SF 1637

as introduced - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to taxation; income; allowing sale of net 
  1.3             operating loss; providing a withholding tax credit; 
  1.4             amending Minnesota Statutes 2002, sections 290.0921, 
  1.5             subdivision 4; 290.095, by adding a subdivision; 
  1.6             Minnesota Statutes 2003 Supplement, sections 290.01, 
  1.7             subdivisions 19a, 19b, 19c, 19d; 290.091, subdivision 
  1.8             2; 290.0921, subdivision 3; proposing coding for new 
  1.9             law in Minnesota Statutes, chapter 290. 
  1.10  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.11     Section 1.  Minnesota Statutes 2003 Supplement, section 
  1.12  290.01, subdivision 19a, is amended to read: 
  1.13     Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
  1.14  individuals, estates, and trusts, there shall be added to 
  1.15  federal taxable income: 
  1.16     (1)(i) interest income on obligations of any state other 
  1.17  than Minnesota or a political or governmental subdivision, 
  1.18  municipality, or governmental agency or instrumentality of any 
  1.19  state other than Minnesota exempt from federal income taxes 
  1.20  under the Internal Revenue Code or any other federal statute; 
  1.21  and 
  1.22     (ii) exempt-interest dividends as defined in section 
  1.23  852(b)(5) of the Internal Revenue Code, except the portion of 
  1.24  the exempt-interest dividends derived from interest income on 
  1.25  obligations of the state of Minnesota or its political or 
  1.26  governmental subdivisions, municipalities, governmental agencies 
  1.27  or instrumentalities, but only if the portion of the 
  2.1   exempt-interest dividends from such Minnesota sources paid to 
  2.2   all shareholders represents 95 percent or more of the 
  2.3   exempt-interest dividends that are paid by the regulated 
  2.4   investment company as defined in section 851(a) of the Internal 
  2.5   Revenue Code, or the fund of the regulated investment company as 
  2.6   defined in section 851(g) of the Internal Revenue Code, making 
  2.7   the payment; and 
  2.8      (iii) for the purposes of items (i) and (ii), interest on 
  2.9   obligations of an Indian tribal government described in section 
  2.10  7871(c) of the Internal Revenue Code shall be treated as 
  2.11  interest income on obligations of the state in which the tribe 
  2.12  is located; 
  2.13     (2) the amount of income taxes paid or accrued within the 
  2.14  taxable year under this chapter and income taxes paid to any 
  2.15  other state or to any province or territory of Canada, to the 
  2.16  extent allowed as a deduction under section 63(d) of the 
  2.17  Internal Revenue Code, but the addition may not be more than the 
  2.18  amount by which the itemized deductions as allowed under section 
  2.19  63(d) of the Internal Revenue Code exceeds the amount of the 
  2.20  standard deduction as defined in section 63(c) of the Internal 
  2.21  Revenue Code.  For the purpose of this paragraph, the 
  2.22  disallowance of itemized deductions under section 68 of the 
  2.23  Internal Revenue Code of 1986, income tax is the last itemized 
  2.24  deduction disallowed; 
  2.25     (3) the capital gain amount of a lump sum distribution to 
  2.26  which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
  2.27  Reform Act of 1986, Public Law 99-514, applies; 
  2.28     (4) the amount of income taxes paid or accrued within the 
  2.29  taxable year under this chapter and income taxes paid to any 
  2.30  other state or any province or territory of Canada, to the 
  2.31  extent allowed as a deduction in determining federal adjusted 
  2.32  gross income.  For the purpose of this paragraph, income taxes 
  2.33  do not include the taxes imposed by sections 290.0922, 
  2.34  subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 
  2.35     (5) the amount of expense, interest, or taxes disallowed 
  2.36  pursuant to section 290.10; 
  3.1      (6) the amount of a partner's pro rata share of net income 
  3.2   which does not flow through to the partner because the 
  3.3   partnership elected to pay the tax on the income under section 
  3.4   6242(a)(2) of the Internal Revenue Code; and 
  3.5      (7) 80 percent of the depreciation deduction allowed under 
  3.6   section 168(k) of the Internal Revenue Code.  For purposes of 
  3.7   this clause, if the taxpayer has an activity that in the taxable 
  3.8   year generates a deduction for depreciation under section 168(k) 
  3.9   and the activity generates a loss for the taxable year that the 
  3.10  taxpayer is not allowed to claim for the taxable year, "the 
  3.11  depreciation allowed under section 168(k)" for the taxable year 
  3.12  is limited to excess of the depreciation claimed by the activity 
  3.13  under section 168(k) over the amount of the loss from the 
  3.14  activity that is not allowed in the taxable year.  In succeeding 
  3.15  taxable years when the losses not allowed in the taxable year 
  3.16  are allowed, the depreciation under section 168(k) is allowed; 
  3.17  and 
  3.18     (8) to the extent deducted in computing federal taxable 
  3.19  income, the amount of net operating losses sold under section 
  3.20  290.095, subdivision 13. 
  3.21     [EFFECTIVE DATE.] This section is effective for taxable 
  3.22  years beginning after December 31, 2003. 
