SF 2801

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; modifying corporate franchise 
  1.3             tax deductions for business expenses; amending 
  1.4             Minnesota Statutes 2002, sections 290.068, by adding a 
  1.5             subdivision; 290.095, subdivision 4; 290.10; 290.21, 
  1.6             subdivision 4; Minnesota Statutes 2003 Supplement, 
  1.7             section 290.01, subdivisions 19c, 19d. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 2003 Supplement, section 
  1.10  290.01, subdivision 19c, is amended to read: 
  1.11     Subd. 19c.  [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 
  1.12  INCOME.] For corporations, there shall be added to federal 
  1.13  taxable income: 
  1.14     (1) the amount of any deduction taken for federal income 
  1.15  tax purposes for income, excise, or franchise taxes based on net 
  1.16  income or related minimum taxes, including but not limited to 
  1.17  the tax imposed under section 290.0922, paid by the corporation 
  1.18  to Minnesota, another state, a political subdivision of another 
  1.19  state, the District of Columbia, or any foreign country or 
  1.20  possession of the United States; 
  1.21     (2) interest not subject to federal tax upon obligations 
  1.22  of:  the United States, its possessions, its agencies, or its 
  1.23  instrumentalities; the state of Minnesota or any other state, 
  1.24  any of its political or governmental subdivisions, any of its 
  1.25  municipalities, or any of its governmental agencies or 
  1.26  instrumentalities; the District of Columbia; or Indian tribal 
  2.1   governments; 
  2.2      (3) exempt-interest dividends received as defined in 
  2.3   section 852(b)(5) of the Internal Revenue Code; 
  2.4      (4) the amount of any net operating loss deduction taken 
  2.5   for federal income tax purposes under section 172 or 832(c)(10) 
  2.6   of the Internal Revenue Code or operations loss deduction under 
  2.7   section 810 of the Internal Revenue Code; 
  2.8      (5) the amount of any special deductions taken for federal 
  2.9   income tax purposes under sections 241 to 247 of the Internal 
  2.10  Revenue Code; 
  2.11     (6) losses from the business of mining, as defined in 
  2.12  section 290.05, subdivision 1, clause (a), that are not subject 
  2.13  to Minnesota income tax; 
  2.14     (7) the amount of any capital losses deducted for federal 
  2.15  income tax purposes under sections 1211 and 1212 of the Internal 
  2.16  Revenue Code; 
  2.17     (8) the exempt foreign trade income of a foreign sales 
  2.18  corporation under sections 921(a) and 291 of the Internal 
  2.19  Revenue Code; 
  2.20     (9) the amount of percentage depletion deducted under 
  2.21  sections 611 through 614 and 291 of the Internal Revenue Code; 
  2.22     (10) for certified pollution control facilities placed in 
  2.23  service in a taxable year beginning before December 31, 1986, 
  2.24  and for which amortization deductions were elected under section 
  2.25  169 of the Internal Revenue Code of 1954, as amended through 
  2.26  December 31, 1985, the amount of the amortization deduction 
  2.27  allowed in computing federal taxable income for those 
  2.28  facilities; 
  2.29     (11) the amount of any deemed dividend from a foreign 
  2.30  operating corporation determined pursuant to section 290.17, 
  2.31  subdivision 4, paragraph (g); 
  2.32     (12) the amount of any environmental tax paid under section 
  2.33  59(a) of the Internal Revenue Code; 
  2.34     (13) the amount of a partner's pro rata share of net income 
  2.35  which does not flow through to the partner because the 
  2.36  partnership elected to pay the tax on the income under section 
  3.1   6242(a)(2) of the Internal Revenue Code; 
  3.2      (14) the amount of net income excluded under section 114 of 
  3.3   the Internal Revenue Code; 
  3.4      (15) any increase in subpart F income, as defined in 
  3.5   section 952(a) of the Internal Revenue Code, for the taxable 
  3.6   year when subpart F income is calculated without regard to the 
  3.7   provisions of section 614 of Public Law 107-147; and 
  3.8      (16) 80 percent of the depreciation deduction allowed under 
  3.9   section 168(k) of the Internal Revenue Code.  For purposes of 
  3.10  this clause, if the taxpayer has an activity that in the taxable 
  3.11  year generates a deduction for depreciation under section 168(k) 
  3.12  and the activity generates a loss for the taxable year that the 
  3.13  taxpayer is not allowed to claim for the taxable year, "the 
  3.14  depreciation allowed under section 168(k)" for the taxable year 
  3.15  is limited to excess of the depreciation claimed by the activity 
  3.16  under section 168(k) over the amount of the loss from the 
  3.17  activity that is not allowed in the taxable year.  In succeeding 
  3.18  taxable years when the losses not allowed in the taxable year 
  3.19  are allowed, the depreciation under section 168(k) is allowed; 
  3.20  and 
  3.21     (17) the amount of any deduction taken for federal income 
  3.22  tax purposes for business expenses not allowed under section 
  3.23  290.10, subdivision 2. 
