Engrossments
Introduction		Posted on 03/28/2016

A bill for an act
relating to taxation; providing for tax reductions to middle class families; closing
loopholes; providing tax fairness; appropriating money; amending Minnesota
Statutes 2014, sections 16D.08, subdivision 2; 270.80, subdivisions 2, 3, 4, by
adding subdivisions; 270.81, subdivision 3, by adding a subdivision; 270.82;
270.83, subdivisions 1, 2; 270.84; 270.86; 270.87; 270C.03, subdivision 1;
270C.33, subdivision 6; 270C.722, subdivision 1; 270C.728, by adding a
subdivision; 272.02, subdivision 9; 275.025, subdivisions 1, 4; 289A.60, by
adding a subdivision; 290.01, subdivisions 4a, 19a, 19b, 19c, by adding a
subdivision; 290.067, subdivisions 1, 2, 2b, 3; 290.0671, subdivisions 6, 7;
290.0674, subdivision 2, by adding subdivisions; 290.068, subdivision 2;
290.091, subdivision 2; 290.17, subdivision 4; 290.191, subdivision 5; 290.21,
subdivision 4; 290A.03, subdivision 13; 290B.03, subdivision 1; 290B.04,
subdivision 1; 291.03, subdivision 11; 296A.01, subdivision 12; 296A.08,
subdivision 2; 297A.815, subdivision 3; 297A.94; 297F.01, subdivision 14;
297F.03, subdivisions 5, 6; 297F.04, subdivision 1; 297F.13, subdivision 4;
297F.19, by adding a subdivision; 297F.20, by adding subdivisions; 297F.21,
subdivision 1; 297H.04, subdivision 2; 461.12, subdivision 8; Minnesota Statutes
2015 Supplement, sections 289A.02, subdivision 7; 290.01, subdivisions 19,
31; 290.0671, subdivision 1; 290A.03, subdivision 15; 291.005, subdivision
1; proposing coding for new law in Minnesota Statutes, chapters 270C;
297F; repealing Minnesota Statutes 2014, sections 270.81, subdivision 4;
270.83, subdivision 3; 290.067, subdivision 2a; 297F.185; Minnesota Statutes
2015 Supplement, section 290.0671, subdivision 6a; Minnesota Rules, parts
8106.0100, subparts 1, 2, 3, 4, 5, 6, 7, 8, 10, 12, 13, 14, 17, 17a, 18, 19, 20,
21; 8106.0300, subparts 1, 3; 8106.0400; 8106.0500; 8106.0600; 8106.0700;
8106.0800; 8106.9900.

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

ARTICLE 1

FEDERAL UPDATE

Section 1.

Minnesota Statutes 2015 Supplement, section 289A.02, subdivision 7,
is amended to read:

Subd. 7.

Internal Revenue Code.

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 2015 Supplement, section 290.01, subdivision 19, is
amended to read:

Subd. 19.

Net income.

The term "net income" means the federal taxable income,
as defined in section 63 of the Internal Revenue Code of 1986, as amended through the
date named in this subdivision, incorporating the federal effective dates of changes to the
Internal Revenue Code and any elections made by the taxpayer in accordance with the
Internal Revenue Code in determining federal taxable income for federal income tax
purposes, and with the modifications provided in subdivisions 19a to 19f.

In the case of a regulated investment company or a fund thereof, as defined in section
851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
except that:

(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
Revenue Code does not apply;

(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal
Revenue Code must be applied by allowing a deduction for capital gain dividends and
exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal
Revenue Code; and

(3) the deduction for dividends paid must also be applied in the amount of any
undistributed capital gains which the regulated investment company elects to have treated
as provided in section 852(b)(3)(D) of the Internal Revenue Code.

The net income of a real estate investment trust as defined and limited by section
856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
taxable income as defined in section 857(b)(2) of the Internal Revenue Code.

The net income of a designated settlement fund as defined in section 468B(d) of
the Internal Revenue Code means the gross income as defined in section 468B(b) of the
Internal Revenue Code.

The Internal Revenue Code of 1986, as amended through December 31, deleted text begin 2014deleted text end new text begin 2015new text end ,
shall be in effect for taxable years beginning after December 31, 1996.

Except as otherwise provided, references to the Internal Revenue Code in
subdivisions 19 to 19f mean the code in effect for purposes of determining net income for
the applicable year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment,
except the changes incorporated by federal changes are effective retroactively at the same
time as the changes were effective for federal purposes.
new text end

Sec. 3.

Minnesota Statutes 2014, section 290.01, subdivision 19a, is amended to read:

Subd. 19a.

Additions to federal taxable income.

For individuals, estates, and
trusts, there shall be added to federal taxable income:

(1)(i) interest income on obligations of any state other than Minnesota or a political
or governmental subdivision, municipality, or governmental agency or instrumentality
of any state other than Minnesota exempt from federal income taxes under the Internal
Revenue Code or any other federal statute; and

(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
Code, except:

(A) the portion of the exempt-interest dividends exempt from state taxation under
the laws of the United States; and

(B) the portion of the exempt-interest dividends derived from interest income
on obligations of the state of Minnesota or its political or governmental subdivisions,
municipalities, governmental agencies or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to all shareholders represents
95 percent or more of the exempt-interest dividends, including any dividends exempt
under subitem (A), that are paid by the regulated investment company as defined in section
851(a) of the Internal Revenue Code, or the fund of the regulated investment company as
defined in section 851(g) of the Internal Revenue Code, making the payment; and

(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
government described in section 7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe is located;

(2) the amount of income, sales and use, motor vehicle sales, or excise taxes paid or
accrued within the taxable year under this chapter and the amount of taxes based on net
income paid, sales and use, motor vehicle sales, or excise taxes paid to any other state or
to any province or territory of Canada, to the extent allowed as a deduction under section
63(d) of the Internal Revenue Code, but the addition may not be more than the amount
by which the state itemized deduction exceeds the amount of the standard deduction as
defined in section 63(c) of the Internal Revenue Code, minus any addition that would have
been required under clause (17) if the taxpayer had claimed the standard deduction. For
the purpose of this clause, income, sales and use, motor vehicle sales, or excise taxes are
the last itemized deductions disallowed under clause (15);

(3) the capital gain amount of a lump-sum distribution to which the special tax under
section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the taxable year under this
chapter and taxes based on net income paid to any other state or any province or territory
of Canada, to the extent allowed as a deduction in determining federal adjusted gross
income. For the purpose of this paragraph, income taxes do not include the taxes imposed
by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
other than expenses or interest used in computing net interest income for the subtraction
allowed under subdivision 19b, clause (1);

