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SF 331

1st Engrossment - 87th Legislature (2011 - 2012) Posted on 03/06/2012 02:05pm

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - 1st Engrossment

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A bill for an act
relating to child care; creating a child care scholarship finance system; providing
tax credits for training and retaining early education workers; improving quality
early childhood education programming; appropriating money; amending
Minnesota Statutes 2010, sections 119B.09, subdivision 5; 119B.13, subdivision
3a; 290.01, subdivisions 19a, 19c; proposing coding for new law in Minnesota
Statutes, chapter 290; proposing coding for new law as Minnesota Statutes,
chapter 119C.

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

ARTICLE 1

EARLY CHILDHOOD EDUCATION ACCOUNTABILITY AND SCHOLARSHIPS

Section 1.

Minnesota Statutes 2010, section 119B.09, subdivision 5, is amended to read:


Subd. 5.

Provider choice.

Parents new text beginwho reside in a Parent Aware Plus region as
defined in section 119C.03, subdivision 5, must choose a rated provider under section
119C.01, subdivision 7, for their three- and four-year-old children, unless a waiver is
granted by the commissioner. Parents who do not reside in a Parent Aware Plus region
new text endmay choose child care providers as defined under section 119B.011, subdivision 19, that
best meet the needs of their family. Counties shall make resources available to parents
in choosing quality child care services. Counties may require a parent to sign a release
stating their knowledge and responsibilities in choosing a legal provider described under
section 119B.011, subdivision 19. When a county knows that a particular provider is
unsafe, or that the circumstances of the child care arrangement chosen by the parent are
unsafe, the county may deny a child care subsidy. A county may not restrict access to a
general category of provider allowed under section 119B.011, subdivision 19.

Sec. 2.

Minnesota Statutes 2010, section 119B.13, subdivision 3a, is amended to read:


Subd. 3a.

Provider rate differential for accreditation.

new text begin(a) new text endA family child care
provider or child care center shall be paid a 15 percent differential above the maximum
rate established in subdivision 1, up to the actual provider rate, ifnew text begin: (1)new text end the provider or
center holds a current early childhood development credential or is accreditednew text begin; or (2) the
provider is a Parent Aware rated four-star program under chapter 119C
new text end.

new text begin (b) new text endFor a family child care provider, early childhood development credential and
accreditation includes an individual who has earned a child development associate
degree, a child development associate credential, a diploma in child development from a
Minnesota state technical college, or a bachelor's or post baccalaureate degree in early
childhood education from an accredited college or university, or who is accredited by
the National Association for Family Child Care or the Competency Based Training
and Assessment Program. For a child care center, accreditation includes accreditation
by the National Association for the Education of Young Children, the Council on
Accreditation, the National Early Childhood Program Accreditation, the National
School-Age Care Association, or the National Head Start Association Program of
Excellence. For Montessori programs, accreditation includes the American Montessori
Society, Association of Montessori International-USA, or the National Center for
Montessori Education.

Sec. 3.

new text begin [119C.01] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin The terms defined in this section apply to this chapter.
new text end

new text begin Subd. 2. new text end

new text begin Commissioner. new text end

new text begin "Commissioner" means the commissioner of human
services.
new text end

new text begin Subd. 3. new text end

new text begin Eligible program. new text end

new text begin "Eligible program" means a licensed center-based
child care program under chapter 245A, or licensed family child care program under
chapter 245A.
new text end

new text begin Subd. 4. new text end

new text begin Parent Aware. new text end

new text begin "Parent Aware" means the voluntary evidence-based quality
rating and improvement system for early childhood education under section 119C.02.
new text end

new text begin Subd. 5. new text end

new text begin Parent Aware Plus regions. new text end

new text begin "Parent Aware Plus regions" means Parent
Aware regions as designated by the commissioner under section 119C.03, subdivision 5.
new text end

new text begin Subd. 6. new text end

new text begin Parent Aware region. new text end

new text begin "Parent Aware region" means a geographic area
approved by the commissioner under section 119C.03.
new text end