  3.24     [EFFECTIVE DATE.] This section is effective for taxable 
  3.25  years beginning after December 31, 2003. 
  3.26     Sec. 2.  Minnesota Statutes 2003 Supplement, section 
  3.27  290.01, subdivision 19d, is amended to read: 
  3.28     Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
  3.29  TAXABLE INCOME.] For corporations, there shall be subtracted 
  3.30  from federal taxable income after the increases provided in 
  3.31  subdivision 19c:  
  3.32     (1) the amount of foreign dividend gross-up added to gross 
  3.33  income for federal income tax purposes under section 78 of the 
  3.34  Internal Revenue Code; 
  3.35     (2) the amount of salary expense not allowed for federal 
  3.36  income tax purposes due to claiming the federal jobs credit 
  4.1   under section 51 of the Internal Revenue Code; 
  4.2      (3) any dividend (not including any distribution in 
  4.3   liquidation) paid within the taxable year by a national or state 
  4.4   bank to the United States, or to any instrumentality of the 
  4.5   United States exempt from federal income taxes, on the preferred 
  4.6   stock of the bank owned by the United States or the 
  4.7   instrumentality; 
  4.8      (4) amounts disallowed for intangible drilling costs due to 
  4.9   differences between this chapter and the Internal Revenue Code 
  4.10  in taxable years beginning before January 1, 1987, as follows: 
  4.11     (i) to the extent the disallowed costs are represented by 
  4.12  physical property, an amount equal to the allowance for 
  4.13  depreciation under Minnesota Statutes 1986, section 290.09, 
  4.14  subdivision 7, subject to the modifications contained in 
  4.15  subdivision 19e; and 
  4.16     (ii) to the extent the disallowed costs are not represented 
  4.17  by physical property, an amount equal to the allowance for cost 
  4.18  depletion under Minnesota Statutes 1986, section 290.09, 
  4.19  subdivision 8; 
  4.20     (5) the deduction for capital losses pursuant to sections 
  4.21  1211 and 1212 of the Internal Revenue Code, except that: 
  4.22     (i) for capital losses incurred in taxable years beginning 
  4.23  after December 31, 1986, capital loss carrybacks shall not be 
  4.24  allowed; 
  4.25     (ii) for capital losses incurred in taxable years beginning
  4.26  after December 31, 1986, a capital loss carryover to each of the 
  4.27  15 taxable years succeeding the loss year shall be allowed; 
  4.28     (iii) for capital losses incurred in taxable years 
  4.29  beginning before January 1, 1987, a capital loss carryback to 
  4.30  each of the three taxable years preceding the loss year, subject 
  4.31  to the provisions of Minnesota Statutes 1986, section 290.16, 
  4.32  shall be allowed; and 
  4.33     (iv) for capital losses incurred in taxable years beginning
  4.34  before January 1, 1987, a capital loss carryover to each of the 
  4.35  five taxable years succeeding the loss year to the extent such 
  4.36  loss was not used in a prior taxable year and subject to the 
  5.1   provisions of Minnesota Statutes 1986, section 290.16, shall be 
  5.2   allowed; 
  5.3      (6) an amount for interest and expenses relating to income 
  5.4   not taxable for federal income tax purposes, if (i) the income 
  5.5   is taxable under this chapter and (ii) the interest and expenses 
  5.6   were disallowed as deductions under the provisions of section 
  5.7   171(a)(2), 265 or 291 of the Internal Revenue Code in computing 
  5.8   federal taxable income; 
  5.9      (7) in the case of mines, oil and gas wells, other natural 
  5.10  deposits, and timber for which percentage depletion was 
  5.11  disallowed pursuant to subdivision 19c, clause (11), a 
  5.12  reasonable allowance for depletion based on actual cost.  In the 