(6) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(7) 80 percent of the depreciation deduction allowed under section 168(k) of the
Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
in the taxable year generates a deduction for depreciation under section 168(k) and the
activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
limited to excess of the depreciation claimed by the activity under section 168(k) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k) is allowed;

(8) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable deleted text begin bydeleted text end new text begin under the dollar limits ofnew text end
section 179 of the Internal Revenue Code of 1986, as amended through December 31, 2003;

(9) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code;

(10) the amount of expenses disallowed under section 290.10, subdivision 2;

(11) for taxable years beginning before January 1, 2010, the amount deducted for
qualified tuition and related expenses under section 222 of the Internal Revenue Code, to
the extent deducted from gross income;

(12) for taxable years beginning before January 1, 2010, the amount deducted for
certain expenses of elementary and secondary school teachers under section 62(a)(2)(D)
of the Internal Revenue Code, to the extent deducted from gross income;

(13) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code;

(14) changes to federal taxable income attributable to a net operating loss that the
taxpayer elected to carry back for more than two years for federal purposes but for which
the losses can be carried back for only two years under section 290.095, subdivision
11, paragraph (c);

(15) the amount of disallowed itemized deductions, but the amount of disallowed
itemized deductions plus the addition required under clause (2) may not be more than the
amount by which the itemized deductions as allowed under section 63(d) of the Internal
Revenue Code exceeds the amount of the standard deduction as defined in section 63(c) of
the Internal Revenue Code, and reduced by any addition that would have been required
under clause (17) if the taxpayer had claimed the standard deduction:

(i) the amount of disallowed itemized deductions is equal to the lesser of:

(A) three percent of the excess of the taxpayer's federal adjusted gross income
over the applicable amount; or

(B) 80 percent of the amount of the itemized deductions otherwise allowable to the
taxpayer under the Internal Revenue Code for the taxable year;

(ii) the term "applicable amount" means $100,000, or $50,000 in the case of a
married individual filing a separate return. Each dollar amount shall be increased by
an amount equal to:

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof;

(iii) the term "itemized deductions" does not include:

(A) the deduction for medical expenses under section 213 of the Internal Revenue
Code;

(B) any deduction for investment interest as defined in section 163(d) of the Internal
Revenue Code; and

(C) the deduction under section 165(a) of the Internal Revenue Code for casualty or
theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue
Code or for losses described in section 165(d) of the Internal Revenue Code;

(16) the amount of disallowed personal exemptions for taxpayers with federal
adjusted gross income over the threshold amount:

(i) the disallowed personal exemption amount is equal to the number of personal
exemptions allowed under section 151(b) and (c) of the Internal Revenue Code multiplied
by the dollar amount for personal exemptions under section 151(d)(1) and (2) of the
Internal Revenue Code, as adjusted for inflation by section 151(d)(4) of the Internal
Revenue Code, and by the applicable percentage;

(ii) "applicable percentage" means two percentage points for each $2,500 (or
fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable
year exceeds the threshold amount. In the case of a married individual filing a separate
return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In
no event shall the applicable percentage exceed 100 percent;

(iii) the term "threshold amount" means:

(A) $150,000 in the case of a joint return or a surviving spouse;

(B) $125,000 in the case of a head of a household;

(C) $100,000 in the case of an individual who is not married and who is not a
surviving spouse or head of a household; and

(D) $75,000 in the case of a married individual filing a separate return; and

(iv) the thresholds shall be increased by an amount equal to:

(A) such dollar amount, multiplied by

(17) to the extent deducted in the computation of federal taxable income, for taxable
years beginning after December 31, 2010, and before January 1, 2014, the difference
between the standard deduction allowed under section 63(c) of the Internal Revenue Code
and the standard deduction allowed for 2011, 2012, and 2013 under the Internal Revenue
Code as amended through December 1, 2010.

new text begin EFFECTIVE DATE. new text end

Sec. 4.

Minnesota Statutes 2014, section 290.01, subdivision 19b, is amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For individuals, estates,
and trusts, there shall be subtracted from federal taxable income:

(1) net interest income on obligations of any authority, commission, or
instrumentality of the United States to the extent includable in taxable income for federal
income tax purposes but exempt from state income tax under the laws of the United States;

(2) if included in federal taxable income, the amount of any overpayment of income
tax to Minnesota or to any other state, for any previous taxable year, whether the amount
is received as a refund or as a credit to another taxable year's income tax liability;

(3) the amount paid to others, less the amount used to claim the credit allowed under
section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
transportation of each qualifying child in attending an elementary or secondary school
situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
resident of this state may legally fulfill the state's compulsory attendance laws, which
is not operated for profit, and which adheres to the provisions of the Civil Rights Act
of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and equipment purchased
or leased for use in elementary and secondary schools in teaching only those subjects
legally and commonly taught in public elementary and secondary schools in this state.
Equipment expenses qualifying for deduction includes expenses as defined and limited in
section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
books and materials used in the teaching of religious tenets, doctrines, or worship, the
purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
or materials for, or transportation to, extracurricular activities including sporting events,
musical or dramatic events, speech activities, driver's education, or similar programs. No
deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
the qualifying child's vehicle to provide such transportation for a qualifying child. For
purposes of the subtraction provided by this clause, "qualifying child" has the meaning
given in section 32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross income, income realized on
disposition of property exempt from tax under section 290.491;

(6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
of the Internal Revenue Code in determining federal taxable income by an individual
who does not itemize deductions for federal income tax purposes for the taxable year, an
amount equal to 50 percent of the excess of charitable contributions over $500 allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code,
under the provisions of Public Law 109-1 and Public Law 111-126;

(7) for individuals who are allowed a federal foreign tax credit for taxes that do not
qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
of subnational foreign taxes for the taxable year, but not to exceed the total subnational
foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
"federal foreign tax credit" means the credit allowed under section 27 of the Internal
Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
the extent they exceed the federal foreign tax credit;

(8) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), or 19c, clause (12), in the case of a
shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
delayed depreciation. For purposes of this clause, "delayed depreciation" means the amount
of the addition made by the taxpayer under subdivision 19a, clause (7), or subdivision 19c,
clause (12), in the case of a shareholder of an S corporation, minus the positive value of
any net operating loss under section 172 of the Internal Revenue Code generated for the
tax year of the addition. The resulting delayed depreciation cannot be less than zero;

(9) job opportunity building zone income as provided under section 469.316;