new text begin Subd. 7. new text end

new text begin Rated program. new text end

new text begin "Rated program" means an eligible program in a Parent
Aware region that receives one, two, three, or four stars.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

new text begin [119C.02] PARENT AWARE.
new text end

new text begin Subdivision 1. new text end

new text begin Department of Human Services; request for proposal. new text end

new text begin The
Department of Human Services must develop a request for proposal for an organization
to: (1) develop the methods used to verify, assess, and monitor program compliance
with the standards, including review of and action on applications; (2) conduct on-site
assessments, if applicable; (3) develop and maintain a data quality management system for
compiling all data used to calculate program ratings and related procedures for ensuring
data quality and integrity; and (4) coordinate a system for sharing ratings and related
quality information with the public. The commissioner must consult with the Minnesota
Early Learning Foundation to design the request for proposal. Eligible responders include
units of state and local governments, nonprofit organizations, research organizations, and
educational institutions. The commissioner shall issue a request for proposal by July 30,
2011. The commissioner shall issue a contract by October 31, 2011. The contract is valid
for three years. By July 30, 2014, and every three years thereafter, the commissioner
must consult with the Minnesota Early Learning Foundation or its designated successor
organization to review and update the request for proposal. The contract must be issued by
October 31 of that year and every three years thereafter. The Minnesota Early Learning
Foundation and its designated successor organization are consultants to the commissioner
on the request for proposal and are not eligible responders.
new text end

new text begin Subd. 2. new text end

new text begin Criteria; measure. new text end

new text begin (a) Parent Aware must use quality ratings shown to
be linked to improving children's school readiness outcomes and must evaluate, at a
minimum, how programs perform in the following areas:
new text end

new text begin (1) family partnerships;
new text end

new text begin (2) tracking learning;
new text end

new text begin (3) teacher training and education; and
new text end

new text begin (4) teaching materials and strategies.
new text end

new text begin (b) The commissioner, in coordination with the commissioner of education, must
establish and regularly update the standards and indicators that determine program quality
for the quality rating system. In fiscal year 2012 and later, the commissioner must use
the Minnesota quality rating system tool in use in fiscal year 2011, the results of the
evaluations of that quality rating system, and the recommendations in the report required
under section 124D.142.
new text end

new text begin (c) Ratings must be indicated using stars. Four stars is the best possible rating. No
stars means the program has not been rated.
new text end

new text begin Subd. 3. new text end

new text begin Rated programs. new text end

new text begin At least twice each year, beginning June 30, 2012, the
contract entity awarded the contract in subdivision 1 must submit a list of rated programs
to the commissioner. The list of rated programs serves as the commissioner's rating. The
commissioner's decision is final.
new text end

new text begin Subd. 4. new text end

new text begin Evaluation. new text end

new text begin The commissioner shall contract with an independent private
organization to use private funds to evaluate the Parent Aware quality rating system if
sufficient private funding is available. The evaluation must incorporate rating levels and
outcome-based data reflecting child progress toward school readiness. The evaluation
must also include recommendations on continued monitoring and improvement of the
correlation between rating levels and outcome-based child progress toward school
readiness. The commissioner shall make available to the independent private organization
any data requested by the organization consistent with chapter 13 and at no cost to the
organization.
new text end

Sec. 5.

new text begin [119C.03] SELECTION PROCESS FOR PARENT AWARE REGIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Designation of Parent Aware regions. new text end

new text begin For the purposes of this
section, Parent Aware regions are the economic development regions as designated by the
governor under section 462.385.
new text end

new text begin Subd. 2. new text end

new text begin Application process. new text end

new text begin The commissioner shall develop an application
process to select new Parent Aware regions using the following criteria:
new text end

new text begin (1) the percentage of preschool-aged children who are from families with income
equal to or less than 47 percent of the state median income;
new text end

new text begin (2) the region's demonstrated efforts to use existing public and private resources to
improve program quality in alignment with Parent Aware quality standards;
new text end

new text begin (3) the level of community support, especially support of the counties and local
representatives of child care centers and licensed family child care homes; and
new text end

new text begin (4) the demonstration of quality improvement support from local nonprofits and
foundations.
new text end

