SF 1274

as introduced - 86th Legislature (2009 - 2010) Posted on 02/09/2010 02:19am

A bill for an act
relating to taxation; property taxes; individual income taxes; sales taxes and
accelerated payments; corporate franchise taxes; administration and compliance;
economic development; budget format and reserve; amending the statewide
general property tax; amending levy limits; adding a fourth bracket to the
individual income tax; adjusting the individual alternative minimum tax;
adding a clothing sales tax credit to the individual income tax; providing
for a gradual phaseout of the corporate franchise tax; repealing deductions,
credits, and additions to the corporate franchise tax; repealing the corporate
alternative minimum tax; ending the minimum fee for corporations; amending
the gross and net income allocation definitions related to corporations; amending
the June accelerated tax payments; modifying the definition of a sale and
purchase to include legal and accounting services; adjusting the sales tax
rate; eliminating the imposition and refund of sales tax on capital equipment;
eliminating an obsolete provision; repealing the sales tax exemption for clothing;
amending administration and compliance statutes to remove corporate taxpayer
requirements; requiring the budget to show estimates for two biennia; requiring
the budget to the legislature to show structural balance over two biennia;
repealing the Price of Government Law; appropriating money; amending
Minnesota Statutes 2008, sections 16A.10, subdivision 1; 16A.11, subdivision 2;
275.025, subdivisions 1, 4; 275.71, subdivisions 2, 4, 5; 289A.18, subdivision
1; 289A.19, subdivision 2; 289A.20, subdivisions 1, 4; 289A.30, subdivision 1;
289A.31, subdivision 1; 289A.60, subdivisions 1, 4, 15; 290.01, subdivisions
19f, 22, 29; 290.03; 290.04, subdivision 1; 290.06, subdivisions 1, 2c, 2d, 33;
290.091, subdivision 1; 290.0922, subdivision 1; 290.095, subdivision 3; 290.17,
subdivisions 1, 4; 290.191, subdivision 4; 290.32; 290.36; 290.9201, subdivision
1; 297A.61, subdivision 3; 297A.62, subdivision 1, by adding a subdivision;
297A.68, subdivision 5; 297A.75; 297B.02, subdivision 1; 297F.09, subdivision
10; 297G.09, subdivision 9; 469.310, subdivision 10; 469.321, subdivision 5;
469.330, subdivision 10; proposing coding for new law in Minnesota Statutes,
chapter 290; repealing Minnesota Statutes 2008, sections 16A.102, subdivision
4; 297A.67, subdivision 8.

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

ARTICLE 1

PROPERTY TAXES

Section 1.

Minnesota Statutes 2008, section 275.025, subdivision 1, is amended to read:

Subdivision 1.

Levy amount.

The state general levy is levied against
commercial-industrial property and seasonal residential recreational property, as defined in
this section. The state general levy base amount deleted text begin is $592,000,000 for taxes payable in 2002 deleted text end new text begin
for taxes payable in 2010 only is determined as follows: (1) for commercial-industrial
property, the amount of $1,003,000,000; and (2) for seasonal residential recreational
property, the amount of $39,700,000 new text end . For taxes payable in subsequent years, the levy base
amount is increased each year by multiplying the levy base amount for the prior year by
the sum of one plus the rate of increase, if any, in the implicit price deflator for government
consumption expenditures and gross investment for state and local governments prepared
by the Bureau of Economic Analysts of the United States Department of Commerce for
the 12-month period ending March 31 of the year prior to the year the taxes are payable.
The tax under this section is not treated as a local tax rate under section 469.177 and is not
the levy of a governmental unit under chapters 276A and 473F.

deleted text begin The commissioner shall increase or decrease the preliminary or final rate for a year
as necessary to account for errors and tax base changes that affected a preliminary or final
rate for either of the two preceding years. Adjustments are allowed to the extent that the
necessary information is available to the commissioner at the time the rates for a year must
be certified, and for the following reasons:
deleted text end

deleted text begin (1) an erroneous report of taxable value by a local official;
deleted text end

deleted text begin (2) an erroneous calculation by the commissioner; and
deleted text end

deleted text begin (3) an increase or decrease in taxable value for commercial-industrial or seasonal
residential recreational property reported on the abstracts of tax lists submitted under
section 275.29 that was not reported on the abstracts of assessment submitted under
section 270C.89 for the same year.
deleted text end

deleted text begin The commissioner may, but need not, make adjustments if the total difference in the tax
levied for the year would be less than $100,000.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2010 and
thereafter.
new text end

Sec. 2.

Minnesota Statutes 2008, section 275.025, subdivision 4, is amended to read:

Subd. 4.

deleted text begin Apportionment and deleted text end Levy of state general tax.

deleted text begin Ninety-five percent of the
state general tax must be levied by applying a uniform rate to all commercial-industrial tax
capacity and five percent of the state general tax must be levied by applying a uniform
rate to all seasonal residential recreational tax capacity. deleted text end On or before October 1 each year,
the commissioner of revenue shall certify the preliminary state general levy rates to each
county auditor that must be used to prepare the notices of proposed property taxes for taxes
payable in the following year. By January 1 of each year, the commissioner shall certify
the final state general levy rate to each county auditor that shall be used in spreading taxes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2010 and
thereafter.
new text end

Sec. 3.

Minnesota Statutes 2008, section 275.71, subdivision 2, is amended to read:

Subd. 2.

Levy limit base.

(a) The levy limit base for a local governmental unit for
taxes levied in 2008 is its levy aid base from the previous year, subject to any adjustments
under section 275.72. deleted text begin For taxes levied in 2009 and 2010, the levy limit base for a local
governmental unit is its adjusted levy limit base in the previous year, subject to any
adjustments under section 275.72.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2010 and
thereafter.
new text end

Sec. 4.

Minnesota Statutes 2008, section 275.71, subdivision 4, is amended to read:

Subd. 4.

Adjusted levy limit base.

For taxes levied in 2008 deleted text begin through 2010 deleted text end , the
adjusted levy limit base is equal to the levy limit base computed under subdivision 2
or section 275.72, multiplied by:

(1) one plus the lesser of 3.9 percent or the percentage growth in the implicit price
deflator new text begin , but not less than zero new text end ;

(2) one plus a percentage equal to 50 percent of the percentage increase in the number
of households, if any, for the most recent 12-month period for which data is available; and

(3) one plus a percentage equal to 50 percent of the percentage increase in the
taxable market value of the jurisdiction due to new construction of class 3 property, as
defined in section 273.13, subdivision 4, except for state-assessed utility and railroad
property, for the most recent year for which data is available.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2010 and
thereafter.
new text end

Sec. 5.

Minnesota Statutes 2008, section 275.71, subdivision 5, is amended to read:

Subd. 5.

Property tax levy limit.

For taxes levied in 2008 deleted text begin through 2010 deleted text end , the
property tax levy limit for a local governmental unit is equal to its adjusted levy limit
base determined under subdivision 4 plus any additional levy authorized under section
275.73, which is levied against net tax capacity, reduced by the sum of (i) the total amount
of aids and reimbursements that the local governmental unit is certified to receive under
sections 477A.011 to 477A.014, (ii) taconite aids under sections 298.28 and 298.282
including any aid which was required to be placed in a special fund for expenditure in
the next succeeding year, (iii) estimated payments to the local governmental unit under
section 272.029, adjusted for any error in estimation in the preceding year, and (iv) aids
under section 477A.16.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2010 and
thereafter.
new text end

ARTICLE 2

INDIVIDUAL INCOME TAXES

Section 1.

Minnesota Statutes 2008, section 290.06, subdivision 2c, is amended to read:

Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

(a) The income
taxes imposed by this chapter upon married individuals filing joint returns and surviving
spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
applying to their taxable net income the following schedule of rates:

(1) on the first deleted text begin $25,680 deleted text end new text begin $31,860 new text end , 5.35 percent;

(2) on all over deleted text begin $25,680 deleted text end new text begin $31,860 new text end , but not over deleted text begin $102,030 deleted text end new text begin $126,580 new text end , 7.05 percent;

(3) on all over deleted text begin $102,030 deleted text end new text begin $126,580, but not over $250,000 new text end , 7.85 percent new text begin ; and
new text end

new text begin (4) for taxable years beginning after December 31, 2008, and before January 1,
2010, on all over $250,000, 8.15 percent, and for taxable years beginning after December
31, 2009, on all over $250,000, 8.50 percent new text end .

Married individuals filing separate returns, estates, and trusts must compute their
income tax by applying the above rates to their taxable income, except that the income
brackets will be one-half of the above amounts.

(b) The income taxes imposed by this chapter upon unmarried individuals must be
computed by applying to taxable net income the following schedule of rates:

(1) on the first deleted text begin $17,570 deleted text end new text begin $21,800 new text end , 5.35 percent;

(2) on all over deleted text begin $17,570 deleted text end new text begin $21,800 new text end , but not over deleted text begin $57,710 deleted text end new text begin $71,590 new text end , 7.05 percent;

(3) on all over deleted text begin $57,710 deleted text end new text begin $71,590, but not over $141,250 new text end , 7.85 percent new text begin ; and
new text end

new text begin (4) for taxable years beginning after December 31, 2008, and before January 1,
2010, on all over $141,250, 8.15 percent, and for taxable years beginning after December
31, 2009, on all over $141,250, 8.50 percent new text end .

