HF 885B

Conference Committee Report - 86th Legislature (2009 - 2010) Posted on 01/15/2013 08:25pm

1.1CONFERENCE COMMITTEE REPORT ON H. F. No. 885

1.2A bill for an act

1.3relating to taxation; making policy, technical, administrative, and clarifying
1.4changes to income, corporate franchise, estate, sales, use, minerals, mortgage,
1.5property, gross receipts, gambling, cigarette, tobacco, liquor, insurance, and
1.6various taxes and tax-related provisions; modifying local government aid and
1.7tax data provision; appropriating money; amending Minnesota Statutes 2008,
1.8sections 126C.21, subdivision 4; 126C.48, subdivision 8; 270B.14, subdivision
1.916; 270C.02, subdivision 1; 270C.12, by adding a subdivision; 270C.446,
1.10subdivisions 2, 5; 270C.56, subdivision 1; 273.11, subdivision 23; 273.111,
1.11subdivision 4; 273.1115, subdivision 2; 273.113, subdivisions 1, 2; 273.1231,
1.12subdivision 8; 273.124, subdivision 21; 273.13, subdivisions 23, 25, 33; 273.33,
1.13subdivision 2; 273.37, subdivision 2; 274.13, subdivision 2; 274.135, subdivision
1.143; 274.14; 274.175; 275.70, subdivision 5; 275.71, subdivision 4; 287.04; 287.05,
1.15by adding a subdivision; 287.22; 287.25; 289A.08, subdivision 3; 289A.12, by
1.16adding a subdivision; 289A.18, subdivision 1; 289A.19, subdivision 4; 289A.38,
1.17subdivision 7; 289A.41; 290.0671, subdivision 1; 290A.10; 290A.14; 290C.06;
1.18290C.07; 295.56; 295.57, subdivision 5; 296A.21, subdivision 1; 297A.70,
1.19subdivisions 2, 4; 297A.992, subdivision 2; 297A.993, subdivision 1; 297E.02,
1.20subdivision 4; 297E.06, by adding a subdivision; 297E.11, subdivision 1;
1.21297F.09, subdivision 7; 297G.09, subdivision 6; 297I.30, by adding a subdivision;
1.22297I.35, subdivision 2; 298.28, subdivisions 4, 11; 423A.02, subdivisions 1b,
1.233, by adding a subdivision; 473.843, subdivision 3; 477A.011, subdivisions
1.2434, 42; 477A.013, subdivision 8; repealing Minnesota Statutes 2008, sections
1.25287.26; 287.27, subdivision 1; 297A.67, subdivision 24; 298.28, subdivisions
1.2611a, 13; Minnesota Rules, parts 8115.0200; 8115.0300; 8115.0400; 8115.0500;
1.278115.0600; 8115.1000; 8115.1100; 8115.1200; 8115.1300; 8115.1400;
1.288115.1500; 8115.1600; 8115.1700; 8115.1800; 8115.1900; 8115.2000;
1.298115.2100; 8115.2200; 8115.2300; 8115.2400; 8115.2500; 8115.2600;
1.308115.2700; 8115.2800; 8115.2900; 8115.3000; 8115.4000; 8115.4100;
1.318115.4200; 8115.4300; 8115.4400; 8115.4500; 8115.4600; 8115.4700;
1.328115.4800; 8115.4900; 8115.5000; 8115.5100; 8115.5200; 8115.5300;
1.338115.5400; 8115.5500; 8115.5600; 8115.5700; 8115.5800; 8115.5900;
1.348115.6000; 8115.6100; 8115.6200; 8115.6300; 8115.6400; 8115.9900.
1.35May 7, 2009
1.36The Honorable Margaret Anderson Kelliher
1.37Speaker of the House of Representatives
1.38The Honorable James P. Metzen
1.39President of the Senate
2.1We, the undersigned conferees for H. F. No. 885 report that we have agreed upon the
2.2items in dispute and recommend as follows:
2.3That the Senate recede from its amendment and that H. F. No. 885 be further
2.4amended as follows:
2.5Delete everything after the enacting clause and insert:

2.6    "Section 1. Minnesota Statutes 2008, section 290.06, subdivision 2c, is amended to
2.7read:
2.8    Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income
2.9taxes imposed by this chapter upon married individuals filing joint returns and surviving
2.10spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
2.11applying to their taxable net income the following schedule of rates:
2.12    (1) on the first $25,680 $33,220, 5.35 percent;
2.13    (2) on all over $25,680 $33,220, but not over $102,030 $131,970, 7.05 percent;
2.14    (3) on all over $102,030 $131,970, but not over $250,000, 7.85 percent.; and
2.15(4) on all over $250,000, nine percent.
2.16    Married individuals filing separate returns, estates, and trusts must compute their
2.17income tax by applying the above rates to their taxable income, except that the income
2.18brackets will be one-half of the above amounts.
2.19    (b) The income taxes imposed by this chapter upon unmarried individuals must be
2.20computed by applying to taxable net income the following schedule of rates:
2.21    (1) on the first $17,570 $22,730, 5.35 percent;
2.22    (2) on all over $17,570 $22,730, but not over $57,710 $74,650, 7.05 percent;
2.23    (3) on all over $57,710 $74,650, but not over $141,250, 7.85 percent.; and
2.24(4) on all over $141,250, nine percent.
2.25    (c) The income taxes imposed by this chapter upon unmarried individuals qualifying
2.26as a head of household as defined in section 2(b) of the Internal Revenue Code must be
2.27computed by applying to taxable net income the following schedule of rates:
2.28    (1) on the first $21,630 $27,980, 5.35 percent;
2.29    (2) on all over $21,630 $27,980, but not over $86,910 $112,420, 7.05 percent;
2.30    (3) on all over $86,910 $112,420, but not over $212,500, 7.85 percent.; and
2.31(4) on all over $212,500, nine percent.
2.32    (d) In lieu of a tax computed according to the rates set forth in this subdivision, the
2.33tax of any individual taxpayer whose taxable net income for the taxable year is less than
2.34an amount determined by the commissioner must be computed in accordance with tables
2.35prepared and issued by the commissioner of revenue based on income brackets of not
2.36more than $100. The amount of tax for each bracket shall be computed at the rates set
3.1forth in this subdivision, provided that the commissioner may disregard a fractional part of
3.2a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
3.3    (e) An individual who is not a Minnesota resident for the entire year must compute
3.4the individual's Minnesota income tax as provided in this subdivision. After the
3.5application of the nonrefundable credits provided in this chapter, the tax liability must
3.6then be multiplied by a fraction in which:
3.7    (1) the numerator is the individual's Minnesota source federal adjusted gross income
3.8as defined in section 62 of the Internal Revenue Code and increased by the additions
3.9required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), and
3.10(13) and reduced by the Minnesota assignable portion of the subtraction for United States
3.11government interest under section 290.01, subdivision 19b, clause (1), and the subtractions
3.12under section 290.01, subdivision 19b, clauses (9), (10), (14), (15), and (16), after applying
3.13the allocation and assignability provisions of section 290.081, clause (a), or 290.17; and
3.14    (2) the denominator is the individual's federal adjusted gross income as defined in
3.15section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
3.16section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), and (13) and
3.17reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1), (9),
3.18(10), (14), (15), and (16).
3.19(f) For taxable years beginning after December 31, 2013, the maximum tax rate
3.20under this subdivision is 7.85 percent, if the commissioner of finance estimates in the
3.21February 2013 economic forecast that the unrestricted general fund balance at the end of
3.22fiscal year 2013 equals or exceeds $500,000,000.
3.23EFFECTIVE DATE.This section is effective for taxable years beginning after
3.24December 31, 2008.