new text begin Subd. 3. new text end

new text begin Application preparation. new text end

new text begin A resource and referral organization under
section 119B.19 must prepare and submit the application for their region for approval
under subdivision 4 to become a Parent Aware region in coordination with local partners.
new text end

new text begin Subd. 4. new text end

new text begin Region approval. new text end

new text begin The commissioner shall develop an application process
by December 1, 2011. A region may apply beginning February 1, 2012, to become a
Parent Aware region. Economic development regions 9, 10, and 11 are automatically
approved as Parent Aware regions beginning in fiscal year 2012. The commissioner shall
approve the first Parent Aware region by June 30, 2012, and shall approve all regions as
Parent Aware regions by June 30, 2015.
new text end

new text begin Subd. 5. new text end

new text begin Parent Aware Plus regions; commissioner approval. new text end

new text begin The commissioner
must designate a Parent Aware region as a Parent Aware Plus region when there is a
sufficient number of programs rated for each program type. The commissioner must
also consider, at a minimum, the following criteria when designating Parent Aware Plus
regions: (1) the distribution of rated programs by eligible program type within a region;
(2) the amount of funding available for scholarships in the region; and (3) the distribution
of the population of low-income preschool-aged children in the region. The commissioner
must also designate Hennepin County, the city of St. Paul, Blue Earth County, and
Nicollet County as Parent Aware Plus regions beginning in fiscal year 2012 and allow
those regions to continue using the existing model of the Parent Aware quality rating
system in fiscal year 2012. For the purposes of provider choice under section 119B.09,
subdivision 5, Parent Aware Plus regions would not be implemented prior to January 1 of
the year in which the region is approved as a Parent Aware Plus region.
new text end

Sec. 6.

new text begin [119C.04] EARLY CHILDHOOD EDUCATION SCHOLARSHIPS.
new text end

new text begin Subdivision 1. new text end

new text begin Early childhood education scholarship locations. new text end

new text begin In fiscal year
2012 and later, the commissioner shall make scholarships available in the Parent Aware
Plus regions. In fiscal year 2013 and later, the commissioner shall establish additional
locations where early childhood education scholarships may be used to pay for services
provided by rated programs. The additional early childhood education scholarship
locations must be located in Parent Aware Plus regions. The commissioner may assign
duties as described in subdivisions 5 and 7 to approved Parent Aware Plus regions,
as appropriate.
new text end

new text begin Subd. 2. new text end

new text begin Scholarship eligibility. new text end

new text begin (a) All children whose parents or legal guardians
meet the eligibility requirements of paragraph (b) are eligible to receive early childhood
education scholarships under this section.
new text end

new text begin (b) A parent or legal guardian is eligible for an early childhood education scholarship
if the parent or legal guardian has a child three or four years of age on September 1,
beginning in calendar year 2011; lives in one of the early childhood education scholarship
locations according to subdivision 1; and has income equal to or less than 47 percent of
the state median income in the current calendar year.
new text end

new text begin Subd. 3. new text end

new text begin Eligibility determination. new text end

new text begin (a) The commissioner of human services shall
develop a simple application process that families may use to apply for early childhood
education scholarships based on the criteria in subdivision 2.
new text end

new text begin (b) For the purpose of establishing eligibility for the early childhood education
scholarship, the commissioners of education and human services shall accept a
self-declaration from parents or legal guardians.
new text end

new text begin (c) The commissioner shall also accept children identified in other public funding
eligibility processes, including the Free and Reduced-Price Lunch Program, National
School Lunch Act, United States Code, title 42, section 1751, part 210; Head Start under
federal Improving Head Start for School Readiness Act of 2007; Minnesota family
investment program under chapter 256J; and child care assistance programs under chapter
119B.
new text end

new text begin Subd. 4. new text end

new text begin Scholarship value. new text end

new text begin For fiscal year 2012 and later, the early childhood
education scholarship is equal to $4,000 each year for each eligible child according to
subdivision 2.
new text end