(c) The income taxes imposed by this chapter upon unmarried individuals qualifying
as a head of household as defined in section 2(b) of the Internal Revenue Code must be
computed by applying to taxable net income the following schedule of rates:

(1) on the first deleted text begin $21,630 deleted text end new text begin $26,830 new text end , 5.35 percent;

(2) on all over deleted text begin $21,630 deleted text end new text begin $26,830 new text end , but not over deleted text begin $86,910 deleted text end new text begin $107,820 new text end , 7.05 percent;

(3) on all over deleted text begin $86,910 deleted text end new text begin $107,820, but not over $212,500 new text end , 7.85 percent new text begin ; and
new text end

new text begin (4) for taxable years beginning after December 31, 2008, and before January 1,
2010, on all over $212,500, 8.15 percent, and for taxable years beginning after December
31, 2009, on all over $121,500, 8.50 percent new text end .

(d) In lieu of a tax computed according to the rates set forth in this subdivision, the
tax of any individual taxpayer whose taxable net income for the taxable year is less than
an amount determined by the commissioner must be computed in accordance with tables
prepared and issued by the commissioner of revenue based on income brackets of not
more than $100. The amount of tax for each bracket shall be computed at the rates set
forth in this subdivision, provided that the commissioner may disregard a fractional part of
a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the entire year must compute
the individual's Minnesota income tax as provided in this subdivision. After the
application of the nonrefundable credits provided in this chapter, the tax liability must
then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income
as defined in section 62 of the Internal Revenue Code and increased by the additions
required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), and
(13) and reduced by the Minnesota assignable portion of the subtraction for United States
government interest under section 290.01, subdivision 19b, clause (1), and the subtractions
under section 290.01, subdivision 19b, clauses (9), (10), (14), (15), and (16), after applying
the allocation and assignability provisions of section 290.081, clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted gross income as defined in
section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), and (13) and
reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1), (9),
(10), (14), (15), and (16).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2008.
new text end

Sec. 2.

Minnesota Statutes 2008, section 290.06, subdivision 2d, is amended to read:

Subd. 2d.

Inflation adjustment of brackets.

(a) For taxable years beginning after
December 31, deleted text begin 2000 deleted text end new text begin 2008 new text end , the minimum and maximum dollar amounts for each rate
bracket for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the
percentage determined under paragraph (b). For the purpose of making the adjustment as
provided in this subdivision all of the rate brackets provided in subdivision 2c shall be the
rate brackets as they existed for taxable years beginning after December 31, deleted text begin 1999 deleted text end new text begin 2007 new text end ,
and before January 1, deleted text begin 2001 deleted text end new text begin 2008 new text end . The rate applicable to any rate bracket must not be
changed. The dollar amounts setting forth the tax shall be adjusted to reflect the changes
in the rate brackets. The rate brackets as adjusted must be rounded to the nearest $10
amount. If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.

(b) The commissioner shall adjust the rate brackets and by the percentage determined
pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in
section 1(f)(3)(B) the word deleted text begin "1999" deleted text end new text begin "2007" new text end shall be substituted for the word "1992." For
deleted text begin 2001 deleted text end new text begin 2009 new text end , the commissioner shall then determine the percent change from the 12 months
ending on August 31, deleted text begin 1999 deleted text end new text begin 2007 new text end , to the 12 months ending on August 31, deleted text begin 2000 deleted text end new text begin 2008 new text end , and
in each subsequent year, from the 12 months ending on August 31, deleted text begin 1999 deleted text end new text begin 2007 new text end , to the 12
months ending on August 31 of the year preceding the taxable year. The determination of
the commissioner pursuant to this subdivision shall not be considered a "rule" and shall
not be subject to the Administrative Procedure Act contained in chapter 14.

No later than December 15 of each year, the commissioner shall announce the
specific percentage that will be used to adjust the tax rate brackets.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2008.
new text end

Sec. 3.

new text begin [290.0683] CLOTHING SALES TAX CREDIT.
new text end

new text begin Subdivision 1. 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) "Income" has the meaning given in section 290.067, subdivision 2a.
new text end

new text begin (c) "Dependent" has the meaning given in section 152 of the Internal Revenue Code.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed. new text end

new text begin A taxpayer is allowed a refundable credit against the tax
imposed under this chapter. The credit is equal to $60 for a married couple filing a joint
return, and $30 for all filers, plus $30 for the first dependent claimed on the return, $15
for each of the second and third dependents claimed on the return, $10 for the fourth
dependent claimed on the return, and $5 for each subsequent dependent.
new text end

new text begin Subd. 3. new text end

new text begin Limitations. new text end

new text begin The credit allowed in this section is reduced by $10 for every
$1,000 of income in excess of 200 percent of the federal poverty guidelines.
new text end

new text begin Subd. 4. 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, 2009.
new text end

Sec. 4.

Minnesota Statutes 2008, section 290.091, subdivision 1, is amended to read:

Subdivision 1.

Imposition of tax.

In addition to all other taxes imposed by this
chapter a tax is imposed on individuals, estates, and trusts equal to the excess (if any) of

(a) an amount equal to deleted text begin 6.4 deleted text end new text begin 6.55 new text end percent of alternative minimum taxable income after
subtracting the exemption amount, over

(b) the regular tax for the taxable year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2008.
new text end

ARTICLE 3

CORPORATE INCOME TAXES

Section 1.

Minnesota Statutes 2008, section 290.01, subdivision 19f, is amended to
read:

Subd. 19f.

Basis modifications affecting gain or loss on disposition of property.

(a) For individuals, estates, and trusts, the basis of property is its adjusted basis for
federal income tax purposes except as set forth in paragraphs (f), (g), and (m). deleted text begin For
corporations, the basis of property is its adjusted basis for federal income tax purposes,
without regard to the time when the property became subject to tax under this chapter or to
whether out-of-state losses or items of tax preference with respect to the property were not
deductible under this chapter, except that the modifications to the basis for federal income
tax purposes set forth in paragraphs (b) to (j) are allowed to corporations, and the resulting
modifications to federal taxable income must be made in the year in which gain or loss
on the sale or other disposition of property is recognized.
deleted text end

(b) The basis of property shall not be reduced to reflect federal investment tax credit.

(c) The basis of property subject to the accelerated cost recovery system under
section 168 of the Internal Revenue Code shall be modified to reflect the modifications in
depreciation with respect to the property provided for in subdivision 19e. For certified
pollution control facilities for which amortization deductions were elected under section
169 of the Internal Revenue Code of 1954, the basis of the property must be increased by
the amount of the amortization deduction not previously allowed under this chapter.

(d) For property acquired before January 1, 1933, the basis for computing a gain is
the fair market value of the property as of that date. The basis for determining a loss is
the cost of the property to the taxpayer less any depreciation, amortization, or depletion,
actually sustained before that date. If the adjusted cost exceeds the fair market value of the
property, then the basis is the adjusted cost regardless of whether there is a gain or loss.

(e) The basis is reduced by the allowance for amortization of bond premium if an
election to amortize was made pursuant to Minnesota Statutes 1986, section 290.09,
subdivision 13, and the allowance could have been deducted by the taxpayer under this
chapter during the period of the taxpayer's ownership of the property.

(f) For assets placed in service before January 1, 1987, deleted text begin corporations, deleted text end partnerships,
or individuals engaged in the business of mining ores other than iron ore or taconite
concentrates subject to the occupation tax under chapter 298 must use the occupation
tax basis of property used in that business.

(g) For assets placed in service before January 1, 1990, deleted text begin corporations, deleted text end partnerships,
or individuals engaged in the business of mining iron ore or taconite concentrates subject
to the occupation tax under chapter 298 must use the occupation tax basis of property
used in that business.

(h) In applying the provisions of sections 301(c)(3)(B), 312(f) and (g), and 316(a)(1)
of the Internal Revenue Code, the dates December 31, 1932, and January 1, 1933, shall be
substituted for February 28, 1913, and March 1, 1913, respectively.

(i) In applying the provisions of section 362(a) and (c) of the Internal Revenue Code,
the date December 31, 1956, shall be substituted for June 22, 1954.

(j) The basis of property shall be increased by the amount of intangible drilling
costs not previously allowed due to differences between this chapter and the Internal
Revenue Code.

(k) The adjusted basis of any corporate partner's interest in a partnership is the same
as the adjusted basis for federal income tax purposes modified as required to reflect the
basis modifications set forth in paragraphs (b) to (j). The adjusted basis of a partnership
in which the partner is an individual, estate, or trust is the same as the adjusted basis for
federal income tax purposes modified as required to reflect the basis modifications set
forth in paragraphs (f) and (g).

(l) The modifications contained in paragraphs (b) to (j) also apply to the basis of
property that is determined by reference to the basis of the same property in the hands of a
different taxpayer or by reference to the basis of different property.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 2.

Minnesota Statutes 2008, section 290.01, subdivision 22, is amended to read:

Subd. 22.

Taxable net income.

For tax years beginning after December 31, 1986,
the term "taxable net income" means:

(1) for resident individuals the same as net income;

(2) for individuals who were not residents of Minnesota for the entire year, the same
as net income except that the tax is imposed only on the Minnesota apportioned share of
that income as determined pursuant to section 290.06, subdivision 2c, paragraph (e);

(3) for all other taxpayers, the part of net income that is allocable to Minnesota by
assignment or apportionment under one or more of sections 290.17, 290.191, 290.20,
and 290.36.

For tax years beginning before January 1, 1987, the term "taxable net income"
means the net income assignable to this state pursuant to sections 290.17 to 290.20. deleted text begin For
corporations, taxable net income is then reduced by the deductions contained in section
290.21. deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 3.

Minnesota Statutes 2008, section 290.01, subdivision 29, is amended to read:

Subd. 29.

Taxable income.