  5.13  case of leases the deduction must be apportioned between the 
  5.14  lessor and lessee in accordance with rules prescribed by the 
  5.15  commissioner.  In the case of property held in trust, the 
  5.16  allowable deduction must be apportioned between the income 
  5.17  beneficiaries and the trustee in accordance with the pertinent 
  5.18  provisions of the trust, or if there is no provision in the 
  5.19  instrument, on the basis of the trust's income allocable to 
  5.20  each; 
  5.21     (8) for certified pollution control facilities placed in 
  5.22  service in a taxable year beginning before December 31, 1986, 
  5.23  and for which amortization deductions were elected under section 
  5.24  169 of the Internal Revenue Code of 1954, as amended through 
  5.25  December 31, 1985, an amount equal to the allowance for 
  5.26  depreciation under Minnesota Statutes 1986, section 290.09, 
  5.27  subdivision 7; 
  5.28     (9) amounts included in federal taxable income that are due 
  5.29  to refunds of income, excise, or franchise taxes based on net 
  5.30  income or related minimum taxes paid by the corporation to 
  5.31  Minnesota, another state, a political subdivision of another 
  5.32  state, the District of Columbia, or a foreign country or 
  5.33  possession of the United States to the extent that the taxes 
  5.34  were added to federal taxable income under section 290.01, 
  5.35  subdivision 19c, clause (1), in a prior taxable year; 
  5.36     (10) 80 percent of royalties, fees, or other like income 
  6.1   accrued or received from a foreign operating corporation or a 
  6.2   foreign corporation which is part of the same unitary business 
  6.3   as the receiving corporation and are not accrued or received 
  6.4   from a corporation that has removed jobs from a location within 
  6.5   the United States to a location outside the United States, or 
  6.6   has created jobs outside the United States for the purpose of 
  6.7   producing goods or services that are to be consumed within the 
  6.8   United States; 
  6.9      (11) income or gains from the business of mining as defined 
  6.10  in section 290.05, subdivision 1, clause (a), that are not 
  6.11  subject to Minnesota franchise tax; 
  6.12     (12) the amount of handicap access expenditures in the 
  6.13  taxable year which are not allowed to be deducted or capitalized 
  6.14  under section 44(d)(7) of the Internal Revenue Code; 
  6.15     (13) the amount of qualified research expenses not allowed 
  6.16  for federal income tax purposes under section 280C(c) of the 
  6.17  Internal Revenue Code, but only to the extent that the amount 
  6.18  exceeds the amount of the credit allowed under section 
  6.19  290.068 and does not include an amount that is not allowed under 
  6.20  section 290.068, subdivision 7; 
  6.21     (14) the amount of salary expenses not allowed for federal 
  6.22  income tax purposes due to claiming the Indian employment credit 
  6.23  under section 45A(a) of the Internal Revenue Code; 
  6.24     (15) the amount of any refund of environmental taxes paid 
  6.25  under section 59A of the Internal Revenue Code; 
  6.26     (16) for taxable years beginning before January 1, 2008, 
  6.27  the amount of the federal small ethanol producer credit allowed 
  6.28  under section 40(a)(3) of the Internal Revenue Code which is 
  6.29  included in gross income under section 87 of the Internal 
  6.30  Revenue Code; 
  6.31     (17) for a corporation whose foreign sales corporation, as 
  6.32  defined in section 922 of the Internal Revenue Code, constituted 
  6.33  a foreign operating corporation during any taxable year ending 
  6.34  before January 1, 1995, and a return was filed by August 15, 