new text begin Subd. 5. new text end

new text begin Scholarship use. new text end

new text begin (a) The early childhood education scholarship must be
used during the 13 months after July 1, 2011, and each year thereafter by the parent or
legal guardian on behalf of their child for services designed to promote school readiness at
a rated program in a Parent Aware Plus region. A parent or legal guardian may use the
early childhood education scholarship to pay fees or charges associated with their eligible
child's education at a rated program, according to subdivision 6.
new text end

new text begin (b) To maintain an eligible child's early childhood education scholarship, a parent or
legal guardian must begin to use the scholarship within six months following the receipt
of the scholarship or October 1.
new text end

new text begin (c) For the purpose of dividing the early childhood education scholarship between
two or more rated programs, a parent or legal guardian may reduce the early childhood
education scholarship value paid to an individual rated program. The commissioner must
determine a method to allow a parent or legal guardian to reduce or divide an early
childhood education scholarship.
new text end

new text begin Subd. 6. new text end

new text begin Quality standard; transition. new text end

new text begin (a) A rated program is eligible to receive
early childhood education scholarships if the program has received a three- or four-star
rating under Parent Aware under section 119C.02 and is located in a Parent Aware Plus
region. An eligible program must agree to accept early childhood education scholarships
to pay for services.
new text end

new text begin (b) Notwithstanding paragraph (a), for the first two fiscal years after a Parent
Aware region has become a Parent Aware Plus region, a rated program located in the
Parent Aware Plus region is eligible to receive early childhood education scholarships
to pay for its services if the program has received a one-star or better rating under the
Parent Aware rating system. An eligible program must agree to accept early childhood
education scholarships to pay for services. This paragraph does not apply to the Parent
Aware Plus regions located in the city of Saint Paul, Hennepin County, Nicollet County,
and Blue Earth County.
new text end

new text begin Subd. 7. new text end

new text begin Redeeming a scholarship. new text end

new text begin (a) A rated program that has received an early
childhood education scholarship on behalf of an eligible child to pay for services must
remit the scholarship in a manner determined by the commissioner.
new text end

new text begin (b) The commissioner must pay rated programs the value of the early childhood
education scholarship within 30 days of receiving the scholarship from a program.
new text end

new text begin (c) The commissioner must determine a method for paying rated programs if a parent
or legal guardian has divided or reduced a scholarship under subdivision 5, paragraph (c).
new text end

new text begin Subd. 8. new text end

new text begin Earned income calculation. new text end

new text begin Scholarships paid to providers on behalf
of eligible parents must not be counted as earned income for the purposes of medical
assistance, MinnesotaCare, MFIP, diversionary work program, child care assistance, or
Head Start programs. Scholarships paid to providers on behalf of eligible parents must
not be considered child care funds for the purposes of the child care assistance program
under chapter 119B.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 7. new text beginPROGRAMMATIC STREAMLINING.
new text end

new text begin By January 15, 2013, the commissioner of human services shall report to the
legislative committees having jurisdiction over early childhood education and child care
on a framework for incorporating the existing state programs that provide access to early
learning and care programming into a single scholarship program that funds access to
high-quality early learning and care programs for low-income children in Minnesota.
The report must also identify barriers and impediments to applying federal child care
assistance and Head Start program funds in the form of a scholarship, under Minnesota
Statutes, section 119C.04. As part of the framework, the commissioner must also take
into consideration efforts for simplifying the application and management procedures
for participating families and providers.
new text end

Sec. 8. new text beginCHILD CARE DEVELOPMENT FUNDS; PARENT AWARE.
new text end

new text begin The commissioner of human services shall direct $....... in federal child care
development funds in fiscal years 2012 and 2013 for the purpose of implementing Parent
Aware under Minnesota Statutes, sections 119C.01 to 119C.03. Of this amount, in fiscal
year 2012, $......., and in fiscal year 2013, $......., are appropriated to help eligible programs
prepare for and participate in Parent Aware. The commissioner shall ensure that funds are
expended according to federal child care development fund regulations.
new text end