(10) to the extent included in federal taxable income, the amount of compensation
paid to members of the Minnesota National Guard or other reserve components of the
United States military for active service, including compensation for services performed
under the Active Guard Reserve (AGR) program. For purposes of this clause, "active
service" means (i) state active service as defined in section 190.05, subdivision 5a, clause
(1); or (ii) federally funded state active service as defined in section 190.05, subdivision
5b, and "active service" includes service performed in accordance with section 190.08,
subdivision 3;

(11) to the extent included in federal taxable income, the amount of compensation
paid to Minnesota residents who are members of the armed forces of the United States
or United Nations for active duty performed under United States Code, title 10; or the
authority of the United Nations;

(12) an amount, not to exceed $10,000, equal to qualified expenses related to a
qualified donor's donation, while living, of one or more of the qualified donor's organs
to another person for human organ transplantation. For purposes of this clause, "organ"
means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
"human organ transplantation" means the medical procedure by which transfer of a human
organ is made from the body of one person to the body of another person; "qualified
expenses" means unreimbursed expenses for both the individual and the qualified donor
for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
may be subtracted under this clause only once; and "qualified donor" means the individual
or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
individual may claim the subtraction in this clause for each instance of organ donation for
transplantation during the taxable year in which the qualified expenses occur;

(13) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (8), or 19c, clause (13), in the case of a
shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (13), in the
case of a shareholder of a corporation that is an S corporation, minus the positive value of
any net operating loss under section 172 of the Internal Revenue Code generated for the
tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
subtraction is not allowed under this clause;

(14) to the extent included in the federal taxable income of a nonresident of
Minnesota, compensation paid to a service member as defined in United States Code, title
10, section 101(a)(5), for military service as defined in the Servicemembers Civil Relief
Act, Public Law 108-189, section 101(2);

(15) to the extent included in federal taxable income, the amount of national service
educational awards received from the National Service Trust under United States Code,
title 42, sections 12601 to 12604, for service in an approved Americorps National Service
program;

(16) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under subdivision 19a, clause (13);

(17) the amount of the net operating loss allowed under section 290.095, subdivision
11, paragraph (c);

(18) the amount of expenses not allowed for federal income tax purposes due
to claiming the railroad track maintenance credit under section 45G(a) of the Internal
Revenue Code;

(19) the amount of the limitation on itemized deductions under section 68(b) of
the Internal Revenue Code;new text begin and
new text end

(20) the amount of the phaseout of personal exemptions under section 151(d) of
the Internal Revenue Codedeleted text begin ; anddeleted text end new text begin .
new text end

deleted text begin (21) to the extent included in federal taxable income, the amount of qualified
transportation fringe benefits described in section 132(f)(1)(A) and (B) of the Internal
Revenue Code. The subtraction is limited to the lesser of the amount of qualified
transportation fringe benefits received in excess of the limitations under section
132(f)(2)(A) of the Internal Revenue Code for the year or the difference between the
maximum qualified parking benefits excludable under section 132(f)(2)(B) of the Internal
Revenue Code minus the amount of transit benefits excludable under section 132(f)(2)(A)
of the Internal Revenue Code.
deleted text end

new text begin EFFECTIVE DATE. new text end

Sec. 5.

Minnesota Statutes 2014, section 290.01, subdivision 19c, is amended to read:

Subd. 19c.

Corporations; additions to federal taxable income.

For corporations,
there shall be added to federal taxable income:

(1) the amount of any deduction taken for federal income tax purposes for income,
excise, or franchise taxes based on net income or related minimum taxes, including but not
limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
another state, a political subdivision of another state, the District of Columbia, or any
foreign country or possession of the United States;

(2) interest not subject to federal tax upon obligations of: the United States, its
possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
state, any of its political or governmental subdivisions, any of its municipalities, or any
of its governmental agencies or instrumentalities; the District of Columbia; or Indian
tribal governments;

(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
Revenue Code;

(4) the amount of any net operating loss deduction taken for federal income tax
purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
deduction under section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal income tax purposes
under sections 241 to 247 and 965 of the Internal Revenue Code;

(6) losses from the business of mining, as defined in section 290.05, subdivision 1,
clause (a), that are not subject to Minnesota income tax;

(7) the amount of any capital losses deducted for federal income tax purposes under
sections 1211 and 1212 of the Internal Revenue Code;

(8) the amount of percentage depletion deducted under sections 611 through 614 and
291 of the Internal Revenue Code;

(9) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, the amount of the amortization deduction allowed in computing federal taxable
income for those facilities;

(10) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(11) any increase in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard to
the provisions of Division C, title III, section 303(b) of Public Law 110-343;

(12) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A)
and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer
has an activity that in the taxable year generates a deduction for depreciation under
section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year
that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed
under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the
depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k)(1)(A) and (k)(4)(A) is allowed;

(13) 80 percent of the amount by which the deduction allowed by section 179 of
the Internal Revenue Code exceeds the deduction allowable deleted text begin bydeleted text end new text begin under the dollar limits ofnew text end
section 179 of the Internal Revenue Code of 1986, as amended through December 31, 2003;

(14) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code;

(15) the amount of expenses disallowed under section 290.10, subdivision 2; and

(16) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

Sec. 6.

Minnesota Statutes 2015 Supplement, section 290.01, subdivision 31, is
amended to read:

Subd. 31.

Internal Revenue Code.

Unless specifically defined otherwise, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through December
31, deleted text begin 2014deleted text end new text begin 2015new text end . Internal Revenue Code also includes any uncodified provision in federal
law that relates to provisions of the Internal Revenue Code that are incorporated into
Minnesota law. When used in this chapter, the reference to "subtitle A, chapter 1,
subchapter N, part 1, of the Internal Revenue Code" is to the Internal Revenue Code as
amended through March 18, 2010.

new text begin EFFECTIVE DATE. new text end

Sec. 7.

Minnesota Statutes 2015 Supplement, section 290.0671, subdivision 1, is
amended to read:

Subdivision 1.

Credit allowed.

(b) For individuals with no qualifying children, the credit equals 2.10 percent of the
first $6,180 of earned income. The credit is reduced by 2.01 percent of earned income
or adjusted gross income, whichever is greater, in excess of $8,130, but in no case is
the credit less than zero.

(c) For individuals with one qualifying child, the credit equals 9.35 percent of the
first $11,120 of earned income. The credit is reduced by 6.02 percent of earned income
or adjusted gross income, whichever is greater, in excess of $21,190 , but in no case is
the credit less than zero.

(d) For individuals with two or more qualifying children, the credit equals 11percent
of the first $18,240 of earned income. The credit is reduced by 10.82 percent of earned
income or adjusted gross income, whichever is greater, in excess of $25,130, but in no
case is the credit less than zero.