The term "taxable income" means deleted text begin :
deleted text end

deleted text begin (1) for individuals, estates, and trusts, the same as deleted text end taxable net income deleted text begin ; deleted text end new text begin .
new text end

deleted text begin (2) for corporations, the taxable net income less
deleted text end

deleted text begin (i) the net operating loss deduction under section 290.095;
deleted text end

deleted text begin (ii) the dividends received deduction under section 290.21, subdivision 4;
deleted text end

deleted text begin (iii) the exemption for operating in a job opportunity building zone under section
469.317;
deleted text end

deleted text begin (iv) the exemption for operating in a biotechnology and health sciences industry
zone under section 469.337; and
deleted text end

deleted text begin (v) the exemption for operating in an international economic development zone
under section 469.326.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 4.

Minnesota Statutes 2008, section 290.03, is amended to read:

290.03 INCOME TAX; IMPOSITION, CLASSES OF TAXPAYERS.

An annual tax for each taxable year, computed in the manner and at the rates
hereinafter provided, is hereby imposed upon the taxable income for such year of the
following classes of taxpayers:

(1) Resident and nonresident individuals;

(2) Estates of decedents, dying domiciled within or without this state;

(3) Trusts deleted text begin (except those taxable as corporations) deleted text end however created by residents or
nonresidents or by domestic or foreign corporations.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 5.

Minnesota Statutes 2008, section 290.04, subdivision 1, is amended to read:

Subdivision 1.

Accrual.

deleted text begin The liability for the tax imposed by section 290.02 shall
arise upon the first day of the taxable year upon which a domestic corporation exercises
any of the privileges specified in section 290.02 or exists as a corporation, or on which
a foreign corporation is possessed of the privilege for the grant to it of the privilege of
transacting or for the actual transaction by it of any local business within this state during
any part of its taxable year, in corporate or organized form. deleted text end The liability for the tax
imposed by section 290.03 shall arise concurrently with the receipt or accrual of income
during the taxable year. The provisions shall in no way affect the determination of the
amount of such taxes, the time for making returns, and the time for paying such taxes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 6.

Minnesota Statutes 2008, section 290.06, subdivision 1, is amended to read:

Subdivision 1.

Computation, corporations.

new text begin (a) For taxable years beginning before
January 1, 2010, new text end the franchise tax imposed upon corporations shall be computed by
applying to their taxable income the rate of 9.8 percent.

new text begin (b) For taxable years beginning after December 31, 2009, the rates listed below
apply to taxable years beginning during the calendar year referenced below:
new text end

	new text begin Taxable years beginning during the calendar year: new text end	new text begin Tax rate: new text end
	new text begin 2010 new text end	new text begin 7.35 percent new text end
	new text begin 2011 new text end	new text begin 4.9 percent new text end
	new text begin 2012 new text end	new text begin 2.45 percent new text end
	new text begin 2013 and later years new text end	new text begin 0 percent 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, 2009.
new text end

Sec. 7.

Minnesota Statutes 2008, section 290.06, subdivision 33, is amended to read:

Subd. 33.

Bovine testing credit.

(a) An owner of cattle in Minnesota may take a
credit against the tax due under this chapter for an amount equal to: (1) for deleted text begin corporate
filers, including deleted text end shareholders of an S corporation under section 290.9725, 25 percent of
the expenses incurred during the taxable year to conduct tuberculosis testing on those
cattle; and (2) for all other filers, one-half the expenses incurred during the taxable year to
conduct tuberculosis testing on those cattle.

(b) If the amount of credit which the taxpayer is eligible to receive under this
subdivision exceeds the taxpayer's tax liability under this chapter, the commissioner of
revenue shall refund the excess to the taxpayer.

(c) The amount necessary to pay claims for the refund provided in this subdivision is
appropriated from the general fund to the commissioner of revenue.

(d) Expenses incurred in a calendar year in which tuberculosis testing of cattle in
Minnesota is not federally required are not allowed in claiming the credit under paragraph
(a).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 8.

Minnesota Statutes 2008, section 290.0922, subdivision 1, is amended to read:

Subdivision 1.

Imposition.

deleted text begin (a) In addition to the tax imposed by this chapter without
regard to this section, the franchise tax imposed on a corporation required to file under
section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation
under section 290.9725 for the taxable year includes a tax equal to the following amounts:
deleted text end

deleted text begin If the sum of the corporation's Minnesota property, payrolls, and sales or receipts is: deleted text end						deleted text begin the tax equals: deleted text end
		deleted text begin less than deleted text end	deleted text begin $ deleted text end	deleted text begin 500,000 deleted text end		deleted text begin $ deleted text end	deleted text begin 0 deleted text end
	deleted text begin $ deleted text end	deleted text begin 500,000 to deleted text end	deleted text begin $ deleted text end	deleted text begin 999,999 deleted text end		deleted text begin $ deleted text end	deleted text begin 100 deleted text end
	deleted text begin $ deleted text end	deleted text begin 1,000,000 to deleted text end	deleted text begin $ deleted text end	deleted text begin 4,999,999 deleted text end		deleted text begin $ deleted text end	deleted text begin 300 deleted text end
	deleted text begin $ deleted text end	deleted text begin 5,000,000 to deleted text end	deleted text begin $ deleted text end	deleted text begin 9,999,999 deleted text end		deleted text begin $ deleted text end	deleted text begin 1,000 deleted text end
	deleted text begin $ deleted text end	deleted text begin 10,000,000 to deleted text end	deleted text begin $ deleted text end	deleted text begin 19,999,999 deleted text end		deleted text begin $ deleted text end	deleted text begin 2,000 deleted text end
	deleted text begin $ deleted text end	deleted text begin 20,000,000 or more deleted text end				deleted text begin $ deleted text end	deleted text begin 5,000 deleted text end

deleted text begin (b) deleted text end A tax is imposed for each taxable year on a corporation required to file a return
under section 289A.12, subdivision 3, that is treated as an "S" corporation under section
290.9725 and on a partnership required to file a return under section 289A.12, subdivision
3, other than a partnership that derives over 80 percent of its income from farming. The
tax imposed under this paragraph is due on or before the due date of the return for the
taxpayer due under section 289A.18, subdivision 1. The commissioner shall prescribe
the return to be used for payment of this tax. The tax under this paragraph is equal to
the following amounts:

If the sum of the S corporation's or partnership's Minnesota property, payrolls, and sales or receipts is:							the tax equals:
		less than	$	500,000		$	0
	$	500,000 to	$	999,999		$	100
	$	1,000,000 to	$	4,999,999		$	300
	$	5,000,000 to	$	9,999,999		$	1,000
	$	10,000,000 to	$	19,999,999		$	2,000
	$	20,000,000 or more				$	5,000

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 9.

Minnesota Statutes 2008, section 290.095, subdivision 3, is amended to read:

Subd. 3.

Carryover.

(a) A net operating loss incurred in a taxable year: (i)
beginning after December 31, 1986, shall be a net operating loss carryover to each of the
15 taxable years following the taxable year of such loss; (ii) beginning before January 1,
1987, shall be a net operating loss carryover to each of the five taxable years following the
taxable year of such loss subject to the provisions of Minnesota Statutes 1986, section
290.095; and (iii) beginning before January 1, 1987, shall be a net operating loss carryback
to each of the three taxable years preceding the loss year subject to the provisions of
Minnesota Statutes 1986, section 290.095.

(b) The entire amount of the net operating loss for any taxable year shall be carried to
the earliest of the taxable years to which such loss may be carried. The portion of such loss
which shall be carried to each of the other taxable years shall be the excess, if any, of the
amount of such loss over the sum of the taxable net income, adjusted by the modifications
specified in subdivision 4, for each of the taxable years to which such loss may be carried.

deleted text begin (c) Where a corporation apportions its income under the provisions of section
290.191, the net operating loss deduction incurred in any taxable year shall be allowed
to the extent of the apportionment ratio of the loss year.
deleted text end

deleted text begin (d) deleted text end new text begin (c) new text end The provisions of sections 381, 382, and 384 of the Internal Revenue Code
apply to carryovers in certain corporate acquisitions and special limitations on net
operating loss carryovers. The limitation amount determined under section 382 shall be
applied to net income, before apportionment, in each post change year to which a loss
is carried.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 10.

Minnesota Statutes 2008, section 290.17, subdivision 1, is amended to read:

Subdivision 1.

Scope of allocation rules.

(a) The income of resident individuals
is not subject to allocation outside this state. The allocation rules apply to nonresident
individuals, estates, trusts, nonresident partners of partnerships, new text begin and new text end nonresident
shareholders of corporations treated as "S" corporations under section 290.9725 deleted text begin , and all
corporations not having such an election in effect deleted text end . If a partnership deleted text begin or corporation deleted text end would
not otherwise be subject to the allocation rules, but conducts a trade or business that is part
of a unitary business involving another legal entity that is subject to the allocation rules,
the partnership or corporation is subject to the allocation rules.

(b) Expenses, losses, and other deductions (referred to collectively in this paragraph
as "deductions") must be allocated along with the item or class of gross income to which
they are definitely related for purposes of assignment under this section or apportionment
under section 290.191, 290.20, or 290.36. Deductions definitely related to any item of
gross income assigned under subdivision 2, paragraph (e), are assigned to the taxpayer's
domicile.

(c) In the case of an individual who is a resident for only part of a taxable year,
the individual's income, gains, losses, and deductions from the distributive share of a
partnership, S corporation, trust, or estate are not subject to allocation outside this state
to the extent of the distributive share multiplied by a ratio, the numerator of which is
the number of days the individual was a resident of this state during the tax year of the
partnership, S corporation, trust, or estate, and the denominator of which is the number of
days in the taxable year of the partnership, S corporation, trust, or estate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 11.

Minnesota Statutes 2008, section 290.17, subdivision 4, is amended to read:

Subd. 4.

Unitary business principle.

