounts in the special revenue fund.

EFFECTIVE DATE.

This section is effective beginning in the fiscal year beginning
July 1, 2013.

Sec. 2.

Minnesota Statutes 2012, section 273.1398, subdivision 4, is amended to read:


Subd. 4.

Disparity reduction credit.

(a) Beginning with taxes payable in 1989,
class 4a and class 3a property qualifies for a disparity reduction credit if: (1) the property
is located in a border city that has an enterprise zone, as defined in section 469.166; (2)
the property is located in a city with a population greater than 2,500 and less than 35,000
according to the 1980 decennial census; (3) the city is adjacent to a city in another state or
immediately adjacent to a city adjacent to a city in another state; and (4) the adjacent city
in the other state has a population of greater than 5,000 and less than 75,000 according to
the 1980 decennial census.

(b) The credit is an amount sufficient to reduce (i) the taxes levied on class 4a
property to 2.3 2 percent of the property's market value and (ii) the tax on class 3a property
to 2.3 2 percent of market value.

(c) The county auditor shall annually certify the costs of the credits to the
Department of Revenue. The department shall reimburse local governments for the
property taxes forgone as the result of the credits in proportion to their total levies.

EFFECTIVE DATE.

This section is effective beginning with taxes payable in 2014.

Sec. 3.

Minnesota Statutes 2012, section 290C.02, subdivision 6, is amended to read:


Subd. 6.

Forest land.

"Forest land" means land containing a minimum of 20
contiguous acres for which the owner has implemented a forest management plan that was
prepared or updated within the past ten years by an approved plan writer. For purposes of
this subdivision, acres are considered to be contiguous even if they are separated by a road,
waterway, railroad track, or other similar intervening property. At least 50 percent of the
contiguous acreage must meet the definition of forest land in section 88.01, subdivision 7.
For the purposes of sections 290C.01 to 290C.11, forest land does not include the following:

(i) land used for residential or agricultural purposes,;

(ii) land enrolled in the reinvest in Minnesota program, a state or federal conservation
reserve or easement reserve program under sections 103F.501 to 103F.531, the Minnesota
agricultural property tax law under section 273.111, or land subject to agricultural land
preservation controls or restrictions as defined in section 40A.02 or under the Metropolitan
Agricultural Preserves Act under chapter 473H, or;

(iii) land subject to a conservation easement funded under section 97A.056 or a
comparable permanent easement conveyed to a governmental or nonprofit entity; or

(iv) land improved with a structure, pavement, sewer, campsite, or any road, other
than a township road, used for purposes not prescribed in the forest management plan.

EFFECTIVE DATE.

This section is effective for payments made beginning in
calendar year 2014.

Sec. 4.

Minnesota Statutes 2012, section 290C.05, is amended to read:


290C.05 ANNUAL CERTIFICATION.

On or before July 1 of each year, beginning with the year after the original claimant
has received an approved application, the commissioner shall send each claimant enrolled
under the sustainable forest incentive program a certification form. For purposes of this
section, the original claimant is the person that filed the first application under section
290C.04 to enroll the land in the program. The claimant must sign the certification,
attesting that the requirements and conditions for continued enrollment in the program are
currently being met, and must return the signed certification form, along with a copy of
the property tax statement for the property taxes payable on the enrolled property for the
calendar year and any other information the commissioner deems necessary to determine
whether the property is qualified under section 290C.02, subdivision 6, or the amount of
the payment under section 290C.07, paragraph (a), clause (2),
to the commissioner by
August 15 of that same year. If the claimant does not return an annual certification form
by the due date, the provisions in section 290C.11 apply.

EFFECTIVE DATE.

This section is effective for payments made beginning in
calendar year 2014.

Sec. 5.

Minnesota Statutes 2012, section 290C.07, is amended to read:


290C.07 CALCULATION OF INCENTIVE PAYMENT.

(a) An approved claimant under the sustainable forest incentive program is eligible
to receive an annual payment. The payment shall be equal to the lesser of (1) $7 per acre
or (2) one-half of the property tax payable for the calendar year for each acre enrolled in
the sustainable forest incentive program.

(b) The annual payment for each Social Security number or state or federal business
tax identification number must not exceed $100,000.

EFFECTIVE DATE.

This section is effective for payments made beginning in
calendar year 2014.

Sec. 6.

[297I.07] SURCHARGE ON HOMEOWNERS AND AUTO POLICIES.

Subdivision 1.

Surcharge on policies.

(a) Each licensed insurer engaged in writing
insurance shall collect a surcharge equal to $5 per calendar year for each policy issued
or renewed during that calendar year for:

(1) homeowners insurance authorized in section 60A.06, subdivision 1, clause
(1)(c); and

(2) automobile insurance as defined in section 65B.14, subdivision 2.

(b) The surcharge amount collected under this subdivision must not be considered
premium for any other purpose. The surcharge amount must be separately stated on either a
billing or policy declaration or document containing similar information sent to an insured.

Subd. 2.

Collection and administration.

The commissioner shall administer the
surcharge imposed by this section in the same manner as the taxes imposed by this chapter.

Subd. 3.

Deposit of revenues.

The commissioner shall deposit revenues from the
surcharge under this section as follows:

(1) amounts from the surcharge imposed under subdivision 1, paragraph (a), clause
(1), in a surcharge fire pension aid account in the special revenue fund; and

(2) amounts from the surcharge imposed under subdivision 1, paragraph (a), clause
(2), in a surcharge police pension aid account in the special revenue fund.

Subd. 4.

Surcharge termination.

The surcharge imposed under subdivision
1 ends on the December 31 next following the actuarial valuation date on which the
assets of the retirement plan on a market value equals or exceeds 90 percent of the total
actuarial accrued liabilities of the retirement plan as disclosed in an actuarial valuation
prepared under section 356.215 and the Standards for Actuarial Work promulgated by the
Legislative Commission on Pensions and Retirement, for the State Patrol retirement plan
or the public employees police and fire retirement plan, whichever occurs last.

EFFECTIVE DATE.

This section is effective for policies issued after June 30, 2013.

Sec. 7.

Minnesota Statutes 2012, section 477A.011, subdivision 30, is amended to read:


Subd. 30.

Pre-1940 housing percentage.

(a) Except as provided in paragraph (b),
"pre-1940 housing percentage" for a city is 100 times the most recent federal census count
by the United States Bureau of the Census of all housing units in the city built before
1940, divided by the total number of all housing units in the city. Housing units includes
both occupied and vacant housing units as defined by the federal census.

(b) For the city of East Grand Forks only, "pre-1940 housing percentage" is equal
to 100 times the 1990 federal census count of all housing units in the city built before
1940, divided by the most recent count by the United States Bureau of the Census of all
housing units in the city. Housing units includes both occupied and vacant housing units
as defined by the federal census.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 8.

Minnesota Statutes 2012, section 477A.011, is amended by adding a
subdivision to read:


Subd. 30a.

Percent of housing built between 1940 and 1970.

"Percent of housing
built between 1940 and 1970" is equal to 100 times the most recent count by the United
States Bureau of the Census of all housing units in the city built after 1939 but before
1970, divided by the total number of all housing units in the city. Housing units includes
both occupied and vacant housing units as defined by the federal census.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 9.

Minnesota Statutes 2012, section 477A.011, subdivision 34, is amended to read:


Subd. 34.

City revenue need.

(a) For a city with a population equal to or greater
than 2,500 10,000, "city revenue need" is the greater of 285 or 1.15 times the sum of (1)
5.0734098 4.59 times the pre-1940 housing percentage; plus (2) 19.141678 times the
population decline percentage
0.622 times the percent of housing built between 1940 and
1970
; plus (3) 2504.06334 times the road accidents factor 169.415 times the jobs per
capita
; plus (4) 355.0547; minus (5) the metropolitan area factor; minus (6) 49.10638
times the household size
the sparsity adjustment; plus (5) 307.664.

(b) For a city with a population equal to or greater than 2,500 and less than 10,000,
"city revenue need" is 1.15 times the sum of (1) 572.62; plus (2) 5.026 times the pre-1940
housing percentage; minus (3) 53.768 times household size; plus (4) 14.022 times peak
population decline.

(b) (c) For a city with a population less than 2,500, "city revenue need" is the sum of
(1) 2.387 times the pre-1940 housing percentage; plus (2) 2.67591 times the commercial
industrial percentage; plus (3) 3.16042 times the population decline percentage; plus (4)
1.206 times the transformed population; minus (5) 62.772
410 plus 0.367 times the city's
population over 100. The city revenue need under this paragraph shall not exceed 630
.

(c) (d) For a city with a population of at least 2,500 or more and a population in one
of the most recently available five years that was less than 2,500, "city revenue need"
is the sum of (1) its city revenue need calculated under paragraph (a) multiplied by its
transition factor; plus (2) its city revenue need calculated under the formula in paragraph
(b) multiplied by the difference between one and its transition factor. For purposes of this
paragraph, a city's "transition factor" is equal to 0.2 multiplied by the number of years that
the city's population estimate has been 2,500 or more. This provision only applies for aids
payable in calendar years 2006 to 2008 to cities with a 2002 population of less than 2,500.
It applies to any city for aids payable in 2009 and thereafter
but less than 3,000, the "city
revenue need" equals (1) the transition factor times the city's revenue need calculated in
paragraph (b) plus (2) 630 times the difference between one and the transition factor. For
a city with a population of at least 10,000 but less than 10,500, the "city revenue need"
equals (1) the transition factor times the city's revenue need calculated in paragraph (a)
plus (2) the city's revenue need calculated under the formula in paragraph (b) times the
difference between one and the transition factor. For purposes of this paragraph "transition
factor" is 0.2 percent times the amount that the city's population exceeds the minimum
threshold in either of the first two sentences
.

(d) (e) The city revenue need cannot be less than zero.

(e) (f) For calendar year 2005 2015 and subsequent years, the city revenue need for
a city, as determined in paragraphs (a) to (d) (e), is multiplied by the ratio of the annual
implicit price deflator for government consumption expenditures and gross investment for
state and local governments as prepared by the United States Department of Commerce,
for the most recently available year to the 2003 2013 implicit price deflator for state
and local government purchases.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 10.

Minnesota Statutes 2012, section 477A.011, subdivision 42, is amended to read:


Subd. 42.

City jobs base Jobs per capita.

(a) "City jobs base" for a city with a
population of 5,000 or more is equal to the product of (1) $25.20, (2) the number of
jobs per capita in the city, and (3) its population. For cities with a population less than
5,000, the city jobs base is equal to zero. For a city receiving aid under subdivision 36,
paragraph (k), its city jobs base is reduced by the lesser of 36 percent of the amount of
aid received under that paragraph or $1,000,000. No city's city jobs base may exceed
$4,725,000 under this paragraph.

(b) For calendar year 2010 and subsequent years, the city jobs base for a city, as
determined in paragraph (a), is multiplied by the ratio of the appropriation under section
477A.03, subdivision 2a, for the year in which the aid is paid to the appropriation under
that section for aids payable in 2009.

(c) For purposes of this subdivision, "Jobs per capita in the city" means (1) the
average annual number of employees in the city based on the data from the Quarterly
Census of Employment and Wages, as reported by the Department of Employment and
Economic Development, for the most recent calendar year available as of May 1, 2008
November 1 of every odd-numbered year, divided by (2) the city's population for the
same calendar year as the employment data. The commissioner of the Department of
Employment and Economic Development shall certify to the city the average annual
number of employees for each city by June 1, 2008 January 15, of every even-numbered
year beginning with January 15, 2014
. A city may challenge an estimate under this
paragraph by filing its specific objection, including the names of employers that it feels
may have misreported data, in writing with the commissioner by June 20, 2008 December
1 of every odd-numbered year
. The commissioner shall make every reasonable effort
to address the specific objection and adjust the data as necessary. The commissioner
shall certify the estimates of the annual employment to the commissioner of revenue by
July 15, 2008 January 15 of all even-numbered years, including any estimates still under
objection. For aids payable in 2014, "jobs per capita" shall be based on the annual number
of employees and population for calendar year 2010 without additional review.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 11.

Minnesota Statutes 2012, section 477A.011, is amended by adding a
subdivision to read:


Subd. 44.

Peak population decline.

"Peak population decline" is equal to 100
times the difference between one and the ratio of the city's current population, to the
highest city population reported in a federal census from the 1970 census or later. "Peak
population decline" shall not be less than zero.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 12.

Minnesota Statutes 2012, section 477A.011, is amended by adding a
subdivision to read:


Subd. 45.

Sparsity adjustment.

For a city with a population of 10,000 or more, the
sparsity adjustment is 100 for any city with an average population density less than 150
per square mile, according to the most recent federal census, and the sparsity adjustment is
zero for all other cities.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 13.

Minnesota Statutes 2012, section 477A.013, subdivision 8, is amended to read:


Subd. 8.

City formula aid.

(a) For aids payable in 2014 only, the formula aid for
a city is equal to the lesser of its unmet need or the sum of (1) its 2013 certified aid and
(2) the product of (i) the difference between its unmet need and its 2013 certified aid
and (ii) the aid gap percentage.

(b) For aids payable in 2015 and thereafter, the formula aid for a city is equal to
the sum of (1) its city jobs base, (2) its small city aid base, and (3) the need increase
percentage multiplied by the average of its unmet need for the most recently available two
years
formula aid in the previous year and (2) the product of (i) the difference between
its unmet need and its certified aid in the previous year under subdivision 9, and (ii)
the aid gap percentage
.

No city may have a formula aid amount less than zero. The need increase aid gap
percentage must be the same for all cities.

The applicable need increase aid gap percentage must be calculated by the
Department of Revenue so that the total of the aid under subdivision 9 equals the total
amount available for aid under section 477A.03. Data used in calculating aids to cities
under sections 477A.011 to 477A.013 shall be the most recently available data as of
January 1 in the year in which the aid is calculated except that the data used to compute "net
levy" in subdivision 9 is the data most recently available at the time of the aid computation.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 14.

Minnesota Statutes 2012, section 477A.013, subdivision 9, is amended to read:


Subd. 9.

City aid distribution.

(a) In calendar year 2013 2014 and thereafter, each
city shall receive an aid distribution equal to the sum of (1) the city formula aid under
subdivision 8, and (2) its city aid base aid adjustment under subdivision 13.

(b) For aids payable in 2013 and 2014 only, the total aid in the previous year for
any city shall mean the amount of aid it was certified to receive for aids payable in 2012
under this section. For aids payable in 2015 and thereafter, the total aid in the previous
year for any city means the amount of aid it was certified to receive under this section in
the previous payable year.

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

(d) (b) For aids payable in 2014 only, the total aid for a city may not be less than the
amount it was certified to receive in 2013.
For aids payable in 2010 2015 and thereafter,
the total aid for a city with a population less than 2,500 must not be less than the amount
it was certified to receive in the previous year minus the lesser of $10 multiplied by its
population, or five percent of its 2003 certified aid amount. For aids payable in 2009 only,
the total aid for a city with a population less than 2,500 must not be less than what it
received under this section in the previous year unless its total aid in calendar year 2008
was aid under section 477A.011, subdivision 36, paragraph (s), in which case its minimum
aid is zero
its net levy in the year prior to the aid distribution.

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

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

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 15.

Minnesota Statutes 2012, section 477A.013, is amended by adding a
subdivision to read:


Subd. 13.

Certified aid adjustments.

(a) A city that received an aid base increase
under Minnesota Statutes 2012, section 477A.011, subdivision 36, paragraph (e), shall
have its total aid under subdivision 9 increased by an amount equal to $150,000 for aids
payable in 2014 through 2018.

(b) A city that received a temporary aid increase under Minnesota Statutes 2012,
section 477A.011, subdivision 36, paragraph (m), (v), or (w), shall have its total aid under
subdivision 9 decreased by the amount of its aid base increase under those paragraphs in
calendar year 2013.

Sec. 16.

Minnesota Statutes 2012, section 477A.015, is amended to read:


477A.015 PAYMENT DATES.

The commissioner of revenue shall make the payments of local government aid to
affected taxing authorities in two installments on July 20 and December 26 annually.

When the commissioner of public safety determines that a local government has
suffered financial hardship due to a natural disaster, the commissioner of public safety
shall notify the commissioner of revenue, who shall make payments of aids under sections
477A.011 to 477A.014, which are otherwise due on December 26, as soon as is practical
after the determination is made but not before July 20.

The commissioner may pay all or part of the payments of aids under sections
477A.011 to 477A.014, which are due on December 26 at any time after August 15 if a
local government requests such payment as being necessary for meeting its cash flow
needs. For aids payable in 2013 only, a city that is located in an area deemed a disaster
area during the month of April 2013, as defined in section 12A.01, subdivision 5, shall
receive its December 26, 2013 payment with its July 20, 2013 payment.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 17.

Minnesota Statutes 2012, section 477A.03, subdivision 2a, is amended to read:


Subd. 2a.

Cities.

For aids payable in 2013 2014 and thereafter, the total aid paid
under section 477A.013, subdivision 9, is $426,438,012 $506,438,012. For aids payable
in 2015 and thereafter, the total aid paid under section 477A.013, subdivision 9, is the
amount certified under that section in the previous year multiplied by the inflation
adjustment under subdivision 6
.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 18.

Minnesota Statutes 2012, section 477A.03, subdivision 2b, is amended to read:


Subd. 2b.

Counties.