(e) For a part-year resident, the credit must be allocated based on the percentage
calculated under section 290.06, subdivision 2c, paragraph (e).

(f) For a person who was a resident for the entire tax year and has earned income
not subject to tax under this chapter, including income excluded under section 290.01,
subdivision 19b, clause (9), the credit must be allocated based on the ratio of federal
adjusted gross income reduced by the earned income not subject to tax under this chapter
over federal adjusted gross income. For purposes of this paragraph, the subtractions
for military pay under section 290.01, subdivision 19b, clauses (10) and (11), are not
considered "earned income not subject to tax under this chapter."

For the purposes of this paragraph, the exclusion of combat pay under section 112
of the Internal Revenue Code is not considered "earned income not subject to tax under
this chapter."

deleted text begin (g) For tax years beginning after December 31, 2007, and before December 31,
2010, and for tax years beginning after December 31, 2017, the $8,130 in paragraph (b),
the $21,190 in paragraph (c), and the $25,130 in paragraph (d), after being adjusted for
inflation under subdivision 7, are each increased by $3,000 for married taxpayers filing joint
returns. For tax years beginning after December 31, 2008, the commissioner shall annually
adjust the $3,000 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 "2007" shall be
substituted for the word "1992." For 2009, the commissioner shall then determine the
percent change from the 12 months ending on August 31, 2007, to the 12 months ending on
August 31, 2008, and in each subsequent year, from the 12 months ending on August 31,
2007, to the 12 months ending on August 31 of the year preceding the taxable year. The
earned income thresholds as adjusted for inflation must be rounded to the nearest $10. If the
amount ends in $5, the amount is rounded up to the nearest $10. The determination of the
commissioner under this subdivision is not a rule under the Administrative Procedure Act.
deleted text end

new text begin (g) new text end deleted text begin (h)(1) For tax years beginning after December 31, 2012, and before January
1, 2014, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in
paragraph (d), after being adjusted for inflation under subdivision 7, are increased by
$5,340 for married taxpayers filing joint returns; and (2)deleted text end For tax years beginning after
December 31, 2013, deleted text begin and before January 1, 2018,deleted text end the $8,130 in paragraph (b), the $21,190
in paragraph (c), and the $25,130 in paragraph (d), after being adjusted for inflation under
subdivision 7, are each increased by $5,000 for married taxpayers filing joint returns. deleted text begin For
tax years beginning after December 31, 2010, and before January 1, 2012, anddeleted text end For tax
years beginning after December 31, 2013, deleted text begin and before January 1, 2018,deleted text end the commissioner
shall annually adjust the $5,000 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
"2008" shall be substituted for the word "1992." deleted text begin For 2011,deleted text end The commissioner shall then
determine the percent change from the 12 months ending on August 31, 2008, to the 12
months ending on deleted text begin August 31, 2010 , and in each subsequent year, from the 12 months
ending on August 31, 2008, to the 12 months ending ondeleted text end August 31 of the year preceding
the taxable year. The earned income thresholds as adjusted for inflation must be rounded
to the nearest $10. If the amount ends in $5, the amount is rounded up to the nearest $10.
The determination of the commissioner under this subdivision is not a rule under the
Administrative Procedure Act.

deleted text begin (i)deleted text end new text begin (h)new text end The commissioner shall construct tables showing the amount of the credit
at various income levels and make them available to taxpayers. The tables shall follow
the schedule contained in this subdivision, except that the commissioner may graduate
the transition between income brackets.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 8.

Minnesota Statutes 2014, section 290.091, subdivision 2, is amended to read:

Subd. 2.

Definitions.

For purposes of the tax imposed by this section, the following
terms have the meanings given:

(a) "Alternative minimum taxable income" means the sum of the following for
the taxable year:

(1) the taxpayer's federal alternative minimum taxable income as defined in section
55(b)(2) of the Internal Revenue Code;

(2) the taxpayer's itemized deductions allowed in computing federal alternative
minimum taxable income, but excluding:

(i) the charitable contribution deduction under section 170 of the Internal Revenue
Code;

(ii) the medical expense deduction;

(iii) the casualty, theft, and disaster loss deduction; and

(iv) the impairment-related work expenses of a disabled person;

(3) for depletion allowances computed under section 613A(c) of the Internal
Revenue Code, with respect to each property (as defined in section 614 of the Internal
Revenue Code), to the extent not included in federal alternative minimum taxable income,
the excess of the deduction for depletion allowable under section 611 of the Internal
Revenue Code for the taxable year over the adjusted basis of the property at the end of the
taxable year (determined without regard to the depletion deduction for the taxable year);

(4) to the extent not included in federal alternative minimum taxable income, the
amount of the tax preference for intangible drilling cost under section 57(a)(2) of the
Internal Revenue Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative minimum taxable income, the
amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and

(6) the amount of addition required by section 290.01, subdivision 19a, clauses (7)
to (9), and (11) to (14);

less the sum of the amounts determined under the following:

(1) interest income as defined in section 290.01, subdivision 19b, clause (1);

(2) an overpayment of state income tax as provided by section 290.01, subdivision
19b, clause (2), to the extent included in federal alternative minimum taxable income;

(3) the amount of investment interest paid or accrued within the taxable year on
indebtedness to the extent that the amount does not exceed net investment income, as
defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include
amounts deducted in computing federal adjusted gross income;

(4) amounts subtracted from federal taxable income as provided by section 290.01,
subdivision 19b, clauses (6), (8) to (14),new text begin andnew text end (16)deleted text begin , and (21)deleted text end ; and

(5) the amount of the net operating loss allowed under section 290.095, subdivision
11, paragraph (c).

In the case of an estate or trust, alternative minimum taxable income must be
computed as provided in section 59(c) of the Internal Revenue Code.

(b) "Investment interest" means investment interest as defined in section 163(d)(3)
of the Internal Revenue Code.

(d) "Regular tax" means the tax that would be imposed under this chapter (without
regard to this section and section 290.032), reduced by the sum of the nonrefundable
credits allowed under this chapter.

(e) "Tentative minimum tax" equals 6.75 percent of alternative minimum taxable
income after subtracting the exemption amount determined under subdivision 3.

new text begin EFFECTIVE DATE. new text end

Sec. 9.

Minnesota Statutes 2015 Supplement, section 290A.03, subdivision 15, is
amended to read:

Subd. 15.

Internal Revenue Code.

"Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through December 31, deleted text begin 2014deleted text end new text begin 2015new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for property tax refunds
based on property taxes payable after December 31, 2015, and rent paid after December
31, 2014.
new text end

Sec. 10.

Minnesota Statutes 2015 Supplement, section 291.005, subdivision 1, is
amended to read:

Subdivision 1.