(a) If a trade or business conducted wholly
within this state or partly within and partly without this state is part of a unitary business,
the entire income of the unitary business is subject to apportionment pursuant to section
290.191. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
business is considered to be derived from any particular source and none may be allocated
to a particular place except as provided by the applicable apportionment formula. The
provisions of this subdivision do not apply to business income subject to subdivision 5,
income of an insurance company, or income of an investment company determined under
section 290.36.

(b) The term "unitary business" means business activities or operations which
result in a flow of value between them. The term may be applied within a single legal
entity or between multiple entities and without regard to whether each entity is a sole
proprietorship, deleted text begin a corporation, deleted text end a partnership or a trust.

(c) Unity is presumed whenever there is unity of ownership, operation, and use,
evidenced by centralized management or executive force, centralized purchasing,
advertising, accounting, or other controlled interaction, but the absence of these
centralized activities will not necessarily evidence a nonunitary business. Unity is also
presumed when business activities or operations are of mutual benefit, dependent upon or
contributory to one another, either individually or as a group.

(d) Where a business operation conducted in Minnesota is owned by a business
entity that carries on business activity outside the state different in kind from that
conducted within this state, and the other business is conducted entirely outside the state, it
is presumed that the two business operations are unitary in nature, interrelated, connected,
and interdependent unless it can be shown to the contrary.

(e) Unity of ownership is not deemed to exist when a corporation is involved unless
that corporation is a member of a group of two or more business entities and more than 50
percent of the voting stock of each member of the group is directly or indirectly owned
by a common owner or by common owners, either corporate or noncorporate, or by one
or more of the member corporations of the group. For this purpose, the term "voting
stock" shall include membership interests of mutual insurance holding companies formed
under section 66A.40.

(f) The net income and apportionment factors under section 290.191 or 290.20 of
deleted text begin foreign corporations and other deleted text end foreign entities which are part of a unitary business shall
not be included in the net income or the apportionment factors of the unitary business.
A deleted text begin foreign corporation or other deleted text end foreign entity which is required to file a return under this
chapter shall file on a separate return basis. deleted text begin The net income and apportionment factors
under section 290.191 or 290.20 of foreign operating corporations shall not be included in
the net income or the apportionment factors of the unitary business except as provided in
paragraph (g). deleted text end

deleted text begin (g) The adjusted net income of a foreign operating corporation shall be deemed to
be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
proportion to each shareholder's ownership, with which such corporation is engaged in
a unitary business. Such deemed dividend shall be treated as a dividend under section
290.21, subdivision 4.
deleted text end

deleted text begin Dividends actually paid by a foreign operating corporation to a corporate shareholder
which is a member of the same unitary business as the foreign operating corporation shall
be eliminated from the net income of the unitary business in preparing a combined report
for the unitary business. The adjusted net income of a foreign operating corporation
shall be its net income adjusted as follows:
deleted text end

deleted text begin (1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
Rico, or a United States possession or political subdivision of any of the foregoing shall
be a deduction; and
deleted text end

deleted text begin (2) the subtraction from federal taxable income for payments received from foreign
corporations or foreign operating corporations under section 290.01, subdivision 19d,
clause (10), shall not be allowed.
deleted text end

deleted text begin If a foreign operating corporation incurs a net loss, neither income nor deduction
from that corporation shall be included in determining the net income of the unitary
business.
deleted text end

deleted text begin (h) deleted text end new text begin (g) new text end For purposes of determining the net income of a unitary business and the
factors to be used in the apportionment of net income pursuant to section 290.191 or
290.20, there must be included only the income and apportionment factors of deleted text begin domestic
corporations or other deleted text end domestic entities other than foreign operating corporations that are
determined to be part of the unitary business pursuant to this subdivision, notwithstanding
that deleted text begin foreign corporations or other deleted text end foreign entities might be included in the unitary business.

deleted text begin (i) deleted text end new text begin (h) new text end Deductions for expenses, interest, or taxes otherwise allowable under
this chapter that are connected with or allocable against dividends, deemed dividends
described in paragraph (g), or royalties, fees, or other like income described in section
290.01, subdivision 19d, clause (10), shall not be disallowed.

deleted text begin (j) deleted text end new text begin (i) new text end Each deleted text begin corporation or other deleted text end entity, except a sole proprietorship, that is part of
a unitary business must file combined reports as the commissioner determines. On the
reports, all intercompany transactions between entities included pursuant to paragraph
(h) must be eliminated and the entire net income of the unitary business determined in
accordance with this subdivision is apportioned among the entities by using each entity's
Minnesota factors for apportionment purposes in the numerators of the apportionment
formula and the total factors for apportionment purposes of all entities included pursuant
to paragraph (h) in the denominators of the apportionment formula.

deleted text begin (k) If a corporation has been divested from a unitary business and is included in a
combined report for a fractional part of the common accounting period of the combined
report:
deleted text end

deleted text begin (1) its income includable in the combined report is its income incurred for that part
of the year determined by proration or separate accounting; and
deleted text end

deleted text begin (2) its sales, property, and payroll included in the apportionment formula must
be prorated or accounted for separately.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 12.

Minnesota Statutes 2008, section 290.191, subdivision 4, is amended to read:

Subd. 4.

Apportionment formula for certain mail order businesses.

If the
business of a deleted text begin corporation, deleted text end partnership, or proprietorship consists exclusively of the
selling of tangible personal property and services at retail, as defined in section 297A.61,
subdivision 4, paragraph (a), in response to orders received by United States mail,
telephone, facsimile, or other electronic media, and 99 percent of the taxpayer's property
and payroll is within Minnesota, then the taxpayer may apportion net income to Minnesota
based solely upon the percentage that the sales made within this state in connection
with its trade or business during the tax period are of the total sales wherever made in
connection with the trade or business during the tax period. Property and payroll factors
are disregarded. In determining eligibility for this subdivision:

(1) the sale not in the ordinary course of business of tangible or intangible assets
used in conducting business activities must be disregarded; and

(2) property and payroll at a distribution center outside of Minnesota are disregarded
if the sole activity at the distribution center is the filling of orders, and no solicitation
of orders occurs at the distribution center.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 13.

Minnesota Statutes 2008, section 290.32, is amended to read:

290.32 TAXES FOR PART OF YEAR, COMPUTATION.

When under this chapter a taxpayer is permitted or required to make a return for a
fractional part of a year, the tax shall be computed in the same manner as if such fractional
part of a year were an entire year, except:

(1) A taxpayer who is permitted to change the basis for reporting income from a
fiscal to a calendar year shall make a separate return for the period between the close of
the taxpayer's last fiscal year and the following December 31st; if the change is from a
calendar to a fiscal year, a separate return shall be made for the period between the close
of the taxpayer's last calendar year and the date designated as the close of the fiscal year;
and if the change is from one fiscal year to another fiscal year, a separate return shall be
made for the period between the close of the former fiscal year and the date designated as
the close of the new fiscal year. deleted text begin The taxable net income, or for corporations the taxable
net income as reduced by the deductions contained in section 290.21, for any such period
shall be put on an annual basis by multiplying the amount thereof by 12 and dividing by
the number of months included in the period for which such separate return is made; and
the tax shall be that part of a tax, computed on the taxable net income put on such annual
basis which the number of months in such period bears to 12 months. deleted text end

(2) Where any of the enumerated changes in accounting period referred to in clause
(1) involve a 52-53 week fiscal year and any such change results in a short period of less
than seven days, such short period shall be added to and deemed a part of the following
taxable year. If the change results in a short period of seven or more days, but less than
359 days, the taxable net income, or for corporations the taxable net income as reduced
by the deductions contained in section 290.21, for any such period shall be placed on an
annual basis by multiplying such income by 365 and dividing the result by the same
number of days in the short period; and the tax shall be that part of a tax, computed on the
taxable net income placed on such annual basis which the number of days in such short
period bears to 365 days. Where the short period is 359 days or more, the tax shall be
computed in the same manner as if such short period were an entire year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 14.

Minnesota Statutes 2008, section 290.36, is amended to read:

290.36 INVESTMENT COMPANIES; REPORT OF NET INCOME;
COMPUTATION OF AMOUNT OF INCOME ALLOCABLE TO STATE.

The taxable net income of investment companies shall be computed as follows:

Each investment company transacting business as such in this state shall report to
the commissioner the net income returned by the company for the taxable year to the
United States under the provisions of the Internal Revenue Code, less the credits provided
therein and subject to the adjustments required by this chapter. The commissioner shall
compute therefrom the taxable net income of the investment company by assigning to this
state that proportion of such net income, less such credits which the aggregate of the gross
payments collected by the company during the taxable year from old and new business
upon investment contracts issued by the company and held by residents of this state, bears
to the total amount of the gross payments collected during such year by the company from
such business upon investment contracts issued by the company and held by persons
residing within the state and elsewhere.

As used in this section, the term "investment company" means any person,
copartnership, new text begin or new text end association, deleted text begin or corporation, deleted text end whether local or foreign, coming within
the purview of section 54.26, and who or which is registered under the Investment
Company Act of 1940 (United States Code, title 15, section 80a-1 and following), as
amended through December 31, 1986, and who or which solicits or receives payments
to be made to itself and which issues therefor, or has issued therefor and has or shall
have outstanding so-called bonds, shares, coupons, certificates of membership, or other
evidences of obligation or agreement or pretended agreement to return to the holders or
owners thereof money or anything of value at some future date; and as to whom the
gross payments received during the taxable year in question upon outstanding investment
contracts, plus interest and dividends earned on investment contracts determined by
prorating the total dividends and interest for the taxable year in question in the same
proportion that certificate reserves as defined by the Investment Company Act of 1940, as
amended through December 31, 1986, is to total assets, shall be at least 50 percent of the
company's gross payments upon investment contracts plus gross income from all other
sources except dividends from subsidiaries for the taxable year in question. The term
"investment contract" shall mean any such so-called bonds, shares, coupons, certificates
of membership, or other evidences of obligation or agreement or pretended agreement
issued by an investment company.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 15.