  3.23     Sec. 2.  Minnesota Statutes 2003 Supplement, section 
  3.24  290.01, subdivision 19b, is amended to read: 
  3.25     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  3.26  individuals, estates, and trusts, there shall be subtracted from 
  3.27  federal taxable income: 
  3.28     (1) interest income on obligations of any authority, 
  3.29  commission, or instrumentality of the United States to the 
  3.30  extent includable in taxable income for federal income tax 
  3.31  purposes but exempt from state income tax under the laws of the 
  3.32  United States; 
  3.33     (2) if included in federal taxable income, the amount of 
  3.34  any overpayment of income tax to Minnesota or to any other 
  3.35  state, for any previous taxable year, whether the amount is 
  3.36  received as a refund or as a credit to another taxable year's 
  4.1   income tax liability; 
  4.2      (3) the amount paid to others, less the amount used to 
  4.3   claim the credit allowed under section 290.0674, not to exceed 
  4.4   $1,625 for each qualifying child in grades kindergarten to 6 and 
  4.5   $2,500 for each qualifying child in grades 7 to 12, for tuition, 
  4.6   textbooks, and transportation of each qualifying child in 
  4.7   attending an elementary or secondary school situated in 
  4.8   Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
  4.9   wherein a resident of this state may legally fulfill the state's 
  4.10  compulsory attendance laws, which is not operated for profit, 
  4.11  and which adheres to the provisions of the Civil Rights Act of 
  4.12  1964 and chapter 363A.  For the purposes of this clause, 
  4.13  "tuition" includes fees or tuition as defined in section 
  4.14  290.0674, subdivision 1, clause (1).  As used in this clause, 
  4.15  "textbooks" includes books and other instructional materials and 
  4.16  equipment purchased or leased for use in elementary and 
  4.17  secondary schools in teaching only those subjects legally and 
  4.18  commonly taught in public elementary and secondary schools in 
  4.19  this state.  Equipment expenses qualifying for deduction 
  4.20  includes expenses as defined and limited in section 290.0674, 
  4.21  subdivision 1, clause (3).  "Textbooks" does not include 
  4.22  instructional books and materials used in the teaching of 
  4.23  religious tenets, doctrines, or worship, the purpose of which is 
  4.24  to instill such tenets, doctrines, or worship, nor does it 
  4.25  include books or materials for, or transportation to, 
  4.26  extracurricular activities including sporting events, musical or 
  4.27  dramatic events, speech activities, driver's education, or 
  4.28  similar programs.  For purposes of the subtraction provided by 
  4.29  this clause, "qualifying child" has the meaning given in section 
  4.30  32(c)(3) of the Internal Revenue Code; 
  4.31     (4) income as provided under section 290.0802; 
  4.32     (5) to the extent included in federal adjusted gross 
  4.33  income, income realized on disposition of property exempt from 
  4.34  tax under section 290.491; 
  4.35     (6) to the extent included in federal taxable income, 
  4.36  postservice benefits for youth community service under section 
  5.1   124D.42 for volunteer service under United States Code, title 
  5.2   42, sections 12601 to 12604; 
  5.3      (7) to the extent not deducted in determining federal 
  5.4   taxable income by an individual who does not itemize deductions 
  5.5   for federal income tax purposes for the taxable year, an amount 
  5.6   equal to 50 percent of the excess of charitable contributions 
  5.7   allowable as a deduction for the taxable year under section 
  5.8   170(a) of the Internal Revenue Code over $500; 
  5.9      (8) for taxable years beginning before January 1, 2008, the 
  5.10  amount of the federal small ethanol producer credit allowed 
  5.11  under section 40(a)(3) of the Internal Revenue Code which is 
  5.12  included in gross income under section 87 of the Internal 
  5.13  Revenue Code; 
  5.14     (9) for individuals who are allowed a federal foreign tax 
  5.15  credit for taxes that do not qualify for a credit under section 
  5.16  290.06, subdivision 22, an amount equal to the carryover of 
  5.17  subnational foreign taxes for the taxable year, but not to 
  5.18  exceed the total subnational foreign taxes reported in claiming 
  5.19  the foreign tax credit.  For purposes of this clause, "federal 
  5.20  foreign tax credit" means the credit allowed under section 27 of 
  5.21  the Internal Revenue Code, and "carryover of subnational foreign 
  5.22  taxes" equals the carryover allowed under section 904(c) of the 
  5.23  Internal Revenue Code minus national level foreign taxes to the 
  5.24  extent they exceed the federal foreign tax credit; 
  5.25     (10) in each of the five tax years immediately following 
  5.26  the tax year in which an addition is required under subdivision 
  5.27  19a, clause (7), an amount equal to one-fifth of the delayed 
  5.28  depreciation.  For purposes of this clause, "delayed 
  5.29  depreciation" means the amount of the addition made by the 
  5.30  taxpayer under subdivision 19a, clause (7), minus the positive 
  5.31  value of any net operating loss under section 172 of the 
  5.32  Internal Revenue Code generated for the tax year of the 
  5.33  addition.  The resulting delayed depreciation cannot be less 
  5.34  than zero; and 
  5.35     (11) job opportunity building zone income as provided under 
  5.36  section 469.316; 
  6.1      (12) income received by a qualified high technology 
  6.2   business from the sale of a net operating loss as allowed under 
  6.3   section 290.095, subdivision 13; 
  6.4      (13) the amount of net operating loss purchased under 
  6.5   section 290.095, subdivision 13; and 
  6.6      (14) to the extent included in federal taxable income, the 
  6.7   amount of the credit against withholding tax under section 
  6.8   290.924. 
  6.9      [EFFECTIVE DATE.] This section is effective for taxable 
  6.10  years beginning after December 31, 2003. 