Scope.

Unless the context otherwise clearly requires, the following
terms used in this chapter shall have the following meanings:

(1) "Commissioner" means the commissioner of revenue or any person to whom the
commissioner has delegated functions under this chapter.

(2) "Federal gross estate" means the gross estate of a decedent as required to be valued
and otherwise determined for federal estate tax purposes under the Internal Revenue Code,
increased by the value of any property in which the decedent had a qualifying income
interest for life and for which an election was made under section 291.03, subdivision 1d,
for Minnesota estate tax purposes, but was not made for federal estate tax purposes.

(3) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through December 31, deleted text begin 2014deleted text end new text begin 2015new text end .

(4) "Minnesota gross estate" means the federal gross estate of a decedent after
(a) excluding therefrom any property included in the estate which has its situs outside
Minnesota, and (b) including any property omitted from the federal gross estate which
is includable in the estate, has its situs in Minnesota, and was not disclosed to federal
taxing authorities.

(5) "Nonresident decedent" means an individual whose domicile at the time of
death was not in Minnesota.

(6) "Personal representative" means the executor, administrator or other person
appointed by the court to administer and dispose of the property of the decedent. If there
is no executor, administrator or other person appointed, qualified, and acting within this
state, then any person in actual or constructive possession of any property having a situs in
this state which is included in the federal gross estate of the decedent shall be deemed
to be a personal representative to the extent of the property and the Minnesota estate tax
due with respect to the property.

(7) "Resident decedent" means an individual whose domicile at the time of death
was in Minnesota.

(8) "Situs of property" means, with respect to:

(i) real property, the state or country in which it is located;

(ii) tangible personal property, the state or country in which it was normally kept
or located at the time of the decedent's death or for a gift of tangible personal property
within three years of death, the state or country in which it was normally kept or located
when the gift was executed;

(iii) a qualified work of art, as defined in section 2503(g)(2) of the Internal Revenue
Code, owned by a nonresident decedent and that is normally kept or located in this state
because it is on loan to an organization, qualifying as exempt from taxation under section
501(c)(3) of the Internal Revenue Code, that is located in Minnesota, the situs of the art is
deemed to be outside of Minnesota, notwithstanding the provisions of item (ii); and

(iv) intangible personal property, the state or country in which the decedent was
domiciled at death or for a gift of intangible personal property within three years of death,
the state or country in which the decedent was domiciled when the gift was executed.

For a nonresident decedent with an ownership interest in a pass-through entity with
assets that include real or tangible personal property, situs of the real or tangible personal
property, including qualified works of art, is determined as if the pass-through entity does
not exist and the real or tangible personal property is personally owned by the decedent.
If the pass-through entity is owned by a person or persons in addition to the decedent,
ownership of the property is attributed to the decedent in proportion to the decedent's
capital ownership share of the pass-through entity.

(9) "Pass-through entity" includes the following:

(i) an entity electing S corporation status under section 1362 of the Internal Revenue
Code;

(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;

(iii) a single-member limited liability company or similar entity, regardless of
whether it is taxed as an association or is disregarded for federal income tax purposes
under Code of Federal Regulations, title 26, section 301.7701-3; or

(iv) a trust to the extent the property is includible in the decedent's federal gross
estate; but excludes

(v) an entity whose ownership interest securities are traded on an exchange regulated
by the Securities and Exchange Commission as a national securities exchange under
section 6 of the Securities Exchange Act, United States Code, title 15, section 78f.

new text begin EFFECTIVE DATE. new text end

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

Sec. 11. new text begin AMENDED RETURNS.
new text end

new text begin Subdivision 1. new text end

new text begin Certain IRA rollovers. new text end

new text begin An individual who excludes an amount
from net income in a prior taxable year through rollover of an airline payment amount to
a traditional IRA, as authorized under Public Law 114-113, division Q, title III, section
307, may file an amended individual income tax return and claim for refund of state taxes
as provided under Minnesota Statutes, section 289A.40, subdivision 1, or, if later, by
September 1, 2016.
new text end

new text begin Subd. 2. new text end

new text begin Exclusion for certain incarcerated individuals. new text end

new text begin An individual who
excludes from net income in a prior taxable year civil damages, restitution, or other
monetary award received as compensation for a wrongful incarceration, as authorized
under Public Law 114-113, division Q, title III, section 304, may file an amended
individual income tax return and claim for refund of state taxes as provided under
Minnesota Statutes, section 289A.40, subdivision 1, or, if later, by September 1, 2016.
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

Sec. 12. new text begin APPROPRIATION.
new text end

new text begin $1,612,000 is appropriated in fiscal year 2016 from the general fund to the
commissioner of revenue to administer the provisions of this article. $35,000 of this
amount is added to the agency's budget base to administer the provisions of this article.
new text end

ARTICLE 2

INDIVIDUAL INCOME TAX CREDITS

Section 1.

Minnesota Statutes 2014, section 290.067, subdivision 1, is amended to read:

Subdivision 1.

Amount of credit.

(a) A taxpayer may take as a credit against the tax
deleted text begin due from the taxpayer and a spouse, if any,deleted text end new text begin imposednew text end under this chapter an amount equal
to the new text begin sum of new text end dependent care deleted text begin credit for which the taxpayer is eligible pursuant to the
provisions of section 21 of the Internal Revenue Code subject to the limitations provided
in subdivision 2 except thatdeleted text end new text begin credits calculated under this paragraph and paragraphs (b),
(d), and (e).new text end In determining whether deleted text begin the child qualified as a dependentdeleted text end new text begin expenses were paid
to care for a qualifying individualnew text end , income received as a Minnesota family investment
program grant or allowance to or on behalf of the deleted text begin childdeleted text end new text begin qualifying individualnew text end must not be
taken into account in determining whether the deleted text begin childdeleted text end new text begin qualifying individualnew text end received more
than half of the deleted text begin child'sdeleted text end new text begin individual'snew text end support from the taxpayerdeleted text begin , and the provisions of section
32(b)(1)(D) of the Internal Revenue Code do not applydeleted text end .