Minnesota Statutes 2008, section 290.9201, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) "Entertainer" means an individual who is not a
resident of Minnesota or a state with which Minnesota has a reciprocal agreement under
section 290.081 who performs acts in Minnesota that amuse, entertain, or inform. For
purposes of this section, "entertainer" includes, but is not limited to, a musician, singer,
dancer, comedian, thespian, athlete, and public speaker.

(b) Entertainment entity means either: (1) an entertainer who is paid compensation
for providing entertainment as an independent contractor, new text begin or new text end (2) a partnership that is
paid compensation for entertainment provided by entertainers who are partners deleted text begin , or (3) a
corporation that is paid compensation for entertainment provided by entertainers who are
shareholders of the corporation deleted text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 16. new text begin EXPIRATION.
new text end

new text begin Minnesota Statutes 2008, sections 290.01, subdivisions 19c, 19d, and 19e; 290.014,
subdivision 5; 290.02; 290.06, subdivisions 1, 24, and 27; 290.068, subdivision 1;
290.0921, subdivisions 1, 2, 3, 3a, 4, 6, 7, and 8; 290.21, subdivisions 1 and 4; 290.371,
subdivisions 1, 2, 3, and 4; and 290.432, expire after December 31, 2012.
new text end

ARTICLE 4

SALES AND USE TAXES

Section 1.

Minnesota Statutes 2008, section 297A.61, subdivision 3, is amended to
read:

Subd. 3.

Sale and purchase.

(a) "Sale" and "purchase" include, but are not limited
to, each of the transactions listed in this subdivision.

(b) Sale and purchase include:

(1) any transfer of title or possession, or both, of tangible personal property, whether
absolutely or conditionally, for a consideration in money or by exchange or barter; and

(2) the leasing of or the granting of a license to use or consume, for a consideration
in money or by exchange or barter, tangible personal property, other than a manufactured
home used for residential purposes for a continuous period of 30 days or more.

(c) Sale and purchase include the production, fabrication, printing, or processing of
tangible personal property for a consideration for consumers who furnish either directly or
indirectly the materials used in the production, fabrication, printing, or processing.

(d) Sale and purchase include the preparing for a consideration of food.
Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited
to, the following:

(1) prepared food sold by the retailer;

(2) soft drinks;

(3) candy;

(4) dietary supplements; and

(5) all food sold through vending machines.

(e) A sale and a purchase includes the furnishing for a consideration of electricity,
gas, water, or steam for use or consumption within this state.

(f) A sale and a purchase includes the transfer for a consideration of prewritten
computer software whether delivered electronically, by load and leave, or otherwise.

(g) A sale and a purchase includes the furnishing for a consideration of the following
services:

(1) the privilege of admission to places of amusement, recreational areas, or athletic
events, and the making available of amusement devices, tanning facilities, reducing
salons, steam baths, Turkish baths, health clubs, and spas or athletic facilities;

(2) lodging and related services by a hotel, rooming house, resort, campground,
motel, or trailer camp, including furnishing the guest of the facility with access to
telecommunication services, and the granting of any similar license to use real property
in a specific facility, other than the renting or leasing of it for a continuous period of
30 days or more under an enforceable written agreement that may not be terminated
without prior notice;

(3) nonresidential parking services, whether on a contractual, hourly, or other
periodic basis, except for parking at a meter;

(4) the granting of membership in a club, association, or other organization if:

(i) the club, association, or other organization makes available for the use of its
members sports and athletic facilities, without regard to whether a separate charge is
assessed for use of the facilities; and

(ii) use of the sports and athletic facility is not made available to the general public
on the same basis as it is made available to members.

Granting of membership means both onetime initiation fees and periodic membership
dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and
squash courts; basketball and volleyball facilities; running tracks; exercise equipment;
swimming pools; and other similar athletic or sports facilities;

(5) delivery of aggregate materials by a third party, excluding delivery of aggregate
material used in road construction, and delivery of concrete block by a third party if
the delivery would be subject to the sales tax if provided by the seller of the concrete
block; and

(6) services as provided in this clause:

(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
include services provided by coin operated facilities operated by the customer;

(ii) motor vehicle washing, waxing, and cleaning services, including services
provided by coin operated facilities operated by the customer, and rustproofing,
undercoating, and towing of motor vehicles;

(iii) building and residential cleaning, maintenance, and disinfecting services and
pest control and exterminating services;

(iv) detective, security, burglar, fire alarm, and armored car services; but not
including services performed within the jurisdiction they serve by off-duty licensed peace
officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit
organization for monitoring and electronic surveillance of persons placed on in-home
detention pursuant to court order or under the direction of the Minnesota Department
of Corrections;

(v) pet grooming services;

(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor
plant care; tree, bush, shrub, and stump removal, except when performed as part of a land
clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for
public utility lines. Services performed under a construction contract for the installation of
shrubbery, plants, sod, trees, bushes, and similar items are not taxable;

(vii) massages, except when provided by a licensed health care facility or
professional or upon written referral from a licensed health care facility or professional for
treatment of illness, injury, or disease; and

(viii) the furnishing of lodging, board, and care services for animals in kennels and
other similar arrangements, but excluding veterinary and horse boarding services new text begin ;
new text end

new text begin (7) legal services; and
new text end

new text begin (8) accounting, bookkeeping, and tax preparation services new text end .

In applying the provisions of this chapter, the terms "tangible personal property"
and "retail sale" include taxable services listed in clause (6), items (i) to (vi) and (viii),
and the provision of these taxable services, unless specifically provided otherwise.
Services performed by an employee for an employer are not taxable. Services performed
by a partnership or association for another partnership or association are not taxable if
one of the entities owns or controls more than 80 percent of the voting power of the
equity interest in the other entity. Services performed between members of an affiliated
group of corporations are not taxable. For purposes of the preceding sentence, "affiliated
group of corporations" means those entities that would be classified as members of an
affiliated group as defined under United States Code, title 26, section 1504, disregarding
the exclusions in section 1504(b).

For purposes of clause (5), "road construction" means construction of (1) public
roads, (2) cartways, and (3) private roads in townships located outside of the seven-county
metropolitan area up to the point of the emergency response location sign.

(h) A sale and a purchase includes the furnishing for a consideration of tangible
personal property or taxable services by the United States or any of its agencies or
instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political
subdivisions.

(i) A sale and a purchase includes the furnishing for a consideration of
telecommunications services, ancillary services associated with telecommunication
services, cable television services, direct satellite services, and ring tones.
Telecommunication services include, but are not limited to, the following services,
as defined in section 297A.669: air-to-ground radiotelephone service, mobile
telecommunication service, postpaid calling service, prepaid calling service, prepaid
wireless calling service, and private communication services. The services in this
paragraph are taxed to the extent allowed under federal law.

(j) A sale and a purchase includes the furnishing for a consideration of installation if
the installation charges would be subject to the sales tax if the installation were provided
by the seller of the item being installed.

(k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer
to a customer when (1) the vehicle is rented by the customer for a consideration, or (2)
the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section
65B.29, subdivision 1, clause (1).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases after June
30, 2011.
new text end

Sec. 2.

Minnesota Statutes 2008, section 297A.62, subdivision 1, is amended to read:

Subdivision 1.

Generally.

Except as otherwise provided in subdivision 3 or in this
chapter, a sales tax of deleted text begin 6.5 deleted text end new text begin ... new text end percent is imposed new text begin after December 31, 2009, and ... percent
after June 30, 2011, new text end on the gross receipts from retail sales as defined in section 297A.61,
subdivision 4, made in this state or to a destination in this state by a person who is required
to have or voluntarily obtains a permit under section 297A.83, subdivision 1.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 3.

Minnesota Statutes 2008, section 297A.62, is amended by adding a subdivision
to read:

new text begin Subd. 1a. new text end

new text begin Sales and use tax rate under Minnesota Constitution, article XI,
section 15. new text end

new text begin Pursuant to the requirements of the Minnesota Constitution, article XI,
section 15, the proportion of the sales and use tax rate in subdivision 1 dedicated for the
purposes defined in that section is ... percent after December 31, 2009, and ... percent
after June 30, 2011.
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, 2009.
new text end

Sec. 4.

Minnesota Statutes 2008, section 297A.68, subdivision 5, is amended to read:

Subd. 5.

Capital equipment.

(a) Capital equipment is exempt. deleted text begin The tax must be
imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and
then refunded in the manner provided in section 297A.75.
deleted text end

"Capital equipment" means machinery and equipment purchased or leased, and used
in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining,
or refining tangible personal property to be sold ultimately at retail if the machinery and
equipment are essential to the integrated production process of manufacturing, fabricating,
mining, or refining. Capital equipment also includes machinery and equipment
used primarily to electronically transmit results retrieved by a customer of an online
computerized data retrieval system.

(b) Capital equipment includes, but is not limited to:

(1) machinery and equipment used to operate, control, or regulate the production
equipment;

(2) machinery and equipment used for research and development, design, quality
control, and testing activities;

(3) environmental control devices that are used to maintain conditions such as
temperature, humidity, light, or air pressure when those conditions are essential to and are
part of the production process;

(4) materials and supplies used to construct and install machinery or equipment;

(5) repair and replacement parts, including accessories, whether purchased as spare
parts, repair parts, or as upgrades or modifications to machinery or equipment;

(6) materials used for foundations that support machinery or equipment;

(7) materials used to construct and install special purpose buildings used in the
production process;

(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed
as part of the delivery process regardless if mounted on a chassis, repair parts for
ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and

(9) machinery or equipment used for research, development, design, or production
of computer software.