(a) For aids payable in 2013 2014 and thereafter, the total aid
payable under section 477A.0124, subdivision 3, is $80,795,000 $95,795,000. Each
calendar year, $500,000 of this appropriation shall be retained by the commissioner
of revenue to make reimbursements to the commissioner of management and budget
for payments made under section 611.27. For calendar year 2004, the amount shall
be in addition to the payments authorized under section 477A.0124, subdivision 1.
For calendar year 2005 and subsequent years, the amount shall be deducted from the
appropriation under this paragraph.
The reimbursements shall be to defray the additional
costs associated with court-ordered counsel under section 611.27. Any retained amounts
not used for reimbursement in a year shall be included in the next distribution of county
need aid that is certified to the county auditors for the purpose of property tax reduction
for the next taxes payable year.

(b) For aids payable in 2013 2014 and thereafter, the total aid under section
477A.0124, subdivision 4, is $84,909,575 $99,909,575. The commissioner of management
and budget shall bill the commissioner of revenue for the cost of preparation of local impact
notes as required by section 3.987, not to exceed $207,000 in each fiscal year 2004 and
thereafter
. The commissioner of education shall bill the commissioner of revenue for the
cost of preparation of local impact notes for school districts as required by section 3.987,
not to exceed $7,000 in each fiscal year 2004 and thereafter. The commissioner of revenue
shall deduct the amounts billed under this paragraph from the appropriation under this
paragraph. The amounts deducted are appropriated to the commissioner of management
and budget and the commissioner of education for the preparation of local impact notes.

EFFECTIVE DATE.

This section is effective for aid payable in 2014 and thereafter.

Sec. 19.

Minnesota Statutes 2012, section 477A.03, is amended by adding a
subdivision to read:


Subd. 6.

Inflation adjustment.

In 2015 and thereafter, the amount paid under
subdivision 2a shall be multiplied by an amount equal to one plus the sum of (1) the
percentage increase in the implicit price deflator for government expenditures and gross
investment for state and local government purchases as prepared by the United States
Department of Commerce, for the 12-month period ending March 31 of the previous
calendar year, and (2) the percentage increase in total city population for the most recently
available years as of January 15 of the current year. The percentage increase in this
subdivision shall not be less than 2.5 percent or greater than five percent.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 20. REPEALER.

(a) Minnesota Statutes 2012, sections 477A.011, subdivisions 2a, 19, 29, 31, 32, 33,
36, 39, 40, 41, and 42; 477A.013, subdivisions 11 and 12; 477A.0133; and 477A.0134,
are
repealed.

(b) Laws 2006, chapter 259, article 11, section 3, as amended by Laws 2008, chapter
154, article 1, section 4,
is repealed.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

ARTICLE 4

PROPERTY TAXES

Section 1.

Minnesota Statutes 2012, section 103B.102, subdivision 3, is amended to
read:


Subd. 3.

Evaluation and report.

The Board of Water and Soil Resources shall
evaluate performance, financial, and activity information for each local water management
entity. The board shall evaluate the entities' progress in accomplishing their adopted plans
on a regular basis as determined by the board based on budget and operations of the local
water management entity
, but not less than once every five ten years. The board shall
maintain a summary of local water management entity performance on the board's Web site.
Beginning February 1, 2008, and annually thereafter, the board shall provide an analysis
of local water management entity performance to the chairs of the house of representatives
and senate committees having jurisdiction over environment and natural resources policy.

Sec. 2.

Minnesota Statutes 2012, section 103B.335, is amended to read:


103B.335 TAX LEVY AUTHORITY.

Subdivision 1.

Local water planning and management.

The governing body of
any county, municipality, or township may levy a tax in an amount required to implement
sections 103B.301 to 103B.355 or a comprehensive watershed management plan as
defined in section 103B.3363
.

Subd. 2.

Priority programs; conservation and watershed districts.

A county
may levy amounts necessary to pay the reasonable increased costs to soil and water
conservation districts and watershed districts of administering and implementing priority
programs identified in an approved and adopted plan or a comprehensive watershed
management plan as defined in section 103B.3363
.

Sec. 3.

Minnesota Statutes 2012, section 103B.3369, subdivision 5, is amended to read:


Subd. 5.

Financial assistance.

A base grant may be awarded to a county that
provides a match utilizing a water implementation tax or other local source. A water
implementation tax that a county intends to use as a match to the base grant must be
levied at a rate sufficient to generate a minimum amount determined by the board.
The board may award performance-based grants to local units of government that are
responsible for implementing elements of applicable portions of watershed management
plans, comprehensive plans, local water management plans, or comprehensive watershed
management plans, developed or amended, adopted and approved, according to chapter
103B, 103C, or 103D. Upon request by a local government unit, the board may also
award performance-based grants to local units of government to carry out TMDL
implementation plans as provided in chapter 114D, if the TMDL implementation plan has
been incorporated into the local water management plan according to the procedures for
approving comprehensive plans, watershed management plans, local water management
plans, or comprehensive watershed management plans under chapter 103B, 103C, or
103D, or if the TMDL implementation plan has undergone a public review process.
Notwithstanding section 16A.41, the board may award performance-based grants on an
advanced basis. The fee authorized in section 40A.152 may be used as a local match
or as a supplement to state funding to accomplish implementation of comprehensive
plans, watershed management plans, local water management plans, or comprehensive
watershed management plans under chapter 103B, 103C, or 103D.

Sec. 4.

Minnesota Statutes 2012, section 103C.501, subdivision 4, is amended to read:


Subd. 4.

Cost-sharing funds.

(a) The state board shall allocate at least 70 percent
of
cost-sharing funds to areas with high priority erosion, sedimentation, or water quality
problems or water quantity problems due to altered hydrology. The areas must be selected
based on the statewide priorities established by the state board.

(b) The allocated funds must be used for conservation practices for high priority
problems identified in the comprehensive and annual work plans of the districts, for
the technical assistance portion of the grant funds to leverage federal or other nonstate
funds, or to address high-priority needs identified in local water management plans or
comprehensive watershed management plans
.

(b) The remaining cost-sharing funds may be allocated to districts as follows:

(1) for technical and administrative assistance, not more than 20 percent of the
funds; and

(2) for conservation practices for lower priority erosion, sedimentation, or water
quality problems.

Sec. 5.

Minnesota Statutes 2012, section 103F.405, subdivision 1, is amended to read:


Subdivision 1.

Authority.

Each statutory or home rule charter city, town, or
county that has planning and zoning authority under sections 366.10 to 366.19, 394.21
to 394.37, or 462.351 to 462.365 is encouraged to adopt a soil loss ordinance. The soil
loss ordinance must use the soil loss tolerance for each soil series described in the United
States Soil Natural Resources Conservation Service Field Office Technical Guide, or
another method approved by the Board of Water and Soil Resources,
to determine the
soil loss limits, but the soil loss limits must be attainable by the best practicable soil
conservation practice. Ordinances adopted by local governments within the metropolitan
area defined in section 473.121
must be consistent with local water management plans
adopted under section 103B.235
a comprehensive plan, local water management plan, or
watershed management plan developed or amended, adopted and approved, according
to chapter 103B, 103C, or 103D
.

Sec. 6.

Minnesota Statutes 2012, section 168.012, subdivision 9, is amended to read:


Subd. 9.

Manufactured homes and park trailers.

Manufactured homes and park
trailers shall not be taxed as motor vehicles using the public streets and highways and shall
be exempt from the motor vehicle tax provisions of this chapter. Except as provided in
section 273.125, manufactured homes and park trailers shall be taxed as personal property.
The provisions of Minnesota Statutes 1957, section 272.02 or any other act providing for
tax exemption shall be inapplicable to manufactured homes and park trailers, except such
manufactured homes as are held by a licensed dealer or limited dealer and exempted as
inventory under subdivision 9a. Travel trailers not conspicuously displaying current
registration plates on the property tax assessment date shall be taxed as manufactured
homes if occupied as human dwelling places.

EFFECTIVE DATE.

This section is effective for taxes payable in 2014 and
thereafter.

Sec. 7.

Minnesota Statutes 2012, section 168.012, is amended by adding a subdivision
to read:


Subd. 9a.

Manufactured home as dealer inventory.

Manufactured homes as
defined in section 327.31, subdivision 6, shall be considered as dealer inventory if the
home is:

(1) listed as inventory and held by a licensed or limited dealer;

(2) unoccupied and not available for rent;

(3) may or may not be permanently connected to utilities when located in a
manufactured park; and

(4) may or may not be temporarily connected to utilities when located at a dealer's
sales center.

EFFECTIVE DATE.

This section is effective for taxes payable in 2014 and
thereafter.

Sec. 8.

Minnesota Statutes 2012, section 272.02, subdivision 39, is amended to read:


Subd. 39.

Economic development; public purpose.

The holding of property by a
political subdivision of the state for later resale for economic development purposes shall
be considered a public purpose in accordance with subdivision 8 for a period not to exceed
nine years, except that for property located in a city of 5,000 20,000 population or under
that is located outside of the metropolitan area as defined in section 473.121, subdivision
2
, the period must not exceed 15 years.

The holding of property by a political subdivision of the state for later resale (1)
which is purchased or held for housing purposes, or (2) which meets the conditions
described in section 469.174, subdivision 10, shall be considered a public purpose in
accordance with subdivision 8.

The governing body of the political subdivision which acquires property which is
subject to this subdivision shall after the purchase of the property certify to the city or
county assessor whether the property is held for economic development purposes or
housing purposes, or whether it meets the conditions of section 469.174, subdivision 10.
If the property is acquired for economic development purposes and buildings or other
improvements are constructed after acquisition of the property, and if more than one-half
of the floor space of the buildings or improvements which is available for lease to or use
by a private individual, corporation, or other entity is leased to or otherwise used by
a private individual, corporation, or other entity the provisions of this subdivision shall
not apply to the property. This subdivision shall not create an exemption from section
272.01, subdivision 2; 272.68; 273.19; or 469.040, subdivision 3; or other provision of
law providing for the taxation of or for payments in lieu of taxes for publicly held property
which is leased, loaned, or otherwise made available and used by a private person.

EFFECTIVE DATE.

This section is effective for assessment year 2013 and
thereafter and for taxes payable in 2014 and thereafter.

Sec. 9.

Minnesota Statutes 2012, section 272.02, is amended by adding a subdivision
to read:


Subd. 98.

Certain property owned by an Indian tribe.

(a) Property is exempt that:

(1) was classified as 3a under section 273.13, subdivision 24, for taxes payable
in 2013;

(2) is located in a city of the first class with a population greater than 300,000 as of
the 2010 federal census;

(3) is owned and occupied directly or indirectly by a federally recognized Indian
tribe within the state of Minnesota; and

(4) is used exclusively for tribal purposes or institutions of public charity as defined
in subdivision 7.

(b) For purposes of this subdivision, a "tribal purpose" is a public purpose as defined
in subdivision 8 and includes noncommercial tribal government activities. Property
that qualifies for the exemption under this subdivision is limited to no more than two
contiguous parcels and structures that do not exceed in the aggregate 20,000 square feet.
Property acquired for single-family housing, market-rate apartments, agriculture, or
forestry does not qualify for this exemption. The exemption created by this subdivision
expires with taxes payable in 2024.

EFFECTIVE DATE.

This section is effective beginning with taxes payable in 2014.

Sec. 10.

Minnesota Statutes 2012, section 272.02, is amended by adding a subdivision
to read:


Subd. 99.

Public entertainment facility; property tax exemption; special
assessment.

Any real or personal property acquired, owned, leased, controlled, used,
or occupied by a first class city for the primary purpose of providing an arena for a
professional basketball team is declared to be acquired, owned, leased, controlled, used,
and occupied for public, governmental, and municipal purposes, and is exempt from ad
valorem taxation by the state or any political subdivision of the state, provided that the
properties are subject to special assessments levied by a political subdivision for a local
improvement in amounts proportionate to and not exceeding the special benefit received
by the properties from the improvement. In determining the special benefit received by
the properties, no possible use of any of the properties in any manner different from their
intended use for providing a professional basketball arena at the time may be considered.
Notwithstanding section 272.01, subdivision 2, or 273.19, real or personal property subject
to a lease or use agreement between the city and another person for uses related to the
purposes of the operation of the arena is exempt from taxation regardless of the length of
the lease or use agreement. This section, insofar as it provides an exemption or special
treatment, does not apply to any real property that is leased for residential, business, or
commercial development, or to a restaurant that is open for general business more than
200 days a year, or for other purposes different from those necessary to the provision
and operation of the arena.

EFFECTIVE DATE.

This section is effective beginning with assessment year 2013.

Sec. 11.

Minnesota Statutes 2012, section 272.02, is amended by adding a subdivision
to read:


Subd. 100.

Public entertainment facility; property tax exemption; special
assessment.

Any real or personal property acquired, owned, leased, controlled, used,
or occupied by a first class city for the primary purpose of providing a ball park for a
minor league baseball team is declared to be acquired, owned, leased, controlled, used,
and occupied for public, governmental, and municipal purposes, and is exempt from ad
valorem taxation by the state or any political subdivision of the state, provided that the
properties are subject to special assessments levied by a political subdivision for a local
improvement in amounts proportionate to and not exceeding the special benefit received
by the properties from the improvement. In determining the special benefit received by
the properties, no possible use of any of the properties in any manner different from
their intended use for providing a minor league ballpark at the time may be considered.
Notwithstanding section 272.01, subdivision 2, or 273.19, real or personal property
subject to a lease or use agreement between the city and another person for uses related to
the purposes of the operation of the ballpark and related parking facilities is exempt from
taxation regardless of the length of the lease or use agreement. This section, insofar as it
provides an exemption or special treatment, does not apply to any real property that is
leased for residential, business, or commercial development or other purposes different
from those necessary to the provision and operation of the ball park.

EFFECTIVE DATE.

This section is effective beginning with assessment year 2013.

Sec. 12.

Minnesota Statutes 2012, section 272.02, is amended by adding a subdivision
to read:


Subd. 101.

Electric generation facility; personal property.

(a) Notwithstanding
subdivision 9, clause (a), and section 453.54, subdivision 20, attached machinery and
other personal property which is part of an electric generation facility that exceeds five
megawatts of installed capacity and meets the requirements of this subdivision is exempt.
At the time of construction, the facility must be:

(1) designed to utilize natural gas as a primary fuel;

(2) owned and operated by a municipal power agency as defined in section 453.52,
subdivision 8;

(3) designed to utilize reciprocating engines paired with generators to produce
electrical power;

(4) located within the service territory of a municipal power agency's electrical
municipal utility that serves load exclusively in a metropolitan county as defined in
section 473.121, subdivision 4; and

(5) designed to connect directly with a municipality's substation.

(b) Construction of the facility must be commenced after June 1, 2013, and before
June 1, 2017. Property eligible for this exemption does not include electric transmission
lines and interconnections or gas pipelines and interconnections appurtenant to the
property or the facility.

EFFECTIVE DATE.

This section is effective for assessment year 2013, taxes
payable in 2014, and thereafter.

Sec. 13.

Minnesota Statutes 2012, section 273.11, is amended by adding a subdivision
to read:


Subd. 24.

Valuation limit for class 4d property.

Notwithstanding the provisions of
subdivision 1, the taxable value of any property classified as class 4d under section 273.13,
subdivision 25, is limited as provided under this section. For assessment year 2013, the
value may not exceed $100,000 times the number of dwelling units. For subsequent years,
the limit is adjusted each year by the average statewide change in estimated market value
of property classified as class 4a and 4d under section 273.13, subdivision 25, for the
previous assessment year, excluding valuation change due to new construction, rounded to
the nearest $1,000. Beginning with assessment year 2014, the commissioner of revenue
must certify the limit for each assessment year by November 1 of the previous year.

EFFECTIVE DATE.

This section is effective beginning with assessment year 2013.

Sec. 14.

Minnesota Statutes 2012, section 279.01, subdivision 1, is amended to read:


Subdivision 1.

Due dates; penalties.

Except as provided in subdivision subdivisions
3 or 4 to 5, on May 16 or 21 days after the postmark date on the envelope containing the
property tax statement, whichever is later, a penalty accrues and thereafter is charged upon
all unpaid taxes on real estate on the current lists in the hands of the county treasurer. The
penalty is at a rate of two percent on homestead property until May 31 and four percent on
June 1. The penalty on nonhomestead property is at a rate of four percent until May 31 and
eight percent on June 1. This penalty does not accrue until June 1 of each year, or 21 days
after the postmark date on the envelope containing the property tax statements, whichever
is later, on commercial use real property used for seasonal residential recreational purposes
and classified as class 1c or 4c, and on other commercial use real property classified as
class 3a, provided that over 60 percent of the gross income earned by the enterprise on the
class 3a property is earned during the months of May, June, July, and August. In order for
the first half of the tax due on class 3a property to be paid after May 15 and before June 1,
or 21 days after the postmark date on the envelope containing the property tax statement,
whichever is later, without penalty, the owner of the property must attach an affidavit
to the payment attesting to compliance with the income provision of this subdivision.
Thereafter, for both homestead and nonhomestead property, on the first day of each month
beginning July 1, up to and including October 1 following, an additional penalty of one
percent for each month accrues and is charged on all such unpaid taxes provided that if the
due date was extended beyond May 15 as the result of any delay in mailing property tax
statements no additional penalty shall accrue if the tax is paid by the extended due date. If
the tax is not paid by the extended due date, then all penalties that would have accrued if
the due date had been May 15 shall be charged. When the taxes against any tract or lot
exceed $100, one-half thereof may be paid prior to May 16 or 21 days after the postmark
date on the envelope containing the property tax statement, whichever is later; and, if so
paid, no penalty attaches; the remaining one-half may be paid at any time prior to October
16 following, without penalty; but, if not so paid, then a penalty of two percent accrues
thereon for homestead property and a penalty of four percent on nonhomestead property.
Thereafter, for homestead property, on the first day of November an additional penalty of
four percent accrues and on the first day of December following, an additional penalty of
two percent accrues and is charged on all such unpaid taxes. Thereafter, for nonhomestead
property, on the first day of November and December following, an additional penalty of
four percent for each month accrues and is charged on all such unpaid taxes. If one-half of
such taxes are not paid prior to May 16 or 21 days after the postmark date on the envelope
containing the property tax statement, whichever is later, the same may be paid at any time
prior to October 16, with accrued penalties to the date of payment added, and thereupon
no penalty attaches to the remaining one-half until October 16 following.

