SF 1158

as introduced - 82nd Legislature (2001 - 2002) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to taxation; corporation franchise tax; 
  1.3             extending the exemption for foreign insurance 
  1.4             companies to all insurance companies; amending 
  1.5             Minnesota Statutes 2000, sections 290.01, subdivisions 
  1.6             22 and 29; 290.014, subdivision 5; 290.05, subdivision 
  1.7             1; 290.0921, subdivisions 1, 2, and 6; 290.0922, 
  1.8             subdivision 2; 290.093; 290.095, subdivision 2; 
  1.9             290.17, subdivisions 1 and 4; 290.191, subdivision 2; 
  1.10            290.21, subdivision 4; and 297I.20; repealing 
  1.11            Minnesota Statutes 2000, sections 290.095, subdivision 
  1.12            1a; and 290.35. 
  1.13  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.14     Section 1.  Minnesota Statutes 2000, section 290.01, 
  1.15  subdivision 22, is amended to read: 
  1.16     Subd. 22.  [TAXABLE NET INCOME.] For tax years beginning 
  1.17  after December 31, 1986, the term "taxable net income" means:  
  1.18     (1) for resident individuals the same as net income; 
  1.19     (2) for individuals who were not residents of Minnesota for 
  1.20  the entire year, the same as net income except that the tax is 
  1.21  imposed only on the Minnesota apportioned share of that income 
  1.22  as determined pursuant to section 290.06, subdivision 2c, 
  1.23  paragraph (e); 
  1.24     (3) for all other taxpayers, the part of net income that is 
  1.25  allocable to Minnesota by assignment or apportionment under one 
  1.26  or more of sections 290.17, 290.191, 290.20, 290.35, and 290.36. 
  1.27     For tax years beginning before January 1, 1987, the term 
  1.28  "taxable net income"  means the net income assignable to this 
  1.29  state pursuant to sections 290.17 to 290.20.  For corporations, 
  2.1   taxable net income is then reduced by the deductions contained 
  2.2   in section 290.21.  
  2.3      [EFFECTIVE DATE.] This section is effective for taxable 
  2.4   years beginning after December 31, 2000. 
  2.5      Sec. 2.  Minnesota Statutes 2000, section 290.01, 
  2.6   subdivision 29, is amended to read: 
  2.7      Subd. 29.  [TAXABLE INCOME.] For tax years beginning after 
  2.8   December 31, 1986, the term "taxable income" means:  
  2.9      (1) for individuals, estates, and trusts, the same as 
  2.10  taxable net income; 
  2.11     (2) for corporations, including insurance companies, the 
  2.12  taxable net income less 
  2.13     (i) the net operating loss deduction under section 290.095; 
  2.14     (ii) the dividends received deduction under section 290.21, 
  2.15  subdivision 4; and 
  2.16     (iii) the charitable contribution deduction under section 
  2.17  290.21, subdivision 3. 
  2.18     [EFFECTIVE DATE.] This section is effective for taxable 
  2.19  years beginning after December 31, 2000. 
  2.20     Sec. 3.  Minnesota Statutes 2000, section 290.014, 
  2.21  subdivision 5, is amended to read: 
  2.22     Subd. 5.  [CORPORATIONS.] Except as provided in section 
  2.23  290.015, corporations are subject to the return filing 
  2.24  requirements and to tax as provided in this chapter if the 
  2.25  corporation so exercises its franchise as to engage in such 
  2.26  contacts with this state as to cause part of the income of the 
  2.27  corporation to be:  
  2.28     (1) allocable to this state under section 290.17, 290.191, 
  2.29  290.20, 290.35, or 290.36; 
  2.30     (2) taxed to the corporation under the Internal Revenue 
  2.31  Code (or not taxed under the Internal Revenue Code by reason of 
  2.32  its character but of a character which is taxable under this 
  2.33  chapter) in its capacity as a beneficiary of an estate with 
  2.34  income allocable to this state under section 290.17, 290.191, or 
  2.35  290.20 and the income, taking into account the income character 
  2.36  provisions of section 662(b) of the Internal Revenue Code, would 
  3.1   be allocable to this state under section 290.17, 290.191, or 
  3.2   290.20 if realized by the corporation directly from the source 
  3.3   from which realized by the estate; 
  3.4      (3) taxed to the corporation under the Internal Revenue 
  3.5   Code (or not taxed under the Internal Revenue Code by reason of 
  3.6   its character but of a character which is taxable under this 
  3.7   chapter) in its capacity as a beneficiary or grantor or other 
  3.8   person treated as a substantial owner of a trust with income 
  3.9   allocable to this state under section 290.17, 290.191, or 290.20 
  3.10  and the income, taking into account the income character 
  3.11  provisions of section 652(b), 662(b), or 664(b) of the Internal 
  3.12  Revenue Code, would be allocable to this state under section 
  3.13  290.17, 290.191, or 290.20 if realized by the corporation 
  3.14  directly from the source from which realized by the trust; or 
  3.15     (4) taxed to the corporation under the Internal Revenue 
  3.16  Code (or not taxed under the Internal Revenue Code by reason of 
  3.17  its character but of a character which is taxable under this 
  3.18  chapter) in its capacity as a limited or general partner in a 
  3.19  partnership with income allocable to this state under section 
  3.20  290.17, 290.191, or 290.20 and the income, taking into account 
  3.21  the income character provisions of section 702(b) of the 
  3.22  Internal Revenue Code, would be allocable to this state under 
  3.23  section 290.17, 290.191, or 290.20 if realized by the 
  3.24  corporation directly from the source from which realized by the 
  3.25  partnership. 