(c) Capital equipment does not include the following:

(1) motor vehicles taxed under chapter 297B;

(2) machinery or equipment used to receive or store raw materials;

(3) building materials, except for materials included in paragraph (b), clauses (6)
and (7);

(4) machinery or equipment used for nonproduction purposes, including, but not
limited to, the following: plant security, fire prevention, first aid, and hospital stations;
support operations or administration; pollution control; and plant cleaning, disposal of
scrap and waste, plant communications, space heating, cooling, lighting, or safety;

(5) farm machinery and aquaculture production equipment as defined by section
297A.61, subdivisions 12 and 13;

(6) machinery or equipment purchased and installed by a contractor as part of an
improvement to real property;

(7) machinery and equipment used by restaurants in the furnishing, preparing, or
serving of prepared foods as defined in section 297A.61, subdivision 31;

(8) machinery and equipment used to furnish the services listed in section 297A.61,
subdivision 3, paragraph (g), clause (6), items (i) to (vi) and (viii);

(9) machinery or equipment used in the transportation, transmission, or distribution
of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines,
tanks, mains, or other means of transporting those products. This clause does not apply to
machinery or equipment used to blend petroleum or biodiesel fuel as defined in section
239.77; or

(10) any other item that is not essential to the integrated process of manufacturing,
fabricating, mining, or refining.

(d) For purposes of this subdivision:

(1) "Equipment" means independent devices or tools separate from machinery but
essential to an integrated production process, including computers and computer software,
used in operating, controlling, or regulating machinery and equipment; and any subunit or
assembly comprising a component of any machinery or accessory or attachment parts of
machinery, such as tools, dies, jigs, patterns, and molds.

(2) "Fabricating" means to make, build, create, produce, or assemble components or
property to work in a new or different manner.

(3) "Integrated production process" means a process or series of operations through
which tangible personal property is manufactured, fabricated, mined, or refined. For
purposes of this clause, (i) manufacturing begins with the removal of raw materials
from inventory and ends when the last process prior to loading for shipment has been
completed; (ii) fabricating begins with the removal from storage or inventory of the
property to be assembled, processed, altered, or modified and ends with the creation
or production of the new or changed product; (iii) mining begins with the removal of
overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
ends when the last process before stockpiling is completed; and (iv) refining begins with
the removal from inventory or storage of a natural resource and ends with the conversion
of the item to its completed form.

(4) "Machinery" means mechanical, electronic, or electrical devices, including
computers and computer software, that are purchased or constructed to be used for the
activities set forth in paragraph (a), beginning with the removal of raw materials from
inventory through completion of the product, including packaging of the product.

(5) "Machinery and equipment used for pollution control" means machinery and
equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
described in paragraph (a).

(6) "Manufacturing" means an operation or series of operations where raw materials
are changed in form, composition, or condition by machinery and equipment and which
results in the production of a new article of tangible personal property. For purposes of
this subdivision, "manufacturing" includes the generation of electricity or steam to be
sold at retail.

(7) "Mining" means the extraction of minerals, ores, stone, or peat.

(8) "Online data retrieval system" means a system whose cumulation of information
is equally available and accessible to all its customers.

(9) "Primarily" means machinery and equipment used 50 percent or more of the time
in an activity described in paragraph (a).

(10) "Refining" means the process of converting a natural resource to an intermediate
or finished product, including the treatment of water to be sold at retail.

(11) This subdivision does not apply to telecommunications equipment as
provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit
for telecommunications services.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 5.

Minnesota Statutes 2008, section 297A.75, is amended to read:

297A.75 REFUND; APPROPRIATION.

Subdivision 1.

Tax collected.

The tax on the gross receipts from the sale of the
following exempt items must be imposed and collected as if the sale were taxable and the
rate under section 297A.62, subdivision 1, applied. The exempt items include:

deleted text begin (1) capital equipment exempt under section 297A.68, subdivision 5;
deleted text end

deleted text begin (2) deleted text end new text begin (1) new text end building materials for an agricultural processing facility exempt under section
297A.71, subdivision 13;

deleted text begin (3) deleted text end new text begin (2) new text end building materials for mineral production facilities exempt under section
297A.71, subdivision 14;

deleted text begin (4) deleted text end new text begin (3) new text end building materials for correctional facilities under section 297A.71,
subdivision 3;

deleted text begin (5) deleted text end new text begin (4) new text end building materials used in a residence for disabled veterans exempt under
section 297A.71, subdivision 11;

deleted text begin (6) deleted text end new text begin (5) new text end elevators and building materials exempt under section 297A.71, subdivision
12;

deleted text begin (7) deleted text end new text begin (6) new text end building materials for the Long Lake Conservation Center exempt under
section 297A.71, subdivision 17;

deleted text begin (8) materials, supplies, fixtures, furnishings, and equipment for a county law
enforcement and family service center under section 297A.71, subdivision 26;
deleted text end

deleted text begin (9) deleted text end new text begin (7) new text end materials and supplies for qualified low-income housing under section
297A.71, subdivision 23;

deleted text begin (10) deleted text end new text begin (8) new text end materials, supplies, and equipment for municipal electric utility facilities
under section 297A.71, subdivision 35;

deleted text begin (11) deleted text end new text begin (9) new text end equipment and materials used for the generation, transmission, and
distribution of electrical energy and an aerial camera package exempt under section
297A.68, subdivision 37;

deleted text begin (12) deleted text end new text begin (10) new text end tangible personal property and taxable services and construction materials,
supplies, and equipment exempt under section 297A.68, subdivision 41;

deleted text begin (13) deleted text end new text begin (11) new text end commuter rail vehicle and repair parts under section 297A.70, subdivision
3, clause (11); and

deleted text begin (14) deleted text end new text begin (12) new text end materials, supplies, and equipment for construction or improvement of
projects and facilities under section 297A.71, subdivision 40.

Subd. 2.

Refund; eligible persons.

Upon application on forms prescribed by the
commissioner, a refund equal to the tax paid on the gross receipts of the exempt items
must be paid to the applicant. Only the following persons may apply for the refund:

(1) for subdivision 1, clauses (1) deleted text begin to (3) deleted text end new text begin and (2) new text end , the applicant must be the purchaser;

(2) for subdivision 1, clauses deleted text begin (4), (7), deleted text end new text begin (3) new text end and deleted text begin (8) deleted text end new text begin (6) new text end , the applicant must be the
governmental subdivision;

(3) for subdivision 1, clause deleted text begin (5) deleted text end new text begin (4) new text end , the applicant must be the recipient of the
benefits provided in United States Code, title 38, chapter 21;

(4) for subdivision 1, clause deleted text begin (6) deleted text end new text begin (5) new text end , the applicant must be the owner of the
homestead property;

(5) for subdivision 1, clause deleted text begin (9) deleted text end new text begin (7) new text end , the owner of the qualified low-income housing
project;

(6) for subdivision 1, clause deleted text begin (10) deleted text end new text begin (8) new text end , the applicant must be a municipal electric
utility or a joint venture of municipal electric utilities;

(7) for subdivision 1, clauses deleted text begin (11) deleted text end new text begin (9) new text end and deleted text begin (12) deleted text end new text begin (10) new text end , the owner of the qualifying
business; and

(8) for subdivision 1, clauses deleted text begin (13) deleted text end new text begin (11) new text end and deleted text begin (14) deleted text end new text begin (12) new text end , the applicant must be the
governmental entity that owns or contracts for the project or facility.

Subd. 3.

Application.

(a) The application must include sufficient information
to permit the commissioner to verify the tax paid. If the tax was paid by a contractor,
subcontractor, or builder, under subdivision 1, clause new text begin (3), new text end (4), (5), (6), (7), (8), (9), (10),
(11), new text begin or new text end (12), deleted text begin (13), or (14), deleted text end the contractor, subcontractor, or builder must furnish to the
refund applicant a statement including the cost of the exempt items and the taxes paid on
the items unless otherwise specifically provided by this subdivision. The provisions of
sections 289A.40 and 289A.50 apply to refunds under this section.

deleted text begin (b) An applicant may not file more than two applications per calendar year for
refunds for taxes paid on capital equipment exempt under section 297A.68, subdivision 5.
deleted text end

deleted text begin (c) deleted text end new text begin (b) new text end Total refunds for purchases of items in section 297A.71, subdivision 40,
must not exceed $5,000,000 in fiscal years 2010 and 2011. Applications for refunds for
purchases of items in sections 297A.70, subdivision 3, paragraph (a), clause (11), and
297A.71, subdivision 40, must not be filed until after June 30, 2009.

Subd. 4.

Interest.

Interest must be paid on the refund at the rate in section 270C.405
from 90 days after the refund claim is filed with the commissioner for taxes paid under
subdivision 1.

Subd. 5.

Appropriation.

The amount required to make the refunds is annually
appropriated to the commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 6.

Minnesota Statutes 2008, section 297B.02, subdivision 1, is amended to read:

Subdivision 1.

Rate.

There is imposed an excise tax at the rate deleted text begin provided in chapter
297A deleted text end new text begin of 6.5 percent new text end on the purchase price of any motor vehicle purchased or acquired,
either in or outside of the state of Minnesota, which is required to be registered under
the laws of this state.

The excise tax is also imposed on the purchase price of motor vehicles purchased
or acquired on Indian reservations when the tribal council has entered into a sales tax on
motor vehicles refund agreement with the state of Minnesota.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2010.
new text end

Sec. 7. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2008, section 297A.67, subdivision 8, new text end new text begin is repealed.
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, 2009.
new text end

ARTICLE 5

JUNE ACCELERATED TAX PAYMENTS

Section 1.

Minnesota Statutes 2008, section 289A.20, subdivision 4, is amended to
read:

Subd. 4.

Sales and use tax.