  6.11     Sec. 3.  Minnesota Statutes 2003 Supplement, section 
  6.12  290.01, subdivision 19c, is amended to read: 
  6.13     Subd. 19c.  [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 
  6.14  INCOME.] For corporations, there shall be added to federal 
  6.15  taxable income: 
  6.16     (1) the amount of any deduction taken for federal income 
  6.17  tax purposes for income, excise, or franchise taxes based on net 
  6.18  income or related minimum taxes, including but not limited to 
  6.19  the tax imposed under section 290.0922, paid by the corporation 
  6.20  to Minnesota, another state, a political subdivision of another 
  6.21  state, the District of Columbia, or any foreign country or 
  6.22  possession of the United States; 
  6.23     (2) interest not subject to federal tax upon obligations 
  6.24  of:  the United States, its possessions, its agencies, or its 
  6.25  instrumentalities; the state of Minnesota or any other state, 
  6.26  any of its political or governmental subdivisions, any of its 
  6.27  municipalities, or any of its governmental agencies or 
  6.28  instrumentalities; the District of Columbia; or Indian tribal 
  6.29  governments; 
  6.30     (3) exempt-interest dividends received as defined in 
  6.31  section 852(b)(5) of the Internal Revenue Code; 
  6.32     (4) the amount of any net operating loss deduction taken 
  6.33  for federal income tax purposes under section 172 or 832(c)(10) 
  6.34  of the Internal Revenue Code or operations loss deduction under 
  6.35  section 810 of the Internal Revenue Code; 
  6.36     (5) the amount of any special deductions taken for federal 
  7.1   income tax purposes under sections 241 to 247 of the Internal 
  7.2   Revenue Code; 
  7.3      (6) losses from the business of mining, as defined in 
  7.4   section 290.05, subdivision 1, clause (a), that are not subject 
  7.5   to Minnesota income tax; 
  7.6      (7) the amount of any capital losses deducted for federal 
  7.7   income tax purposes under sections 1211 and 1212 of the Internal 
  7.8   Revenue Code; 
  7.9      (8) the exempt foreign trade income of a foreign sales 
  7.10  corporation under sections 921(a) and 291 of the Internal 
  7.11  Revenue Code; 
  7.12     (9) the amount of percentage depletion deducted under 
  7.13  sections 611 through 614 and 291 of the Internal Revenue Code; 
  7.14     (10) for certified pollution control facilities placed in 
  7.15  service in a taxable year beginning before December 31, 1986, 
  7.16  and for which amortization deductions were elected under section 
  7.17  169 of the Internal Revenue Code of 1954, as amended through 
  7.18  December 31, 1985, the amount of the amortization deduction 
  7.19  allowed in computing federal taxable income for those 
  7.20  facilities; 
  7.21     (11) the amount of any deemed dividend from a foreign 
  7.22  operating corporation determined pursuant to section 290.17, 
  7.23  subdivision 4, paragraph (g); 
  7.24     (12) the amount of any environmental tax paid under section 
  7.25  59(a) of the Internal Revenue Code; 
  7.26     (13) the amount of a partner's pro rata share of net income 
  7.27  which does not flow through to the partner because the 
  7.28  partnership elected to pay the tax on the income under section 
  7.29  6242(a)(2) of the Internal Revenue Code; 
  7.30     (14) the amount of net income excluded under section 114 of 
  7.31  the Internal Revenue Code; 
  7.32     (15) any increase in subpart F income, as defined in 
  7.33  section 952(a) of the Internal Revenue Code, for the taxable 
  7.34  year when subpart F income is calculated without regard to the 
  7.35  provisions of section 614 of Public Law 107-147; and 
  7.36     (16) 80 percent of the depreciation deduction allowed under 
  8.1   section 168(k) of the Internal Revenue Code.  For purposes of 
  8.2   this clause, if the taxpayer has an activity that in the taxable 
  8.3   year generates a deduction for depreciation under section 168(k) 
  8.4   and the activity generates a loss for the taxable year that the 
  8.5   taxpayer is not allowed to claim for the taxable year, "the 
  8.6   depreciation allowed under section 168(k)" for the taxable year 
  8.7   is limited to excess of the depreciation claimed by the activity 
  8.8   under section 168(k) over the amount of the loss from the 
  8.9   activity that is not allowed in the taxable year.  In succeeding 
  8.10  taxable years when the losses not allowed in the taxable year 
  8.11  are allowed, the depreciation under section 168(k) is allowed; 
  8.12  and 
  8.13     (17) to the extent deducted in computing federal taxable 
  8.14  income, the amount of net operating losses sold under section 
  8.15  290.095, subdivision 13. 
  8.16     [EFFECTIVE DATE.] This section is effective for taxable 
  8.17  years beginning after December 31, 2003. 