Sec. 9. new text beginWAIVER PROCESS RELATED TO CHILD CARE PROVIDER
CHOICE.
new text end

new text begin The commissioner of human services shall develop a simple waiver process related
to Minnesota Statutes, section 119B.09, subdivision 5, that requires the parent or guardian
to submit notice of a preferred alternative child arrangement.
new text end

Sec. 10. new text beginAPPROPRIATIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Department of Human Services. new text end

new text begin The sums indicated in this section
are appropriated from the general fund to the Department of Human Services for the
fiscal years designated.
new text end

new text begin Subd. 2. new text end

new text begin Early childhood education scholarships. new text end

new text begin For grants to early childhood
education scholarships under Minnesota Statutes, section 119C.04:
new text end

new text begin $
new text end
new text begin 8,000,000
new text end
new text begin .....
new text end
new text begin 2012
new text end
new text begin $
new text end
new text begin 9,000,000
new text end
new text begin .....
new text end
new text begin 2013
new text end

new text begin In fiscal year 2012, this appropriation is for early childhood scholarships in Parent
Aware Plus regions. In fiscal year 2013 and later, the appropriation is for scholarship
grants to fund eligible early childhood care and education programs located in Parent
Aware Plus regions that have received early childhood education scholarships from
eligible parents or legal guardians under Minnesota Statutes, section 119C.04, subdivision
2. The appropriation is available until expended. This appropriation is part of the base
budget for subsequent fiscal years.
new text end

new text begin Each year, if this appropriation is insufficient to provide early childhood education
scholarships to all eligible children, the Department of Human Services shall make
scholarships available on a first-come, first-served basis.
new text end

ARTICLE 2

TAX CREDITS

Section 1.

Minnesota Statutes 2010, 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. 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) 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) 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) 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) 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; deleted text beginand
deleted text end

(17) the amount of unemployment compensation exempt from tax under section
85(c) of the Internal Revenue Codenew text begin;
new text end

new text begin (18) the amount of the deduction under section 170 of the Internal Revenue Code
that represents contributions that qualify for an early childhood education access to quality
tax credit under section 290.0694; and
new text end

new text begin (19) the amount of the deduction under section 170 of the Internal Revenue
Code that represents contributions that qualify for an early childhood education quality
improvement credit under section 290.0695
new text end.

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2010, 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) 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) 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) 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; deleted text beginand
deleted text end

(25) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Codenew text begin;
new text end

new text begin (26) the amount of the deduction under section 170 of the Internal Revenue Code
that represents contributions that qualify for an early childhood education access to quality
tax credit under section 290.0694; and
new text end

new text begin (27) the amount of the deduction under section 170 of the Internal Revenue
Code that represents contributions that qualify for an early childhood education quality
improvement credit under section 290.0695
new text end.

new text begin EFFECTIVE DATE. new text end

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

Sec. 3.

new text begin [290.0693] EARLY CHILDHOOD TRAIN AND RETAIN CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Statement of intent. new text end

new text begin The purpose of the early childhood train
and retain credit is to encourage and reward early childhood education professionals
for furthering their education and providing continuity of instruction to Minnesota's
children. The success of the credit must be measured by comparing the number of early
childhood education professionals claiming the credit at the various point levels in the
first year the credit is allowed with the number claiming the credit at the various point
levels in following years.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed. new text end

new text begin (a) An individual who is an eligible early childhood
education professional is allowed a credit against the tax imposed by this chapter as
follows:
new text end

new text begin Early education experience points
new text end
new text begin Credit amount
new text end
new text begin 1 to 2
new text end
new text begin $500
new text end
new text begin 3 to 5
new text end
new text begin $1,000
new text end
new text begin 6 to 7
new text end
new text begin $1,500
new text end
new text begin 8 to 10
new text end
new text begin $2,500
new text end
new text begin 11 to 12
new text end
new text begin $3,000
new text end

new text begin (b) For taxable year 2011, the maximum aggregate credits must not exceed $500,000
per taxable year. For taxable years beginning after December 31, 2011, the maximum
aggregate credits must not exceed $1,000,000 per taxable year.
new text end

new text begin (c) 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).
new text end