This section applies to payment of personal property taxes assessed against
improvements to leased property, except as provided by section 277.01, subdivision 3.

A county may provide by resolution that in the case of a property owner that has
multiple tracts or parcels with aggregate taxes exceeding $100, payments may be made in
installments as provided in this subdivision.

The county treasurer may accept payments of more or less than the exact amount of
a tax installment due. Payments must be applied first to the oldest installment that is due
but which has not been fully paid. If the accepted payment is less than the amount due,
payments must be applied first to the penalty accrued for the year or the installment being
paid. Acceptance of partial payment of tax does not constitute a waiver of the minimum
payment required as a condition for filing an appeal under section 278.03 or any other law,
nor does it affect the order of payment of delinquent taxes under section 280.39.

Sec. 15.

Minnesota Statutes 2012, section 279.01, is amended by adding a subdivision
to read:


Subd. 5.

Federal active service exception.

In the case of a homestead property
owned by an individual who is on federal active service, as defined in section 190.05,
subdivision 5c, as a member of the National Guard or a reserve component, a six-month
grace period is granted for complying with the due dates imposed by subdivision 1. During
this period, no late fees or penalties shall accrue against the property. The due date for
property taxes owed under this chapter for an individual covered by this subdivision shall
be November 16 for taxes due on May 16, and April 16 of the following year for taxes due
on October 16. A taxpayer making a payment under this subdivision must accompany
the payment with a signed copy of the taxpayer's orders or form DD214 showing the
dates of active service which clearly indicate that the taxpayer was in active service as a
member of the National Guard or a reserve component on the date the payment was due.
This grace period applies to all homestead property owned by individuals on federal active
service, as herein defined, for all of that property's due dates which fall on a day that is
included in the taxpayer's federal active service.

Sec. 16.

Minnesota Statutes 2012, section 279.02, is amended to read:


279.02 DUTIES OF COUNTY AUDITOR AND TREASURER.

Subdivision 1.

Delinquent property; rates.

On the first business day in January, of
each year, the county treasurer shall return the tax lists on hand to the county auditor, who
shall compare the same with the statements receipted for by the treasurer on file in the
auditor's office and each tract or lot of real property against which the taxes, or any part
thereof, remain unpaid, shall be deemed delinquent, and thereupon an additional penalty
of two percent on the amount of the original tax remaining unpaid shall immediately
accrue and thereafter be charged upon all such delinquent taxes; and any auditor who
shall make out and deliver any statement of delinquent taxes without including therein
the penalties imposed by law, and any treasurer who shall receive payment of such taxes
without including in such payment all items as shown on the auditor's statement, shall be
liable to the county for the amounts of any items omitted.

Subd. 2.

Federal active service exception.

Notwithstanding subdivision 1, a
homestead property owned by an individual who is on federal active service, as defined
in section 190.05, subdivision 5c, as a member of the National Guard or a reserve
component, shall not be deemed delinquent under this section if the due dates imposed
under section 279.01 fall on a day in which the individual was on federal active service.

Sec. 17.

Minnesota Statutes 2012, section 287.05, is amended by adding a subdivision
to read:


Subd. 10.

Hennepin and Ramsey Counties.

For properties located in Hennepin
and Ramsey Counties, the county may impose an additional mortgage registry tax as
defined in sections 383A.80 and 383B.80.

EFFECTIVE DATE.

This section is effective for deeds and mortgages
acknowledged on or after July 1, 2013.

Sec. 18.

[287.40] HENNEPIN AND RAMSEY COUNTIES.

For properties located in Hennepin and Ramsey Counties, the county may impose an
additional deed tax as defined in sections 383A.80 and 383B.80.

EFFECTIVE DATE.

This section is effective for deeds and mortgages
acknowledged on or after July 1, 2013.

Sec. 19.

Laws 1988, chapter 645, section 3, as amended by Laws 1999, chapter 243,
article 6, section 9, Laws 2000, chapter 490, article 6, section 15, and Laws 2008, chapter
154, article 2, section 30, is amended to read:


Sec. 3. TAX; PAYMENT OF EXPENSES.

(a) The tax levied by the hospital district under Minnesota Statutes, section 447.34,
must not be levied at a rate that exceeds the amount authorized to be levied under that
section. The proceeds of the tax may be used for all purposes of the hospital district,
except as provided in paragraph (b).

(b) 0.015 percent of taxable market value of the tax in paragraph (a) may be used
solely by the Cook ambulance service and the Orr ambulance service for the purpose of
capital expenditures as it relates to:

(1) ambulance acquisitions for the Cook ambulance service and the Orr ambulance
service and not;

(2) attached and portable equipment for use in and for the ambulances; and

(3) parts and replacement parts for maintenance and repair of the ambulances.

The money may not be used for administrative, operation, or salary expenses.

(c) The part of the levy referred to in paragraph (b) must be administered by the
Cook Hospital and passed on in equal amounts directly to the Cook area ambulance
service board and the city of Orr to be held in trust until funding for a new ambulance is
needed by either the Cook ambulance service or the Orr ambulance service
used for the
purposes in paragraph (b)
.

Sec. 20.

Laws 1999, chapter 243, article 6, section 11, is amended to read:


Sec. 11. CEMETERY LEVY FOR SAWYER BY CARLTON COUNTY.

Subdivision 1.

Levy authorized.

Notwithstanding other law to the contrary, the
Carlton county board of commissioners may annually levy in and for the unorganized
township territory of Sawyer an amount up to $1,000 annually for cemetery purposes,
beginning with taxes payable in 2000 and ending with taxes payable in 2009
.

Subd. 2.

Effective date.

This section is effective June 1, 1999, without local
approval.

EFFECTIVE DATE; LOCAL APPROVAL.

This section applies to taxes
payable in 2014 and thereafter, and is effective the day after the Carlton county board
of commissioners and its chief clerical officer timely complete their compliance with
Minnesota Statutes, section 645.021, subdivisions 2 and 3.

Sec. 21.

Laws 2008, chapter 366, article 5, section 33, the effective date, is amended to
read:


EFFECTIVE DATE.

This section is effective for taxes levied in 2008, payable in
2009, and is repealed effective for taxes levied in 2013 2018, payable in 2014 2019,
and thereafter.

EFFECTIVE DATE.

This section is effective beginning with taxes payable in 2014.

Sec. 22.

Laws 2010, chapter 389, article 1, section 12, the effective date, is amended to
read:


EFFECTIVE DATE.

This section is effective for assessment years year 2010 and
2011, for taxes payable in 2011 and 2012 thereafter.

EFFECTIVE DATE.

This section is effective for assessment year 2012 and
thereafter.

Sec. 23. MINNEAPOLIS AND ST. PAUL; ENTERTAINMENT FACILITIES
COORDINATION.

(a) On or before January 1, 2015, the cities of St. Paul and Minneapolis shall establish
a joint governing structure to coordinate and provide for joint marketing, promotion, and
scheduling of conventions and events at the Target Center and Xcel Energy Center.

(b) On or before February 1, 2014, the cities of St. Paul and Minneapolis, and
representatives from the primary professional sports team tenant of each facility, shall also
study and report to the legislature on creating a joint governing structure to provide for
joint administration, financing, and operations of the facilities and the possible effects of
joint governance on the finances of each facility and each city. The study under this
paragraph must:

(1) examine the current finances of each facility, including past and projected costs
and revenues; projected capital improvements; and the current and projected impact
of each facility on the city's general fund;

(2) determine the impacts of joint governance on the future finances of each facility
and city;

(3) examine the inclusion of other entertainment venues in the joint governance, and
the impact the inclusion of those facilities would have on all the facilities within the joint
governing structure and the cities in which they are located; and

(4) consider the amount of city, regional, and state funding, if any, that would be
required to fund and operate the facilities under a joint governing structure.

(c) In considering joint governing structures under paragraph (b), the study shall
specifically consider the feasibility of joining the Target Center and the Xcel Energy
Center, and possibly other venues, to the Minnesota Sports Facilities Authority under
Minnesota Statutes, section 473J.08.

(d) Representatives of the cities and the primary professional sports team tenants
of each facility shall meet within 30 days of the effective date of this section to begin
implementation of this section.

EFFECTIVE DATE.

This section is effective the day following final enactment
upon compliance with the provisions of Minnesota Statutes, section 645.021, subdivisions
2 and 3, by the governing bodies of the cities of St. Paul and Minneapolis and their chief
clerical officers, and provided that, notwithstanding the time limits under Minnesota
Statutes, section 645.021, subdivision 3, the certificates of approval are filed with the
secretary of state within 30 days after enactment of this act.

Sec. 24. MORATORIUM ON CHANGES IN ASSESSMENT PRACTICE.

(a) An assessor may not deviate from current practices or policies used generally in
assessing or determining the taxable status of property used in the production of biofuels,
wine, beer, distilled beverages, or dairy products.

(b) An assessor may not change the taxable status of any existing property involved
in the industrial processes identified in paragraph (a), unless the change is made as a result
of a change in use of the property, or to correct an error. For currently taxable properties,
the assessor may change the estimated market value of the property.

EFFECTIVE DATE.

This section is effective for assessment year 2013 only.

Sec. 25. STUDY AND REPORT ON CERTAIN PROPERTY USED IN
BUSINESS AND PRODUCTION.

In order to provide the legislature with information on the assessment of property
used in business and production activities, the commissioner of revenue must study the
impact of the exception contained in Minnesota Statutes, section 272.03, subdivision
1(c)(iii). The commissioner must report a summary of findings and recommendations to
the chairs and ranking minority members of the taxes committees of the senate and house
of representatives by February 1, 2014.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 26. REIMBURSEMENT FOR PROPERTY TAX ABATEMENTS.

Subdivision 1.

Reimbursement.

The commissioner of revenue shall reimburse
taxing jurisdictions for property tax abatements granted in Hennepin County under Laws
2011, First Special Session chapter 7, article 5, section 13, notwithstanding the time limits
contained in that section. The reimbursements must be made to each taxing jurisdiction
pursuant to the certification of the Hennepin County auditor.

Subd. 2.

Appropriation.

The amount necessary, not to exceed $400,000, is
appropriated to the commissioner of revenue from the general fund to make the payments
required under this section. This appropriation does not cancel but is available until June
30, 2014.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 27. IRON RANGE FISCAL DISPARITIES STUDY.

Subdivision 1.

Study required.

The commissioner of revenue shall conduct a study
of the tax relief area revenue distribution program contained in Minnesota Statutes, chapter
276A, commonly known as the Iron Range fiscal disparities program. By February 1,
2015, the commissioner shall submit a report to the chairs and ranking minority members
of the house of representatives and senate tax committees consisting of the findings of the
study and identification of issues for policy makers to consider. The study must analyze:

(1) the extent to which the benefits of the economic growth in the region are shared
throughout the region, especially for growth that results from state or regional decisions;

(2) the program's impact on the variability of tax rates across jurisdictions of the
region;

(3) the program's impact on the distribution of homestead property tax burdens
across jurisdictions of the region; and

(4) the relationship between the impacts of the program and overburden on
jurisdictions containing properties that provide regional benefits, specifically the costs
those properties impose on their host jurisdictions in excess of their tax payments. The
report must include a description of other property tax, aid, and local development
programs that interact with the fiscal disparities program.

Subd. 2.

Funds transfer from fiscal disparities levy.

For taxes payable in 2014
only, $75,000 must be added to St. Louis County's areawide levy as otherwise determined
under Minnesota Statutes, section 276A.06, subdivision 5. Upon receipt of the proceeds of
this levy, St. Louis County must transfer this money to the commissioner of management
and budget for deposit into an account in the special revenue fund. One-half of the
proceeds of the levy must be transferred prior to June 30, 2014.

Subd. 3.

Appropriation.

$37,500 in fiscal year 2014 and $37,500 in fiscal year
2015 are appropriated from the account in the special revenue fund established under
subdivision 2 to the commissioner of revenue to pay for the study required by this section.
Any amounts remaining in the account in the special revenue fund on June 30, 2015, must
be distributed to St. Louis County for the purposes of reducing the areawide tax rate
for taxes payable in 2016.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 28. REPEALER.

(a) Minnesota Statutes 2012, sections 428A.101; and 428A.21, are repealed.

(b) Minnesota Statutes 2012, sections 383A.80, subdivision 4; and 383B.80,
subdivision 4,
are repealed.

EFFECTIVE DATE.

This section is effective the day following final enactment,
and paragraph (b) reinstates the authority for Hennepin and Ramsey Counties to
impose the additional mortgage registry and deed tax effective for deeds and mortgages
acknowledged on or after July 1, 2013.

ARTICLE 5

SPECIAL TAXES

Section 1.

Minnesota Statutes 2012, section 270C.56, subdivision 1, is amended to read:


Subdivision 1.

Liability imposed.

A person who, either singly or jointly with
others, has the control of, supervision of, or responsibility for filing returns or reports,
paying taxes, or collecting or withholding and remitting taxes and who fails to do so, or a
person who is liable under any other law, is liable for the payment of taxes arising under
chapters 295, 296A, 297A, 297F, and 297G, or sections 256.9658, 290.92, and 297E.02,
and the applicable penalties and interest on those taxes.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 2.

[295.61] SPORTS MEMORABILIA GROSS RECEIPTS TAX.

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms
have the meanings given, unless the context clearly indicates otherwise.

(b) "Commissioner" means the commissioner of revenue.

(c) "Sale" means a transfer of title or possession of tangible personal property,
whether absolutely or conditionally.

(d) "Sports memorabilia" means items available for sale to the public that are sold
under a license granted by any professional sports league or a team that is a franchise of a
professional sports league, or an affiliate or subsidiary of a league or a team, including:

(1) one-of-a-kind items related to sports figures, teams, or events;

(2) trading cards;

(3) photographs;

(4) clothing;

(5) sports event licensed items;

(6) sports equipment; and

(7) similar items.

(e) "Wholesale" or "sale at wholesale" means a sale to a retailer, as defined in section
297A.61, subdivision 9, for the purpose of reselling the property to a third party.

(f) "Wholesaler" means any person making wholesale sales of sports memorabilia
to purchasers in the state.

Subd. 2.

Imposition.

A tax is imposed on each sale at wholesale of sports
memorabilia equal to ten percent of the gross revenues from the sale.

Subd. 3.

Estimated payments; annual return.

(a) Each wholesaler must make
estimated payments of the tax for the calendar year to the commissioner in quarterly
installments by April 15, July 15, October 15, and January 15 of the following calendar
year. Estimated tax payments are not required if the tax for the calendar year is less than
$500. An underpayment of estimated installments bears interest at the rate specified in
section 270C.40, from the due date of the payment until paid or until the due date of the
annual return at the rate specified in section 270C.40. An underpayment of an estimated
installment is the difference between the amount paid and the lesser of (1) 90 percent of
one-quarter of the tax for the calendar year, or (2) the tax for the actual gross revenues
received during the quarter.

(b) A taxpayer with an aggregate tax liability of $10,000 or more during a fiscal
year ending June 30, must remit all liabilities by funds transfer as defined in section
336.4A-104, paragraph (a), in the next calendar year. The funds-transfer payment date,
as defined in section 336.4A-401, is on or before the first funds-transfer business day
after the date the tax is due.

(c) The taxpayer must file an annual return reconciling the estimated payments by
March 15 of the following calendar year.

(d) The estimated payments and annual return must contain the information and be
in the form prescribed by the commissioner.

Subd. 4.

Compensating use tax.

If the tax is not paid under subdivision 2, a
compensating tax is imposed on possession for sale or use of sports memorabilia in
the state. The rate of tax equals the rate under subdivision 2, and must be paid by the
possessor of the items.

Subd. 5.

Administrative provisions.

Unless specifically provided otherwise by this
section, the audit, assessment, refund, penalty, interest, enforcement, collection remedies,
appeal, and administrative provisions of chapters 270C and 289A that apply to taxes
imposed under chapter 297A apply to taxes imposed under this section.

Subd. 6.

Disposition of revenues.

The commissioner shall deposit the revenues
from the tax in the general fund.

EFFECTIVE DATE.

This section is effective for sales made after June 30, 2013.

Sec. 3.

Minnesota Statutes 2012, section 297F.01, subdivision 3, is amended to read:


Subd. 3.

Cigarette.

"Cigarette" means any roll for smoking made wholly or in part
of tobacco, that weighs 4.5 pounds or less per thousand:

(1) the wrapper or cover of which is made of paper or another substance or material
except tobacco; or

(2) wrapped in any substance containing tobacco, however labeled or named, which,
because of its appearance, size, the type of tobacco used in the filler, or its packaging,
pricing, marketing, or labeling, is likely to be offered to or purchased by consumers as
a cigarette, as defined in clause (1), unless it is wrapped in whole tobacco leaf and does
not have a cellulose acetate or other cigarette-like filter
.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 4.

Minnesota Statutes 2012, section 297F.01, is amended by adding a subdivision
to read:


Subd. 10b.