3.25    Sec. 2. Minnesota Statutes 2008, section 290.06, subdivision 2d, is amended to read:
3.26    Subd. 2d. Inflation adjustment of brackets. (a) For taxable years beginning after
3.27December 31, 2000 2009, the minimum and maximum dollar amounts for each rate
3.28bracket for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the
3.29percentage determined under paragraph (b). For the purpose of making the adjustment as
3.30provided in this subdivision all of the rate brackets provided in subdivision 2c shall be the
3.31rate brackets as they existed for taxable years beginning after December 31, 1999 2008,
3.32and before January 1, 2001 2010. The rate applicable to any rate bracket must not be
3.33changed. The dollar amounts setting forth the tax shall be adjusted to reflect the changes
3.34in the rate brackets. The rate brackets as adjusted must be rounded to the nearest $10
3.35amount. If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.
4.1(b) The commissioner shall adjust the rate brackets and by the percentage determined
4.2pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that:
4.3(1) in section 1(f)(2)(A) the words "increasing or decreasing" shall be substituted
4.4for the word "increasing";
4.5(2) in section 1(f)(3)(A) the words "differs from" shall be substituted for the word
4.6"exceeds"; and
4.7(3) in section 1(f)(3)(B) the word "1999" "2008" shall be substituted for the word
4.8"1992." For 2001 2010, the commissioner shall then determine the percent change from
4.9the 12 months ending on August 31, 1999 2008, to the 12 months ending on August 31,
4.102000 2009, and in each subsequent year, from the 12 months ending on August 31, 1999
4.112008, to the 12 months ending on August 31 of the year preceding the taxable year. The
4.12determination of the commissioner pursuant to this subdivision shall not be considered a
4.13"rule" and shall not be subject to the Administrative Procedure Act contained in chapter 14.
4.14No later than December 15 of each year, the commissioner shall announce the
4.15specific percentage that will be used to adjust the tax rate brackets.
4.16EFFECTIVE DATE.This section is effective for taxable years beginning after
4.17December 31, 2008.