(a) The taxes imposed by chapter 297A are due and
payable to the commissioner monthly on or before the 20th day of the month following the
month in which the taxable event occurred, or following another reporting period as the
commissioner prescribes or as allowed under section 289A.18, subdivision 4, paragraph
(f) or (g), except that use taxes due on an annual use tax return as provided under section
289A.11, subdivision 1, are payable by April 15 following the close of the calendar year.

(b) A vendor having a liability of $120,000 or more during a fiscal year ending June
30 must remit the June liability for the next year in the following manner:

(1) Two business days before June 30 of the year, the vendor must remit deleted text begin 90 deleted text end new text begin 0 new text end percent
of the estimated June liability to the commissioner.

(2) On or before August 20 of the year, the vendor must pay any additional amount
of tax not remitted in June.

(c) A vendor having a liability of:

(1) $20,000 or more in the fiscal year ending June 30, 2005; or

(2) $10,000 or more in the fiscal year ending June 30, 2006, and fiscal years
thereafter,

must remit all liabilities on returns due for periods beginning in the subsequent calendar
year by electronic means on or before the 20th day of the month following the month in
which the taxable event occurred, or on or before the 20th day of the month following the
month in which the sale is reported under section 289A.18, subdivision 4, except for deleted text begin 90 deleted text end new text begin 0 new text end
percent of the estimated June liability, which is due two business days before June 30. The
remaining amount of the June liability is due on August 20.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with June 2010 tax
liabilities.
new text end

Sec. 2.

Minnesota Statutes 2008, section 289A.60, subdivision 15, is amended to read:

Subd. 15.

Accelerated payment of June sales tax liability; penalty for
underpayment.

For payments made after December 31, 2006, if a vendor is required by
law to submit an estimation of June sales tax liabilities and deleted text begin 90 deleted text end new text begin 0 new text end percent payment by a
certain date, the vendor shall pay a penalty equal to ten percent of the amount of actual
June liability required to be paid in June less the amount remitted in June. The penalty
must not be imposed, however, if the amount remitted in June equals the lesser of deleted text begin 90 deleted text end new text begin 0 new text end
percent of the preceding May's liability or deleted text begin 90 deleted text end new text begin 0 new text end percent of the average monthly liability for
the previous calendar year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with June 2010 tax
liabilities.
new text end

Sec. 3.

Minnesota Statutes 2008, section 297F.09, subdivision 10, is amended to read:

Subd. 10.

Accelerated tax payment; cigarette or tobacco products distributor.

A cigarette or tobacco products distributor having a liability of $120,000 or more during a
fiscal year ending June 30, shall remit the June liability for the next year in the following
manner:

(a) Two business days before June 30 of the year, the distributor shall remit the
actual May liability and deleted text begin 90 deleted text end new text begin 0 new text end percent of the estimated June liability to the commissioner
and file the return in the form and manner prescribed by the commissioner.

(b) On or before August 18 of the year, the distributor shall submit a return showing
the actual June liability and pay any additional amount of tax not remitted in June. A
penalty is imposed equal to ten percent of the amount of June liability required to be paid
in June, less the amount remitted in June. However, the penalty is not imposed if the
amount remitted in June equals the lesser of:

(1) deleted text begin 90 deleted text end new text begin 0 new text end percent of the actual June liability; or

(2) deleted text begin 90 deleted text end new text begin 0 new text end percent of the preceding May's liability.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with June 2010 tax
liabilities.
new text end

Sec. 4.

Minnesota Statutes 2008, section 297G.09, subdivision 9, is amended to read:

Subd. 9.

Accelerated tax payment; penalty.

A person liable for tax under this
chapter having a liability of $120,000 or more during a fiscal year ending June 30, shall
remit the June liability for the next year in the following manner:

(a) Two business days before June 30 of the year, the taxpayer shall remit the actual
May liability and deleted text begin 90 deleted text end new text begin 0 new text end percent of the estimated June liability to the commissioner and file
the return in the form and manner prescribed by the commissioner.

(b) On or before August 18 of the year, the taxpayer shall submit a return showing
the actual June liability and pay any additional amount of tax not remitted in June. A
penalty is imposed equal to ten percent of the amount of June liability required to be paid
in June less the amount remitted in June. However, the penalty is not imposed if the
amount remitted in June equals the lesser of:

(1) deleted text begin 90 deleted text end new text begin 0 new text end percent of the actual June liability; or

(2) deleted text begin 90 deleted text end new text begin 0 new text end percent of the preceding May liability.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with June 2010 tax
liabilities.
new text end

ARTICLE 6

ADMINISTRATION AND COMPLIANCE

Section 1.

Minnesota Statutes 2008, section 289A.18, subdivision 1, is amended to
read:

Subdivision 1.

Individual income, fiduciary income, deleted text begin corporate franchise, deleted text end and
entertainment taxes; partnership and S corporation returns; information returns;
mining company returns.

The returns required to be made under sections 289A.08 and
289A.12 must be filed at the following times:

(1) returns made on the basis of the calendar year must be filed on April 15 following
the close of the calendar year, except that returns of corporations must be filed on March
15 following the close of the calendar year;

(2) returns made on the basis of the fiscal year must be filed on the 15th day of the
fourth month following the close of the fiscal year, except that returns of corporations
must be filed on the 15th day of the third month following the close of the fiscal year;

(3) returns for a fractional part of a year must be filed on the 15th day of the fourth
month following the end of the month in which falls the last day of the period for which
the return is made, except that the returns of corporations must be filed on the 15th day of
the third month following the end of the tax year; or, in the case of a corporation which is
a member of a unitary group, the return of the corporation must be filed on the 15th day of
the third month following the end of the tax year of the unitary group in which falls the
last day of the period for which the return is made;

(4) in the case of a final return of a decedent for a fractional part of a year, the return
must be filed on the 15th day of the fourth month following the close of the 12-month
period that began with the first day of that fractional part of a year;

(5) in the case of the return of a cooperative association, returns must be filed on or
before the 15th day of the ninth month following the close of the taxable year;

(6) deleted text begin if a corporation has been divested from a unitary group and files a return for
a fractional part of a year in which it was a member of a unitary business that files a
combined report under section 290.17, subdivision 4, the divested corporation's return
must be filed on the 15th day of the third month following the close of the common
accounting period that includes the fractional year; deleted text end

deleted text begin (7) deleted text end returns of entertainment entities must be filed on April 15 following the close of
the calendar year;

deleted text begin (8) deleted text end new text begin (7) new text end returns required to be filed under section 289A.08, subdivision 4, must be
filed on the 15th day of the fifth month following the close of the taxable year;

deleted text begin (9) deleted text end new text begin (8) new text end returns of mining companies must be filed on May 1 following the close
of the calendar year; and

deleted text begin (10) deleted text end new text begin (9) new text end returns required to be filed with the commissioner under section 289A.12,
subdivision 2 or 4 to 10, must be filed within 30 days after being demanded by the
commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 2.

Minnesota Statutes 2008, section 289A.19, subdivision 2, is amended to read:

Subd. 2.

deleted text begin Corporate franchise and deleted text end Mining company taxes.

deleted text begin Corporations or deleted text end
Mining companies shall receive an extension of seven months or the amount of time
granted by the Internal Revenue Service, whichever is longer, for filing the return of a
corporation subject to tax under chapter 290 or for filing the return of a mining company
subject to tax under sections 298.01 and 298.015. Interest on any balance of tax not paid
when the regularly required return is due must be paid at the rate specified in section
270C.40, from the date such payment should have been made if no extension was granted,
until the date of payment of such tax.

If a deleted text begin corporation or deleted text end mining company does not:

(1) pay at least 90 percent of the amount of tax shown on the return on or before the
regular due date of the return, the penalty prescribed by section 289A.60, subdivision 1,
shall be imposed on the unpaid balance of tax; or

(2) pay the balance due shown on the regularly required return on or before the
extended due date of the return, the penalty prescribed by section 289A.60, subdivision 1,
shall be imposed on the unpaid balance of tax from the original due date of the return.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 3.

Minnesota Statutes 2008, section 289A.20, subdivision 1, is amended to read:

Subdivision 1.

Individual income, fiduciary income, mining company, deleted text begin corporate
franchise, deleted text end and entertainment taxes.

(a) Individual income, fiduciary, new text begin and new text end mining
company deleted text begin , and corporate franchise deleted text end taxes must be paid to the commissioner on or before the
date the return must be filed under section 289A.18, subdivision 1, or the extended due
date as provided in section 289A.19, unless an earlier date for payment is provided.

Notwithstanding any other law, a taxpayer whose unpaid liability for income or
corporate franchise taxes, as reflected upon the return, is $1 or less need not pay the tax.

(b) Entertainment taxes must be paid on or before the date the return must be filed
under section 289A.18, subdivision 1.

(c) If a fiduciary administers 100 or more trusts, fiduciary income taxes for all trusts
administered by the fiduciary must be paid by electronic means.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 4.

Minnesota Statutes 2008, section 289A.30, subdivision 1, is amended to read:

Subdivision 1.

Fiduciary income deleted text begin , corporate franchise tax deleted text end .

Where good cause
exists, the commissioner may extend the time for payment of the amount determined as a
fiduciary income tax deleted text begin or corporate franchise tax by the taxpayer deleted text end , or an amount determined
as a deficiency, for a period of not more than six months from the date prescribed for
the payment of the tax.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 5.

Minnesota Statutes 2008, section 289A.31, subdivision 1, is amended to read:

Subdivision 1.

Individual income, fiduciary income, mining company, deleted text begin corporate
franchise, deleted text end and entertainment taxes.