  3.26     [EFFECTIVE DATE.] This section is effective for taxable 
  3.27  years beginning after December 31, 2000. 
  3.28     Sec. 4.  Minnesota Statutes 2000, section 290.05, 
  3.29  subdivision 1, is amended to read: 
  3.30     Subdivision 1.  [EXEMPT ENTITIES.] The following 
  3.31  corporations, individuals, estates, trusts, and organizations 
  3.32  shall be exempted from taxation under this chapter, provided 
  3.33  that every such person or corporation claiming exemption under 
  3.34  this chapter, in whole or in part, must establish to the 
  3.35  satisfaction of the commissioner the taxable status of any 
  3.36  income or activity: 
  4.1      (a) corporations, individuals, estates, and trusts engaged 
  4.2   in the business of mining or producing iron ore and other ores 
  4.3   the mining or production of which is subject to the occupation 
  4.4   tax imposed by section 298.01; but if any such corporation, 
  4.5   individual, estate, or trust engages in any other business or 
  4.6   activity or has income from any property not used in such 
  4.7   business it shall be subject to this tax computed on the net 
  4.8   income from such property or such other business or activity.  
  4.9   Royalty shall not be considered as income from the business of 
  4.10  mining or producing iron ore within the meaning of this section; 
  4.11     (b) the United States of America, the state of Minnesota or 
  4.12  any political subdivision of either agencies or 
  4.13  instrumentalities, whether engaged in the discharge of 
  4.14  governmental or proprietary functions; and 
  4.15     (c) any insurance company that is domiciled in a state or 
  4.16  country other than Minnesota that imposes retaliatory taxes, 
  4.17  fines, deposits, penalties, licenses, or fees and that does not 
  4.18  grant, on a reciprocal basis, exemption from such retaliatory 
  4.19  taxes to insurance companies or their agents domiciled in 
  4.20  Minnesota.  "Retaliatory taxes" means taxes imposed on insurance 
  4.21  companies organized in another state or country that result from 
  4.22  the fact that an insurance company organized in the taxing 
  4.23  jurisdiction and doing business in the other jurisdiction is 
  4.24  subject to taxes, fines, deposits, penalties, licenses, or fees 
  4.25  in an amount exceeding that imposed by the taxing jurisdiction 
  4.26  upon an insurance company organized in the other state or 
  4.27  country and doing business to the same extent in the taxing 
  4.28  jurisdiction; and 
  4.29     (d) town and farmers' mutual insurance companies and mutual 
  4.30  property and casualty insurance companies, other than those (1) 
  4.31  writing life insurance or (2) whose total assets on December 31, 
  4.32  1989, exceeded $1,600,000,000. 
  4.33     [EFFECTIVE DATE.] This section is effective for taxable 
  4.34  years beginning after December 31, 2000. 
  4.35     Sec. 5.  Minnesota Statutes 2000, section 290.0921, 
  4.36  subdivision 1, is amended to read: 
  5.1      Subdivision 1.  [TAX IMPOSED.] In addition to the taxes 
  5.2   computed under this chapter without regard to this section, the 
  5.3   franchise tax imposed on corporations includes a tax equal to 
  5.4   the excess, if any, for the taxable year of:  
  5.5      (1) 5.8 percent of Minnesota alternative minimum taxable 
  5.6   income less the credit allowed under section 290.35, subdivision 
  5.7   3; over 
  5.8      (2) the tax imposed under section 290.06, subdivision 1, 
  5.9   without regard to this section.  
  5.10     [EFFECTIVE DATE.] This section is effective for taxable 
  5.11  years beginning after December 31, 2000. 
  5.12     Sec. 6.  Minnesota Statutes 2000, section 290.0921, 
  5.13  subdivision 2, is amended to read: 
  5.14     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
  5.15  the following terms have the meanings given them. 