4.18    Sec. 3. [290.094] SURTAX ON CERTAIN INTEREST INCOME.
4.19    Subdivision 1. Definitions. (a) Unless the language or context clearly indicates that
4.20a different meaning is intended, for the purposes of this section, the following terms
4.21have the meanings given them.
4.22(b) "Annual percentage rate" has the meaning given the term in Code of Federal
4.23Regulations, title 12, parts 226.14 and 226.22, related to open-end and closed-end credit.
4.24(c) "Borrower" means a debtor under a loan or a purchaser of debt under a credit
4.25sale contract.
4.26(d) "Cardholder" means a person to whom a credit card is issued or who has agreed
4.27with the financial institution to pay obligations arising from the issuance to or use of the
4.28card by another person.
4.29(e) "Consumer loan" means a loan made by a financial institution in which:
4.30(1) the debtor is a person other than an organization;
4.31(2) the debt is incurred primarily for a personal, family, or household purpose; and
4.32(3) the debt is payable in installments or a finance charge is made.
4.33(f) "Credit" means the right granted by a financial institution to a borrower to defer
4.34payment of a debt, to incur debt and defer its payment, or to purchase property or services
4.35and defer payment.
5.1(g) "Credit card" means a card or device issued under an arrangement under
5.2which a financial institution gives to a cardholder the privilege of obtaining credit from
5.3the financial institution or other person in purchasing or leasing property or services,
5.4obtaining loans, or otherwise. A transaction is "pursuant to a credit card" only if credit is
5.5obtained according to the terms of the arrangement by transmitting information contained
5.6on the card or device orally, in writing, by mechanical or electronic methods, or in any
5.7other manner. A transaction is not "pursuant to a credit card" if the card or device is
5.8used solely in that transaction to:
5.9(1) identify the cardholder or evidence the cardholder's creditworthiness and credit is
5.10not obtained according to the terms of the arrangement;
5.11(2) obtain a guarantee of payment from the cardholder's deposit account, whether or
5.12not the payment results in a credit extension to the cardholder by the financial institution; or
5.13(3) effect an immediate transfer of funds from the cardholder's deposit account by
5.14electronic or other means, whether or not the transfer results in a credit extension to
5.15the cardholder by the financial institution.
5.16(h) "Credit sale contract" means a contract evidencing a credit sale. "Credit sale"
5.17means a sale of goods or services, or an interest in land, in which:
5.18(1) credit is granted by a seller who regularly engages as a seller in credit transactions
5.19of the same kind; and
5.20(2) the debt is payable in installments or a finance charge is made.
5.21(i) "Financial institution" means a state or federally chartered bank, a state or
5.22federally chartered bank and trust, a trust company with banking powers, a state or
5.23federally chartered savings association, an industrial loan and thrift company organized
5.24under chapter 53, a regulated lender organized under chapter 56, or an operating subsidiary
5.25of any such institution.
5.26(j) "Loan" means:
5.27(1) the creation of debt by the financial institution's payment of money to the
5.28borrower or a third person for the account of the borrower;
5.29(2) the creation of debt pursuant to a credit card in any manner, including a cash
5.30advance or the financial institution's honoring a draft or similar order for the payment of
5.31money drawn or accepted by the borrower, paying or agreeing to pay the borrower's
5.32obligation, or purchasing or otherwise acquiring the borrower's obligation from the
5.33obligee or the borrower's assignee;
5.34(3) the creation of debt by a cash advance to a borrower pursuant to an overdraft
5.35line of credit arrangement;
6.1(4) the creation of debt by a credit to an account with the financial institution upon
6.2which the borrower is entitled to draw immediately;
6.3(5) the forbearance of debt arising from a loan; and
6.4(6) the creation of debt pursuant to open-end credit.
6.5"Loan" does not include the forbearance of debt arising from a sale or lease, a credit
6.6sale contract, or an overdraft from a person's deposit account with a financial institution
6.7which is not pursuant to a written agreement to pay overdrafts with the right to defer
6.8repayment thereof.
6.9(k) "Organization" means a corporation, government, government subdivision or
6.10agency, trust, estate, partnership, joint venture, cooperative, limited liability company,
6.11limited liability partnership, or association.
6.12(l) "Person" means a natural person or an organization.
6.13(m) "Principal" means the total of:
6.14(1) the amount paid to, received by, or paid or repayable for the account of, the
6.15borrower; and
6.16(2) to the extent that payment is deferred:
6.17(i) the amount actually paid or to be paid by the financial institution for additional
6.18charges permitted under this section; and
6.19(ii) prepaid finance charges.
6.20    Subd. 2. Scope. (a) Any person or organization conducting a trade or business
6.21in this state who is subject to the truth in lending requirements under Code of Federal
6.22Regulations, title 12, part 226 (Federal Regulation Z), and who charges interest on the
6.23credit issued shall be subject to a surtax on each transaction as prescribed by this chapter.
6.24Transactions include any open-end and closed-end credit transactions subject to Federal
6.25Regulation Z such as loans, consumer loans, credit sale contracts, extensions of credit, and
6.26credit issued pursuant to a credit card. A transferee or assignee of a transaction subject to
6.27the surtax under this section is also subject to the tax under this section.
6.28(b) The tax shall be determined for each transaction subject to the requirements of
6.29this section that occurs during the calendar year.
6.30    Subd. 3. Surtax rate. The surtax shall be imposed at the rate of 30 percent on any
6.31income attributable to interest collected from the portion of an annual percentage rate
6.32that exceeds 15 percent on transactions subject to Code of Federal Regulations, title 12,
6.33part 226 (Federal Regulation Z).
7.1    Subd. 4. Collection and administration. The tax imposed by this section shall
7.2be paid annually to the commissioner of revenue and is subject to the same collection,
7.3enforcement, and penalty provisions as other taxes imposed by this chapter.
7.4EFFECTIVE DATE.This section is effective for taxable years beginning after
7.5December 31, 2008.

7.6    Sec. 4. Minnesota Statutes 2008, section 295.75, subdivision 2, is amended to read:
7.7    Subd. 2. Gross receipts tax imposed. A tax is imposed on each liquor retailer equal
7.8to 2.5 five percent of gross receipts from retail sales in Minnesota of liquor.
7.9EFFECTIVE DATE.This section is effective for gross receipts received after
7.10June 30, 2009.