  6.35  1996, claiming the deduction under section 290.21, subdivision 
  6.36  4, for income received from the foreign operating corporation, 
  7.1   an amount equal to 1.23 multiplied by the amount of income 
  7.2   excluded under section 114 of the Internal Revenue Code, 
  7.3   provided the income is not income of a foreign operating 
  7.4   company; 
  7.5      (18) any decrease in subpart F income, as defined in 
  7.6   section 952(a) of the Internal Revenue Code, for the taxable 
  7.7   year when subpart F income is calculated without regard to the 
  7.8   provisions of section 614 of Public Law 107-147; and 
  7.9      (19) in each of the five tax years immediately following 
  7.10  the tax year in which an addition is required under subdivision 
  7.11  19c, clause (16), an amount equal to one-fifth of the delayed 
  7.12  depreciation.  For purposes of this clause, "delayed 
  7.13  depreciation" means the amount of the addition made by the 
  7.14  taxpayer under subdivision 19c, clause (16).  The resulting 
  7.15  delayed depreciation cannot be less than zero. 
  7.16     [EFFECTIVE DATE.] This section is effective for taxable 
  7.17  years beginning after December 31, 2003. 
  7.18     Sec. 3.  Minnesota Statutes 2002, section 290.068, is 
  7.19  amended by adding a subdivision to read: 
  7.20     Subd. 7.  [CREDIT NOT ALLOWED.] No credit under this 
  7.21  section shall be allowed to a taxpayer that has removed jobs 
  7.22  from a location within the United States to a location outside 
  7.23  the United States, or has created jobs outside the United States 
  7.24  for the purpose of producing goods or services that are to be 
  7.25  consumed within the United States. 
  7.26     [EFFECTIVE DATE.] This section is effective for taxable 
  7.27  years beginning after December 31, 2003. 
  7.28     Sec. 4.  Minnesota Statutes 2002, section 290.095, 
  7.29  subdivision 4, is amended to read: 
  7.30     Subd. 4.  [COMPUTATION AND MODIFICATIONS.] The following 
  7.31  modifications shall be made in computing a net operating loss in 
  7.32  any taxable year and also in computing the taxable net income 
  7.33  for any taxable year before a net operating loss deduction shall 
  7.34  be allowed: 
  7.35     (a) No deduction shall be allowed for or with respect to 
  7.36  losses connected with income producing activities if the income 
  8.1   therefrom would not be required to be either assignable to this 
  8.2   state or included in computing the taxpayer's taxable net income.
  8.3      (b) A net operating loss deduction shall not be allowed. 
  8.4      (c) The amount deductible on account of losses from sales 
  8.5   or exchanges of capital assets shall not exceed the amount 
  8.6   includable on account of gains from sales or exchanges of 
  8.7   capital assets.  
  8.8      (d) Renegotiation of profits for a prior taxable year under 
  8.9   the renegotiation laws of the United States of America, 
  8.10  including renegotiation of the profits with a subcontractor, 
  8.11  shall not enter into the computation. 
  8.12     (e) Federal income and excess profits taxes shall not be 
  8.13  allowed as a deduction. 
  8.14     (f) No deduction shall be allowed for or with respect to 
  8.15  losses connected with income-producing activities that are 
  8.16  related to the removal of jobs from a location within the United 
  8.17  States to a location outside the United States, or the creation 
  8.18  of jobs outside the United States for purposes of production of 
  8.19  goods or services that are to be consumed within the United 
  8.20  States. 
  8.21     [EFFECTIVE DATE.] This section is effective for taxable 
  8.22  years beginning after December 31, 2003. 