Moist snuff.

"Moist snuff" means any finely cut, ground, or powdered
smokeless tobacco that is intended to be placed or dipped in the mouth.

Sec. 5.

Minnesota Statutes 2012, section 297F.01, subdivision 19, is amended to read:


Subd. 19.

Tobacco products.

"Tobacco products" means any product containing,
made, or derived from tobacco that is intended for human consumption, whether chewed,
smoked, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by any other means,
or any component, part, or accessory of a tobacco product, including, but not limited
to, cigars; little cigars; cheroots; stogies; periques; granulated, plug cut, crimp cut,
ready rubbed, and other smoking tobacco; snuff; snuff flour; cavendish; plug and twist
tobacco; fine-cut and other chewing tobacco; shorts; refuse scraps, clippings, cuttings
and sweepings of tobacco, and other kinds and forms of tobacco; but does not include
cigarettes as defined in this section. Tobacco products excludes any tobacco product
that has been approved by the United States Food and Drug Administration for sale as
a tobacco cessation product, as a tobacco dependence product, or for other medical
purposes, and is being marketed and sold solely for such an approved purpose.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 6.

Minnesota Statutes 2012, section 297F.05, subdivision 1, is amended to read:


Subdivision 1.

Rates; cigarettes.

A tax is imposed upon the sale of cigarettes in
this state, upon having cigarettes in possession in this state with intent to sell, upon any
person engaged in business as a distributor, and upon the use or storage by consumers, at
the following rates:

(1) on cigarettes weighing not more than three pounds per thousand, 24 141.5 mills
on each such cigarette; and

(2) on cigarettes weighing more than three pounds per thousand, 48 283 mills on
each such cigarette.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 7.

Minnesota Statutes 2012, section 297F.05, is amended by adding a subdivision
to read:


Subd. 1a.

Annual indexing.

(a) Each year the commissioner shall adjust the
tax rates under subdivision 1, including any adjustment made in prior years under this
subdivision, by multiplying the mill rates for the current calendar year by an adjustment
factor. The adjustment factor equals the in-lieu sales tax rate that applies to the following
calendar year divided by the in-lieu sales tax rate for the current calendar year. For
purposes of this subdivision, "in-lieu sales tax rate" means the tax rate established under
section 297F.25, subdivision 1, in tenths of a cent per pack.

(b) The commissioner shall publish the resulting rate by November 1 and the rate
applies to sales made on or after January 1 of the following year.

(c) The determination of the commissioner under this subdivision is not a rule and is
not subject to the Administrative Procedure Act in chapter 14.

Sec. 8.

Minnesota Statutes 2012, section 297F.05, subdivision 3, is amended to read:


Subd. 3.

Rates; tobacco products.

(a) A tax is imposed upon all tobacco products
in this state and upon any person engaged in business as a distributor, at the rate of 35
95 percent of the wholesale sales price of the tobacco products. The tax is imposed at
the time the distributor:

(1) brings, or causes to be brought, into this state from outside the state tobacco
products for sale;

(2) makes, manufactures, or fabricates tobacco products in this state for sale in
this state; or

(3) ships or transports tobacco products to retailers in this state, to be sold by those
retailers.

(b) Notwithstanding paragraph (a), a minimum tax equal to the rate imposed on a
pack of 20 cigarettes weighing not more than three pounds per thousand, as established
under subdivision 1, is imposed on each container of moist snuff.

For purposes of this subdivision, a "container" means the smallest consumer-size can,
package, or other container that is marketed or packaged by the manufacturer, distributor,
or retailer for separate sale to a retail purchaser.

EFFECTIVE DATE.

This section is effective July 1, 2013, except the minimum
tax under paragraph (b) is effective January 1, 2014.

Sec. 9.

Minnesota Statutes 2012, section 297F.05, subdivision 4, is amended to read:


Subd. 4.

Use tax; tobacco products.

A tax is imposed upon the use or storage by
consumers of tobacco products in this state, and upon such consumers, at the rate of 35 95
percent of the cost to the consumer of the tobacco products or the minimum tax under
subdivision 3, paragraph (b), whichever is greater
.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 10.

Minnesota Statutes 2012, section 297F.24, subdivision 1, is amended to read:


Subdivision 1.

Fee imposed.

(a) A fee is imposed upon the sale of nonsettlement
cigarettes in this state, upon having nonsettlement cigarettes in possession in this state
with intent to sell, upon any person engaged in business as a distributor, and upon the use
or storage by consumers of nonsettlement cigarettes. The fee equals a rate of 1.75 2.5
cents per cigarette.

(b) The purpose of this fee is to:

(1) ensure that manufacturers of nonsettlement cigarettes pay fees to the state that
are comparable to costs attributable to the use of the cigarettes;

(2) prevent manufacturers of nonsettlement cigarettes from undermining the state's
policy of discouraging underage smoking by offering nonsettlement cigarettes at prices
substantially below the cigarettes of other manufacturers; and

(3) fund such other purposes as the legislature determines appropriate.

Sec. 11.

Minnesota Statutes 2012, section 297F.25, subdivision 1, is amended to read:


Subdivision 1.

Imposition.

(a) A tax is imposed on distributors on the sale of
cigarettes by a cigarette distributor to a retailer or cigarette subjobber for resale in this
state. The tax is equal to 6.5 percent of the combined tax rate under section 297A.62,
multiplied by
the weighted average retail price and must be expressed in cents per pack
rounded to the nearest one-tenth of a cent. The weighted average retail price must be
determined annually, with new rates published by November 1, and effective for sales
on or after January 1 of the following year. The weighted average retail price must be
established by surveying cigarette retailers statewide in a manner and time determined by
the commissioner. The commissioner shall make an inflation adjustment in accordance
with the Consumer Price Index for all urban consumers inflation indicator as published in
the most recent state budget forecast. The commissioner shall use the inflation factor for
the calendar year in which the new tax rate takes effect. If the survey indicates that the
average retail price of cigarettes has not increased relative to the average retail price in
the previous year's survey, then the commissioner shall not make an inflation adjustment.
The determination of the commissioner pursuant to this subdivision is not a "rule" and is
not subject to the Administrative Procedure Act contained in chapter 14. For packs of
cigarettes with other than 20 cigarettes, the tax must be adjusted proportionally.

(b) Notwithstanding paragraph (a), and in lieu of a survey of cigarette retailers, the
tax calculation of the weighted average retail price for the sales of cigarettes from August
1, 2011, through December 31, 2011, shall be calculated by: (1) increasing the average
retail price per pack of 20 cigarettes from the most recent survey by the percentage change
in a weighted average of the presumed legal prices for cigarettes during the year after
completion of that survey, as reported and published by the Department of Commerce
under section 325D.371; (2) subtracting the sales tax included in the retail price; and (3)
adjusting for expected inflation. The rate must be published by May 1 and is effective for
sales after July 31. If the weighted average of the presumed legal prices indicates that the
average retail price of cigarettes has not increased relative to the average retail price in the
most recent survey, then no inflation adjustment must be made. For packs of cigarettes
with other than 20 cigarettes, the tax must be adjusted proportionally.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 12.

Minnesota Statutes 2012, section 297G.03, subdivision 1, is amended to read:


Subdivision 1.

General rate; distilled spirits and wine.

The following excise tax is
imposed on all distilled spirits and wine manufactured, imported, sold, or possessed in
this state:

Standard
Metric
(a) Distilled spirits, liqueurs, cordials,
and specialties regardless of alcohol
content (excluding ethyl alcohol)
$
5.03
11.02 per gallon
$
1.33
2.91 per liter
(b) Wine containing 14 percent or less
alcohol by volume (except cider as
defined in section 297G.01, subdivision
3a
)
$
.30
2.08 per gallon
$
.08
.55 per liter
(c) Wine containing more than 14
percent but not more than 21 percent
alcohol by volume
$
.95
2.73 per gallon
$
.25
.72 per liter
(d) Wine containing more than 21
percent but not more than 24 percent
alcohol by volume
$
1.82
3.64 per gallon
$
.48
.97 per liter
(e) Wine containing more than 24
percent alcohol by volume
$
3.52
5.34 per gallon
$
.93
1.42 per liter
(f) Natural and artificial sparkling wines
containing alcohol
$
1.82
3.60 per gallon
$
.48
.95 per liter
(g) Cider as defined in section 297G.01,
subdivision 3a
$
.15
1.93 per gallon
$
.04
.51 per liter
(h) Low-alcohol dairy cocktails
$
.08
1.36 per gallon
$
.02
.36 per liter

In computing the tax on a package of distilled spirits or wine, a proportional tax at a
like rate on all fractional parts of a gallon or liter must be paid, except that the tax on a
fractional part of a gallon less than 1/16 of a gallon is the same as for 1/16 of a gallon.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 13.

Minnesota Statutes 2012, section 297G.03, is amended by adding a
subdivision to read:


Subd. 5.

Small winery credit.

(a) A qualified winery is entitled to a tax credit of
$2.08 per gallon on 50,000 gallons sold in any fiscal year beginning July 1. Qualified
wineries may take the credit on the 18th day of each month, but the total credit allowed
may not exceed in any fiscal year the lesser of:

(1) the liability for tax; or

(2) $104,000.

(b) For purposes of this subdivision, a "qualified winery" means a winery, whether
or not located in this state, producing less than 100,000 gallons of wine in the calendar
year immediately preceding the calendar year for which the credit under this subdivision
is claimed. In determining the number of gallons, all brands or labels of a winery must
be combined. All facilities for the production of wine owned or controlled by the same
person, corporation, or other entity must be treated as a single winery.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 14.

Minnesota Statutes 2012, section 297G.04, is amended to read:


297G.04 FERMENTED MALT BEVERAGES; RATE OF TAX.

Subdivision 1.

Tax imposed.

The following excise tax is imposed on all fermented
malt beverages that are imported, directly or indirectly sold, or possessed in this state:

(1) on fermented malt beverages containing not more than 3.2 percent alcohol by
weight, $2.40 $25.55 per 31-gallon barrel; and

(2) on fermented malt beverages containing more than 3.2 percent alcohol by
weight, $4.60 $27.75 per 31-gallon barrel.

For fractions of a 31-gallon barrel, the tax rate is calculated proportionally.

Subd. 2.

Tax credit.

A qualified brewer producing fermented malt beverages is
entitled to a tax credit of $4.60 $27.75 per barrel on 25,000 50,000 barrels sold in any
fiscal year beginning July 1, regardless of the alcohol content of the product. Qualified
brewers may take the credit on the 18th day of each month, but the total credit allowed
may not exceed in any fiscal year the lesser of:

(1) the liability for tax; or

(2) $115,000 $1,387,500.

For purposes of this subdivision, a "qualified brewer" means a brewer, whether or
not located in this state, manufacturing less than 100,000 200,000 barrels of fermented
malt beverages in the calendar year immediately preceding the calendar year for which
the credit under this subdivision is claimed. In determining the number of barrels, all
brands or labels of a brewer must be combined. All facilities for the manufacture of
fermented malt beverages owned or controlled by the same person, corporation, or other
entity must be treated as a single brewer.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 15.

Minnesota Statutes 2012, section 325D.32, subdivision 2, is amended to read:


Subd. 2.

Cigarettes.

"Cigarettes" means and includes any roll for smoking, made
wholly or in part of tobacco, irrespective of size and shape and whether or not such
tobacco is flavored, adulterated or mixed with any other ingredient, the wrapper or cover
of which is made of paper or any other substance or material except whole tobacco leaf,
and includes any cigarette as defined in section 297F.01, subdivision 3
.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 16. FLOOR STOCKS TAX.

Subdivision 1.

Cigarettes.

(a) A floor stocks tax is imposed on every person
engaged in the business in this state as a distributor, retailer, subjobber, vendor,
manufacturer, or manufacturer's representative of cigarettes, on the stamped cigarettes and
unaffixed stamps in the person's possession or under the person's control at 12:01 a.m. on
July 1, 2013. The tax is imposed at the rate of 80 mills on each cigarette.

(b) Each distributor, on or before July 11, 2013, shall file a return with the
commissioner of revenue, in the form the commissioner prescribes, showing the stamped
cigarettes and unaffixed stamps on hand at 12:01 a.m. on July 1, 2013, and the amount
of tax due on the cigarettes and unaffixed stamps. Each retailer, subjobber, vendor,
manufacturer, or manufacturer's representative, on or before July 11, 2013, shall file
a return with the commissioner, in the form the commissioner prescribes, showing the
cigarettes on hand at 12:01 a.m. on July 1, 2013, and the amount of tax due on the
cigarettes. The tax imposed by this section is due and payable on or before August 8,
2013, and after that date bears interest at the rate of one percent per month.

Subd. 2.

Audit and enforcement.

The tax imposed by this section is subject to
the audit, assessment, interest, appeal, refund, penalty, enforcement, administrative, and
collection provisions of Minnesota Statutes, chapters 270C and 297F. The commissioner
of revenue may require a distributor to receive and maintain copies of floor stocks fee
returns filed by all persons requesting a credit for returned cigarettes.

Subd. 3.

Deposit of proceeds.

The commissioner of revenue shall deposit the
revenues from the tax under this section in the state treasury and credit them to the
general fund.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 17. INTERIM SALES TAX RATE.

Notwithstanding the provisions of Minnesota Statutes, section 297F.25, the
commissioner shall adjust the weighted average retail price in section 297F.25, subdivision
1, on July 1, 2013, to reflect the price changes under this act. This weighted average
shall be used to compute cigarette sales tax under Minnesota Statutes, section 297F.25,
subdivision 1, until December 31, 2013, when the commissioner shall resume annual
adjustments to the weighted average sales price. The commissioner's determination of
the adjustment that takes effect on January 1, 2014, must be limited to the change in the
weighted average retail that occurs during calendar year 2013 but after July 15, 2013.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 18. TOBACCO TAX COLLECTION REPORT.

Subdivision 1.

Report to legislature.

(a) The commissioner of revenue shall report
to the 2014 legislature on the tobacco tax collection system, including recommendations
to improve compliance under the excise tax for both cigarettes and other tobacco products.
The purpose of the report is to provide information and guidance to the legislature on
improvements to the tobacco tax collection system to:

(1) provide a unified system of collecting both the cigarette and other tobacco
taxes, regardless of category, size, or shape, that ensures the highest reasonable rates of
tax collection;

(2) discourage tax evasion; and

(3) help to prevent illegal sale of tobacco products, which may make these products
more accessible to youth.

(b) In the report, the commissioner shall:

(1) provide a detailed review of the present excise tax collection and compliance
system as it applies to both cigarettes and other tobacco products. This must include
an assessment of the levels of compliance for each category of products and the effect
of the stamping requirement on compliance for each category of products and the effect
of the stamping requirement on compliance rates for cigarettes relative to other tobacco
products. It also must identify any weaknesses in the system;

(2) survey the methods of collection and enforcement used by other states or nations,
including identifying and discussing emerging best practices that ensure tracking of both
cigarettes and other tobacco products and result in the highest rates of tax collection and
compliance. These best practices must consider high-technology alternatives, such as use
of bar codes, radio-frequency identification tags, or similar mechanisms for tracking
compliance;

(3) evaluate the adequacy and effectiveness of the existing penalties and other
sanctions for noncompliance;

(4) evaluate the adequacy of the resources allocated by the state to enforce the
tobacco tax and prevention laws; and

(5) make recommendations on implementation of a comprehensive tobacco tax
collection system for Minnesota that can be implemented by January 1, 2014, including:

(i) recommendations on the specific steps needed to institute and implement the new
system, including estimates of the state's costs of doing so and any additional personnel
requirements;

(ii) recommendations on methods to recover the cost of implementing the system
from the industry;

(iii) evaluation of the extent to which the proposed system is sufficiently flexible
and adaptable to adjust to modifications in the construction, packaging, formatting, and
marketing of tobacco products by the industry; and

(iv) recommendations to modify existing penalties or to impose new penalties or
other sanctions to ensure compliance with the system.

Subd. 2.

Due date.

The report required by subdivision 1 is due January 1, 2014.

Subd. 3.

Procedure.

The report required under this section must be made in the
manner provided under Minnesota Statutes, section 3.195. In addition, copies must be
provided to the chairs and ranking minority members of the legislative committees and
divisions with jurisdiction over taxation.

Subd. 4.

Appropriation.

(a) $100,000 is appropriated from the general fund to the
commissioner of revenue for fiscal year 2014 for the cost of preparing the report under
subdivision 1.

(b) The appropriation under this subdivision is a onetime appropriation and is not
included in the base budget.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 19. REPEALER.

Minnesota Statutes 2012, sections 16A.725; and 256.9658, are repealed.

EFFECTIVE DATE.

This section is effective July 1, 2013.

ARTICLE 6

INDIVIDUAL INCOME AND CORPORATE FRANCHISE TAXES

Section 1.

Minnesota Statutes 2012, 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.

(c) "Qualified investor" means an investor who has been certified by the
commissioner under subdivision 3.

(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; or

(2) $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.

EFFECTIVE DATE.

This section is effective for qualified small businesses
certified after June 30, 2013.

Sec. 2.

Minnesota Statutes 2012, 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 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. The application for certification for 2010 must be made available on the department's
Web site by August 1, 2010. Applications for subsequent years' certification must be made
available on the department's Web site by November 1 of the preceding year.

(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, 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.

(c) To receive certification, a business must satisfy all of the following conditions:

(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) 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; or

(iii) 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) the
business has 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; and

(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 businesses certified under this
subdivision for the calendar year and make the list accessible to the public on the
department's Web site.