7.11    Sec. 5. Minnesota Statutes 2008, section 297G.03, subdivision 1, is amended to read:
7.12    Subdivision 1. General rate; distilled spirits and wine. The following excise tax is
7.13imposed on all distilled spirits and wine manufactured, imported, sold, or possessed in
7.14this state:

7.15				Standard			Metric
7.16 7.17 7.18 7.19	(a) Distilled spirits, liqueurs, cordials, and specialties regardless of alcohol content (excluding ethyl alcohol)		$	5.037.59 per gallon		$	1.33 2.01 per liter
7.20 7.21 7.22 7.23	(b) Wine containing 14 percent or less alcohol by volume (except cider as defined in section 297G.01, subdivision 3a)		$	.30.81 per gallon		$	.08.22 per liter
7.24 7.25 7.26	(c) Wine containing more than 14 percent but not more than 21 percent alcohol by volume		$	.951.46 per gallon		$	.25.39 per liter
7.27 7.28 7.29	(d) Wine containing more than 21 percent but not more than 24 percent alcohol by volume		$	1.822.33 per gallon		$	.48.62 per liter
7.30 7.31	(e) Wine containing more than 24 percent alcohol by volume		$	3.524.03 per gallon		$	.931.07 per liter
8.1 8.2	(f) Natural and artificial sparkling wines containing alcohol		$	1.822.33 per gallon		$	.48.62 per liter
8.3 8.4	(g) Cider as defined in section 297G.01, subdivision 3a		$	.15.66 per gallon		$	.04.18 per liter
8.5	(h) Low alcohol dairy cocktails		$	.08 per gallon		$	.02 per liter

8.6In computing the tax on a package of distilled spirits or wine, a proportional tax at a
8.7like rate on all fractional parts of a gallon or liter must be paid, except that the tax on a
8.8fractional part of a gallon less than 1/16 of a gallon is the same as for 1/16 of a gallon.
8.9EFFECTIVE DATE.This section is effective July 1, 2009.

8.10    Sec. 6. Minnesota Statutes 2008, section 297G.04, is amended to read:
8.11297G.04 FERMENTED MALT BEVERAGES; RATE OF TAX.
8.12    Subdivision 1. Tax imposed. The following excise tax is imposed on all fermented
8.13malt beverages that are imported, directly or indirectly sold, or possessed in this state:
8.14(1) on fermented malt beverages containing not more than 3.2 percent alcohol by
8.15weight, $2.40 $9.01 per 31-gallon barrel; and
8.16(2) on fermented malt beverages containing more than 3.2 percent alcohol by
8.17weight, $4.60 $11.21 per 31-gallon barrel.
8.18For fractions of a 31-gallon barrel, the tax rate is calculated proportionally.
8.19    Subd. 2. Tax credit. A qualified brewer producing fermented malt beverages is
8.20entitled to a tax credit of $4.60 $11.21 per barrel on 25,000 barrels sold in any fiscal year
8.21beginning July 1, regardless of the alcohol content of the product. Qualified brewers may
8.22take the credit on the 18th day of each month, but the total credit allowed may not exceed
8.23in any fiscal year the lesser of:
8.24(1) the liability for tax; or
8.25(2) $115,000 $280,000.
8.26For purposes of this subdivision, a "qualified brewer" means a brewer, whether
8.27or not located in this state, manufacturing less than 100,000 barrels of fermented malt
8.28beverages in the calendar year immediately preceding the calendar year for which the
8.29credit under this subdivision is claimed. In determining the number of barrels, all brands
8.30or labels of a brewer must be combined. All facilities for the manufacture of fermented
8.31malt beverages owned or controlled by the same person, corporation, or other entity
8.32must be treated as a single brewer.
8.33EFFECTIVE DATE.This section is effective July 1, 2009.

9.1    Sec. 7. GENERAL FUND ACCOUNTS; FISCAL YEARS 2010-2013.
9.2    Subdivision 1. E-12 education account. An E-12 education account is created in
9.3the general fund. Amounts remain in the account until appropriated for E-12 education.
9.4Appropriations from the account may only be used for E-12 education.
9.5    Subd. 2. Nursing home and long-term care account. A nursing home and
9.6long-term care account is created in the general fund. Amounts remain in the account until
9.7appropriated for nursing homes or long-term care services. Appropriations from the
9.8account may only be used for nursing homes and long-term care services.
9.9    Subd. 3. Hospital account. A hospital account is created in the general fund.
9.10Amounts remain in the account until appropriated for hospitals. Appropriations from the
9.11account may only be used for hospitals.
9.12    Subd. 4. Expiration. This section expires June 30, 2013.