new text begin Subd. 3. new text end

new text begin Definitions. new text end

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

new text begin (b) "Early education experience points" means the eligible early childhood education
professional's points registered with the Minnesota Center for Professional Development
Registry.
new text end

new text begin (c) "Eligible early childhood education professional" means an individual who:
new text end

new text begin (1) is registered with the Minnesota Center for Professional Development Registry;
new text end

new text begin (2) is employed at a quality program;
new text end

new text begin (3) works directly with children who have not yet enrolled in kindergarten or first
grade; and
new text end

new text begin (4) has been employed at the same program for at least 20 hours per week for at least
12 months during the tax year.
new text end

new text begin (d) "Quality program" means a program rated using the quality rating and
improvement system tool established by the guidelines under chapter 119C.
new text end

new text begin Subd. 4. new text end

new text begin Application for credit certificates. new text end

new text begin For taxable years beginning after
December 31, 2010, a taxpayer must apply to the commissioner for an early childhood
train and retain tax credit certificate. The credit certificates under this section must be
made available on a first-come, first-served basis until the maximum statewide credit
amount has been reached. The commissioner must not issue a tax credit certificate for an
amount greater than the limits under subdivision 2.
new text end

new text begin Subd. 5. new text end

new text begin Credit refundable. new text end

new text begin If the amount of credit an individual is eligible to
receive under this section exceeds the claimant's tax liability under this chapter, the
commissioner shall refund the excess to the claimant.
new text end

new text begin Subd. 6. new text end

new text begin Appropriation. new text end

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

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

new text begin [290.0694] EARLY CHILDHOOD EDUCATION ACCESS TO QUALITY
TAX CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Statement of intent. new text end

new text begin The purpose of the early childhood education
access to quality tax credit is to increase the amount of private contributions available to
provide low-income children in Minnesota with access to high-quality early childhood
education programs. The success of the credit must be measured by determining the
total amount of private contributions that are made to provide early childhood education
scholarships and are eligible for the credit under this section.
new text end

new text begin Subd. 2. new text end

new text begin Definitions. new text end

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

new text begin (b) "Early childhood education access to quality donation" means a donation to a
qualified early childhood education program.
new text end

new text begin (c) "Qualified early childhood education program" means a program operated
in Minnesota that:
new text end

new text begin (1) has been rated using the quality rating and improvement system tool established
by the guidelines under chapter 119C; and
new text end

new text begin (2) accepts early childhood education access to quality donations under this section
as payment of tuition for a qualified student who is enrolled in the program.
new text end

new text begin (d) "Qualified student" means a student who:
new text end

new text begin (1) has not attained the age of seven years and become subject to the requirements of
section 120A.22, subdivision 5;
new text end

new text begin (2) has reached age three or four by September 1;
new text end

new text begin (3) is a Minnesota resident; and
new text end

new text begin (4) is a member of a household whose total annual income during the year, without
consideration of the benefits under this program, is equal to or less than 47 percent of the
state median income in the current calendar year.
new text end

new text begin Subd. 3. new text end

new text begin Credit allowed. new text end

new text begin (a) An individual or corporate taxpayer is allowed a
credit against the tax due under this chapter equal to 75 percent of the amount donated to
a qualified early childhood education program during the taxable year. For taxable year
2011, the maximum aggregate credits must not exceed $500,000 per taxable year. For
taxable years beginning after December 31, 2011, the maximum aggregate credits must
not exceed $1,000,000 per taxable year.
new text end

new text begin (b) A taxpayer must provide a copy of the receipt provided by the qualified early
childhood education program when claiming the credit for the donation.
new text end

new text begin Subd. 4. new text end

new text begin Application for credit certificates. new text end

new text begin For taxable years beginning after
December 31, 2010, a taxpayer must apply to the commissioner for an early childhood
education access to quality tax credit certificate. The credit certificates under this section
must be made available on a first-come, first-served basis until the maximum statewide
credit amount has been reached. The commissioner must not issue a tax credit certificate
for an amount greater than the limits under subdivision 3.
new text end

new text begin Subd. 5. new text end

new text begin Responsibilities of qualified early childhood education programs. new text end