(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; and

(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.

EFFECTIVE DATE.

This section is effective for qualified small businesses
certified after June 30, 2013, except the amendments to paragraph (c), clause (7), are
effective the day following final enactment.

Sec. 3.

Minnesota Statutes 2012, section 116J.8737, subdivision 8, is amended to read:


Subd. 8.

Data privacy.

(a) Data contained in an application submitted to the
commissioner under subdivision 2, 3, or 4 are nonpublic data, or private data on
individuals, as defined in section 13.02, subdivision 9 or 12, except that the following
data items are public:

(1) the name, mailing address, telephone number, e-mail address, contact person's
name, and industry type
of a qualified small business upon approval of the application
and certification by the commissioner under subdivision 2;

(2) the name of a qualified investor upon approval of the application and certification
by the commissioner under subdivision 3;

(3) the name of a qualified fund upon approval of the application and certification
by the commissioner under subdivision 4;

(4) for credit certificates issued under subdivision 5, the amount of the credit
certificate issued, amount of the qualifying investment, the name of the qualifying investor
or qualifying fund that received the certificate, and the name of the qualifying small
business in which the qualifying investment was made;

(5) for credits revoked under subdivision 7, paragraph (a), the amount revoked and
the name of the qualified investor or qualified fund; and

(6) for credits revoked under subdivision 7, paragraphs (b) and (c), the amount
revoked and the name of the qualified small business.

(b) The following data, including data classified as nonpublic or private, must be
provided to the consultant for use in conducting the program evaluation under subdivision
10:

(1) the commissioner of employment and economic development shall provide data
contained in an application for certification received from a qualified small business,
qualified investor, or qualified fund, and any annual reporting information received on a
qualified small business, qualified investor, or qualified fund; and

(2) the commissioner of revenue shall provide data contained in any applicable tax
returns of a qualified small business, qualified investor, or qualified fund.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 4.

Minnesota Statutes 2012, section 289A.02, subdivision 7, is amended to read:


Subd. 7.

Internal Revenue Code.

Unless specifically defined otherwise, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through April
14, 2011
January 3, 2013.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 5.

Minnesota Statutes 2012, 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 Code, 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; and

(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 subtraction allowed under section 290.01,
subdivision 19b
, clauses (11) and (14) (9) and (12), 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.

Sec. 6.

Minnesota Statutes 2012, section 289A.08, subdivision 3, is amended to read:


Subd. 3.

Corporations.

(a) A corporation that is subject to the state's jurisdiction to
tax under section 290.014, subdivision 5, must file a return, except that a foreign operating
corporation as defined in section 290.01, subdivision 6b, is not required to file a return
.

(b) Members of a unitary business that are required to file a combined report on one
return must designate a member of the unitary business to be responsible for tax matters,
including the filing of returns, the payment of taxes, additions to tax, penalties, interest,
or any other payment, and for the receipt of refunds of taxes or interest paid in excess of
taxes lawfully due. The designated member must be a member of the unitary business that
is filing the single combined report and either:

(1) a corporation that is subject to the taxes imposed by chapter 290; or

(2) a corporation that is not subject to the taxes imposed by chapter 290:

(i) Such corporation consents by filing the return as a designated member under this
clause to remit taxes, penalties, interest, or additions to tax due from the members of the
unitary business subject to tax, and receive refunds or other payments on behalf of other
members of the unitary business. The member designated under this clause is a "taxpayer"
for the purposes of this chapter and chapter 270C, and is liable for any liability imposed
on the unitary business under this chapter and chapter 290.

(ii) If the state does not otherwise have the jurisdiction to tax the member designated
under this clause, consenting to be the designated member does not create the jurisdiction
to impose tax on the designated member, other than as described in item (i).

(iii) The member designated under this clause must apply for a business tax account
identification number.

(c) The commissioner shall adopt rules for the filing of one return on behalf of the
members of an affiliated group of corporations that are required to file a combined report.
All members of an affiliated group that are required to file a combined report must file one
return on behalf of the members of the group under rules adopted by the commissioner.

(d) If a corporation claims on a return that it has paid tax in excess of the amount of
taxes lawfully due, that corporation must include on that return information necessary for
payment of the tax in excess of the amount lawfully due by electronic means.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 7.

Minnesota Statutes 2012, 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 290.01, subdivision 19a, clauses (6) to (10) (9), and the subtractions provided in:
(i) section 290.01, subdivision 19b, clause (8), to the extent the amount is assignable or
allocable to Minnesota under section 290.17; and (ii) section 290.01, subdivision 19b,
clause (13). The subtraction allowed under section 290.01, subdivision 19b, clause (8), is
only allowed on the composite tax computation to the extent the electing partner would
have been allowed the subtraction.

Sec. 8.

Minnesota Statutes 2012, section 290.01, subdivision 5, is amended to read:


Subd. 5.

Domestic corporation.

The term "domestic" when applied to a corporation
means a corporation:

(1) created or organized in the United States, or under the laws of the United States or
of any state, the District of Columbia, or any political subdivision of any of the foregoing
but not including the Commonwealth of Puerto Rico, or any possession of the United States;

(2) which qualifies as a DISC, as defined in section 992(a) of the Internal Revenue
Code; or

(3) which qualifies as a FSC, as defined in section 922 of the Internal Revenue Code.

(2) which, regardless of the place where the corporation was incorporated:

(i) has the average of its property, payroll, and sales factors, as defined under section
290.191, within the territorial limits of the 50 states of the United States and the District of
Columbia of 20 percent or more; or

(ii) derives less than 80 percent of its income from foreign sources;

(3) which is:

(i) a foreign corporation, foreign partnership, or other foreign entity that has its
income included in the federal taxable income, as defined in section 63 of the Internal
Revenue Code, of an entity as defined in clause (1) or an individual who is a United States
resident, as defined in section 865(g) of the Internal Revenue Code; and

(ii) not treated as a corporation for federal income tax purposes;

(4) which is incorporated in a tax haven; or

(5) which is engaged in activity in a tax haven sufficient for the tax haven to impose a
net income tax under United States constitutional standards and section 290.015, and which
reports that 20 percent or more of its income is attributable to business in the tax haven.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 9.

Minnesota Statutes 2012, section 290.01, is amended by adding a subdivision
to read:


Subd. 5c.

Tax haven.

(a) "Tax haven" means the following foreign jurisdictions,
unless the listing of the jurisdiction does not apply under paragraph (b):

(1) Anguilla;

(2) Antigua and Barbuda;

(3) Aruba;

(4) Bahamas;

(5) Bahrain;

(6) Belize;

(7) Bermuda;

(8) British Virgin Islands;

(9) Cayman Islands;

(10) Cook Islands;

(11) Costa Rica;

(12) Cyprus;

(13) Dominica;

(14) Gibraltar;

(15) Grenada;

(16) Guernsey-Sark-Alderney;

(17) Isle of Man;

(18) Jersey;

(19) Jordan;

(20) Lebanon;

(21) Liberia;

(22) Liechtenstein;

(23) Malta;

(24) Marshall Islands;

(25) Monaco;

(26) Nauru;

(27) Netherlands Antilles;

(28) Niue;

(29) Panama;

(30) St. Kitts and Nevis;

(31) St. Lucia;

(32) St. Vincent and Grenadines;

(33) Samoa;

(34) Turks and Caicos; and

(35) Vanuatu.

(b) A foreign jurisdiction's listing under paragraph (a) does not apply to the first
taxable year after:

(1) the United States enters into a tax treaty or other agreement with the foreign
jurisdiction that provides for prompt, obligatory, and automatic exchange of information
with the United States government relevant to enforcing the provisions of federal tax laws
applicable to both individuals and all corporations and other entities and the treaty or other
agreement was in effect for the taxable year; and

(2) the foreign jurisdiction imposes a tax rate of at least ten percent on a tax base
equal to at least 90 percent of the tax base that applies to corporations under the Internal
Revenue Code.

EFFECTIVE DATE.

This section is effective for returns filed for taxable years
beginning after December 31, 2012.

Sec. 10.

Minnesota Statutes 2012, section 290.01, subdivision 19, as amended by Laws
2013, chapter 3, section 3, is amended to read:


Subd. 19.

Net income.

The term "net income" means the federal taxable income,
as defined in section 63 of the Internal Revenue Code of 1986, as amended through the
date named in this subdivision, incorporating the federal effective dates of changes to the
Internal Revenue Code and any elections made by the taxpayer in accordance with the
Internal Revenue Code in determining federal taxable income for federal income tax
purposes, and with the modifications provided in subdivisions 19a to 19f.

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

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

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

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

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

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

The Internal Revenue Code of 1986, as amended through April 14, 2011 January 3,
2013
, shall be in effect for taxable years beginning after December 31, 1996, and before
January 1, 2012, and for taxable years beginning after December 31, 2012. The Internal
Revenue Code of 1986, as amended through January 3, 2013, is in effect for taxable years
beginning after December 31, 2011, and before January 1, 2013
.

Except as otherwise provided, references to the Internal Revenue Code in
subdivisions 19 to 19f mean the code in effect for purposes of determining net income for
the applicable year.

EFFECTIVE DATE.

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

Sec. 11.

Minnesota Statutes 2012, section 290.01, subdivision 19a, is amended to read:


Subd. 19a.

Additions to federal taxable income.

For individuals, estates, and
trusts, there shall be added to federal taxable income:

(1)(i) interest 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 exempt from federal income taxes under the Internal
Revenue Code or any other federal statute; and

(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
Code, except:

(A) the portion of the exempt-interest dividends exempt from state taxation under
the laws of the United States; and

(B) the portion of the exempt-interest dividends derived from interest income
on obligations of the state of Minnesota or its political or governmental subdivisions,
municipalities, governmental agencies or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to all shareholders represents
95 percent or more of the exempt-interest dividends, including any dividends exempt
under subitem (A), that are paid by the regulated investment company as defined in section
851(a) of the Internal Revenue Code, or the fund of the regulated investment company as
defined in section 851(g) of the Internal Revenue Code, making the payment; and

(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
government described in section 7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe is located;

(2) to the extent allowed as a deduction under section 63(d) of the Internal Revenue
Code
the amount of:

(i) income, sales and use, motor vehicle sales, or excise taxes paid or accrued within
the taxable year under this chapter and the amount of;

(ii) taxes based on net income paid, sales and use, motor vehicle sales, or excise
taxes paid to any other state or to any province or territory of Canada, to the extent allowed
as a deduction under section 63(d) of the Internal Revenue Code,
; and

(iii) charitable contributions, as defined in section 170(c) of the Internal Revenue
Code, to the extent allowed as a deduction under section 170(a) of the Internal Revenue
Code.

but The addition sum of the additions under items (i) to (iii) may not be more
than the amount by which the itemized deductions as allowed under section 63(d) of
the Internal Revenue Code
state itemized deduction exceeds the amount of the standard
deduction as defined in section 63(c) of the Internal Revenue Code, disregarding the
amounts allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue
Code, minus any addition that would have been required under clause (21) if the taxpayer
had claimed the standard deduction. For the purpose of this paragraph, the disallowance of
itemized deductions under section 68 of the Internal Revenue Code of 1986, income, sales
and use, motor vehicle sales, or excise taxes are the last itemized deductions disallowed
.
For purposes of this clause, income, sales and use, and charitable contributions are the last
itemized deductions disallowed under clause (13)
;

(3) the capital gain amount of a lump-sum distribution to which the special tax under
section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the taxable year under this
chapter and taxes based on net income paid to any other state or any province or territory
of Canada, to the extent allowed as a deduction in determining federal adjusted gross
income. For the purpose of this paragraph, income taxes do not include the taxes imposed
by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
other than expenses or interest used in computing net interest income for the subtraction
allowed under subdivision 19b, clause (1);

(6) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(7) 80 percent of the depreciation deduction allowed under section 168(k) of the
Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
in the taxable year generates a deduction for depreciation under section 168(k) and the
activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
limited to excess of the depreciation claimed by the activity under section 168(k) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k) is allowed;

(8) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;

(9) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code;

(10) for taxable years beginning before January 1, 2013, the exclusion allowed under
section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;

(11) (10) the amount of expenses disallowed under section 290.10, subdivision 2;

(12) for taxable years beginning before January 1, 2010, the amount deducted for
qualified tuition and related expenses under section 222 of the Internal Revenue Code, to
the extent deducted from gross income;

(13) for taxable years beginning before January 1, 2010, the amount deducted for
certain expenses of elementary and secondary school teachers under section 62(a)(2)(D)
of the Internal Revenue Code, to the extent deducted from gross income;

(14) the additional standard deduction for property taxes payable that is allowable
under section 63(c)(1)(C) of the Internal Revenue Code;

(15) the additional standard deduction for qualified motor vehicle sales taxes
allowable under section 63(c)(1)(E) of the Internal Revenue Code;

(16) (11) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code;

(17) the amount of unemployment compensation exempt from tax under section
85(c) of the Internal Revenue Code;

(18) (12) changes to federal taxable income attributable to a net operating loss that
the taxpayer elected to carry back for more than two years for federal purposes but for
which the losses can be carried back for only two years under section 290.095, subdivision
11, paragraph (c);

(19) (13) to the extent included in the computation of federal taxable income in
taxable years beginning after December 31, 2010, the amount of disallowed itemized
deductions, but the amount of disallowed itemized deductions plus the addition required
under clause (2) may not be more than the amount by which the itemized deductions as
allowed under section 63(d) of the Internal Revenue Code exceeds the amount of the
standard deduction as defined in section 63(c) of the Internal Revenue Code, disregarding
the amounts allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue
Code, and reduced by any addition that would have been required under clause (21) if the
taxpayer had claimed the standard deduction
:

(i) the amount of disallowed itemized deductions is equal to the lesser of:

(A) three percent of the excess of the taxpayer's federal adjusted gross income
over the applicable amount; or

(B) 80 percent of the amount of the itemized deductions otherwise allowable to the
taxpayer under the Internal Revenue Code for the taxable year;

(ii) the term "applicable amount" means $100,000, or $50,000 in the case of a
married individual filing a separate return. Each dollar amount shall be increased by
an amount equal to:

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof;

(iii) the term "itemized deductions" does not include:

(A) the deduction for medical expenses under section 213 of the Internal Revenue
Code;

(B) any deduction for investment interest as defined in section 163(d) of the Internal
Revenue Code; and

(C) the deduction under section 165(a) of the Internal Revenue Code for casualty or
theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue
Code or for losses described in section 165(d) of the Internal Revenue Code; and

(20) (14) to the extent included in federal taxable income in taxable years beginning
after December 31, 2010, the amount of disallowed personal exemptions for taxpayers
with federal adjusted gross income over the threshold amount:

(i) the disallowed personal exemption amount is equal to the dollar amount of the
personal exemptions claimed by the taxpayer in the computation of federal taxable income
multiplied by the applicable percentage;

(ii) "applicable percentage" means two percentage points for each $2,500 (or
fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable
year exceeds the threshold amount. In the case of a married individual filing a separate
return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In
no event shall the applicable percentage exceed 100 percent;

(iii) the term "threshold amount" means:

(A) $150,000 in the case of a joint return or a surviving spouse;

(B) $125,000 in the case of a head of a household;

(C) $100,000 in the case of an individual who is not married and who is not a
surviving spouse or head of a household; and

(D) $75,000 in the case of a married individual filing a separate return; and

(iv) the thresholds shall be increased by an amount equal to:

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; and.

(21) to the extent deducted in the computation of federal taxable income, for taxable
years beginning after December 31, 2010, and before January 1, 2013, the difference
between the standard deduction allowed under section 63(c) of the Internal Revenue Code
and the standard deduction allowed for 2011 and 2012 under the Internal Revenue Code
as amended through December 1, 2010.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 12.

Minnesota Statutes 2012, section 290.01, subdivision 19b, is amended to read:


Subd. 19b.

Subtractions from federal taxable income.

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

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

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

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

(4) income as provided under section 290.0802;

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

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

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

(8) (6) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), or 19c, clause (15) (12), in the case
of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
delayed depreciation. For purposes of this clause, "delayed depreciation" means the amount
of the addition made by the taxpayer under subdivision 19a, clause (7), or subdivision 19c,
clause (15) (12), in the case of a shareholder of an S corporation, minus the positive value
of any net operating loss under section 172 of the Internal Revenue Code generated for the
tax year of the addition. The resulting delayed depreciation cannot be less than zero;

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

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

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

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

(13) (11) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (8), or 19c, clause (16) (13), in the case
of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth of
the addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16)
(13), in the case of a shareholder of a corporation that is an S corporation, minus the
positive value of any net operating loss under section 172 of the Internal Revenue Code
generated for the tax year of the addition. If the net operating loss exceeds the addition for
the tax year, a subtraction is not allowed under this clause;

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

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

(16) (14) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19a, clause (16) (11); and

(17) (15) the amount of the net operating loss allowed under section 290.095,
subdivision 11
, paragraph (c).;

(16) the amount of the limitation on itemized deductions under section 68(b) of the
Internal Revenue Code;

(17) the amount of the phase-out of personal exemptions under section 151(d) of
the Internal Revenue Code; and

(18) in the year that the expenditures are made for railroad track maintenance, as
defined in section 45G(d) of the Internal Revenue Code, in the case of a shareholder of a
corporation that is an S corporation or a partner in a partnership, an amount equal to the
credit awarded under section 45G(a) of the Internal Revenue Code. The subtraction is
reduced to an amount equal to the percentage of the shareholder's or partner's share of the
net income of the S corporation or partnership.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 13.