  8.18     Sec. 4.  Minnesota Statutes 2003 Supplement, section 
  8.19  290.01, subdivision 19d, is amended to read: 
  8.20     Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
  8.21  TAXABLE INCOME.] For corporations, there shall be subtracted 
  8.22  from federal taxable income after the increases provided in 
  8.23  subdivision 19c:  
  8.24     (1) the amount of foreign dividend gross-up added to gross 
  8.25  income for federal income tax purposes under section 78 of the 
  8.26  Internal Revenue Code; 
  8.27     (2) the amount of salary expense not allowed for federal 
  8.28  income tax purposes due to claiming the federal jobs credit 
  8.29  under section 51 of the Internal Revenue Code; 
  8.30     (3) any dividend (not including any distribution in 
  8.31  liquidation) paid within the taxable year by a national or state 
  8.32  bank to the United States, or to any instrumentality of the 
  8.33  United States exempt from federal income taxes, on the preferred 
  8.34  stock of the bank owned by the United States or the 
  8.35  instrumentality; 
  8.36     (4) amounts disallowed for intangible drilling costs due to 
  9.1   differences between this chapter and the Internal Revenue Code 
  9.2   in taxable years beginning before January 1, 1987, as follows: 
  9.3      (i) to the extent the disallowed costs are represented by 
  9.4   physical property, an amount equal to the allowance for 
  9.5   depreciation under Minnesota Statutes 1986, section 290.09, 
  9.6   subdivision 7, subject to the modifications contained in 
  9.7   subdivision 19e; and 
  9.8      (ii) to the extent the disallowed costs are not 
  9.9   represented by physical property, an amount equal to the 
  9.10  allowance for cost depletion under Minnesota Statutes 1986, 
  9.11  section 290.09, subdivision 8; 
  9.12     (5) the deduction for capital losses pursuant to sections 
  9.13  1211 and 1212 of the Internal Revenue Code, except that: 
  9.14     (i) for capital losses incurred in taxable years beginning 
  9.15  after December 31, 1986, capital loss carrybacks shall not be 
  9.16  allowed; 
  9.17     (ii) for capital losses incurred in taxable years beginning
  9.18  after December 31, 1986, a capital loss carryover to each of the 
  9.19  15 taxable years succeeding the loss year shall be allowed; 
  9.20     (iii) for capital losses incurred in taxable years 
  9.21  beginning before January 1, 1987, a capital loss carryback to 
  9.22  each of the three taxable years preceding the loss year, subject 
  9.23  to the provisions of Minnesota Statutes 1986, section 290.16, 
  9.24  shall be allowed; and 
  9.25     (iv) for capital losses incurred in taxable years beginning
  9.26  before January 1, 1987, a capital loss carryover to each of the 
  9.27  five taxable years succeeding the loss year to the extent such 
  9.28  loss was not used in a prior taxable year and subject to the 
  9.29  provisions of Minnesota Statutes 1986, section 290.16, shall be 
  9.30  allowed; 
  9.31     (6) an amount for interest and expenses relating to income 
  9.32  not taxable for federal income tax purposes, if (i) the income 
  9.33  is taxable under this chapter and (ii) the interest and expenses 
  9.34  were disallowed as deductions under the provisions of section 
  9.35  171(a)(2), 265 or 291 of the Internal Revenue Code in computing 
  9.36  federal taxable income; 
 10.1      (7) in the case of mines, oil and gas wells, other natural 
 10.2   deposits, and timber for which percentage depletion was 
 10.3   disallowed pursuant to subdivision 19c, clause (11), a 
 10.4   reasonable allowance for depletion based on actual cost.  In the 
 10.5   case of leases the deduction must be apportioned between the 
 10.6   lessor and lessee in accordance with rules prescribed by the 
 10.7   commissioner.  In the case of property held in trust, the 
 10.8   allowable deduction must be apportioned between the income 
 10.9   beneficiaries and the trustee in accordance with the pertinent 
 10.10  provisions of the trust, or if there is no provision in the 
 10.11  instrument, on the basis of the trust's income allocable to 
 10.12  each; 
 10.13     (8) for certified pollution control facilities placed in 
 10.14  service in a taxable year beginning before December 31, 1986, 
 10.15  and for which amortization deductions were elected under section 
 10.16  169 of the Internal Revenue Code of 1954, as amended through 
 10.17  December 31, 1985, an amount equal to the allowance for 
 10.18  depreciation under Minnesota Statutes 1986, section 290.09, 
 10.19  subdivision 7; 
 10.20     (9) amounts included in federal taxable income that are due 
 10.21  to refunds of income, excise, or franchise taxes based on net 
 10.22  income or related minimum taxes paid by the corporation to 
 10.23  Minnesota, another state, a political subdivision of another 
 10.24  state, the District of Columbia, or a foreign country or 
 10.25  possession of the United States to the extent that the taxes 
 10.26  were added to federal taxable income under section 290.01, 
 10.27  subdivision 19c, clause (1), in a prior taxable year; 
 10.28     (10) 80 percent of royalties, fees, or other like income 
 10.29  accrued or received from a foreign operating corporation or a 
 10.30  foreign corporation which is part of the same unitary business 
 10.31  as the receiving corporation; 
 10.32     (11) income or gains from the business of mining as defined 
 10.33  in section 290.05, subdivision 1, clause (a), that are not 
 10.34  subject to Minnesota franchise tax; 
 10.35     (12) the amount of handicap access expenditures in the 
 10.36  taxable year which are not allowed to be deducted or capitalized 
 11.1   under section 44(d)(7) of the Internal Revenue Code; 
 11.2      (13) the amount of qualified research expenses not allowed 
 11.3   for federal income tax purposes under section 280C(c) of the 
 11.4   Internal Revenue Code, but only to the extent that the amount 
 11.5   exceeds the amount of the credit allowed under section 290.068; 