  8.23     Sec. 5.  Minnesota Statutes 2002, section 290.10, is 
  8.24  amended to read: 
  8.25     290.10 [NONDEDUCTIBLE ITEMS.] 
  8.26     Subdivision 1.  [EXPENSES, INTEREST, TAXES; MINING.] Except 
  8.27  as provided in section 290.17, subdivision 4, paragraph (i), in 
  8.28  computing the net income of a taxpayer no deduction shall in any 
  8.29  case be allowed for expenses, interest and taxes connected with 
  8.30  or allocable against the production or receipt of all income not 
  8.31  included in the measure of the tax imposed by this chapter, 
  8.32  except that for corporations engaged in the business of mining 
  8.33  or producing iron ore, the mining of which is subject to the 
  8.34  occupation tax imposed by section 298.01, subdivision 4, this 
  8.35  shall not prevent the deduction of expenses and other items to 
  8.36  the extent that the expenses and other items are allowable under 
  9.1   this chapter and are not deductible, capitalizable, retainable 
  9.2   in basis, or taken into account by allowance or otherwise in 
  9.3   computing the occupation tax and do not exceed the amounts taken 
  9.4   for federal income tax purposes for that year.  Occupation taxes 
  9.5   imposed under chapter 298, royalty taxes imposed under chapter 
  9.6   299, or depletion expenses may not be deducted under this clause.
  9.7      Subd. 2.  [EXPENSES FOR OUTSOURCED BUSINESS ACTIVITIES.] No 
  9.8   deduction shall be allowed for expenses that are paid or 
  9.9   incurred for the removal of jobs from a location within the 
  9.10  United States to a location outside the United States, or the 
  9.11  creation of jobs outside the United States for purposes of 
  9.12  production of goods or services that are to be consumed within 
  9.13  the United States. 
  9.14     [EFFECTIVE DATE.] This section is effective for taxable 
  9.15  years beginning after December 31, 2003. 
  9.16     Sec. 6.  Minnesota Statutes 2002, section 290.21, 
  9.17  subdivision 4, is amended to read: 
  9.18     Subd. 4.  (a)(1) Eighty percent of dividends received by a 
  9.19  corporation during the taxable year from another corporation, in 
  9.20  which the recipient owns 20 percent or more of the stock, by 
  9.21  vote and value, not including stock described in section 
  9.22  1504(a)(4) of the Internal Revenue Code when the corporate stock 
  9.23  with respect to which dividends are paid does not constitute the 
  9.24  stock in trade of the taxpayer or would not be included in the 
  9.25  inventory of the taxpayer, or does not constitute property held 
  9.26  by the taxpayer primarily for sale to customers in the ordinary 
  9.27  course of the taxpayer's trade or business, or when the trade or 
  9.28  business of the taxpayer does not consist principally of the 
  9.29  holding of the stocks and the collection of the income and gains 
  9.30  therefrom; and 
  9.31     (2)(i) the remaining 20 percent of dividends if the 
  9.32  dividends received are the stock in an affiliated company 
  9.33  transferred in an overall plan of reorganization and the 
  9.34  dividend is eliminated in consolidation under Treasury 
  9.35  Department Regulation 1.1502-14(a), as amended through December 
  9.36  31, 1989; 
 10.1      (ii) the remaining 20 percent of dividends if the dividends 
 10.2   are received from a corporation which is subject to tax under 
 10.3   section 290.36 and which is a member of an affiliated group of 
 10.4   corporations as defined by the Internal Revenue Code and the 
 10.5   dividend is eliminated in consolidation under Treasury 
 10.6   Department Regulation 1.1502-14(a), as amended through December 
 10.7   31, 1989, or is deducted under an election under section 243(b) 
 10.8   of the Internal Revenue Code; or 
 10.9      (iii) the remaining 20 percent of the dividends if the 
 10.10  dividends are received from a property and casualty insurer as 
 10.11  defined under section 60A.60, subdivision 8, which is a member 
 10.12  of an affiliated group of corporations as defined by the 
 10.13  Internal Revenue Code and either:  (A) the dividend is 
 10.14  eliminated in consolidation under Treasury Regulation 
 10.15  1.1502-14(a), as amended through December 31, 1989; or (B) the 
 10.16  dividend is deducted under an election under section 243(b) of 
 10.17  the Internal Revenue Code. 