Minnesota Statutes 2012, section 290.01, subdivision 19c, is amended to read:


Subd. 19c.

Corporations; additions to federal taxable income.

For corporations,
there shall be added to federal taxable income:

(1) the amount of any deduction taken for federal income tax purposes for income,
excise, or franchise taxes based on net income or related minimum taxes, including but not
limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
another state, a political subdivision of another state, the District of Columbia, or any
foreign country or possession of the United States;

(2) interest not subject to federal tax upon obligations of: the United States, its
possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
state, any of its political or governmental subdivisions, any of its municipalities, or any
of its governmental agencies or instrumentalities; the District of Columbia; or Indian
tribal governments;

(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
Revenue Code;

(4) the amount of any net operating loss deduction taken for federal income tax
purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
deduction under section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal income tax purposes
under sections 241 to 247 and 965 of the Internal Revenue Code;

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

(7) the amount of any capital losses deducted for federal income tax purposes under
sections 1211 and 1212 of the Internal Revenue Code;

(8) the exempt foreign trade income of a foreign sales corporation under sections
921(a) and 291 of the Internal Revenue Code;

(9) (8) the amount of percentage depletion deducted under sections 611 through
614 and 291 of the Internal Revenue Code;

(10) (9) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, the amount of the amortization deduction allowed in computing federal taxable
income for those facilities;

(11) the amount of any deemed dividend from a foreign operating corporation
determined pursuant to section 290.17, subdivision 4, paragraph (g). The deemed dividend
shall be reduced by the amount of the addition to income required by clauses (20), (21),
(22), and (23);

(12) (10) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(13) the amount of net income excluded under section 114 of the Internal Revenue
Code;

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

(15) (12) 80 percent of the depreciation deduction allowed under section
168(k)(1)(A) and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if
the taxpayer has an activity that in the taxable year generates a deduction for depreciation
under section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable
year that the taxpayer is not allowed to claim for the taxable year, "the depreciation
allowed under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess
of the depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A)
over the amount of the loss from the activity that is not allowed in the taxable year. In
succeeding taxable years when the losses not allowed in the taxable year are allowed, the
depreciation under section 168(k)(1)(A) and (k)(4)(A) is allowed;

(16) (13) 80 percent of the amount by which the deduction allowed by section 179 of
the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;

(17) (14) to the extent deducted in computing federal taxable income, the amount of
the deduction allowable under section 199 of the Internal Revenue Code;

(18) for taxable years beginning before January 1, 2013, the exclusion allowed under
section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;

(19) (15) the amount of expenses disallowed under section 290.10, subdivision 2; and

(20) an amount equal to the interest and intangible expenses, losses, and costs paid,
accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit
of a corporation that is a member of the taxpayer's unitary business group that qualifies
as a foreign operating corporation. For purposes of this clause, intangible expenses and
costs include:

(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
use, maintenance or management, ownership, sale, exchange, or any other disposition of
intangible property;

(ii) losses incurred, directly or indirectly, from factoring transactions or discounting
transactions;

(iii) royalty, patent, technical, and copyright fees;

(iv) licensing fees; and

(v) other similar expenses and costs.

For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.

This clause does not apply to any item of interest or intangible expenses or costs paid,
accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect
to such item of income to the extent that the income to the foreign operating corporation
is income from sources without the United States as defined in subtitle A, chapter 1,
subchapter N, part 1, of the Internal Revenue Code;

(21) except as already included in the taxpayer's taxable income pursuant to clause
(20), any interest income and income generated from intangible property received or
accrued by a foreign operating corporation that is a member of the taxpayer's unitary
group. For purposes of this clause, income generated from intangible property includes:

(i) income related to the direct or indirect acquisition, use, maintenance or
management, ownership, sale, exchange, or any other disposition of intangible property;

(ii) income from factoring transactions or discounting transactions;

(iii) royalty, patent, technical, and copyright fees;

(iv) licensing fees; and

(v) other similar income.

For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.

This clause does not apply to any item of interest or intangible income received or accrued
by a foreign operating corporation with respect to such item of income to the extent that
the income is income from sources without the United States as defined in subtitle A,
chapter 1, subchapter N, part 1, of the Internal Revenue Code;

(22) the dividends attributable to the income of a foreign operating corporation that
is a member of the taxpayer's unitary group in an amount that is equal to the dividends
paid deduction of a real estate investment trust under section 561(a) of the Internal
Revenue Code for amounts paid or accrued by the real estate investment trust to the
foreign operating corporation;

(23) the income of a foreign operating corporation that is a member of the taxpayer's
unitary group in an amount that is equal to gains derived from the sale of real or personal
property located in the United States;

(24) for taxable years beginning before January 1, 2010, the additional amount
allowed as a deduction for donation of computer technology and equipment under section
170(e)(6) of the Internal Revenue Code, to the extent deducted from taxable income; and

(25) (16) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 14.

Minnesota Statutes 2012, section 290.01, subdivision 19d, is amended to read:


Subd. 19d.

Corporations; modifications decreasing federal taxable income.

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

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

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

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

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

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

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

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

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

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

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

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

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

(7) in the case of mines, oil and gas wells, other natural deposits, and timber for
which percentage depletion was disallowed pursuant to subdivision 19c, clause (9) (8), a
reasonable allowance for depletion based on actual cost. In the case of leases the deduction
must be apportioned between the lessor and lessee in accordance with rules prescribed
by the commissioner. In the case of property held in trust, the allowable deduction must
be apportioned between the income beneficiaries and the trustee in accordance with the
pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
of the trust's income allocable to each;

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

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

(10) 80 50 percent of royalties, fees, or other like income accrued or received from a
foreign operating corporation or a foreign corporation which is part of the same unitary
business as the receiving corporation, unless the income resulting from such payments or
accruals is income from sources within the United States as defined in subtitle A, chapter
1, subchapter N, part 1, of the Internal Revenue Code;

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

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

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

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

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

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

(17) (16) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (15) (12), an amount equal to one-fifth
of the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
amount of the addition made by the taxpayer under subdivision 19c, clause (15) (12). The
resulting delayed depreciation cannot be less than zero;

(18) (17) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (16) (13), an amount equal to one-fifth
of the amount of the addition; and

(19) (18) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19c, clause (25). (16); and

(19) in the year that the expenditures are made for railroad track maintenance, as
defined in section 45G(d) of the Internal Revenue Code, an amount equal to the credit
awarded under section 45G(a) of the Internal Revenue Code.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 15.

Minnesota Statutes 2012, section 290.01, is amended by adding a subdivision
to read:


Subd. 29a.

State itemized deduction.

The term "state itemized deduction" means
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 subdivision 19a, clause (13).

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 16.

Minnesota Statutes 2012, section 290.01, subdivision 31, as amended by Laws
2013, chapter 3, section 4, is amended to read:


Subd. 31.

Internal Revenue Code.

Unless specifically defined otherwise, for
taxable years beginning before January 1, 2012, and after December 31, 2012,
"Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through April 14,
2011; and for taxable years beginning after December 31, 2011, and before January 1,
2013, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
through
January 3, 2013. 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. When used in this chapter, the reference to "subtitle A, chapter 1,
subchapter N, part 1, of the Internal Revenue Code" is to the Internal Revenue Code as
amended through March 18, 2010.

EFFECTIVE DATE.

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

Sec. 17.

Minnesota Statutes 2012, section 290.01, is amended by adding a subdivision
to read:


Subd. 33.

Foreign source income; income from foreign sources.

The terms
"foreign source income" and "income from foreign sources" means income from sources
without the United States as defined in subtitle A, chapter 1, subchapter N, part 1, of the
Internal Revenue Code.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 18.

Minnesota Statutes 2012, section 290.06, subdivision 2c, is amended to read:


Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

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

(1) On the first $25,680 $31,650, 5.35 percent;

(2) On all over $25,680 $31,650, but not over $102,030 $130,000, 7.05 percent;

(3) On all over $102,030 $130,000, but not over $400,000, 7.85 percent.;

(4) On all over $400,000, 8.49 percent.

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

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

(1) On the first $17,570 $21,650, 5.35 percent;

(2) On all over $17,570 $21,650, but not over $57,710 $73,500, 7.05 percent;

(3) On all over $57,710 $73,500, but not over $226,200, 7.85 percent.;

(4) On all over $226,200, 8.49 percent.

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

(1) On the first $21,630 $26,650, 5.35 percent;

(2) On all over $21,630 $26,650, but not over $86,910 $110,700, 7.05 percent;

(3) On all over $86,910 $110,700, but not over $340,700, 7.85 percent.;

(4) On all over $340,700, 8.49 percent.

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

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

(1) the numerator is the individual's Minnesota source federal adjusted gross income
as defined in section 62 of the Internal Revenue Code and increased by the additions
required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12),
(13), and (16) to (18)
(5) to (9), (11), and (12), and reduced by the Minnesota assignable
portion of the subtraction for United States government interest under section 290.01,
subdivision 19b
, clause (1), and the subtractions under section 290.01, subdivision 19b,
clauses (8), (9), (13), (14), (16), and (17) (6), (7), (11), (12), (14), and (15), after applying
the allocation and assignability provisions of section 290.081, clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted gross income as defined in
section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), (13), and (16) to
(18)
(5) to (9), (11), and (12), and reduced by the amounts specified in section 290.01,
subdivision 19b
, clauses (1), (8), (9), (13), (14), (16), and (17) (6), (7), (11), (12), (14),
and (15)
.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 19.

Minnesota Statutes 2012, section 290.06, subdivision 2d, is amended to read:


Subd. 2d.

Inflation adjustment of brackets.

(a) For taxable years beginning after
December 31, 2000 2013, the minimum and maximum dollar amounts for each rate
bracket for which a tax is imposed in subdivision 2c 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, 1999 2012,
and before January 1, 2001 2014. 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.

(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 "1999" "2012" shall be substituted for the word "1992." For
2001 2014, the commissioner shall then determine the percent change from the 12 months
ending on August 31, 1999 2012, to the 12 months ending on August 31, 2000 2013, and
in each subsequent year, from the 12 months ending on August 31, 1999 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 14.

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.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 20.

Minnesota Statutes 2012, section 290.06, is amended by adding a subdivision
to read:


Subd. 36.

Charitable contributions credit.

(a) A taxpayer, other than a corporation,
estate, or trust, is allowed a credit against the tax imposed by this chapter equal to eight
percent of the amount by which eligible charitable contributions exceed the greater of:

(1) two percent of the taxpayer's adjusted gross income for the taxable year; or

(2) $400 ($800 for married filing jointly).

(b) For purposes of this subdivision, "eligible charitable contributions" means
charitable contributions allowable as a deduction for the taxable year under section 170(a)
of the Internal Revenue Code, subject to the limitations of section 170(b) of the Internal
Revenue Code, and determined without regard to whether or not the taxpayer itemizes
deductions.

(c) For purposes of this subdivision, "adjusted gross income" has the meaning given
in section 62 of the Internal Revenue Code.

(d) For a nonresident or part-year resident, the credit must be allocated based on the
percentage calculated under subdivision 2c, paragraph (e).

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 21.

Minnesota Statutes 2012, section 290.067, subdivision 1, is amended to read:


Subdivision 1.

Amount of credit.

(a) A taxpayer may take as a credit against the
tax due from the taxpayer and a spouse, if any, under this chapter an amount equal to the
dependent care credit for which the taxpayer is eligible pursuant to the provisions of
section 21 of the Internal Revenue Code subject to the limitations provided in subdivision
2 except that in determining whether the child qualified as a dependent, income received
as a Minnesota family investment program grant or allowance to or on behalf of the child
must not be taken into account in determining whether the child received more than half
of the child's support from the taxpayer, and the provisions of section 32(b)(1)(D) of
the Internal Revenue Code do not apply.

(b) If a child who has not attained the age of six years at the close of the taxable year
is cared for at a licensed family day care home operated by the child's parent, the taxpayer
is deemed to have paid employment-related expenses. If the child is 16 months old or
younger at the close of the taxable year, the amount of expenses deemed to have been paid
equals the maximum limit for one qualified individual under section 21(c) and (d) of the
Internal Revenue Code. If the child is older than 16 months of age but has not attained the
age of six years at the close of the taxable year, the amount of expenses deemed to have
been paid equals the amount the licensee would charge for the care of a child of the same
age for the same number of hours of care.

(c) If a married couple:

(1) has a child who has not attained the age of one year at the close of the taxable year;

(2) files a joint tax return for the taxable year; and

(3) does not participate in a dependent care assistance program as defined in section
129 of the Internal Revenue Code, in lieu of the actual employment related expenses paid
for that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of
(i) the combined earned income of the couple or (ii) the amount of the maximum limit for
one qualified individual under section 21(c) and (d) of the Internal Revenue Code will
be deemed to be the employment related expense paid for that child. The earned income
limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed
amount. These deemed amounts apply regardless of whether any employment-related
expenses have been paid.

(d) If the taxpayer is not required and does not file a federal individual income tax
return for the tax year, no credit is allowed for any amount paid to any person unless:

(1) the name, address, and taxpayer identification number of the person are included
on the return claiming the credit; or

(2) if the person is an organization described in section 501(c)(3) of the Internal
Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code,
the name and address of the person are included on the return claiming the credit.

In the case of a failure to provide the information required under the preceding sentence,
the preceding sentence does not apply if it is shown that the taxpayer exercised due
diligence in attempting to provide the information required.

In the case of a nonresident, part-year resident, or a person who has earned income
not subject to tax under this chapter including earned income excluded pursuant to section
290.01, subdivision 19b, clause (9) (7), the credit determined under section 21 of the
Internal Revenue Code must be allocated based on the ratio by which the earned income
of the claimant and the claimant's spouse from Minnesota sources bears to the total earned
income of the claimant and the claimant's spouse.

For residents of Minnesota, the subtractions for military pay under section 290.01,
subdivision 19b
, clauses (10) and (11) (8) and (9), are not considered "earned income not
subject to tax under this chapter."

For residents of Minnesota, the exclusion of combat pay under section 112 of the
Internal Revenue Code is not considered "earned income not subject to tax under this
chapter."

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 22.

Minnesota Statutes 2012, section 290.067, subdivision 2a, is amended to read:


Subd. 2a.

Income.

(a) For purposes of this section, "income" means the sum of
the following:

(1) federal adjusted gross income as defined in section 62 of 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;

(xii) nontaxable scholarship or fellowship grants;

(xiii) the amount of deduction allowed under section 199 of the Internal Revenue
Code;

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

(xv) the amount of deducted for tuition expenses required to be added to income
under section 290.01, subdivision 19a, clause (12)
under section 222 of the Internal
Revenue Code
; and

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

(xvii) unemployment compensation.

In the case of an individual who files an income tax return on a fiscal year basis, the
term "federal adjusted gross income" means federal adjusted gross income reflected in the
fiscal year ending in the next calendar year. Federal adjusted gross income may 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 that were exclusively funded by the claimant
or spouse if the funding payments were not excluded from federal adjusted gross income
in the years when the payments were made;

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

(4) relief granted under chapter 290A;

(5) child support payments received under a temporary or final decree of dissolution
or legal separation; and

(6) 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 107-16.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 23.

Minnesota Statutes 2012, section 290.0671, subdivision 1, is amended to read:


Subdivision 1.

Credit allowed.

(a) An individual 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.

(b) For individuals with no qualifying children, the credit equals 1.9125 percent of
the first $4,620 of earned income. The credit is reduced by 1.9125 percent of earned
income or adjusted gross income, whichever is greater, in excess of $5,770, but in no
case is the credit less than zero.

(c) For individuals with one qualifying child, the credit equals 8.5 percent of the first
$6,920 of earned income and 8.5 percent of earned income over $12,080 but less than
$13,450. The credit is reduced by 5.73 percent of earned income or adjusted gross income,
whichever is greater, in excess of $15,080, but in no case is the credit less than zero.

(d) For individuals with two or more qualifying children, the credit equals ten percent
of the first $9,720 of earned income and 20 percent of earned income over $14,860 but less
than $16,800. The credit is reduced by 10.3 percent of earned income or adjusted gross
income, whichever is greater, in excess of $17,890, but in no case is the credit less than zero.

(e) For a nonresident or part-year resident, the credit must be allocated based on the
percentage calculated under section 290.06, subdivision 2c, paragraph (e).

(f) 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 290.01,
subdivision 19b
, clause (9), 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 subtractions for
military pay under section 290.01, subdivision 19b, clauses (10) and (11) (8) and (9), are
not considered "earned income not subject to tax under this chapter."

For the purposes of this paragraph, the exclusion of combat pay under section 112
of the Internal Revenue Code is not considered "earned income not subject to tax under
this chapter."

(g) For tax years beginning after December 31, 2007, and before December 31,
2010, and for tax years beginning after December 31, 2017, the $5,770 in paragraph (b),
the $15,080 in paragraph (c), and the $17,890 in paragraph (d), after being adjusted for
inflation under subdivision 7, are each increased by $3,000 for married taxpayers filing joint
returns. For tax years beginning after December 31, 2008, the commissioner shall annually
adjust the $3,000 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 "2007" shall be
substituted for the word "1992." For 2009, the commissioner shall then determine the
percent change from the 12 months ending on August 31, 2007, to the 12 months ending on
August 31, 2008, and in each subsequent year, from the 12 months ending on August 31,
2007, 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.

(h) For tax years beginning after December 31, 2010, and before January 1, 2012,
and for tax years beginning after December 31, 2012, and before January 1, 2018, the
$5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 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,
2010, and before January 1, 2012, and for tax years beginning after December 31, 2012,
and before January 1, 2018,
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 2011, 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, 2010, 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.