new text begin (b) A taxpayer who incurs actual employment-related expenses may take as a credit
against the tax imposed under this chapter an amount equal to the dependent care credit
for which the taxpayer is eligible under section 21 of the Internal Revenue Code.
new text end

new text begin (c) A taxpayer who elects to claim a credit under paragraph (d) or (e) may claim
a credit under paragraph (b) only for employment-related expenses paid to care for
qualifying individuals other than a child for whom deemed expenses were used to claim
the credit under paragraph (d) or (e).
new text end

new text begin (d) new text end deleted text begin (b) If a child who has not attained the age of six years at the close of the taxable
year is cared for at a licensed family day care home operated by the child's parent, the
taxpayer is deemed to have paid employment-related expenses.deleted text end new text begin In lieu of the credit under
paragraph (b), a taxpayer who operates a licensed family day care home may elect to
claim as a credit against the tax imposed under this chapter an amount equal to the
dependent care credit for which the taxpayer is eligible under section 21 of the Internal
Revenue Code, calculated using deemed expenses rather than actual expenses paid.new text end If the
child is 16 months old or younger at the close of the taxable year, deleted text begin the amount ofdeleted text end new text begin deemed
new text end expenses deleted text begin deemed to have been paid equalsdeleted text end new text begin are equal tonew text end the maximum deleted text begin limitdeleted text end new text begin amount of
employment-related expenses incurred during the taxable year that may be taken into
accountnew text end for one deleted text begin qualifieddeleted text end new text begin qualifyingnew text end individual under section 21(c) and (d) of the Internal
Revenue Code. If the child is older than 16 months of age but has not attained the age of
six years at the close of the taxable year, deleted text begin the amount of expenses deemed to have been paid
equalsdeleted text end new text begin deemed expenses are equal tonew text end the amount the licensee would charge for the care of
a child of the same age for the same number of hours of care.new text begin If the child has attained the
age of six at the close of the taxable year, deemed expenses are zero.
new text end

deleted text begin (c) If adeleted text end new text begin (e) In lieu of the credit under paragraph (b), anew text end married couplenew text begin may elect to
claim a credit against the tax imposed under this chapter as computed under paragraph
(f), if the married couplenew text end :

(1) has a child who has not attained the age of one year at the close of the taxable year;

(2) files a joint tax return for the taxable year; deleted text begin and
deleted text end

(3) does not participate in a dependent care assistance program as defined in section
129 of the Internal Revenue Codedeleted text begin , in lieu of the actual employment related expenses paid
for that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of
(i) the combined earned income of the couple or (ii) the amount of the maximum limit for
one qualified individual under section 21(c) and (d) of the Internal Revenue Code will
be deemed to be the employment related expense paid for that child. The earned income
limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed
amount. These deemed amounts apply regardless of whether any employment-related
expenses have been paid.deleted text end new text begin ; and
new text end

new text begin (4) does not operate a licensed family day care center home.
new text end

new text begin (f) A married couple meeting the requirements of paragraph (e) is allowed a credit
against the tax due under this chapter equal to the dependent care credit for which the
couple is eligible under section 21 of the Internal Revenue Code, calculated using deemed
expenses rather than actual employment-related expenses paid. For purposes of this
paragraph, deemed expenses are the lesser of (1) the combined earned income of the
couple, or (2) the maximum amount of employment-related expenses incurred during
the taxable year that may be taken into account for one qualifying individual under
section 21(c) and (d) of the Internal Revenue Code, or for two qualifying individuals for
a taxpayer with two children who have not attained the age of one. The earned income
limitation in section 21(d) of the Internal Revenue Code does not apply to this deemed
amount. These deemed amounts apply regardless of whether the taxpayer has paid any
employment-related expenses.
new text end

deleted text begin (d)deleted text end new text begin (g)new text end If the taxpayer is not required and does not file a federal individual income
tax return for the tax year,new text begin or if the taxpayer does file a federal return but does not claim a
federal dependent care credit,new text end no credit is allowed for any amount paid to any person unless:

(1) the name, address, and taxpayer identification number of the person are included
on the return claiming the credit; or

(2) if the person is an organization described in section 501(c)(3) of the Internal
Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code,
the name and address of the person are included on the return claiming the credit.

In the case of a failure to provide the information required under the preceding sentence,
the preceding sentence does not apply if it is shown that the taxpayer exercised due
diligence in attempting to provide the information required.

deleted text begin (e)deleted text end new text begin (h)new text end In the case of a nonresident, part-year resident, or a person who has earned
income not subject to tax under this chapter including earned income excluded pursuant to
section 290.01, subdivision 19b, clause (9), the credit determined under new text begin this new text end section deleted text begin 21
of the Internal Revenue Codedeleted text end must be allocated based on the ratio by which the earned
income of the claimant and the claimant's spouse from Minnesota sources bears to the
total earned income of the claimant and the claimant's spouse.

deleted text begin (f)deleted text end new text begin (i)new text end For residents of Minnesota, the subtractions for military pay under section
290.01, subdivision 19b, clauses (10) and (11), are not considered "earned income not
subject to tax under this chapter."

deleted text begin (g)deleted text end new text begin (j)new text end For residents of Minnesota, the exclusion of combat pay under section 112
of the Internal Revenue Code is not considered "earned income not subject to tax under
this chapter."

new text begin (k) For purposes of this section, the terms "qualifying individual" and
"employment-related expenses" have the meanings given in section 21 of the Internal
Revenue Code.
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, 2015.
new text end

Sec. 2.

Minnesota Statutes 2014, section 290.067, subdivision 2, is amended to read:

Subd. 2.

Limitations.

deleted text begin The credit for expenses incurred for the care of each
dependent shall not exceed $720 in any taxable year, and the total credit for all dependents
of a claimant shall not exceed $1,440 in a taxable year. The maximum total credit shall
be reduced according to the amount of the income of the claimant and a spouse, if any,
as follows:
deleted text end

deleted text begin income up to $18,040, $720 maximum for one dependent, $1,440 for all dependents;
deleted text end

deleted text begin income over $18,040, the maximum credit for one dependent shall be reduced by
$18 for every $350 of additional income, $36 for all dependents.
deleted text end

deleted text begin The commissioner shall construct and make available to taxpayers tables showing
the amount of the credit at various levels of income and expenses. The tables shall follow
the schedule contained in this subdivision, except that the commissioner may graduate
the transitions between expenses and income brackets. deleted text end new text begin (a) The maximum credit under
subdivision 1, paragraph (b), is:
new text end

new text begin (1) $1,050 for a taxpayer with employment-related expenses for one qualifying
individual;
new text end

new text begin (2) $2,100 for a taxpayer with employment-related expenses for two or more
qualifying individuals;
new text end

new text begin (3) $1,050 for a taxpayer who elects to claim a credit under subdivision 1, paragraph
(d) or (e), if that credit is based on deemed expenses for one child; and
new text end

new text begin (4) $0 for a taxpayer who elects to claim a credit under subdivision 1, paragraph (d)
or (e), if that credit is based on deemed expenses for two or more children.
new text end

new text begin (b) The maximum credit under subdivision 1, paragraphs (d) and (e), is:
new text end