 10.18     (b) Seventy percent of dividends received by a corporation 
 10.19  during the taxable year from another corporation in which the 
 10.20  recipient owns less than 20 percent of the stock, by vote or 
 10.21  value, not including stock described in section 1504(a)(4) of 
 10.22  the Internal Revenue Code when the corporate stock with respect 
 10.23  to which dividends are paid does not constitute the stock in 
 10.24  trade of the taxpayer, or does not constitute property held by 
 10.25  the taxpayer primarily for sale to customers in the ordinary 
 10.26  course of the taxpayer's trade or business, or when the trade or 
 10.27  business of the taxpayer does not consist principally of the 
 10.28  holding of the stocks and the collection of income and gain 
 10.29  therefrom.  
 10.30     (c) The dividend deduction provided in this subdivision 
 10.31  shall be allowed only with respect to dividends that are 
 10.32  included in a corporation's Minnesota taxable net income for the 
 10.33  taxable year. 
 10.34     The dividend deduction provided in this subdivision does 
 10.35  not apply to a dividend from a corporation which, for the 
 10.36  taxable year of the corporation in which the distribution is 
 11.1   made or for the next preceding taxable year of the corporation, 
 11.2   is a corporation exempt from tax under section 501 of the 
 11.3   Internal Revenue Code. 
 11.4      The dividend deduction provided in this subdivision applies 
 11.5   to the amount of regulated investment company dividends only to 
 11.6   the extent determined under section 854(b) of the Internal 
 11.7   Revenue Code. 
 11.8      The dividend deduction provided in this subdivision shall 
 11.9   not be allowed with respect to any dividend for which a 
 11.10  deduction is not allowed under the provisions of section 246(c) 
 11.11  of the Internal Revenue Code. 
 11.12     (d) If dividends received by a corporation that does not 
 11.13  have nexus with Minnesota under the provisions of Public Law 
 11.14  86-272 are included as income on the return of an affiliated 
 11.15  corporation permitted or required to file a combined report 
 11.16  under section 290.34, subdivision 2, then for purposes of this 
 11.17  subdivision the determination as to whether the trade or 
 11.18  business of the corporation consists principally of the holding 
 11.19  of stocks and the collection of income and gains therefrom shall 
 11.20  be made with reference to the trade or business of the 
 11.21  affiliated corporation having a nexus with Minnesota. 
 11.22     (e) The deduction provided by this subdivision does not 
 11.23  apply if the dividends are paid by a FSC as defined in section 
 11.24  922 of the Internal Revenue Code. 
 11.25     (f) If one or more of the members of the unitary group 
 11.26  whose income is included on the combined report received a 
 11.27  dividend, the deduction under this subdivision for each member 
 11.28  of the unitary business required to file a return under this 
 11.29  chapter is the product of:  (1) 100 percent of the dividends 
 11.30  received by members of the group; (2) the percentage allowed 
 11.31  pursuant to paragraph (a) or (b); and (3) the percentage of the 
 11.32  taxpayer's business income apportionable to this state for the 
 11.33  taxable year under section 290.191 or 290.20. 
 11.34     (g) The dividend deduction provided in this subdivision 
 11.35  shall not be allowed if the dividends are paid by a corporation 
 11.36  that has removed jobs from a location within the United States 
 12.1   to a location outside the United States, or has created jobs 
 12.2   outside the United States for the purpose of producing goods or 
 12.3   services that are to be consumed within the United States. 
 12.4      [EFFECTIVE DATE.] This section is effective for taxable 
 12.5   years beginning after December 31, 2003.