(i) 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.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 24.

Minnesota Statutes 2012, 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.

(c) "Taxable income" means net income as defined in section 290.01, subdivision 19.

(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 the sum of (i) the amount for one exemption under section 151(d) of the
Internal Revenue Code and (ii) one-half the amount of the standard deduction under
section 63(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition
required under section 290.01, subdivision 19a, clause (21), and one-half of the addition
that would have been required under section 290.01, subdivision 19a, clause
(21), if the
taxpayer had claimed the standard deduction
.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 25.

Minnesota Statutes 2012, section 290.0677, subdivision 2, is amended to read:


Subd. 2.

Definitions.

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

(b) "Designated area" means a:

(1) combat zone designated by Executive Order from the President of the United
States;

(2) qualified hazardous duty area, designated in Public Law; or

(3) location certified by the U. S. Department of Defense as eligible for combat zone
tax benefits due to the location's direct support of military operations.

(c) "Active military service" means active duty service in any of the United States
armed forces, the National Guard, or reserves.

(d) "Qualified individual" means an individual who has:

(1) either (i) met one of the following criteria:

(i) has served at least 20 years in the military or;

(ii) has a service-connected disability rating of 100 percent for a total and permanent
disability; or

(iii) has been determined by the military to be eligible for compensation 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,
or 12733;
and

(2) separated from military service before the end of the taxable year.

(e) "Adjusted gross income" has the meaning given in section 61 of the Internal
Revenue Code.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 26.

Minnesota Statutes 2012, section 290.068, subdivision 3, is amended to read:


Subd. 3.

Limitation; carryover.

(a)(1) The credit for a taxable year beginning
before January 1, 2010, and after December 31, 2012, shall not exceed the liability for
tax. "Liability for tax" for purposes of this section means the tax imposed under section
290.06, subdivision 1, for the taxable year reduced by the sum of the nonrefundable
credits allowed under this chapter.

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

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

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 27.

Minnesota Statutes 2012, section 290.068, subdivision 6a, is amended to read:


Subd. 6a.

Credit to be refundable.

If the amount of credit allowed in this section
for qualified research expenses incurred in taxable years beginning after December 31,
2009, and before January 1, 2013, exceeds the taxpayer's tax liability under this chapter,
the commissioner shall refund the excess amount. The credit allowed for qualified research
expenses incurred in taxable years beginning after December 31, 2009, and before January
1, 2013,
must be used before any research credit earned under subdivision 3.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 28.

Minnesota Statutes 2012, 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.

(c) "Office" means the State Historic Preservation Office of the Minnesota Historical
Society.

(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 under section 47(a)(2) of the Internal Revenue Code.

(e) "Society" means the Minnesota Historical Society.

(f) "Federal credit" means the credit allowed under section 47(a)(2) of the Internal
Revenue Code.

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

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

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 29.

Minnesota Statutes 2012, 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 $5,000, based on 0.5
percent of
estimated qualified rehabilitation expenses, not to exceed $35,000, 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 the credit or 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 of revenue, 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 of revenue.

(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.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 30.

Minnesota Statutes 2012, 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 taxpayer,
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.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 31.

Minnesota Statutes 2012, section 290.0681, subdivision 5, is amended to read:


Subd. 5.

Partnerships; multiple owners.

Credits granted to a partnership, a limited
liability company taxed as a partnership, S corporation, or multiple owners of property
are passed through to the partners, members, shareholders, or owners, respectively, pro
rata to each partner, member, shareholder, or owner based on their share of the entity's
assets or as specially allocated in their organizational documents or any other executed
agreement
, as of the last day of the taxable year.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 32.

[290.0693] VETERANS JOBS TAX CREDIT.

Subdivision 1.

Definitions.

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

(b) "Date of hire" means the day that the qualified employee begins performing
services as an employee of the qualified employer.

(c) "Disabled veteran" is a veteran who has had a service-connected disability rating
as adjudicated by the United States Veterans Administration, or by the retirement board of
one of the several branches of the armed forces.

(d)(1) "Qualified employee" means an employee as defined in section 290.92,
subdivision 1, who meets the following criteria:

(i) the employee is a resident of Minnesota on the date of hire;

(ii) the employee is paid wages as defined in section 290.92, subdivision 1; and

(iii) the employee's wages are attributable to Minnesota under section 290.191,
subdivision 12;

(2) Qualified employee does not include:

(i) any employee who bears any of the relationships to the employer described in
subparagraphs (A) to (G) of section 152(d)(2) of the Internal Revenue Code;

(ii) if the employer is a corporation, an employee who owns, directly or indirectly,
more than 50 percent in value of the outstanding stock of the corporation, or if the
employer is an entity other than a corporation, an employee who owns, directly or
indirectly, more than 50 percent of the capital and profits interests in the entity, as
determined with the application of section 267(c) of the Internal Revenue Code; or

(iii) if the employer is an estate or trust, any employee who is a fiduciary of the estate
or trust, or is an individual who bears any of the relationships described in subparagraphs
(A) to (G) of section 152(d)(2) of the Internal Revenue Code to a grantor, beneficiary,
or fiduciary of the estate or trust.

(e) "Qualified employer" means an employer that hired a disabled veteran, or an
unemployed veteran as a qualified employee.

(f) "Unemployed veteran" is a veteran who:

(1) received unemployment compensation under state or federal law at any time
during the two-year period prior to the date of hire; and

(2) was unemployed on the date of hire.

(g) "Veteran" has the meaning given in section 197.447.

Subd. 2.

Credit allowed.

(a) A qualified employer is allowed a credit for each of
the following individuals that the qualified employer hires as a qualified employee during
taxable years beginning after December 31, 2012, and before January 1, 2017:

(1) a disabled veteran; or

(2) an unemployed veteran.

(b) Subject to the requirements of this section, there is no limit to the number of
credits that a qualified employer may claim under this section during a taxable year.

(c) A qualified employer may claim the credit either for the taxable year in which
the qualified employee is hired, or in the next taxable year, but may claim the credit only
once for each qualified employee.

Subd. 3.

Credit amount for hiring certain veterans.

(a) A qualified employer who
is required to file a return under section 289A.08, subdivision 1, 2, or 3, is allowed a credit
against the tax imposed by this chapter as determined under this subdivision.

(b) For hiring a disabled veteran as a qualified employee, the credit equals ten
percent of the wages paid to the qualified employee during the taxable year, but the
amount of the credit shall not exceed $1,200.

(c) For hiring an unemployed veteran as a qualified employee, the credit equals
ten percent of the wages paid to the qualified employee during the taxable year, but the
amount of the credit shall not exceed $600.

(d) The credit is limited to the liability for tax under this chapter for the taxable year.

(e) A qualified employer is allowed only one of the credits authorized under
paragraphs (b) and (c) upon hiring a disabled veteran, or an unemployed veteran as a
qualified employee.

(f) A qualified employer may not claim a credit under this subdivision for hiring
a disabled veteran, or an unemployed veteran as a qualified employee if the qualified
employer currently employs or has previously employed the disabled veteran, or
unemployed veteran.

Subd. 4.

Flow-through entities.

Credits granted to a partnership, limited liability
company taxed as a partnership, S corporation, or multiple owners of a business are passed
through to the partners, members, shareholders, or owners, respectively, pro rata to each
partner, member, shareholder, or owner based on their share of the entity's assets or as
specially allocated in their organizational documents, as of the last day of the taxable year.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 33.

Minnesota Statutes 2012, 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) (i) the medical expense deduction;

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

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

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

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

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

(6) the amount of addition required by section 290.01, subdivision 19a, clauses (7)
to (9), (12), (13), and (16) to (18)
(7) to (9), (11), and (12);

less the sum of the amounts determined under the following:

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

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

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

(4) amounts subtracted from federal taxable income as provided by section 290.01,
subdivision 19b
, clauses (6), (8) to (14), and (16) (6) to (12), (14), and (18); and

(5) the amount of the net operating loss allowed under section 290.095, subdivision
11
, paragraph (c).

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

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

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

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

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

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 34.

Minnesota Statutes 2012, section 290.0921, subdivision 3, is amended to read:


Subd. 3.

Alternative minimum taxable income.

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

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

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

(2) The portion of the depreciation deduction allowed for federal income tax
purposes under section 168(k) of the Internal Revenue Code that is required as an addition
under section 290.01, subdivision 19c, clause (15) (12), is disallowed in determining
alternative minimum taxable income.

(3) The subtraction for depreciation allowed under section 290.01, subdivision
19d
, clause (17) (16), is allowed as a depreciation deduction in determining alternative
minimum taxable income.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 35.

Minnesota Statutes 2012, 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
$
500,000
$
0
$
500,000
to
$
999,999
$
100
$
1,000,000
to
$
4,999,999
$
300
$
5,000,000
to
$
9,999,999
$
1,000
$
10,000,000
to
$
19,999,999
$
2,000
$
20,000,000
or
more
$
5,000
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
$
500,000
$
0
$
500,000
to
$
999,999
$
100
$
1,000,000
to
$
4,999,999
$
300
$
5,000,000
to
$
9,999,999
$
1,000
$
10,000,000
to
$
19,999,999
$
2,000
$
20,000,000
or
more
$
5,000
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 adjust the dollar amounts of both the tax and the property,
payrolls, and sales or receipts thresholds in paragraphs (a) and (b) 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 14. 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.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 36.

Minnesota Statutes 2012, 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 is does not deemed to exist when a corporation is two or
more corporations are
involved unless that corporation is a member of a group of two or
more business entities and
more than 50 percent of the voting stock of each member of
the group
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 entities which are part of a unitary business shall
not be included in the net income or the apportionment factors of the unitary business. 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.
The net income and apportionment factors under section 290.191 or 290.20 of foreign
operating corporations shall not be included in the net income or the apportionment
factors of the unitary business except as provided in paragraph (g).
The legislature intends
that the provisions of this paragraph are not severable from the provisions of section
290.01, subdivision 5, clauses (4) and (5), and if any of those provisions are found to be
unconstitutional, the provisions of this paragraph are void for the respective taxable years.

(g) The adjusted net income of a foreign operating corporation shall be deemed to
be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
proportion to each shareholder's ownership, with which such corporation is engaged in
a unitary business. Such deemed dividend shall be treated as a dividend under section
290.21, subdivision 4.

Dividends actually paid by a foreign operating corporation to a corporate shareholder
which is a member of the same unitary business as the foreign operating corporation shall
be eliminated from the net income of the unitary business in preparing a combined report
for the unitary business. The adjusted net income of a foreign operating corporation
shall be its net income adjusted as follows:

(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
Rico, or a United States possession or political subdivision of any of the foregoing shall
be a deduction; and

(2) the subtraction from federal taxable income for payments received from foreign
corporations or foreign operating corporations under section 290.01, subdivision 19d,
clause (10), shall not be allowed.

If a foreign operating corporation incurs a net loss, neither income nor deduction from
that corporation shall be included in determining the net income of the unitary business.

(h) (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 other than foreign operating corporations 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.

(i) (h) Deductions for expenses, interest, or taxes otherwise allowable under
this chapter that are connected with or allocable against dividends, deemed dividends
described
in paragraph (g), or royalties, fees, or other like income described in section
290.01, subdivision 19d, clause (10), shall not be disallowed.

(j) (i) 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 (h) (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 (h) (g) in the denominators of the apportionment formula.
Except as otherwise provided by paragraph (f), all sales of the unitary business made
within Minnesota pursuant to section 290.191 or 290.20 must be included on the separate
combined report of a corporation that is a member of the unitary business and is subject to
the jurisdiction of this state to impose tax under this chapter.

(k) (j) 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.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 37.

Minnesota Statutes 2012, 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) 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.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 38.

Minnesota Statutes 2012, section 290A.03, subdivision 15, as amended by
Laws 2013, chapter 3, section 5, is amended to read:


Subd. 15.

Internal Revenue Code.

For taxable years beginning before January 1,
2012, and after December 31, 2012,
"Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended through April 14, 2011; and for taxable years beginning after
December 31, 2011, and before January 1, 2013, "Internal Revenue Code" means the
Internal Revenue Code of 1986, as amended through
January 3, 2013.

EFFECTIVE DATE.

This section is effective for property tax refunds based on
property taxes payable after December 31, 2013, and rent paid after December 31, 2012.

Sec. 39.

Minnesota Statutes 2012, section 298.01, subdivision 3b, is amended to read:


Subd. 3b.

Deductions.

(a) For purposes of determining taxable income under
subdivision 3, the deductions from gross income include only those expenses necessary
to convert raw ores to marketable quality. Such expenses include costs associated with
refinement but do not include expenses such as transportation, stockpiling, marketing, or
marine insurance that are incurred after marketable ores are produced, unless the expenses
are included in gross income. The allowable deductions from a mine or plant that mines
and produces more than one mineral, metal, or energy resource must be determined
separately for the purposes of computing the deduction in section 290.01, subdivision 19c,
clause (9) (8). These deductions may be combined on one occupation tax return to arrive
at the deduction from gross income for all production.

(b) The provisions of section 290.01, subdivisions 19c, clauses (6) and (9), and 19d,
clauses (7) and (11), are not used to determine taxable income.

Sec. 40. ESTIMATED TAXES; EXCEPTIONS.

No addition to tax, penalties, or interest may be made under Minnesota Statutes,
section 289A.25, for any period before September 15, 2013, with respect to an
underpayment of estimated tax, to the extent that the underpayment was created or
increased by the increase in income tax rates under this article.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 41. REPEALER.

Minnesota Statutes 2012, sections 290.01, subdivision 6b; 290.06, subdivision 22a;
290.0672; and 290.0921, subdivision 7,
are repealed.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

ARTICLE 7

ESTATE AND GIFT TAXES

Section 1.

Minnesota Statutes 2012, section 289A.10, subdivision 1, is amended to read:


Subdivision 1.

Return required.

In the case of a decedent who has an interest in
property with a situs in Minnesota, the personal representative must submit a Minnesota
estate tax return to the commissioner, on a form prescribed by the commissioner, if:

(1) a federal estate tax return is required to be filed; or

(2) the sum of the federal gross estate and federal adjusted taxable gifts made within
three years of the date of the decedent's death
exceeds $1,000,000.

The return must contain a computation of the Minnesota estate tax due. The return
must be signed by the personal representative.

EFFECTIVE DATE.

This section is effective for estates of decedents dying after
December 31, 2012.

Sec. 2.

Minnesota Statutes 2012, 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.

(3) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through April 14, 2011 January 3, 2013, but without regard to the
provisions of sections 501 and 901 of Public Law 107-16, as amended by Public Law
111-312, and section 301(c) of Public Law 111-312
section 2011, paragraph (f), of the
Internal Revenue Code
.

(4) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
defined by section 2011(b)(3) of the Internal Revenue Code, plus

(i) the amount of deduction for state death taxes allowed under section 2058 of the
Internal Revenue Code;

(ii) the amount of taxable gifts, as defined in section 292.16, and made by the
decedent within three years of the decedent's date of death;
less

(ii) (iii)(A) the value of qualified small business property under section 291.03,
subdivision 9
, and the value of qualified farm property under section 291.03, subdivision
10
, or (B) $4,000,000, whichever is less.

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

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

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

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

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

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

(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
; and with respect to

(iii) 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 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.

(10) "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 includible in the decedent's federal gross estate.

EFFECTIVE DATE.

This section is effective for decedents dying after December
31, 2012.

Sec. 3.

Minnesota Statutes 2012, section 291.03, subdivision 1, is amended to read:


Subdivision 1.

Tax amount.

(a) The tax imposed shall be an amount equal to the
proportion of the maximum credit for state death taxes computed under section 2011 of
the Internal Revenue Code, but using Minnesota adjusted taxable estate instead of federal
adjusted taxable estate, as the Minnesota gross estate bears to the value of the federal
gross estate. The tax is reduced by:

(1) the gift tax paid by the decedent under section 292.17 on gifts included in the
Minnesota adjusted gross estate and not subtracted as qualified farm or small business
property; and

(2) any credit allowed under subdivision 1c.

(b) The tax determined under this subdivision must not be greater than the sum of
the following amounts multiplied by a fraction, the numerator of which is the Minnesota
gross estate and the denominator of which is the federal gross estate:

(1) the rates and brackets under section 2001(c) of the Internal Revenue Code
multiplied by the sum of:

(i) the taxable estate, as defined under section 2051 of the Internal Revenue Code; plus

(ii) adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue
Code; less

(iii) the lesser of (A) the sum of the value of qualified small business property
under subdivision 9, and the value of qualified farm property under subdivision 10, or
(B) $4,000,000; less

(2) the amount of tax allowed under section 2001(b)(2) of the Internal Revenue
Code; and less

(3) the federal credit allowed under section 2010 of the Internal Revenue Code.

(c) For purposes of this subdivision, "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through December 31, 2000.

EFFECTIVE DATE.

This section is effective for decedents dying after December
31, 2012.

Sec. 4.

Minnesota Statutes 2012, section 291.03, is amended by adding a subdivision
to read:


Subd. 1c.

Nonresident decedent tax credit.

(a) The estate of a nonresident
decedent that is subject to tax under this chapter on the value of Minnesota situs property
held in a pass-through entity is allowed a credit against the tax due under this section
equal to the lesser of:

(1) the amount of estate or inheritance tax paid to another state that is attributable to
the Minnesota situs property held in the pass-through entity; or

(2) the amount of tax paid under this section attributable to the Minnesota situs
property held in the pass-through entity.

