SF 445

as introduced - 87th Legislature (2011 - 2012) Posted on 02/23/2012 08:50am

A bill for an act
relating to estate taxation; providing an exclusion for certain farm and business
properties; amending Minnesota Statutes 2010, section 291.03, subdivision 1,
by adding subdivisions.

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

Section 1.

Minnesota Statutes 2010, section 291.03, subdivision 1, is amended to read:

Subdivision 1.

Tax amount.

(a) The tax imposed shall be an amount equal to the
proportion of the maximum credit for state death taxes computed under section 2011
of the Internal Revenue Code, but using Minnesota adjusted taxable estate instead of
federal adjusted taxable estate, as the Minnesota gross estate bears to the value of the
federal gross estate.

(b) The tax determined under this subdivision must not be greater than the sum of
the following amounts multiplied by a fraction, the numerator of which is the Minnesota
gross estate and the denominator of which is the federal gross estate:

(1) the rates and brackets under section 2001(c) of the Internal Revenue Code
multiplied by the sum of:

(i) the taxable estate, as defined under section 2051 of the Internal Revenue Code;
plus

(ii) adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue
Code; less

new text begin (iii) the lesser of (A) the sum of the value of qualified small business property
under subdivision 9, and the value of qualified farm property under subdivision 10,
or (B) $4,000,000; less
new text end

(2) the amount of tax allowed under section 2001(b)(2) of the Internal Revenue
Code; and less

(3) the federal credit allowed under section 2010 of the Internal Revenue Code.

(c) For purposes of this subdivision, "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through December 31, 2000.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2010.
new text end

Sec. 2.

Minnesota Statutes 2010, section 291.03, is amended by adding a subdivision
to read:

new text begin Subd. 8. 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 in this subdivision.
new text end

new text begin (b) "Family member" means a family member as defined in section 2032A(e)(2) of
the Internal Revenue Code.
new text end

new text begin (c) "Qualified heir" means a family member who acquired qualified property from
the decedent and satisfies the requirement under subdivision 9, clause (6), or subdivision
10, clause (4), for the property.
new text end

new text begin (d) "Qualified property" means qualified small businesss property under subdivision
9 and qualified farm property under subdivision 10.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2010.
new text end

Sec. 3.

Minnesota Statutes 2010, section 291.03, is amended by adding a subdivision
to read:

new text begin Subd. 9. new text end

new text begin Qualified small business property. new text end

new text begin Property satisfying all of the following
requirements is qualified small business property:
new text end

new text begin (1) The value of the property was included in the federal adjusted taxable estate.
new text end

new text begin (2) The property consists of the assets of a trade or business or shares of stock or
other ownership interests in a corporation or other entity engaged in a trade or business.
The decedent or the decedent's spouse must have materially participated in the trade or
business within the meaning of section 469 of the Internal Revenue Code during the
taxable year that ended before the date of the decedent's death. Shares of stock in a
corporation or an ownership interest in another type of entity do not qualify under this
subdivision if the shares or ownership interests are traded on a public stock exchange at
any time during the three-year period ending on the decedent's date of death.
new text end

new text begin (3) The gross annual sales of the trade or business were $10,000,000 or less for the
last taxable year that ended before the date of the death of the decedent.
new text end

new text begin (4) The property does not consist of cash or cash equivalents. For property consisting
of shares of stock or other ownership interests in an entity, the amount of cash or cash
equivalents held by the corporation or other entity must be deducted from the value of
the property qualifying under this subdivision in proportion to the decedent's share of
ownership of the entity on the date of death.
new text end

new text begin (5) The decedent continuously owned the property for the three-year period ending
on the date of death of the decedent.
new text end

new text begin (6) A family member continuously uses the property in the operation of the trade or
business for three years following the date of death of the decedent.
new text end

new text begin (7) The estate and the qualified heir elect to treat the property as qualified small
business property and agree, in the form prescribed by the commissioner, to pay the
recapture tax under subdivision 11, if applicable.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2010.
new text end

Sec. 4.

Minnesota Statutes 2010, section 291.03, is amended by adding a subdivision
to read:

new text begin Subd. 10. new text end

new text begin Qualified farm property. new text end

new text begin Property satisfying all of the following
requirements is qualified farm property:
new text end

new text begin (1) The value of the property was included in the federal adjusted taxable estate.
new text end

new text begin (2) The property consists of a farm meeting the requirements of section 500.24,
and was classified for property tax purposes as the homestead of the decedent or the
decedent's spouse or both under section 273.124, and as class 2a property under section
273.13, subdivision 23.
new text end

new text begin (3) The decedent continuously owned the property for the three-year period ending
on the date of death of the decedent.
new text end

new text begin (4) A family member continuously uses the property in the operation of the trade or
business for three years following the date of death of the decedent.
new text end

new text begin (5) The estate and the qualified heir elect to treat the property as qualified farm
property and agree, in a form prescribed by the commissioner, to pay the recapture tax
under subdivision 11, if applicable.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2010.
new text end

Sec. 5.

Minnesota Statutes 2010, section 291.03, is amended by adding a subdivision
to read:

new text begin Subd. 11. new text end

new text begin Recapture tax. new text end

new text begin (a) If, within three years after the decedent's death and
before the death of the qualified heir, the qualified heir disposes of any interest in qualified
property, other than by a disposition to a family member, or a family member ceases to
use the qualified property which was acquired or passed from the decedent, an additional
estate tax is imposed on the property.
new text end

new text begin (b) The amount of the additional tax equals the amount of the exclusion claimed by
the estate under subdivision 8, paragraph (d), multiplied by 16 percent.
new text end

new text begin (c) The additional tax under this subdivision is due on the day which is six months
after the date of the disposition or cessation in paragraph (a).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2010.
new text end