new text begin (a)
Each qualified early childhood education program that receives donations directly from
taxpayers under this section must:
new text end

new text begin (1) notify the commissioner of its intent to participate in this program;
new text end

new text begin (2) demonstrate that it meets the definition of a qualified early childhood education
program in subdivision 2, paragraph (c);
new text end

new text begin (3) provide a receipt or verification on a form approved by the commissioner to
taxpayers for donations;
new text end

new text begin (4) conduct criminal background checks on all of its employees and board members
and exclude from employment or governance any individuals that might reasonably pose a
risk to the appropriate use of contributed funds;
new text end

new text begin (5) demonstrate its financial accountability by submitting a financial information
report for the organization that complies with uniform financial accounting standards
established by the commissioner;
new text end

new text begin (6) demonstrate its financial viability, if it is to receive donations of $150,000 or
more during the school year, by filing financial information with the commissioner prior
to September 1 of each year that demonstrates the financial viability of the qualified
early childhood education program; and
new text end

new text begin (7) use amounts received as donations to provide scholarships to qualified students
within one year of the date of receiving the donation.
new text end

new text begin (b) A qualified early childhood education program that receives donations directly
from taxpayers under this program must report to the commissioner by June 1 of each year
the following information regarding donations received and scholarships awarded in the
previous calendar year:
new text end

new text begin (1) the total number and total dollar amount of donations from taxpayers received
during the previous calendar year; and
new text end

new text begin (2) the total number and total dollar amount of scholarships awarded to qualified
students during the previous calendar year.
new text end

new text begin (c) If the commissioner decides to bar a qualified early childhood education program
from the program for failure to comply with the requirements in paragraph (a), the
qualified early childhood education program must notify taxpayers who have donated to
the qualified early childhood education program in writing within 30 days.
new text end

new text begin Subd. 6. new text end

new text begin Responsibilities of commissioner. new text end

new text begin (a) The commissioner must prescribe a
standardized format for a receipt to be issued by a qualified early childhood education
program to a taxpayer to indicate the value of a donation received.
new text end

new text begin (b) The commissioner must prescribe a standardized format for qualified early
childhood education programs to report the information required under subdivision 5.
new text end

new text begin (c) The commissioner must post on the department's Web site the names and
addresses of qualified early childhood education programs and regularly update the names
and addresses of any qualified early childhood education programs that have been barred
from participating in the program.
new text end

new text begin (d) The commissioner must conduct either a financial review or audit of a qualified
early childhood education program upon finding evidence of fraud or intentional
misreporting.
new text end

new text begin (e) The commissioner must bar a qualified early childhood education program from
participating in the program if the commissioner establishes that the qualified early
childhood education program has intentionally and substantially failed to comply with
the requirements in subdivision 5. If the commissioner determines that a qualified early
childhood education program should be barred from the program, the commissioner
must notify the qualified early childhood education program within 60 days of that
determination.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 5.

new text begin [290.0695] EARLY CHILDHOOD EDUCATION QUALITY
IMPROVEMENT CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Statement of intent. new text end

new text begin The purpose of the early childhood education
quality improvement credit is to encourage contributions that result in improvements to
the quality of programming provided by eligible early childhood education providers.
The success of the credit must be measured by determining amounts spent as a result of
contributions qualifying for the credit to improve the quality of programming provided by
eligible early childhood education providers.
new text end

new text begin Subd. 2. new text end

new text begin Definitions. new text end

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

new text begin (b) "Eligible early childhood education provider" means a provider who operates a
program in an area in Minnesota in which the quality rating and improvement system tool
established by the guidelines under chapter 119C is in use for the taxable year.
new text end

new text begin (c) "Resource and referral agency" means an agency that is designated by the
Department of Human Services to provide child care resource and referral services.
new text end

new text begin Subd. 3. new text end

new text begin Credit allowed. new text end

new text begin (a) An individual or corporate taxpayer is allowed a
credit against the tax due under this chapter equal to 75 percent of the amount donated to
an eligible early childhood education provider or a resource and referral agency during
the taxable year. For a taxpayer to be eligible for the credit, donations to eligible early
childhood education providers must be used to improve program quality in ways that
are consistent with the standards set by the quality rating and improvement system, and
donations to resource and referral agencies must be used to provide early childhood
education providers with direct quality improvement services that are consistent with the
standards set by the quality rating and improvement system.
new text end