new text begin (1) $720 for a taxpayer with deemed expenses for one child; and
new text end

new text begin (2) $1,440 for a taxpayer with deemed expenses for two or more children.
new text end

new text begin (c) For a taxpayer who claims a credit under subdivision 1, paragraph (b), who has
federal adjusted gross income, as defined in the Internal Revenue Code, in excess of
$100,000, the credit under subdivision 1, paragraph (b), is equal to the lesser of:
new text end

new text begin (1) the credit calculated under subdivision 1, paragraph (b); or
new text end

new text begin (2) $600 minus five percent of federal adjusted gross income in excess of $100,000
for a taxpayer with one qualifying individual, or $1,200 minus five percent of federal
adjusted gross income in excess of $100,000 for a taxpayer with two or more qualifying
individuals, but in no case is the credit less than zero.
new text end

new text begin (d) For a taxpayer who elects to claim the credit under subdivision 1, paragraph (d)
or (e), with federal adjusted gross income, as defined in the Internal Revenue Code, in
excess of $25,000, the credit is equal to the lesser of:
new text end

new text begin (1) the credit calculated under subdivision 1, paragraph (d) or (e); or
new text end

new text begin (2) $720 minus five percent of federal adjusted gross income in excess of $25,000
for a taxpayer with one qualifying individual, or $1,440 minus five percent of federal
adjusted gross income in excess of $25,000 for a taxpayer with two or more qualifying
individuals, but in no case is the credit less than zero.
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, 2015.
new text end

Sec. 3.

Minnesota Statutes 2014, section 290.067, subdivision 2b, is amended to read:

Subd. 2b.

Inflation adjustment.

The commissioner shall adjust the dollar amount
of the income threshold at which the deleted text begin maximumdeleted text end credit begins to be reduced under
subdivision 2 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 "2015"new text end shall
be substituted for the word "1992." For deleted text begin 2001deleted text end new text begin 2017new text end , the commissioner shall then determine
the percent change from the 12 months ending on August 31, deleted text begin 1999deleted text end new text begin 2015new text end , to the 12 months
ending on August 31, deleted text begin 2000deleted text end new text begin 2016new text end , and in each subsequent year, from the 12 months ending
on August 31, deleted text begin 1999deleted text end new text begin 2015new 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 must not
be considered a "rule" and is not subject to the Administrative Procedure Act contained in
chapter 14. The threshold amount as adjusted must be rounded to the nearest $10 amount.
If the amount ends in $5, the amount is rounded up to the nearest $10 amount.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 4.

Minnesota Statutes 2014, section 290.067, subdivision 3, is amended to read:

Subd. 3.

Credit to be refundable.

If the amount of credit which a claimant
would be eligible to receive pursuant to this deleted text begin subdivisiondeleted text end new text begin sectionnew text end exceeds the claimant's
tax liability under chapter 290, the excess amount of the credit shall be refunded to the
claimant by the commissioner deleted text begin of revenuedeleted text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 5.

Minnesota Statutes 2015 Supplement, section 290.0671, subdivision 1, is
amended to read:

Subdivision 1.

Credit allowed.

(a) An individual who is a resident of Minnesota is
allowed a credit against the tax imposed by this chapter equal to a percentage of earned
income. To receive a credit, a taxpayer must be eligible for a credit under section 32 of
the Internal Revenue Codenew text begin , except that a taxpayer remains eligible for this credit even if
the taxpayer's earned income or adjusted gross income exceeds the amount for which a
credit is available under section 32new text end .

(b) For individuals with no qualifying children, the credit equals deleted text begin 2.10deleted text end new text begin 2.65new text end percent of
the first deleted text begin $6,180deleted text end new text begin $5,000new text end of earned income. The credit is reduced by deleted text begin 2.01deleted text end new text begin 2.62new text end percent of
earned income or adjusted gross income, whichever is greater, in excess of deleted text begin $8,130deleted text end new text begin $9,830new text end ,
but in no case is the credit less than zero.

(c) For individuals with one qualifying child, the credit equals deleted text begin 9.35deleted text end new text begin 12.71new text end percent
of the first deleted text begin $11,120deleted text end new text begin $8,350new text end of earned income. The credit is reduced by deleted text begin 6.02deleted text end new text begin 4.65new text end percent
of earned income or adjusted gross income, whichever is greater, in excess of deleted text begin $21,190
deleted text end new text begin $21,620new text end , but in no case is the credit less than zero.

(d) For individuals with two or more qualifying children, the credit equals deleted text begin 11deleted text end new text begin 14.94
new text end percent of the first deleted text begin $18,240deleted text end new text begin $13,700new text end of earned income. The credit is reduced by deleted text begin 10.82
deleted text end new text begin 8.59new text end percent of earned income or adjusted gross income, whichever is greater, in excess of
deleted text begin $25,130deleted text end new text begin $25,640new text end , but in no case is the credit less than zero.

(e) For a part-year resident, the credit must be allocated based on the percentage
calculated under section 290.06, subdivision 2c, paragraph (e).

For the purposes of this paragraph, the exclusion of combat pay under section 112
of the Internal Revenue Code is not considered "earned income not subject to tax under
this chapter."

new text begin (g) new text end deleted text begin (h)(1) For tax years beginning after December 31, 2012, and before January
1, 2014, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in
paragraph (d), after being adjusted for inflation under subdivision 7, are increased by
$5,340 for married taxpayers filing joint returns; and (2)deleted text end For tax years beginning after
December 31, 2013, deleted text begin and before January 1, 2018,deleted text end the deleted text begin $8,130deleted text end new text begin $9,830new text end in paragraph (b),
the deleted text begin $21,190deleted text end new text begin $21,620new text end in paragraph (c), and the deleted text begin $25,130deleted text end new text begin $25,640new text end in paragraph (d), after
being adjusted for inflation under subdivision 7, are each increased by $5,000 for married
taxpayers filing joint returns. deleted text begin For tax years beginning after December 31, 2010, and
before January 1, 2012, anddeleted text end For tax years beginning after December 31, 2013, deleted text begin and before
January 1, 2018,deleted text end the commissioner shall annually adjust the $5,000 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 "2008" shall be substituted for the word "1992." deleted text begin For
2011,deleted text end The commissioner shall then determine the percent change from the 12 months
ending on August 31, 2008, to the 12 months ending on deleted text begin August 31, 2010 , and in each
subsequent year, from the 12 months ending on August 31, 2008, to the 12 months ending
ondeleted text end August 31 of the year preceding the taxable year. The earned income thresholds as
adjusted for inflation must be rounded to the nearest $10. If the amount ends in $5, the
amount is rounded up to the nearest $10. The determination of the commissioner under
this subdivision is not a rule under the Administrative Procedure Act.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 6.