  5.16     (b) "Alternative minimum taxable net income" is alternative 
  5.17  minimum taxable income, 
  5.18     (1) less the exemption amount, and 
  5.19     (2) apportioned or allocated to Minnesota under section 
  5.20  290.17, 290.191, or 290.20. 
  5.21     (c) The "exemption amount" is $40,000, reduced, but not 
  5.22  below zero, by 25 percent of the excess of alternative minimum 
  5.23  taxable income over $150,000. 
  5.24     (d) "Minnesota alternative minimum taxable income" is 
  5.25  alternative minimum taxable net income, less the deductions for 
  5.26  alternative tax net operating loss under subdivision 4; 
  5.27  charitable contributions under subdivision 5; and dividends 
  5.28  received under subdivision 6.  The sum of the deductions under 
  5.29  this paragraph may not exceed 90 percent of alternative minimum 
  5.30  taxable net income.  This limitation does not apply to a 
  5.31  deduction for dividends paid to or received from a corporation 
  5.32  which is subject to tax under section 290.35 or 290.36 and which 
  5.33  is a member of an affiliated group of corporations as defined by 
  5.34  the Internal Revenue Code. 
  5.35     [EFFECTIVE DATE.] This section is effective for taxable 
  5.36  years beginning after December 31, 2000. 
  6.1      Sec. 7.  Minnesota Statutes 2000, section 290.0921, 
  6.2   subdivision 6, is amended to read: 
  6.3      Subd. 6.  [DIVIDENDS RECEIVED.] (a) A deduction is allowed 
  6.4   from alternative minimum taxable net income equal to the 
  6.5   deduction for dividends received under section 290.21, 
  6.6   subdivision 4, for purposes of calculating taxable income under 
  6.7   section 290.01, subdivision 29. 
  6.8      (b) The amount of the deduction must not exceed 90 percent 
  6.9   of alternative minimum taxable net income.  This limitation does 
  6.10  not apply to dividends paid to or received from a corporation 
  6.11  which is subject to tax under section 290.35 or 290.36 and which 
  6.12  is a member of an affiliated group of corporations as defined by 
  6.13  the Internal Revenue Code. 
  6.14     [EFFECTIVE DATE.] This section is effective for taxable 
  6.15  years beginning after December 31, 2000. 
  6.16     Sec. 8.  Minnesota Statutes 2000, section 290.0922, 
  6.17  subdivision 2, is amended to read: 
  6.18     Subd. 2.  [EXEMPTIONS.] The following entities are exempt 
  6.19  from the tax imposed by this section: 
  6.20     (1) corporations exempt from tax under section 290.05 other 
  6.21  than insurance companies exempt under subdivision 1, paragraph 
  6.22  (d); 
  6.23     (2) real estate investment trusts; 
  6.24     (3) regulated investment companies or a fund thereof; and 
  6.25     (4) entities having a valid election in effect under 
  6.26  section 860D(b) of the Internal Revenue Code; 
  6.27     (5) town and farmers' mutual insurance companies; and 
  6.28     (6) cooperatives organized under chapter 308A that provide 
  6.29  housing exclusively to persons age 55 and over and are 
  6.30  classified as homesteads under section 273.124, subdivision 3. 
  6.31     Entities not specifically exempted by this subdivision are 
  6.32  subject to tax under this section, notwithstanding section 
  6.33  290.05.  
  6.34     [EFFECTIVE DATE.] This section is effective for taxable 
  6.35  years beginning after December 31, 2000. 
  6.36     Sec. 9.  Minnesota Statutes 2000, section 290.093, is 
  7.1   amended to read: 
  7.2      290.093 [TAX COMPUTATION FOR MUTUAL SAVINGS BANKS 
  7.3   CONDUCTING LIFE INSURANCE BUSINESS.] 
  7.4      Mutual savings banks as defined in section 594 of the 
  7.5   Internal Revenue Code are subject to a tax consisting of the sum 
  7.6   of the taxes determined under clauses (1) and (2):  
  7.7      (1) a tax computed on the taxable income determined without 
  7.8   regard to any items of gross income or deductions properly 
  7.9   allocable to the business of the life insurance department, at 
  7.10  the rates and in the manner as if this section did not apply; 
  7.11  and 
  7.12     (2) a tax computed on the income of the life insurance 
  7.13  department determined without regard to any items of gross 
  7.14  income or deductions not properly allocable to the department 
  7.15  computed in the manner provided in section 290.35 and at the 
  7.16  rate provided in section 290.06 for a corporation not engaged in 
  7.17  the business of issuing life insurance contracts.  