 11.6      (14) the amount of salary expenses not allowed for federal 
 11.7   income tax purposes due to claiming the Indian employment credit 
 11.8   under section 45A(a) of the Internal Revenue Code; 
 11.9      (15) the amount of any refund of environmental taxes paid 
 11.10  under section 59A of the Internal Revenue Code; 
 11.11     (16) for taxable years beginning before January 1, 2008, 
 11.12  the amount of the federal small ethanol producer credit allowed 
 11.13  under section 40(a)(3) of the Internal Revenue Code which is 
 11.14  included in gross income under section 87 of the Internal 
 11.15  Revenue Code; 
 11.16     (17) for a corporation whose foreign sales corporation, as 
 11.17  defined in section 922 of the Internal Revenue Code, constituted 
 11.18  a foreign operating corporation during any taxable year ending 
 11.19  before January 1, 1995, and a return was filed by August 15, 
 11.20  1996, claiming the deduction under section 290.21, subdivision 
 11.21  4, for income received from the foreign operating corporation, 
 11.22  an amount equal to 1.23 multiplied by the amount of income 
 11.23  excluded under section 114 of the Internal Revenue Code, 
 11.24  provided the income is not income of a foreign operating 
 11.25  company; 
 11.26     (18) any decrease in subpart F income, as defined in 
 11.27  section 952(a) of the Internal Revenue Code, for the taxable 
 11.28  year when subpart F income is calculated without regard to the 
 11.29  provisions of section 614 of Public Law 107-147; and 
 11.30     (19) in each of the five tax years immediately following 
 11.31  the tax year in which an addition is required under subdivision 
 11.32  19c, clause (16), an amount equal to one-fifth of the delayed 
 11.33  depreciation.  For purposes of this clause, "delayed 
 11.34  depreciation" means the amount of the addition made by the 
 11.35  taxpayer under subdivision 19c, clause (16).  The resulting 
 11.36  delayed depreciation cannot be less than zero; 
 12.1      (20) income received by a qualified high technology 
 12.2   business from the sale of a net operating loss as allowed under 
 12.3   section 290.095, subdivision 13; 
 12.4      (21) the amount of net operating loss purchased under 
 12.5   section 290.095, subdivision 13; and 
 12.6      (22) to the extent included in federal taxable income, the 
 12.7   amount of credit against withholding tax under section 290.924. 
 12.8      [EFFECTIVE DATE.] This section is effective for taxable 
 12.9   years beginning after December 31, 2003. 
 12.10     Sec. 5.  Minnesota Statutes 2003 Supplement, section 
 12.11  290.091, subdivision 2, is amended to read: 
 12.12     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
 12.13  this section, the following terms have the meanings given: 
 12.14     (a) "Alternative minimum taxable income" means the sum of 
 12.15  the following for the taxable year: 
 12.16     (1) the taxpayer's federal alternative minimum taxable 
 12.17  income as defined in section 55(b)(2) of the Internal Revenue 
 12.18  Code; 
 12.19     (2) the taxpayer's itemized deductions allowed in computing 
 12.20  federal alternative minimum taxable income, but excluding: 
 12.21     (i) the charitable contribution deduction under section 170 
 12.22  of the Internal Revenue Code to the extent that the deduction 
 12.23  exceeds 1.0 percent of adjusted gross income, as defined in 
 12.24  section 62 of the Internal Revenue Code; 
 12.25     (ii) the medical expense deduction; 
 12.26     (iii) the casualty, theft, and disaster loss deduction; and 
 12.27     (iv) the impairment-related work expenses of a disabled 
 12.28  person; 
 12.29     (3) for depletion allowances computed under section 613A(c) 
 12.30  of the Internal Revenue Code, with respect to each property (as 
 12.31  defined in section 614 of the Internal Revenue Code), to the 
 12.32  extent not included in federal alternative minimum taxable 
 12.33  income, the excess of the deduction for depletion allowable 
 12.34  under section 611 of the Internal Revenue Code for the taxable 
 12.35  year over the adjusted basis of the property at the end of the 
 12.36  taxable year (determined without regard to the depletion 
 13.1   deduction for the taxable year); 
 13.2      (4) to the extent not included in federal alternative 
 13.3   minimum taxable income, the amount of the tax preference for 
 13.4   intangible drilling cost under section 57(a)(2) of the Internal 
 13.5   Revenue Code determined without regard to subparagraph (E); 
 13.6      (5) to the extent not included in federal alternative 
 13.7   minimum taxable income, the amount of interest income as 
 13.8   provided by section 290.01, subdivision 19a, clause (1); and 
 13.9      (6) the amount of addition required by section 290.01, 
 13.10  subdivision 19a, clause (7); 
 13.11     less the sum of the amounts determined under the following: 
 13.12     (1) interest income as defined in section 290.01, 
 13.13  subdivision 19b, clause (1); 
 13.14     (2) an overpayment of state income tax as provided by 
 13.15  section 290.01, subdivision 19b, clause (2), to the extent 
 13.16  included in federal alternative minimum taxable income; 
 13.17     (3) the amount of investment interest paid or accrued 
 13.18  within the taxable year on indebtedness to the extent that the 
 13.19  amount does not exceed net investment income, as defined in 
 13.20  section 163(d)(4) of the Internal Revenue Code.  Interest does 
 13.21  not include amounts deducted in computing federal adjusted gross 
 13.22  income; and 
 13.23     (4) amounts subtracted from federal taxable income as 
 13.24  provided by section 290.01, subdivision 19b, clauses (10) and 
 13.25  (11) to (14). 
 13.26     In the case of an estate or trust, alternative minimum 
 13.27  taxable income must be computed as provided in section 59(c) of 
 13.28  the Internal Revenue Code. 
 13.29     (b) "Investment interest" means investment interest as 
 13.30  defined in section 163(d)(3) of the Internal Revenue Code. 