9.13    Sec. 8. TRANSFERS.
9.14(a) In the fiscal year 2010-2011 biennium, $986,000,000 is transferred to the
9.15accounts established in section 7 as follows:
9.16(1) $585,784,000 to the E-12 education account;
9.17(2) $287,566,000 to the nursing home and long-term care account; and
9.18(3) $114,130,000 to the hospital account.
9.19(b) In the fiscal year 2012-2013 biennium, $1,000,000,000 is transferred to the
9.20accounts established in section 7 as follows:
9.21(1) $465,259,000 to the E-12 education account;
9.22(2) $361,643,000 to the nursing home and long-term care account; and
9.23(3) $173,978,000 to the hospital account.

9.24    Sec. 9. APPROPRIATIONS.
9.25    Subdivision 1. Tax compliance. (a) $1,194,300 the first year and $2,350,200 the
9.26second year are appropriated from the general fund to the commissioner of revenue for
9.27additional activities to identify and collect tax liabilities from individuals and businesses
9.28that currently do not pay all taxes owed. This initiative is expected to result in new general
9.29fund revenues of $7,948,700 for the biennium ending June 30, 2011.
9.30    (b) The department must report to the chairs of the house of representatives Ways
9.31and Means and senate Finance Committees by March 1, 2010, and January 15, 2011,
9.32on the following performance indicators:
9.33    (1) the number of corporations noncompliant with the corporate tax system each
9.34year and the percentage and dollar amounts of valid tax liabilities collected;
10.1    (2) the number of businesses noncompliant with the sales and use tax system and the
10.2percentage and dollar amount of the valid tax liabilities collected; and
10.3    (3) the number of individual noncompliant cases resolved and the percentage and
10.4dollar amounts of valid tax liabilities collected.
10.5    Subd. 2. Debt collection management. $364,800 the first year and $750,700 the
10.6second year are appropriated from the general fund to the commissioner of revenue for
10.7additional activities to identify and collect tax liabilities from individuals and businesses
10.8that currently do not pay all taxes owed. This initiative is expected to result in new general
10.9fund revenues of $10,691,300 for the biennium ending June 30, 2011."
10.10Delete the title and insert:

10.11"A bill for an act

10.12relating to the financing of state and local government; making changes to
10.13income, liquor, gross receipts, and other tax-related provisions; providing a
10.14surtax on certain interest income; creating certain accounts in the general fund,
10.15including an E-12 education account, a nursing home and long-term care account,
10.16and a hospital account; creating tax compliance initiative; appropriating money;
10.17amending Minnesota Statutes 2008, sections 290.06, subdivisions 2c, 2d; 295.75,
10.18subdivision 2; 297G.03, subdivision 1; 297G.04; proposing coding for new law
10.19in Minnesota Statutes, chapter 290."
We request the adoption of this report and repassage of the bill.House Conferees: (Signed) Ann Lenczewski, Morrie Lanning, Mindy Greiling, Erin Murphy, Keith DowneySenate Conferees: (Signed) Thomas Bakk, Rod Skoe, Ann Rest, D. Scott Dibble, Mee Moua

11.1	We request the adoption of this report and repassage of the bill.
11.2	House Conferees:(Signed)
11.3	.....		.....
11.4	Ann Lenczewski		Paul Marquart
11.5	.....		.....
11.6	Mindy Greiling		Erin Murphy
11.7	.....
11.8	Keith Downey
11.9	Senate Conferees:(Signed)
11.10	.....		.....
11.11	Thomas Bakk		Rod Skoe
11.12	.....		.....
11.13	Ann H. Rest		D. Scott Dibble
11.14	.....
11.15	Mee Moua