  7.18     This section applies only if the life insurance department 
  7.19  would, if it were treated as a separate corporation, qualify as 
  7.20  a life insurance company under section 816 of the Internal 
  7.21  Revenue Code. 
  7.22     [EFFECTIVE DATE.] This section is effective for taxable 
  7.23  years beginning after December 31, 2000. 
  7.24     Sec. 10.  Minnesota Statutes 2000, section 290.095, 
  7.25  subdivision 2, is amended to read: 
  7.26     Subd. 2.  [DEFINED AND LIMITED.] (a) The term "net 
  7.27  operating loss" as used in this section shall mean a net 
  7.28  operating loss as defined in section 172(c) or 810(a), in the 
  7.29  case of life insurance companies, of the Internal Revenue Code, 
  7.30  with the modifications specified in subdivision 4.  The 
  7.31  deductions provided in section 290.21 and the modification 
  7.32  provided in section 290.01, subdivision 19d, clause (11), cannot 
  7.33  be used in the determination of a net operating loss.  
  7.34     (b) The term "net operating loss deduction" as used in this 
  7.35  section means the aggregate of the net operating loss carryovers 
  7.36  to the taxable year, computed in accordance with subdivision 3.  
  8.1   The provisions of section 172(b) or 810(b), in the case of life 
  8.2   insurance companies, of the Internal Revenue Code relating to 
  8.3   the carryback of net operating losses, do not apply. 
  8.4      [EFFECTIVE DATE.] This section is effective for taxable 
  8.5   years beginning after December 31, 2000. 
  8.6      Sec. 11.  Minnesota Statutes 2000, section 290.17, 
  8.7   subdivision 1, is amended to read: 
  8.8      Subdivision 1.  [SCOPE OF ALLOCATION RULES.] (a) The income 
  8.9   of resident individuals is not subject to allocation outside 
  8.10  this state.  The allocation rules apply to nonresident 
  8.11  individuals, estates, trusts, nonresident partners of 
  8.12  partnerships, nonresident shareholders of corporations treated 
  8.13  as "S" corporations under section 290.9725, and all corporations 
  8.14  not having such an election in effect.  If a partnership or 
  8.15  corporation would not otherwise be subject to the allocation 
  8.16  rules, but conducts a trade or business that is part of a 
  8.17  unitary business involving another legal entity that is subject 
  8.18  to the allocation rules, the partnership or corporation is 
  8.19  subject to the allocation rules. 
  8.20     (b) Expenses, losses, and other deductions (referred to 
  8.21  collectively in this paragraph as "deductions") must be 
  8.22  allocated along with the item or class of gross income to which 
  8.23  they are definitely related for purposes of assignment under 
  8.24  this section or apportionment under section 290.191, 290.20, 
  8.25  290.35, or 290.36.  Deductions not definitely related to any 
  8.26  item or class of gross income are assigned to the taxpayer's 
  8.27  domicile. 
  8.28     (c) In the case of an individual who is a resident for only 
  8.29  part of a taxable year, the individual's income, gains, losses, 
  8.30  and deductions from the distributive share of a partnership, S 
  8.31  corporation, trust, or estate are not subject to allocation 
  8.32  outside this state to the extent of the distributive share 
  8.33  multiplied by a ratio, the numerator of which is the number of 
  8.34  days the individual was a resident of this state during the tax 
  8.35  year of the partnership, S corporation, trust, or estate, and 
  8.36  the denominator of which is the number of days in the taxable 
  9.1   year of the partnership, S corporation, trust, or estate. 
  9.2      [EFFECTIVE DATE.] This section is effective for taxable 
  9.3   years beginning after December 31, 2000. 
  9.4      Sec. 12.  Minnesota Statutes 2000, section 290.17, 
  9.5   subdivision 4, is amended to read: 
  9.6      Subd. 4.  [UNITARY BUSINESS PRINCIPLE.] (a) If a trade or 
  9.7   business conducted wholly within this state or partly within and 
  9.8   partly without this state is part of a unitary business, the 
  9.9   entire income of the unitary business is subject to 
  9.10  apportionment pursuant to section 290.191.  Notwithstanding 
  9.11  subdivision 2, paragraph (c), none of the income of a unitary 
  9.12  business is considered to be derived from any particular source 
  9.13  and none may be allocated to a particular place except as 
  9.14  provided by the applicable apportionment formula.  The 
  9.15  provisions of this subdivision do not apply to business income 
  9.16  subject to subdivision 5, income of an insurance company 
  9.17  determined under section 290.35, or income of an investment 
  9.18  company determined under section 290.36. 