 13.31     (c) "Tentative minimum tax" equals 6.4 percent of 
 13.32  alternative minimum taxable income after subtracting the 
 13.33  exemption amount determined under subdivision 3. 
 13.34     (d) "Regular tax" means the tax that would be imposed under 
 13.35  this chapter (without regard to this section and section 
 13.36  290.032), reduced by the sum of the nonrefundable credits 
 14.1   allowed under this chapter.  
 14.2      (e) "Net minimum tax" means the minimum tax imposed by this 
 14.3   section. 
 14.4      [EFFECTIVE DATE.] This section is effective for taxable 
 14.5   years beginning after December 31, 2003. 
 14.6      Sec. 6.  Minnesota Statutes 2003 Supplement, section 
 14.7   290.0921, subdivision 3, is amended to read: 
 14.8      Subd. 3.  [ALTERNATIVE MINIMUM TAXABLE INCOME.] 
 14.9   "Alternative minimum taxable income" is Minnesota net income as 
 14.10  defined in section 290.01, subdivision 19, and includes the 
 14.11  adjustments and tax preference items in sections 56, 57, 58, and 
 14.12  59(d), (e), (f), and (h) of the Internal Revenue Code.  If a 
 14.13  corporation files a separate company Minnesota tax return, the 
 14.14  minimum tax must be computed on a separate company basis.  If a 
 14.15  corporation is part of a tax group filing a unitary return, the 
 14.16  minimum tax must be computed on a unitary basis.  The following 
 14.17  adjustments must be made. 
 14.18     (1) For purposes of the depreciation adjustments under 
 14.19  section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 
 14.20  the basis for depreciable property placed in service in a 
 14.21  taxable year beginning before January 1, 1990, is the adjusted 
 14.22  basis for federal income tax purposes, including any 
 14.23  modification made in a taxable year under section 290.01, 
 14.24  subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 14.25  subdivision 7, paragraph (c). 
 14.26     For taxable years beginning after December 31, 2000, the 
 14.27  amount of any remaining modification made under section 290.01, 
 14.28  subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 14.29  subdivision 7, paragraph (c), not previously deducted is a 
 14.30  depreciation allowance in the first taxable year after December 
 14.31  31, 2000. 
 14.32     (2) The portion of the depreciation deduction allowed for 
 14.33  federal income tax purposes under section 168(k) of the Internal 
 14.34  Revenue Code that is required as an addition under section 
 14.35  290.01, subdivision 19c, clause (16), is disallowed in 
 14.36  determining alternative minimum taxable income. 
 15.1      (3) The subtraction for depreciation allowed under section 
 15.2   290.01, subdivision 19d, clause (19), is allowed as a 
 15.3   depreciation deduction in determining alternative minimum 
 15.4   taxable income. 
 15.5      (4) The alternative tax net operating loss deduction under 
 15.6   sections 56(a)(4) and 56(d) of the Internal Revenue Code does 
 15.7   not apply. 
 15.8      (5) The special rule for certain dividends under section 
 15.9   56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 
 15.10     (6) The special rule for dividends from section 936 
 15.11  companies under section 56(g)(4)(C)(iii) does not apply. 
 15.12     (7) The tax preference for depletion under section 57(a)(1) 
 15.13  of the Internal Revenue Code does not apply. 
 15.14     (8) The tax preference for intangible drilling costs under 
 15.15  section 57(a)(2) of the Internal Revenue Code must be calculated 
 15.16  without regard to subparagraph (E) and the subtraction under 
 15.17  section 290.01, subdivision 19d, clause (4). 
 15.18     (9) The tax preference for tax exempt interest under 
 15.19  section 57(a)(5) of the Internal Revenue Code does not apply.  
 15.20     (10) The tax preference for charitable contributions of 
 15.21  appreciated property under section 57(a)(6) of the Internal 
 15.22  Revenue Code does not apply. 
 15.23     (11) For purposes of calculating the tax preference for 
 15.24  accelerated depreciation or amortization on certain property 
 15.25  placed in service before January 1, 1987, under section 57(a)(7) 
 15.26  of the Internal Revenue Code, the deduction allowable for the 
 15.27  taxable year is the deduction allowed under section 290.01, 
 15.28  subdivision 19e. 
 15.29     For taxable years beginning after December 31, 2000, the 
 15.30  amount of any remaining modification made under section 290.01, 
 15.31  subdivision 19e, not previously deducted is a depreciation or 
 15.32  amortization allowance in the first taxable year after December 
 15.33  31, 2004. 
 15.34     (12) For purposes of calculating the adjustment for 
 15.35  adjusted current earnings in section 56(g) of the Internal 
 15.36  Revenue Code, the term "alternative minimum taxable income" as 
 16.1   it is used in section 56(g) of the Internal Revenue Code, means 
 16.2   alternative minimum taxable income as defined in this 
 16.3   subdivision, determined without regard to the adjustment for 
 16.4   adjusted current earnings in section 56(g) of the Internal 
 16.5   Revenue Code. 
 16.6      (13) For purposes of determining the amount of adjusted 
 16.7   current earnings under section 56(g)(3) of the Internal Revenue 
 16.8   Code, no adjustment shall be made under section 56(g)(4) of the 
 16.9   Internal Revenue Code with respect to (i) the amount of foreign 
 16.10  dividend gross-up subtracted as provided in section 290.01, 
 16.11  subdivision 19d, clause (1), (ii) the amount of refunds of 
 16.12  income, excise, or franchise taxes subtracted as provided in 
 16.13  section 290.01, subdivision 19d, clause (10), or (iii) the 
 16.14  amount of royalties, fees or other like income subtracted as 
 16.15  provided in section 290.01, subdivision 19d, clause (11). 