(b) The amount of tax attributable to the Minnesota situs property held in the
pass-through entity must be determined by the increase in the estate or inheritance tax that
results from including the market value of the property in the estate or treating the value
as a taxable inheritance to the recipient of the property.

EFFECTIVE DATE.

This section is effective for decedents dying after December
31, 2012.

Sec. 5.

Minnesota Statutes 2012, section 291.03, subdivision 8, is amended to read:


Subd. 8.

Definitions.

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

(b) "Family member" means a family member as defined in section 2032A(e)(2) of
the Internal Revenue Code, or a trust whose present beneficiaries are all family members
as defined in section 2032A(e)(2) of the Internal Revenue Code
.

(c) "Qualified heir" means a family member who acquired qualified property from
upon the death of the decedent and satisfies the requirement under subdivision 9, clause
(6) (7), or subdivision 10, clause (4) (5), for the property.

(d) "Qualified property" means qualified small business property under subdivision
9 and qualified farm property under subdivision 10.

EFFECTIVE DATE.

This section is effective retroactively for estates of decedents
dying after June 30, 2011.

Sec. 6.

Minnesota Statutes 2012, 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.
The decedent or the decedent's spouse must have materially participated in the trade or
business within the meaning of section 469 of the Internal Revenue Code during the
taxable year that ended before the date of the decedent's death.
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, and 2038 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.

(4) (5) The property does not consist of cash or, cash equivalents, publicly traded
securities, or assets not used in the operation of the trade or business
. For property
consisting of shares of stock or other ownership interests in an entity, the amount value of
cash or, cash equivalents, publicly traded securities, or assets not used in the operation of
the trade or business
held by the corporation or other entity must be deducted from the
value of the property qualifying under this subdivision in proportion to the decedent's
share of ownership of the entity on the date of death.

(5) (6) The decedent continuously owned the property, including property the
decedent is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue
Code,
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.

(6) A family member continuously uses the property in the operation of the trade or
business for three years following the date of death of the decedent.

(7) 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.

(8) 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.

EFFECTIVE DATE.

This section is effective retroactively for estates of decedents
dying after June 30, 2011.

Sec. 7.

Minnesota Statutes 2012, 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 a farm meeting the requirements of agricultural land as
defined in section 500.24, subdivision 2, paragraph (g), and is owned by a person or entity
that is not excluded from owning agricultural land by
section 500.24, and was classified
for property tax purposes as the homestead of the decedent or the decedent's spouse or
both under section 273.124, and as class 2a property under section 273.13, subdivision 23
.

(3) For property taxes payable in the taxable year of 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 decedent continuously owned the property, including property the decedent
is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue Code,
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 excluded
from owning agricultural land under section 500.24
.

(4) A family member continuously uses the property in the operation of the trade or
business
(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.

(5) (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.

EFFECTIVE DATE.

This section is effective retroactively for estates of decedents
dying after June 30, 2011.

Sec. 8.

Minnesota Statutes 2012, section 291.03, subdivision 11, is amended to read:


Subd. 11.

Recapture tax.

(a) If, within three years after the decedent's death and
before the death of the qualified heir, the qualified heir disposes of any interest in the
qualified property, other than by a disposition to a family member, or a family member
ceases to use the qualified property which was acquired or passed from the decedent
satisfy the requirement under subdivision 9, clause (7); or 10, clause (5), an additional
estate tax is imposed on the property. In the case of a sole proprietor, if the qualified heir
replaces qualified small business property excluded under subdivision 9 with similar
property, then the qualified heir will not be treated as having disposed of an interest in the
qualified property.

(b) The amount of the additional tax equals the amount of the exclusion claimed by
the estate under subdivision 8, paragraph (d), multiplied by 16 percent.

(c) The additional tax under this subdivision is due on the day which is six months
after the date of the disposition or cessation in paragraph (a).

EFFECTIVE DATE.

This section is effective retroactively for estates of decedents
dying after June 30, 2011.

Sec. 9.

[292.16] DEFINITIONS.

(a) For purposes of this chapter, the following definitions apply.

(b) The definitions of terms defined in section 291.005 apply.

(c) "Resident" has the meaning given in section 290.01.

(d) "Taxable gifts" means:

(1) the transfers by gift which are included in taxable gifts for federal gift tax
purposes under the following sections of the Internal Revenue Code:

(i) section 2503;

(ii) sections 2511 to 2514; and

(iii) sections 2516 to 2519; less

(2) the deductions allowed in sections 2522 to 2524 of the Internal Revenue Code.

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

Sec. 10.

[292.17] GIFT TAX.

Subdivision 1.

Imposition.

(a) A tax is imposed on the transfer of property by gift
by any individual resident or nonresident in an amount equal to ten percent of the amount
of the taxable gift.

(b) The donor is liable for payment of the tax. If the gift tax is not paid when due,
the donee of any gift is personally liable for the tax to the extent of the value of the gift.

Subd. 2.

Lifetime credit.

A credit is allowed against the tax imposed under this
section equal to $100,000. This credit applies to the cumulative amount of taxable gifts
made by the donor during the donor's lifetime.

Subd. 3.

Out-of-state gifts.

Taxable gifts exclude the transfer of:

(1) real property located outside of this state;

(2) tangible personal property that was normally kept at a location outside of the
state on the date the gift was executed; and

(3) intangible personal property made by an individual who is not a resident.

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

Sec. 11.

[292.18] RETURNS.

(a) Any individual who makes a taxable gift during the taxable year shall file a gift
tax return in the form and manner prescribed by the commissioner.

(b) If the donor dies before filing the return, the executor of the donor's will or
the administrator of the donor's estate shall file the return. If the donor becomes legally
incompetent before filing the return, the guardian or conservator shall file the return.

(c) The return must include:

(1) each gift made during the calendar year which is to be included in computing the
taxable gifts;

(2) the deductions claimed and allowable under section 292.16, paragraph (d),
clause (2);

(3) a description of the gift, and the donee's name, address, and Social Security
number;

(4) the fair market value of gifts not made in money; and

(5) any other information the commissioner requires to administer the gift tax.

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

Sec. 12.

[292.19] FILING REQUIREMENTS.

Gift tax returns must be filed by the April 15 following the close of the calendar
year, except if a gift is made during the calendar year in which the donor dies, the return
for the donor must be filed by the last date, including extensions, for filing the gift tax
return for federal gift tax purposes for the donor.

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

Sec. 13.

[292.20] APPRAISAL OF PROPERTY; DECLARATION BY DONOR.

The commissioner may require the donor or the donee to show the property subject to
the tax under section 292.17 to the commissioner upon demand and may employ a suitable
person to appraise the property. The donor shall submit a declaration, in a form prescribed
by the commissioner and including any certification required by the commissioner, that the
property shown by the donor on the gift tax return includes all of the property transferred by
gift for the calendar year and not deductible under section 292.16, paragraph (d), clause (2).

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

Sec. 14.

[292.21] ADMINISTRATIVE PROVISIONS.

Subdivision 1.

Payment of tax; penalty for late payment.

The tax imposed under
section 292.17 is due and payable to the commissioner by the April 15 following the close
of the calendar year during which the gift was made. The return required under section
292.19 must be included with the payment. If a taxable gift is made during the calendar
year in which the donor dies, the due date is the last date, including extensions, for filing
the gift tax return for federal gift tax purposes for the donor. If any person fails to pay the
tax due within the time specified under this section, a penalty applies equal to ten percent
of the amount due and unpaid or $100, whichever is greater. The unpaid tax and penalty
bear interest at the rate under section 270C.40 from the due date of the return.

Subd. 2.

Extensions.

The commissioner may, for good cause, extend the time for
filing a gift tax return, if a written request is filed with a tentative return accompanied by a
payment of the tax, which is estimated in the tentative return, on or before the last day for
filing the return. Any person to whom an extension is granted must pay, in addition to the
tax, interest at the rate under section 270C.40 from the date on which the tax would have
been due without the extension.

Subd. 3.

Changes in federal gift tax.

If the amount of a taxpayer's taxable gifts
for federal gift tax purposes, as reported on the taxpayer's federal gift tax return for any
calendar year, is changed or corrected by the Internal Revenue Service or other officer
of the United States or other competent authority, the taxpayer shall report the change or
correction in federal taxable gifts within 180 days after the final determination of the change
or correction, and concede the accuracy of the determination or provide a letter detailing
how the federal determination is incorrect or does not change the Minnesota gift tax. Any
taxpayer filing an amended federal gift tax return shall also file within 180 days an amended
return under this chapter and shall include any information the commissioner requires. The
time for filing the report or amended return may be extended by the commissioner upon due
cause shown. Notwithstanding any limitation of time in this chapter, if, upon examination,
the commissioner finds that the taxpayer is liable for the payment of an additional tax, the
commissioner shall, within a reasonable time from the receipt of the report or amended
return, notify the taxpayer of the amount of additional tax, together with interest computed
at the rate under section 270C.40 from the date when the original tax was due and payable.
Within 30 days of the mailing of the notice, the taxpayer shall pay the commissioner the
amount of the additional tax and interest. If, upon examination of the report or amended
return and related information, the commissioner finds that the taxpayer has overpaid the
tax due the state, the commissioner shall refund the overpayment to the taxpayer.

Subd. 4.

Application of federal rules.

In administering the tax under this chapter,
the commissioner shall apply the provisions of sections 2701 to 2704 of the Internal
Revenue Code. The words "secretary or his delegate," as used in those sections of the
Internal Revenue Code, mean the commissioner.

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

Sec. 15.

[292.22] CREDIT AGAINST ESTATE TAX.

A credit is allowed against the estate tax imposed under chapter 291 in the amount
of any tax imposed and paid under this chapter for a gift includable in the Minnesota
adjusted taxable estate of the donor under section 291.005.

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

ARTICLE 8

SALES AND USE TAX; LOCAL SALES TAXES

Section 1.

Minnesota Statutes 2012, section 297A.61, subdivision 3, is amended to read:


Subd. 3.

Sale and purchase.

(a) "Sale" and "purchase" include, but are not limited
to, each of the transactions listed in this subdivision.

(b) Sale and purchase include:

(1) any transfer of title or possession, or both, of tangible personal property, whether
absolutely or conditionally, for a consideration in money or by exchange or barter; and

(2) the leasing of or the granting of a license to use or consume, for a consideration
in money or by exchange or barter, tangible personal property, other than a manufactured
home used for residential purposes for a continuous period of 30 days or more.

(c) Sale and purchase include the production, fabrication, printing, or processing of
tangible personal property for a consideration for consumers who furnish either directly or
indirectly the materials used in the production, fabrication, printing, or processing.

(d) Sale and purchase include the preparing for a consideration of food.
Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited
to, the following:

(1) prepared food sold by the retailer;

(2) soft drinks;

(3) candy;

(4) dietary supplements; and

(5) all food sold through vending machines.

(e) A sale and a purchase includes the furnishing for a consideration of electricity,
gas, water, or steam for use or consumption within this state.

(f) A sale and a purchase includes the transfer for a consideration of prewritten
computer software whether delivered electronically, by load and leave, or otherwise.

(g) A sale and a purchase includes the furnishing for a consideration of the following
services:

(1) the privilege of admission to places of amusement, recreational areas, or athletic
events, including seat licenses, the rental of box seats, suites, sky boxes, and similar
facilities in stadiums and arenas
and the making available of amusement devices, tanning
facilities, reducing salons, steam baths, Turkish baths, health clubs, and spas or athletic
facilities;

(2) lodging and related services by a hotel, rooming house, resort, campground,
motel, or trailer camp, including furnishing the guest of the facility with access to
telecommunication services, and the granting of any similar license to use real property in
a specific facility, other than the renting or leasing of it for a continuous period of 30 days
or more under an enforceable written agreement that may not be terminated without prior
notice and including accommodations intermediary services provided in connection with
other services provided under this clause;

(3) nonresidential parking services, whether on a contractual, hourly, or other
periodic basis, except for parking at a meter;

(4) the granting of membership in a club, association, or other organization if:

(i) the club, association, or other organization makes available for the use of its
members sports and athletic facilities, without regard to whether a separate charge is
assessed for use of the facilities; and

(ii) use of the sports and athletic facility is not made available to the general public
on the same basis as it is made available to members.

Granting of membership means both onetime initiation fees and periodic membership
dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and
squash courts; basketball and volleyball facilities; running tracks; exercise equipment;
swimming pools; and other similar athletic or sports facilities;

(5) delivery of aggregate materials by a third party, excluding delivery of aggregate
material used in road construction; and delivery of concrete block by a third party if the
delivery would be subject to the sales tax if provided by the seller of the concrete block; and

(6) services as provided in this clause:

(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
include services provided by coin operated facilities operated by the customer;

(ii) motor vehicle washing, waxing, and cleaning services, including services
provided by coin operated facilities operated by the customer, and rustproofing,
undercoating, and towing of motor vehicles;

(iii) building and residential cleaning, maintenance, and disinfecting services and
pest control and exterminating services;

(iv) detective, security, burglar, fire alarm, and armored car services; but not including
services performed within the jurisdiction they serve by off-duty licensed peace officers as
defined in section 626.84, subdivision 1, or services provided by a nonprofit organization
for monitoring and electronic surveillance of persons placed on in-home detention
pursuant to court order or under the direction of the Minnesota Department of Corrections;

(v) pet grooming services;

(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor
plant care; tree, bush, shrub, and stump removal, except when performed as part of a land
clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for
public utility lines. Services performed under a construction contract for the installation of
shrubbery, plants, sod, trees, bushes, and similar items are not taxable;

(vii) massages, except when provided by a licensed health care facility or
professional or upon written referral from a licensed health care facility or professional for
treatment of illness, injury, or disease; and

(viii) the furnishing of lodging, board, and care services for animals in kennels and
other similar arrangements, but excluding veterinary and horse boarding services.

In applying the provisions of this chapter, the terms "tangible personal property"
and "retail sale" include taxable services listed in clause (6), items (i) to (vi) and (viii),
and the provision of these taxable services, unless specifically provided otherwise.
Services performed by an employee for an employer are not taxable. Services performed
by a partnership or association for another partnership or association are not taxable if
one of the entities owns or controls more than 80 percent of the voting power of the
equity interest in the other entity. Services performed between members of an affiliated
group of corporations are not taxable. For purposes of the preceding sentence, "affiliated
group of corporations" means those entities that would be classified as members of an
affiliated group as defined under United States Code, title 26, section 1504, disregarding
the exclusions in section 1504(b).

For purposes of clause (5), "road construction" means construction of (1) public
roads, (2) cartways, and (3) private roads in townships located outside of the seven-county
metropolitan area up to the point of the emergency response location sign.

(h) A sale and a purchase includes the furnishing for a consideration of tangible
personal property or taxable services by the United States or any of its agencies or
instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political
subdivisions.

(i) A sale and a purchase includes the furnishing for a consideration of
telecommunications services, ancillary services associated with telecommunication
services, cable television services, and direct satellite services. Telecommunication
services include, but are not limited to, the following services, as defined in section
297A.669: air-to-ground radiotelephone service, mobile telecommunication service,
postpaid calling service, prepaid calling service, prepaid wireless calling service, and
private communication services. The services in this paragraph are taxed to the extent
allowed under federal law.

(j) A sale and a purchase includes the furnishing for a consideration of installation if
the installation charges would be subject to the sales tax if the installation were provided
by the seller of the item being installed.

(k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer
to a customer when (1) the vehicle is rented by the customer for a consideration, or (2)
the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section
59B.02, subdivision 11.

EFFECTIVE DATE.

This section is effective for sales made after June 30, 2013.

Sec. 2.

Minnesota Statutes 2012, section 297A.61, subdivision 4, is amended to read:


Subd. 4.

Retail sale.

(a) A "retail sale" means any sale, lease, or rental for any
purpose, other than resale, sublease, or subrent of items by the purchaser in the normal
course of business as defined in subdivision 21.

(b) A sale of property used by the owner only by leasing it to others or by holding it
in an effort to lease it, and put to no use by the owner other than resale after the lease or
effort to lease, is a sale of property for resale.

(c) A sale of master computer software that is purchased and used to make copies for
sale or lease is a sale of property for resale.

(d) A sale of building materials, supplies, and equipment to owners, contractors,
subcontractors, or builders for the erection of buildings or the alteration, repair, or
improvement of real property is a retail sale in whatever quantity sold, whether the sale is
for purposes of resale in the form of real property or otherwise.

(e) A sale of carpeting, linoleum, or similar floor covering to a person who provides
for installation of the floor covering is a retail sale and not a sale for resale since a sale of
floor covering which includes installation is a contract for the improvement of real property.

(f) A sale of shrubbery, plants, sod, trees, and similar items to a person who provides
for installation of the items is a retail sale and not a sale for resale since a sale of
shrubbery, plants, sod, trees, and similar items that includes installation is a contract for
the improvement of real property.

(g) A sale of tangible personal property that is awarded as prizes is a retail sale and
is not considered a sale of property for resale.

(h) A sale of tangible personal property utilized or employed in the furnishing or
providing of services under subdivision 3, paragraph (g), clause (1), including, but not
limited to, property given as promotional items, is a retail sale and is not considered a
sale of property for resale.

(i) A sale of tangible personal property used in conducting lawful gambling under
chapter 349 or the State Lottery under chapter 349A, including, but not limited to, property
given as promotional items, is a retail sale and is not considered a sale of property for resale.

(j) Except as otherwise provided in this paragraph, a sale of machines, equipment,
or devices that are used to furnish, provide, or dispense goods or services, including,
but not limited to, coin-operated devices, is a retail sale and is not considered a sale of
property for resale. A sale of coin-