  9.19     (b) The term "unitary business" means business activities 
  9.20  or operations which result in a flow of value between them.  The 
  9.21  term may be applied within a single legal entity or between 
  9.22  multiple entities and without regard to whether each entity is a 
  9.23  sole proprietorship, a corporation, a partnership or a trust.  
  9.24     (c) Unity is presumed whenever there is unity of ownership, 
  9.25  operation, and use, evidenced by centralized management or 
  9.26  executive force, centralized purchasing, advertising, 
  9.27  accounting, or other controlled interaction, but the absence of 
  9.28  these centralized activities will not necessarily evidence a 
  9.29  nonunitary business.  Unity is also presumed when business 
  9.30  activities or operations are of mutual benefit, dependent upon 
  9.31  or contributory to one another, either individually or as a 
  9.32  group. 
  9.33     (d) Where a business operation conducted in Minnesota is 
  9.34  owned by a business entity that carries on business activity 
  9.35  outside the state different in kind from that conducted within 
  9.36  this state, and the other business is conducted entirely outside 
 10.1   the state, it is presumed that the two business operations are 
 10.2   unitary in nature, interrelated, connected, and interdependent 
 10.3   unless it can be shown to the contrary.  
 10.4      (e) Unity of ownership is not deemed to exist when a 
 10.5   corporation is involved unless that corporation is a member of a 
 10.6   group of two or more business entities and more than 50 percent 
 10.7   of the voting stock of each member of the group is directly or 
 10.8   indirectly owned by a common owner or by common owners, either 
 10.9   corporate or noncorporate, or by one or more of the member 
 10.10  corporations of the group.  For this purpose, the term "voting 
 10.11  stock" shall include membership interests of mutual insurance 
 10.12  holding companies formed under section 60A.077.  
 10.13     (f) The net income and apportionment factors under section 
 10.14  290.191 or 290.20 of foreign corporations and other foreign 
 10.15  entities which are part of a unitary business shall not be 
 10.16  included in the net income or the apportionment factors of the 
 10.17  unitary business.  A foreign corporation or other foreign entity 
 10.18  which is required to file a return under this chapter shall file 
 10.19  on a separate return basis.  The net income and apportionment 
 10.20  factors under section 290.191 or 290.20 of foreign operating 
 10.21  corporations shall not be included in the net income or the 
 10.22  apportionment factors of the unitary business except as provided 
 10.23  in paragraph (g). 
 10.24     (g) The adjusted net income of a foreign operating 
 10.25  corporation shall be deemed to be paid as a dividend on the last 
 10.26  day of its taxable year to each shareholder thereof, in 
 10.27  proportion to each shareholder's ownership, with which such 
 10.28  corporation is engaged in a unitary business.  Such deemed 
 10.29  dividend shall be treated as a dividend under section 290.21, 
 10.30  subdivision 4. 
 10.31     Dividends actually paid by a foreign operating corporation 
 10.32  to a corporate shareholder which is a member of the same unitary 
 10.33  business as the foreign operating corporation shall be 
 10.34  eliminated from the net income of the unitary business in 
 10.35  preparing a combined report for the unitary business.  The 
 10.36  adjusted net income of a foreign operating corporation shall be 
 11.1   its net income adjusted as follows: 
 11.2      (1) any taxes paid or accrued to a foreign country, the 
 11.3   commonwealth of Puerto Rico, or a United States possession or 
 11.4   political subdivision of any of the foregoing shall be a 
 11.5   deduction; and 
 11.6      (2) the subtraction from federal taxable income for 
 11.7   payments received from foreign corporations or foreign operating 
 11.8   corporations under section 290.01, subdivision 19d, clause (11), 
 11.9   shall not be allowed. 
 11.10     If a foreign operating corporation incurs a net loss, 
 11.11  neither income nor deduction from that corporation shall be 
 11.12  included in determining the net income of the unitary business. 
 11.13     (h) For purposes of determining the net income of a unitary 
 11.14  business and the factors to be used in the apportionment of net 
 11.15  income pursuant to section 290.191 or 290.20, there must be 
 11.16  included only the income and apportionment factors of domestic 
 11.17  corporations or other domestic entities other than foreign 
 11.18  operating corporations that are determined to be part of the 
 11.19  unitary business pursuant to this subdivision, notwithstanding 
 11.20  that foreign corporations or other foreign entities might be 
 11.21  included in the unitary business.  
 11.22     (i) Deductions for expenses, interest, or taxes otherwise 
 11.23  allowable under this chapter that are connected with or 
 11.24  allocable against dividends, deemed dividends described in 
 11.25  paragraph (g), or royalties, fees, or other like income 
 11.26  described in section 290.01, subdivision 19d, clause (11), shall 
 11.27  not be disallowed. 