(a) Individual income, fiduciary income, mining
company, deleted text begin and corporate franchise taxes, deleted text end and interest and penalties, must be paid by the
taxpayer upon whom the tax is imposed, except in the following cases:

(1) The tax due from a decedent for that part of the taxable year in which the
decedent died during which the decedent was alive and the taxes, interest, and penalty
due for the prior years must be paid by the decedent's personal representative, if any.
If there is no personal representative, the taxes, interest, and penalty must be paid by
the transferees, as defined in section 270C.58, subdivision 3, to the extent they receive
property from the decedent;

(2) The tax due from an infant or other incompetent person must be paid by the
person's guardian or other person authorized or permitted by law to act for the person;

(3) The tax due from the estate of a decedent must be paid by the estate's personal
representative;

(4) The tax due from a trust, including those within the definition of a corporation, as
defined in section 290.01, subdivision 4, must be paid by a trustee; and

(5) The tax due from a taxpayer whose business or property is in charge of a
receiver, trustee in bankruptcy, assignee, or other conservator, must be paid by the
person in charge of the business or property so far as the tax is due to the income from
the business or property.

(b) Entertainment taxes are the joint and several liability of the entertainer and the
entertainment entity. The payor is liable to the state for the payment of the tax required to
be deducted and withheld under section 290.9201, subdivision 7, and is not liable to the
entertainer for the amount of the payment.

(c) The tax imposed under section 290.0922 on partnerships is the joint and several
liability of the partnership and the general partners.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 6.

Minnesota Statutes 2008, section 289A.60, subdivision 1, is amended to read:

Subdivision 1.

Penalty for failure to pay tax.

(a) If a deleted text begin corporate franchise, deleted text end fiduciary
income, mining company, estate, partnership, S corporation, or nonresident entertainer
tax is not paid within the time specified for payment, a penalty of six percent is added to
the unpaid tax, except that if a corporation or mining company meets the requirements of
section 289A.19, subdivision 2, the penalty is not imposed.

(b) For the taxes listed in paragraph (a), in addition to the penalty in that paragraph,
whether imposed or not, if a return or amended return is filed after the due date, without
regard to extensions, and any tax reported as remaining due is not remitted with the return
or amended return, a penalty of five percent of the tax not paid is added to the tax. If the
commissioner issues an order assessing additional tax for a tax listed in paragraph (a),
and the tax is not paid within 60 days after the mailing of the order or, if appealed, within
60 days after final resolution of the appeal, a penalty of five percent of the unpaid tax
is added to the tax.

(c) If an individual income tax is not paid within the time specified for payment, a
penalty of four percent is added to the unpaid tax. There is a presumption of reasonable
cause for the late payment if the individual: (i) pays by the due date of the return at
least 90 percent of the amount of tax, after credits other than withholding and estimated
payments, shown owing on the return; (ii) files the return within six months after the due
date; and (iii) pays the remaining balance of the reported tax when the return is filed.

(d) If the commissioner issues an order assessing additional individual income tax,
and the tax is not paid within 60 days after the mailing of the order or, if appealed, within
60 days after final resolution of the appeal, a penalty of four percent of the unpaid tax
is added to the tax.

(e) If a withholding or sales or use tax is not paid within the time specified for
payment, a penalty must be added to the amount required to be shown as tax. The penalty
is five percent of the tax not paid on or before the date specified for payment of the tax
if the failure is for not more than 30 days, with an additional penalty of five percent of
the amount of tax remaining unpaid during each additional 30 days or fraction of 30 days
during which the failure continues, not exceeding 15 percent in the aggregate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 7.

Minnesota Statutes 2008, section 289A.60, subdivision 4, is amended to read:

Subd. 4.

Substantial understatement of liability; penalty.

(a) The commissioner
of revenue shall impose a penalty for substantial understatement of any tax payable to the
commissioner, except a tax imposed under chapter 297A.

(b) There must be added to the tax an amount equal to 20 percent of the amount of any
underpayment attributable to the understatement. There is a substantial understatement of
tax for the period if the amount of the understatement for the period exceeds the greater of:

(1) ten percent of the tax required to be shown on the return for the period; or

(2)(i) $10,000 in the case of a mining company or a corporation, other than an S
corporation as defined in section 290.9725, when the tax is imposed by chapter 290 or
section 298.01 or 298.015, or

(ii) $5,000 in the case of any other taxpayer, and in the case of a mining company or
a corporation any tax not imposed by chapter 290 or section 298.01 or 298.015.

deleted text begin (c) For a corporation, other than an S corporation, there is also a substantial
understatement of tax for any taxable year if the amount of the understatement for the
taxable year exceeds the lesser of:
deleted text end

deleted text begin (1) ten percent of the tax required to be shown on the return for the taxable year
(or, if greater, $10,000); or
deleted text end

deleted text begin (2) $10,000,000.
deleted text end

deleted text begin (d) deleted text end new text begin (c) new text end The term "understatement" means the excess of the amount of the tax
required to be shown on the return for the period, over the amount of the tax imposed that
is shown on the return. The excess must be determined without regard to items to which
subdivision 27 applies. The amount of the understatement shall be reduced by that part of
the understatement that is attributable to the tax treatment of any item by the taxpayer if
(1) there is or was substantial authority for the treatment, or (2)(i) any item with respect to
which the relevant facts affecting the item's tax treatment are adequately disclosed in the
return or in a statement attached to the return and (ii) there is a reasonable basis for the tax
treatment of the item. The exception for substantial authority under clause (1) does not
apply to positions listed by the Secretary of the Treasury under section 6662(d)(3) of the
Internal Revenue Code. A corporation does not have a reasonable basis for its tax treatment
of an item attributable to a multiple-party financing transaction if the treatment does not
clearly reflect the income of the corporation within the meaning of section 6662(d)(2)(B)
of the Internal Revenue Code. The special rules in cases involving tax shelters provided in
section 6662(d)(2)(C) of the Internal Revenue Code shall apply and shall apply to a tax
shelter the principal purpose of which is the avoidance or evasion of state taxes.

deleted text begin (e) deleted text end new text begin (d) new text end The commissioner may abate all or any part of the addition to the tax
provided by this section on a showing by the taxpayer that there was reasonable cause for
the understatement, or part of it, and that the taxpayer acted in good faith. The additional
tax and penalty shall bear interest at the rate specified in section 270C.40 from the time
the tax should have been paid until paid.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 8. new text begin EXPIRATION.
new text end

new text begin Minnesota Statutes 2008, sections 289A.08, subdivision 3; and 289A.26, expire
after December 31, 2012.
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, 2012.
new text end

ARTICLE 7

ECONOMIC DEVELOPMENT

Section 1.

Minnesota Statutes 2008, section 469.310, subdivision 10, is amended to
read:

Subd. 10.

Person.

"Person" includes an individual, deleted text begin corporation, deleted text end partnership, limited
liability company, association, or any other entity.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 2.

Minnesota Statutes 2008, section 469.321, subdivision 5, is amended to read:

Subd. 5.

Person.

"Person" includes an individual, deleted text begin corporation, deleted text end partnership, limited
liability company, association, or any other entity.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 3.

Minnesota Statutes 2008, section 469.330, subdivision 10, is amended to read:

Subd. 10.

Person.

"Person" includes an individual, deleted text begin corporation, deleted text end partnership, limited
liability company, association, or any other entity.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

ARTICLE 8

MISCELLANEOUS

Section 1.

Minnesota Statutes 2008, section 16A.10, subdivision 1, is amended to read:

Subdivision 1.

Budget format.

In each even-numbered calendar year the
commissioner shall prepare budget forms and instructions for all agencies, including
guidelines for reporting agency performance measures, subject to the approval of the
governor. The commissioner shall request and receive advisory recommendations from
the chairs of the senate Finance Committee and house of representatives Ways and
Means Committee before adopting a format for the biennial budget document. By June
15, the commissioner shall send the proposed budget forms to the appropriations and
finance committees. The committees have until July 15 to give the commissioner their
advisory recommendations on possible improvements. To facilitate this consultation, the
commissioner shall establish a working group consisting of executive branch staff and
designees of the chairs of the senate Finance and house of representatives Ways and Means
Committees. The commissioner must involve this group in all stages of development
of budget forms and instructions. The budget format must show actual expenditures
and receipts for the most recent fiscal year, estimated expenditures and receipts for the
current fiscal year, and estimates for each fiscal year of the next deleted text begin biennium deleted text end new text begin two biennia new text end .
Estimated expenditures must be classified by funds and character of expenditures and may
be subclassified by programs and activities. Agency revenue estimates must show how the
estimates were made and what factors were used. Receipts must be classified by funds,
programs, and activities. Expenditure and revenue estimates must be based on the law in
existence at the time the estimates are prepared.

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2008, section 16A.11, subdivision 2, is amended to read:

Subd. 2.

Part one: message.

Part one of the budget, the governor's message, shall
include the governor's recommendations on the financial policy of the state for the coming
biennium, new text begin and for maintaining structural balance in the following biennium, new text end describing
the important features of the budget plan, embracing a general budget summary setting
forth the aggregate figures of the budget so as to show the balanced relation between the
total proposed expenditures and the total anticipated income, with the basis and factors on
which the estimates are made, the amount to be borrowed, and other means of financing
the budget for the coming biennium, compared with the corresponding figures for at
least the last two completed fiscal years and the current year. The budget plan shall be
supported by explanatory schedules or statements, classifying its expenditures by agencies
and funds, and the income by agencies, sources, funds, and the proposed amount of
new borrowing, as well as proposed new tax or revenue sources. The budget plan shall
be submitted for all special and dedicated funds, as well as the general fund, and shall
include the estimated amounts of federal aids, for whatever purpose provided, together
with estimated expenditures from them.

new text begin EFFECTIVE DATE. new text end

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

Sec. 3. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2008, section 16A.102, subdivision 4, new text end new text begin is repealed.
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