 16.16     (14) Alternative minimum taxable income excludes the income 
 16.17  from operating in a job opportunity building zone as provided 
 16.18  under section 469.317. 
 16.19     (15) Alternative minimum taxable income excludes the income 
 16.20  from operating in a biotechnology and health sciences industry 
 16.21  zone as provided under section 469.337. 
 16.22     (16) Alternative minimum taxable income excludes the income 
 16.23  received by a qualified high technology business from the sale 
 16.24  of a net operating loss under section 290.095, subdivision 13. 
 16.25     Items of tax preference must not be reduced below zero as a 
 16.26  result of the modifications in this subdivision. 
 16.27     [EFFECTIVE DATE.] This section is effective for taxable 
 16.28  years beginning after December 31, 2003. 
 16.29     Sec. 7.  Minnesota Statutes 2002, section 290.0921, 
 16.30  subdivision 4, is amended to read: 
 16.31     Subd. 4.  [ALTERNATIVE TAX NET OPERATING LOSS.] (a) An 
 16.32  alternative tax net operating loss deduction is allowed from 
 16.33  alternative minimum taxable net income equal to the net 
 16.34  operating loss deduction allowable for the taxable year under 
 16.35  section 290.095 with the following modifications: 
 16.36     (1) The amount of the net operating loss deduction must not 
 17.1   exceed 90 percent of alternative minimum taxable net income. 
 17.2      (2) In determining the amount of the net operating loss 
 17.3   deduction (i) the net operating loss under section 290.095 must 
 17.4   be adjusted as provided in paragraph (b), and (ii) for taxable 
 17.5   years beginning after December 31, 1989, section 290.095, 
 17.6   subdivision 3, must be applied by substituting "90 percent of 
 17.7   alternative minimum taxable net income" for "taxable net income."
 17.8      (b) The following adjustments must be made to the 
 17.9   alternative tax net operating loss deduction under paragraph (a):
 17.10     (1) For a loss year beginning after December 31, 1989, the 
 17.11  net operating loss for each year under section 290.095 must be 
 17.12  (i) determined with the adjustments provided in sections 56 and 
 17.13  58 of the Internal Revenue Code, as modified by subdivision 3 
 17.14  and (ii) reduced by the items of tax preference for the year 
 17.15  determined under section 57 of the Internal Revenue Code, as 
 17.16  modified by subdivision 3. 
 17.17     (2) For a loss year beginning before January 1, 1990, the 
 17.18  amount of the net operating loss that may be carried over to 
 17.19  taxable years beginning after December 31, 1989, equals the 
 17.20  amount which may be carried from the loss year to the first 
 17.21  taxable year of the taxpayer beginning after December 31, 1989. 
 17.22     (c) A net operating loss purchased from a qualified high 
 17.23  technology business under section 290.095, subdivision 13, is 
 17.24  allowed as a deduction from alternative minimum taxable net 
 17.25  income.  The modifications in paragraph (a) and adjustments in 
 17.26  paragraph (b) do not apply to the purchased net operating loss. 
 17.27     [EFFECTIVE DATE.] This section is effective for taxable 
 17.28  years beginning after December 31, 2003. 
 17.29     Sec. 8.  Minnesota Statutes 2002, section 290.095, is 
 17.30  amended by adding a subdivision to read: 
 17.31     Subd. 13.  [SALE OF NET OPERATING LOSS.] (a) After 
 17.32  application to and approval by the commissioner of employment 
 17.33  and economic development, a qualified high technology business 
 17.34  may sell its unused net operating loss to another taxpayer.  The 
 17.35  amount received by the qualified high technology business for 
 17.36  the sale of all, or a portion of, its net operating loss must be 
 18.1   equal to or greater than 75 percent of the amount of the tax 
 18.2   reduction, computed at the corporate franchise tax rate under 
 18.3   section 290.06, subdivision 1, the qualified high technology 
 18.4   business would have received if it could have deducted the 
 18.5   entire net operating loss in the tax year.  The amount of net 
 18.6   operating loss that may be sold shall not exceed $500,000 in the 
 18.7   tax year, and the length of time that approval to sell net 
 18.8   operating losses may be granted shall not exceed ten years. 
 18.9      (b) For purposes of this subdivision, a "qualified high 
 18.10  technology business" means a business that has its headquarters 
 18.11  or base of operations in this state and conducts more than 50 
 18.12  percent of its business in the following research activities: 
 18.13     (1) qualified research as defined in section 41(d) of the 
 18.14  Internal Revenue Code; 
 18.15     (2) the development and design of computer software using 
 18.16  fourth generation or higher software development tools or native 
 18.17  programming languages to design and construct unique and 
 18.18  specific code to create applications and design databases for 
 18.19  sale or license; 
 18.20     (3) research, development, production, or provision of 
 18.21  biotechnology that expands the fundamental knowledge about the 
 18.22  functioning of biological systems for the purpose of developing 
 18.23  or providing products or processes for specific commercial or 
 18.24  public purposes, including, but not limited to, medical, 
 18.25  pharmaceutical, nutritional, health, agricultural, and 
 18.26  environmental; 
 18.27     (4) research and development of nanotechnology that 
 18.28  advances knowledge and understanding of physical, chemical, and 
 18.29  biological properties of nanoscale materials and systems at the 
 18.30  atomic, molecular, or supramolecular level, or creates improved 
 18.31  materials, devices, or systems through nanotechnologies, 
 18.32  including, but not limited to, the following applications: 
 18.33     (i) nanostructured materials by design; 
 18.34     (ii) manufacturing at the nanoscale; 
 18.35     (iii) detection of and protection from chemical, 
 18.36  biological, radiological, or explosive substances; 
 19.1      (iv) nanoscale instrumentation and metrology; 
 19.2      (v) nanoelectronics, nanophotonics, and nanomagnetics; 
 19.3      (vi) health care, therapeutics, and diagnostics; 
 19.4      (vii) microcraft and robotics; or 
 19.5      (viii) nanoscale processes for environmental improvement. 