 11.28     (j) Each corporation or other entity, except a sole 
 11.29  proprietorship, that is part of a unitary business must file 
 11.30  combined reports as the commissioner determines.  On the 
 11.31  reports, all intercompany transactions between entities included 
 11.32  pursuant to paragraph (h) must be eliminated and the entire net 
 11.33  income of the unitary business determined in accordance with 
 11.34  this subdivision is apportioned among the entities by using each 
 11.35  entity's Minnesota factors for apportionment purposes in the 
 11.36  numerators of the apportionment formula and the total factors 
 12.1   for apportionment purposes of all entities included pursuant to 
 12.2   paragraph (h) in the denominators of the apportionment formula. 
 12.3      (k) If a corporation has been divested from a unitary 
 12.4   business and is included in a combined report for a fractional 
 12.5   part of the common accounting period of the combined report:  
 12.6      (1) its income includable in the combined report is its 
 12.7   income incurred for that part of the year determined by 
 12.8   proration or separate accounting; and 
 12.9      (2) its sales, property, and payroll included in the 
 12.10  apportionment formula must be prorated or accounted for 
 12.11  separately. 
 12.12     [EFFECTIVE DATE.] This section is effective for taxable 
 12.13  years beginning after December 31, 2000. 
 12.14     Sec. 13.  Minnesota Statutes 2000, section 290.191, 
 12.15  subdivision 2, is amended to read: 
 12.16     Subd. 2.  [APPORTIONMENT FORMULA OF GENERAL APPLICATION.] 
 12.17  Except for those trades or businesses required to use a 
 12.18  different formula under subdivision 3 or section 290.35 or 
 12.19  290.36, and for those trades or businesses that receive 
 12.20  permission to use some other method under section 290.20 or 
 12.21  under subdivision 4, a trade or business required to apportion 
 12.22  its net income must apportion its income to this state on the 
 12.23  basis of the percentage obtained by taking the sum of:  
 12.24     (1) 75 percent of the percentage which the sales made 
 12.25  within this state in connection with the trade or business 
 12.26  during the tax period are of the total sales wherever made in 
 12.27  connection with the trade or business during the tax period; 
 12.28     (2) 12.5 percent of the percentage which the total tangible 
 12.29  property used by the taxpayer in this state in connection with 
 12.30  the trade or business during the tax period is of the total 
 12.31  tangible property, wherever located, used by the taxpayer in 
 12.32  connection with the trade or business during the tax period; and 
 12.33     (3) 12.5 percent of the percentage which the taxpayer's 
 12.34  total payrolls paid or incurred in this state or paid in respect 
 12.35  to labor performed in this state in connection with the trade or 
 12.36  business during the tax period are of the taxpayer's total 
 13.1   payrolls paid or incurred in connection with the trade or 
 13.2   business during the tax period.  
 13.3      [EFFECTIVE DATE.] This section is effective for taxable 
 13.4   years beginning after December 31, 2000. 
 13.5      Sec. 14.  Minnesota Statutes 2000, section 290.21, 
 13.6   subdivision 4, is amended to read: 
 13.7      Subd. 4.  (a)(1) Eighty percent of dividends received by a 
 13.8   corporation during the taxable year from another corporation, in 
 13.9   which the recipient owns 20 percent or more of the stock, by 
 13.10  vote and value, not including stock described in section 
 13.11  1504(a)(4) of the Internal Revenue Code when the corporate stock 
 13.12  with respect to which dividends are paid does not constitute the 
 13.13  stock in trade of the taxpayer or would not be included in the 
 13.14  inventory of the taxpayer, or does not constitute property held 
 13.15  by the taxpayer primarily for sale to customers in the ordinary 
 13.16  course of the taxpayer's trade or business, or when the trade or 
 13.17  business of the taxpayer does not consist principally of the 
 13.18  holding of the stocks and the collection of the income and gains 
 13.19  therefrom; and 
 13.20     (2)(i) The remaining 20 percent of dividends if the 
 13.21  dividends received are the stock in an affiliated company 
 13.22  transferred in an overall plan of reorganization and the 
 13.23  dividend is eliminated in consolidation under Treasury 
 13.24  Department Regulation 1.1502-14(a), as amended through December 
 13.25  31, 1989; or 
 13.26     (ii) The remaining 20 percent of dividends if the dividends 
 13.27  are received from a corporation which is subject to tax under 
 13.28  section 290.35 or 290.36 and which is a member of an affiliated 
 13.29  group of corporations as defined by the Internal Revenue Code 
 13.30  and the dividend is eliminated in consolidation under Treasury 
 13.31  Department Regulation 1.1502-14(a), as amended through December 
 13.32  31, 1989, or is deducted under an election under section 243(b) 
 13.33  of the Internal Revenue Code. 