new text begin (b) For taxable year 2011, the maximum aggregate credits must not exceed $500,000
per taxable year. For taxable years beginning after December 31, 2011, the maximum
aggregate credits must not exceed $1,000,000 per taxable year.
new text end

new text begin (c) A taxpayer must provide a copy of the receipt provided by the eligible early
childhood education provider or resource and referral agency when claiming the credit for
the donation.
new text end

new text begin Subd. 4. new text end

new text begin Application for credit certificates. new text end

new text begin For taxable years beginning
after December 31, 2010, and before January 1, 2013, a taxpayer must apply to the
commissioner for an early childhood education quality improvement tax credit certificate.
The credit certificates under this section must be made available on a first-come,
first-served basis until the maximum statewide credit amount has been reached. The
commissioner must not issue a tax credit certificate for an amount greater than the limits
under subdivision 3.
new text end

new text begin Subd. 5. new text end

new text begin Responsibilities of eligible early childhood education providers and
resource and referral agencies.
new text end

new text begin (a) Each eligible early childhood education provider
and resource and referral agency that receives contributions directly from taxpayers
under this section must:
new text end

new text begin (1) notify the commissioner of its intent to participate in this program;
new text end

new text begin (2) demonstrate to the commissioner that it meets the requirements of this section;
new text end

new text begin (3) provide a receipt or verification on a form approved by the commissioner to
taxpayers for contributions made to the eligible early childhood education provider
or resource and referral agency;
new text end

new text begin (4) conduct criminal background checks on all of its employees and board members
and exclude from employment or governance any individuals that might reasonably pose a
risk to the appropriate use of contributed funds;
new text end

new text begin (5) demonstrate its financial accountability by submitting a financial information
report for the organization that complies with uniform financial accounting standards
established by the commissioner;
new text end

new text begin (6) demonstrate its financial viability, if it is to receive donations of $150,000 or
more during the school year, by filing financial information with the commissioner prior
to September 1 of each year that demonstrates the financial viability of the qualified
foundation; and
new text end

new text begin (7) use amounts received as donations to improve program quality, in the case of
eligible early childhood education providers, or to provide quality improvement services,
in the case of resource and referral agencies, within one year of the date of receiving
the donation.
new text end

new text begin (b) If the commissioner decides to bar an eligible early childhood education
provider or a resource and referral agency from the program for failure to comply with
the requirements in paragraph (a), the provider or agency must notify taxpayers who
have donated to the eligible early childhood provider or resource and referral agency in
writing within 30 days.
new text end

new text begin Subd. 6. new text end

new text begin Responsibilities of commissioner. new text end

new text begin (a) The commissioner must prescribe a
standardized format for a receipt to be issued by an eligible early childhood education
provider or a resource and referral agency to a taxpayer to indicate the value of a
contribution received.
new text end

new text begin (b) The commissioner must prescribe a standardized format for eligible early
childhood education providers or resource and referral agencies to report the information
required under subdivision 5.
new text end

new text begin (c) The commissioner must post on the department's Web site the names and
addresses of eligible early childhood education providers and resource and referral
agencies and regularly update the names and addresses of any eligible early childhood
education providers or resource and referral agencies that have been barred from
participating in the program.
new text end

new text begin (d) The commissioner must conduct either a financial review or audit of an eligible
early childhood education provider or a resource and referral agency upon finding
evidence of fraud or intentional misreporting.
new text end

new text begin (e) The commissioner must bar an eligible early childhood education provider or
a resource and referral agency from participating in the program if the commissioner
establishes that the provider or agency has intentionally and substantially failed to comply
with the requirements in subdivision 5. If the commissioner determines that a provider or
agency should be barred from the program, the commissioner must notify the provider or
agency within 60 days of that determination.
new text end

new text begin EFFECTIVE DATE. new text end

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