SF 383

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

A bill for an act
relating to taxation; modifying taxable income;
amending Minnesota Statutes 2004, sections 290.01,
subdivisions 19a, 19c; 290.10.

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

Section 1.

Minnesota Statutes 2004, 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 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 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 taxes paid or accrued within the
taxable year under this chapter and income 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. For the purpose of this paragraph, the
disallowance of itemized deductions under section 68 of the
Internal Revenue Code of 1986, income tax is the last itemized
deduction 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 income taxes 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;

(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; deleted text begin and
deleted text end

(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 new text begin ;
and
new text end

new text begin (8) the amount of expenses disallowed under section 290.10,
subdivision 2 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, 2004.
new text end

Sec. 2.

Minnesota Statutes 2004, 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 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);

(12) the amount of any environmental tax paid under section
59(a) of the Internal Revenue Code;

(13) 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;

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

(15) 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 section 614 of Public Law 107-147; deleted text begin and
deleted text end

(16) 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 new text begin ;
and
new text end

new text begin (17) the amount of expenses disallowed under section
290.10, subdivision 2 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, 2004.
new text end

Sec. 3.

Minnesota Statutes 2004, section 290.10, is
amended to read:

290.10 NONDEDUCTIBLE ITEMS.

new text begin Subdivision 1. new text end

new text begin Expenses, interest, and taxes. new text end

Except as
provided in section 290.17, subdivision 4, paragraph (i), in
computing the net income of a taxpayer no deduction shall in any
case be allowed for expenses, interest and taxes connected with
or allocable against the production or receipt of all income not
included in the measure of the tax imposed by this chapter,
except that for corporations engaged in the business of mining
or producing iron ore, the mining of which is subject to the
occupation tax imposed by section 298.01, subdivision 4, this
shall not prevent the deduction of expenses and other items to
the extent that the expenses and other items are allowable under
this chapter and are not deductible, capitalizable, retainable
in basis, or taken into account by allowance or otherwise in
computing the occupation tax and do not exceed the amounts taken
for federal income tax purposes for that year. Occupation taxes
imposed under chapter 298, royalty taxes imposed under chapter
299, or depletion expenses may not be deducted under this deleted text begin clause
deleted text end new text begin subdivision new text end .

new text begin Subd. 2. new text end

new text begin Fines, penalties, damages, and expenses. new text end

new text begin (a) No
deduction from taxable income for a trade or business expense
under section 162(a) of the Internal Revenue Code shall be
allowed for any fine, penalty, damages, or expenses paid to:
new text end

new text begin (1) the government of the United States, a state, a
territory or possession of the United States, the District of
Columbia, or the Commonwealth of Puerto Rico;
new text end

new text begin (2) the government of a foreign country; or
new text end

new text begin (3) a political subdivision of, or corporation or other
entity serving as an agency or instrumentality of, any
government described in clause (1) or (2).
new text end

new text begin (b) For purposes of this subdivision, "fine, penalty,
damages, or expenses" include, but are not limited to, any
amount:
new text end

new text begin (1) paid pursuant to a conviction or a plea of guilty or
nolo contendere for any crime in a criminal proceeding;
new text end

new text begin (2) paid as a civil penalty imposed by federal, state, or
local law, including tax penalties and interest;
new text end

new text begin (3) paid in settlement of the taxpayer's actual or
potential liability for a civil or criminal fine or penalty;
new text end

new text begin (4) forfeited as collateral posted in connection with a
proceeding that could result in imposition of a fine or penalty;
or
new text end

new text begin (5) for legal fees and related expenses paid or incurred in
the prosecution or civil action arising from a violation of the
law imposing the fine or civil penalty, court costs assessed
against the taxpayer, or stenographic and printing charges,
compensatory damages, punitive damages, or restitution.
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, 2004.
new text end