 13.34     (b) Seventy percent of dividends received by a corporation 
 13.35  during the taxable year from another corporation in which the 
 13.36  recipient owns less than 20 percent of the stock, by vote or 
 14.1   value, not including stock described in section 1504(a)(4) of 
 14.2   the Internal Revenue Code when the corporate stock with respect 
 14.3   to which dividends are paid does not constitute the stock in 
 14.4   trade of the taxpayer, or does not constitute property held by 
 14.5   the taxpayer primarily for sale to customers in the ordinary 
 14.6   course of the taxpayer's trade or business, or when the trade or 
 14.7   business of the taxpayer does not consist principally of the 
 14.8   holding of the stocks and the collection of income and gain 
 14.9   therefrom.  
 14.10     (c) The dividend deduction provided in this subdivision 
 14.11  shall be allowed only with respect to dividends that are 
 14.12  included in a corporation's Minnesota taxable net income for the 
 14.13  taxable year. 
 14.14     The dividend deduction provided in this subdivision does 
 14.15  not apply to a dividend from a corporation which, for the 
 14.16  taxable year of the corporation in which the distribution is 
 14.17  made or for the next preceding taxable year of the corporation, 
 14.18  is a corporation exempt from tax under section 501 of the 
 14.19  Internal Revenue Code. 
 14.20     The dividend deduction provided in this subdivision applies 
 14.21  to the amount of regulated investment company dividends only to 
 14.22  the extent determined under section 854(b) of the Internal 
 14.23  Revenue Code. 
 14.24     The dividend deduction provided in this subdivision shall 
 14.25  not be allowed with respect to any dividend for which a 
 14.26  deduction is not allowed under the provisions of section 246(c) 
 14.27  of the Internal Revenue Code. 
 14.28     (d) If dividends received by a corporation that does not 
 14.29  have nexus with Minnesota under the provisions of Public Law 
 14.30  Number 86-272 are included as income on the return of an 
 14.31  affiliated corporation permitted or required to file a combined 
 14.32  report under section 290.34, subdivision 2, then for purposes of 
 14.33  this subdivision the determination as to whether the trade or 
 14.34  business of the corporation consists principally of the holding 
 14.35  of stocks and the collection of income and gains therefrom shall 
 14.36  be made with reference to the trade or business of the 
 15.1   affiliated corporation having a nexus with Minnesota. 
 15.2      (e) The deduction provided by this subdivision does not 
 15.3   apply if the dividends are paid by a FSC as defined in section 
 15.4   922 of the Internal Revenue Code. 
 15.5      (f) If one or more of the members of the unitary group 
 15.6   whose income is included on the combined report received a 
 15.7   dividend, the deduction under this subdivision for each member 
 15.8   of the unitary business required to file a return under this 
 15.9   chapter is the product of:  (1) 100 percent of the dividends 
 15.10  received by members of the group; (2) the percentage allowed 
 15.11  pursuant to paragraph (a) or (b); and (3) the percentage of the 
 15.12  taxpayer's business income apportionable to this state for the 
 15.13  taxable year under section 290.191 or 290.20. 
 15.14     [EFFECTIVE DATE.] This section is effective for taxable 
 15.15  years beginning after December 31, 2000. 
 15.16     Sec. 15.  Minnesota Statutes 2000, section 297I.20, is 
 15.17  amended to read: 
 15.18     297I.20 [GUARANTY ASSOCIATION ASSESSMENT OFFSET.] 
 15.19     (a) An insurance company may offset against its premium tax 
 15.20  liability to this state any amount paid for assessments made for 
 15.21  insolvencies which occur after July 31, 1994, under sections 
 15.22  60C.01 to 60C.22; and any amount paid for assessments made after 
 15.23  July 31, 1994, under Minnesota Statutes 1992, sections 61B.01 to 
 15.24  61B.16, or under sections 61B.18 to 61B.32 as follows: 
 15.25     (1) Each such assessment shall give rise to an amount of 
 15.26  offset equal to 20 percent of the amount of the assessment for 
 15.27  each of the five calendar years following the year in which the 
 15.28  assessment was paid. 
 15.29     (2) The amount of offset initially determined for each 
 15.30  taxable year is the sum of the amounts determined under clause 
 15.31  (1) for that taxable year. 
 15.32     (b)(1) Each year the commissioner shall compare total 
 15.33  guaranty association assessments levied over the preceding five 
 15.34  calendar years to the sum of all premium tax and corporate 
 15.35  franchise tax revenues collected from insurance companies, 
 15.36  without reduction for any guaranty association assessment offset 
 16.1   in the preceding calendar year, referred to in this subdivision 
 16.2   as "preceding year insurance tax revenues." 
