1.1 	A bill for an act
1.2 	relating to taxation; allowing a special research and development credit;
1.3 	amending Minnesota Statutes 2006, section 290.068, subdivision 2, by adding a 
1.4 	subdivision.
1.5 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.6 	Section 1. Minnesota Statutes 2006, section 290.068, subdivision 2, is amended to read:
1.7 		Subd. 2.Definitions. For purposes of this section, the following terms have the 
1.8 	meanings given.
1.9 	(a) "Qualified research expenses" means (i) qualified research expenses and basic 
1.10 	research payments as defined in section 41(b) and (e) of the Internal Revenue Code, except 
1.11 	it does not include expenses incurred for qualified research or basic research conducted 
1.12 	outside the state of Minnesota pursuant to section 41(d) and (e) of the Internal Revenue 
1.13 	Code; and (ii) contributions to a nonprofit corporation established and operated pursuant 
1.14 	to the provisions of chapter 317A for the purpose of promoting the establishment and 
1.15 	expansion of business in this state, provided the contributions are invested by the nonprofit 
1.16 	corporation for the purpose of providing funds for small, technologically innovative 
1.17 	enterprises in Minnesota during the early stages of their development.
1.18 	(b) "Qualified research" means qualified research as defined in section 41(d) of the 
1.19 	Internal Revenue Code, except that the term does not include qualified research conducted 
1.20 	outside the state of Minnesota.
1.21 	(c) "Base amount" means base amount as defined in section 41(c) of the Internal 
1.22 	Revenue Code, except that the average annual gross receipts must be calculated using 
1.23 	Minnesota sales or receipts under section 290.191 and the definitions contained in clauses 
1.24 	(a) and (b) shall apply. 
2.1 	(d) For purposes of calculating the credit under subdivision 1, the terms "qualified 
2.2 	research expenses," "qualified research," and "base amount" exclude amounts used in 
2.3 	calculating the special credit under subdivision 7.

2.4 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
2.5 	December 31, 2007.

2.6 	Sec. 2. Minnesota Statutes 2006, section 290.068, is amended by adding a subdivision 
2.7 	to read:
2.8 		Subd. 7.Special credit; qualified businesses. (a) A corporation, individual, 
2.9 	or partnership is allowed a credit equal to ten percent of the environmental research 
2.10 	expenditures incurred for the taxable year, less the base amount of environmental research 
2.11 	expenses.
2.12 	(b) For purposes of this subdivision, "environmental research expenditures" means 
2.13 	qualified research expenses, as defined in subdivision 2, if the research is done to develop 
2.14 	products, processes, methods, technologies, or services intended to do one or more of 
2.15 	the following:
2.16 	(1) to increase the use of energy from renewable sources, as defined in section 
2.17 	216B.1691;
2.18 	(2) to increase the energy efficiency of the electric utility infrastructure system or to 
2.19 	increase energy conservation related to electricity use, as provided in sections 216B.2401 
2.20 	and 216B.241;
2.21 	(3) to reduce greenhouse gas emissions, as defined in section 216H.01, subdivision 
2.22 	2, or to mitigate greenhouse gas emissions through, but not limited to, carbon capture, 
2.23 	storage, or sequestration;
2.24 	(4) to monitor, protect, restore, and preserve the quality of surface waters; and
2.25 	(5) to expand use of biofuels, including by expanding the feasibility or reducing the 
2.26 	cost of producing biofuels or the types of equipment, machinery, and vehicles that can use 
2.27 	biofuels.
2.28 	(c) For purposes of this section, "base amount of environmental expenses" means 
2.29 	the base amount, as defined in subdivision 2, of environmental research expenses as 
2.30 	defined in paragraph (b).

2.31 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
2.32 	December 31, 2007.