 19.6      (c) A business is not a qualified high technology business 
 19.7   if it: 
 19.8      (1) has demonstrated positive net income in either of the 
 19.9   two previous full years of ongoing operations as determined on 
 19.10  its financial statements; 
 19.11     (2) has demonstrated a ratio of 110 percent or greater of 
 19.12  operating revenues divided by operating expenses in either of 
 19.13  the two previous full years of operations as determined on its 
 19.14  financial statements; or 
 19.15     (3) is directly or indirectly at least 15 percent owned or 
 19.16  controlled by another corporation that has demonstrated positive 
 19.17  net income in either of the two previous full years of ongoing 
 19.18  operations as determined on its financial statements or is part 
 19.19  of a consolidated group of affiliate corporations, as filed for 
 19.20  federal income tax purposes, that in the aggregate has 
 19.21  demonstrated positive net income in either of the two previous 
 19.22  full years of ongoing operations as determined on its combined 
 19.23  financial statements. 
 19.24     (d) Partnerships, limited liability partnerships, limited 
 19.25  liability companies classified as partnerships, and S 
 19.26  corporations, prior to distribution, may apply for the sale of 
 19.27  operating losses that would be distributed to the partners or 
 19.28  shareholders.  The application shall only be approved if all 
 19.29  partners, members, or shareholders certify that for Minnesota 
 19.30  tax purposes, they will not deduct the loss that is sold on 
 19.31  their individual tax return. 
 19.32     (e) The income received by the qualified high technology 
 19.33  business from the sale of unused net operating loss is exempt 
 19.34  from tax under this chapter.  In the tax year the income is 
 19.35  received it must be reported on the business tax return and a 
 19.36  copy of the approved application must be attached to the return. 
 20.1      (f) A taxpayer that purchases a net operating loss from a 
 20.2   qualified high technology business shall claim the loss in the 
 20.3   taxable year that the qualified high technology business 
 20.4   generated the loss.  A copy of the approved application by the 
 20.5   commissioner for the sale of the net operating loss must be 
 20.6   attached to the return. 
 20.7      (g) The commissioner of employment and economic 
 20.8   development, in consultation with the commissioner and the 
 20.9   Minnesota Biosciences Council, shall certify qualified high 
 20.10  technology businesses for purposes of this subdivision and 
 20.11  section 290.924. 
 20.12     A business must apply to the commissioner of employment and 
 20.13  economic development to be certified as a qualified high 
 20.14  technology business.  The business must provide all information 
 20.15  specified by the commissioner of employment and economic 
 20.16  development that verifies the business meets the criteria 
 20.17  contained in this subdivision.  The commissioner of employment 
 20.18  and economic development must approve or deny certification 
 20.19  within 90 days of receipt of the application.  If the 
 20.20  application is approved, the commissioner of employment and 
 20.21  economic development will issue to the applicant a certificate 
 20.22  of qualification.  A copy of the certificate must be sent to the 
 20.23  commissioner. 
 20.24     An application for certification that is denied may be 
 20.25  appealed under the provisions of the Administrative Procedure 
 20.26  Act relating to contested cases.  A notice of appeal must be 
 20.27  filed with the commissioner of employment and economic 
 20.28  development on or before 30 days after the date of the notice of 
 20.29  a denial of certification.  Within 30 days of receipt of an 
 20.30  appeal of a denial of certification, the commissioner of 
 20.31  employment and economic development shall issue an order and 
 20.32  notice of a contested case hearing as required under chapter 14. 
 20.33     [EFFECTIVE DATE.] This section is effective for taxable 
 20.34  years beginning after December 31, 2003. 
 20.35     Sec. 9.  [290.924] [HIGH TECHNOLOGY BUSINESS CREDIT.] 
 20.36     A qualified high technology business, as defined in section 
 21.1   290.095, subdivision 13, is allowed a credit for taxes paid 
 21.2   under this section equal to ten percent of the amount of tax to 
 21.3   be withheld under sections 290.92, subdivisions 2a, 3, 4a, 4b, 
 21.4   4c, and 9, and 290.923.  The credit may be claimed against the 
 21.5   tax payment required under section 289A.20, subdivision 2, on 
 21.6   the return filed under section 289A.18, subdivision 2. 
 21.7      The amount of credit claimed under this section is not 
 21.8   income subject to the tax imposed under this chapter. 
 21.9      The amount of credit claimed by a qualified high technology 
 21.10  business under this section shall not reduce the amount of 
 21.11  credit under section 290.92, subdivision 12, to the recipient of 
 21.12  the income against the tax imposed under this chapter. 
 21.13     [EFFECTIVE DATE.] This section is effective for taxable 
 21.14  years beginning after December 31, 2003.