 16.3      (2) If total guaranty association assessments levied over 
 16.4   the preceding five years exceed the preceding year insurance tax 
 16.5   revenues, insurance companies must be allowed only a 
 16.6   proportionate part of the premium tax offset calculated under 
 16.7   paragraph (a) for the current calendar year. 
 16.8      (3) The proportionate part of the premium tax offset 
 16.9   allowed in the current calendar year is determined by 
 16.10  multiplying the amount calculated under paragraph (a) by a 
 16.11  fraction.  The numerator of the fraction equals the preceding 
 16.12  year insurance tax revenues, and its denominator equals total 
 16.13  guaranty association assessments levied over the preceding 
 16.14  five-year period. 
 16.15     (4) The proportionate part of the premium tax offset that 
 16.16  is not allowed must be carried forward to subsequent tax years 
 16.17  and added to the amount of premium tax offset calculated under 
 16.18  paragraph (a) prior to application of the limitation imposed by 
 16.19  this paragraph. 
 16.20     (5) Any amount carried forward from prior years must be 
 16.21  allowed before allowance of the offset for the current year 
 16.22  calculated under paragraph (a). 
 16.23     (6) The premium tax offset limitation must be calculated 
 16.24  separately for (i) insurance companies subject to assessment 
 16.25  under sections 60C.01 to 60C.22, and (ii) insurance companies 
 16.26  subject to assessment under Minnesota Statutes 1992, sections 
 16.27  61B.01 to 61B.16, or 61B.18 to 61B.32. 
 16.28     (7) When the premium tax offset is limited by this 
 16.29  provision, the commissioner shall notify affected insurance 
 16.30  companies on a timely basis for purposes of completing premium 
 16.31  and corporate franchise tax returns.  
 16.32     (8) The guaranty associations created under sections 60C.01 
 16.33  to 60C.22, Minnesota Statutes 1992, sections 61B.01 to 61B.16, 
 16.34  and 61B.18 to 61B.32, shall provide the commissioner with the 
 16.35  necessary information on guaranty association assessments. 
 16.36     (c)(1) If the offset determined by the application of 
 17.1   paragraphs (a) and (b) exceeds the greater of the insurance 
 17.2   company's premium tax liability under this section or its 
 17.3   corporate franchise tax liability under chapter 290 prior to 
 17.4   allowance of the credit for premium taxes, then the insurance 
 17.5   company may carry forward the excess, referred to in this 
 17.6   subdivision as the "carryforward credit" to subsequent taxable 
 17.7   years. 
 17.8      (2) The carryforward credit is allowed as an offset against 
 17.9   premium tax liability for the first succeeding year to the 
 17.10  extent that the premium tax liability for that year exceeds the 
 17.11  amount of the allowable offset for the year determined under 
 17.12  paragraphs (a) and (b). 
 17.13     (3) The carryforward credit must be reduced, but not below 
 17.14  zero, by the greater of the amount of the carryforward credit 
 17.15  allowed as an offset against the premium tax under this 
 17.16  paragraph or the amount of the carryforward credit allowed as an 
 17.17  offset against the insurance company's corporate franchise tax 
 17.18  liability under section 290.35, subdivision 6, paragraph (d).  
 17.19  The remainder, if any, of the carryforward credit must be 
 17.20  carried forward to succeeding taxable years until the entire 
 17.21  carryforward credit has been credited against the insurance 
 17.22  company's liability for premium tax under this chapter and 
 17.23  corporate franchise tax under chapter 290 if applicable for that 
 17.24  taxable year. 
 17.25     (d) When an insurer has offset against taxes its payment of 
 17.26  an assessment of the Minnesota life and health guaranty 
 17.27  association, and the association pays the insurer a refund with 
 17.28  respect to the assessment under Minnesota Statutes 1992, section 
 17.29  61B.07, subdivision 6, or 61B.24, subdivision 6, then the refund 
 17.30  reduces the insurer's carryforward credit under paragraph (c).  
 17.31  If the refund exceeds the amount of the carryforward credit, the 
 17.32  excess amount must be repaid to the state by the insurers to the 
 17.33  extent of the offset in the manner the commissioner requires. 
 17.34     [EFFECTIVE DATE.] This section is effective for taxable 
 17.35  years beginning after December 31, 2000. 
 17.36     Sec. 16.  [REPEALER.] 
 18.1      Minnesota Statutes 2000, sections 290.095, subdivision 1a; 
 18.2   and 290.35, are repealed. 
 18.3      [EFFECTIVE DATE.] This section is effective for taxable 
 18.4   years beginning after December 31, 2000.