Minnesota Statutes 2014, section 290.0671, subdivision 6, is amended to read:

Subd. 6.

Appropriation.

An amount sufficient to pay the refunds required by
this section is appropriated to the commissioner from the general fund. deleted text begin This amount
includes any amounts appropriated to the commissioner of human services from the
federal Temporary Assistance for Needy Families (TANF) block grant funds for transfer
to the commissioner of revenue.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2016.
new text end

Sec. 7.

Minnesota Statutes 2014, section 290.0671, subdivision 7, is amended to read:

Subd. 7.

Inflation adjustment.

The earned income amounts used to calculate
the credit and the income thresholds at which the maximum credit begins to be reduced
in subdivision 1 must be adjusted for inflation. The commissioner shall adjust 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 "2013"deleted text end new text begin "2015"new text end shall be substituted for
the word "1992." For deleted text begin 2015deleted text end new text begin 2017new text end , the commissioner shall then determine the percent
change from the 12 months ending on August 31, deleted text begin 2013deleted text end new text begin 2015new text end , to the 12 months ending
on August 31, deleted text begin 2014deleted text end new text begin 2016new text end , and in each subsequent year, from the 12 months ending on
August 31, deleted text begin 2013deleted text end new text begin 2015new text end , to the 12 months ending on August 31 of the year preceding the
taxable year. The earned income thresholds as adjusted for inflation must be rounded to
the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest
$10 amount. The determination of the commissioner under this subdivision is not a rule
under the Administrative Procedure Act.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 8.

Minnesota Statutes 2014, section 290.0674, subdivision 2, is amended to read:

Subd. 2.

Limitations.

(a) For claimants with income not greater than deleted text begin $33,500
deleted text end new text begin $45,000new text end , the maximum credit allowed for a family is $1,000 multiplied by the number
of qualifying children in kindergarten through grade 12 in the family. The maximum
credit for families with one qualifying child in kindergarten through grade 12 is reduced
by $1 for each $4 of household income over deleted text begin $33,500deleted text end new text begin $45,000new text end , and the maximum credit
for families with two or more qualifying children in kindergarten through grade 12 is
reduced by $2 for each $4 of household income over deleted text begin $33,500deleted text end new text begin $45,000new text end , but in no case is
the credit less than zero.

deleted text begin For purposes of this section "income" has the meaning given in section 290.067,
subdivision 2a.deleted text end In the case of a married claimant, a credit is not allowed unless a joint
income tax return is filed.

(b) For a nonresident or part-year resident, the credit determined under subdivision 1
and the maximum credit amount in paragraph (a) must be allocated using the percentage
calculated in section 290.06, subdivision 2c, paragraph (e).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 9.

Minnesota Statutes 2014, section 290.0674, is amended by adding a subdivision
to read:

new text begin Subd. 2a. new text end

new text begin Income. new text end

new text begin (a) For purposes of this section, "income" means the sum of
the following:
new text end

new text begin (1) federal adjusted gross income as defined in section 62 of the Internal Revenue
Code; and
new text end

new text begin (2) the sum of the following amounts to the extent not included in clause (1):
new text end

new text begin (i) all nontaxable income;
new text end

new text begin (ii) the amount of a passive activity loss that is not disallowed as a result of section
469, paragraph (i) or (m), of the Internal Revenue Code, and the amount of passive activity
loss carryover allowed under section 469(b) of the Internal Revenue Code;
new text end

new text begin (iii) an amount equal to the total of any discharge of qualified farm indebtedness
of a solvent individual excluded from gross income under section 108(g) of the Internal
Revenue Code;
new text end

new text begin (iv) cash public assistance and relief;
new text end

new text begin (v) a pension or annuity (including railroad retirement benefits, all payments,
received under the federal Social Security Act, Supplemental Security Income, and
veterans' benefits), that was:
new text end

new text begin (A) not exclusively funded by the claimant or spouse;
new text end

new text begin (B) funded exclusively by the claimant or spouse; or
new text end

new text begin (C) funded exclusively by the claimant or spouse and which funding payments were
excluded from federal adjusted gross income in the years when the payments were made;
new text end

new text begin (vi) interest received from the federal or a state government or any instrumentality
or political subdivision thereof;
new text end

new text begin (vii) workers' compensation;
new text end

new text begin (viii) nontaxable strike benefits;
new text end

new text begin (ix) the gross amounts of payments received in the nature of disability income or
sick pay as a result of accident, sickness, or other disability, whether funded through
insurance or otherwise;
new text end

new text begin (x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of
1986, as amended through December 31, 1995;
new text end

new text begin (xi) contributions made by the claimant to an individual retirement account,
including a qualified voluntary employee contribution, simplified employee pension plan,
self-employed retirement plan, cash or deferred arrangement plan under section 401(k)
of the Internal Revenue Code, or deferred compensation plan under section 457 of the
Internal Revenue Code;
new text end

new text begin (xii) nontaxable scholarship or fellowship grants;
new text end

new text begin (xiii) the amount of deduction allowed under section 199 of the Internal Revenue
Code;
new text end

new text begin (xiv) the amount of deduction allowed under section 220 or 223 of the Internal
Revenue Code;
new text end

new text begin (xv) the amount deducted for tuition expenses under section 222 of the Internal
Revenue Code; and
new text end

new text begin (xvi) the amount deducted for certain expenses of elementary and secondary school
teachers under section 62(a)(2)(D) of the Internal Revenue Code.
new text end

new text begin In the case of an individual who files an income tax return on a fiscal year basis, the
term "federal adjusted gross income" means federal adjusted gross income reflected in the
fiscal year ending in the next calendar year. Federal adjusted gross income may not be
reduced by the amount of a net operating loss carryback or carryforward or a capital loss
carryback or carryforward allowed for the year.
new text end

new text begin (b) "Income" does not include:
new text end

new text begin (1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;
new text end

new text begin (2) amounts of any pension or annuity that were exclusively funded by the claimant
or spouse if the funding payments were not excluded from federal adjusted gross income
in the years when the payments were made;
new text end

new text begin (3) surplus food or other relief in kind supplied by a governmental agency;
new text end

new text begin (4) relief granted under chapter 290A;
new text end

new text begin (5) child support payments received under a temporary or final decree of dissolution
or legal separation; and
new text end

new text begin (6) restitution payments received by eligible individuals and excludable interest as
defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of
2001, Public Law 107-16.
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, 2015.
new text end

Sec. 10.

Minnesota Statutes 2014, section 290.0674, is amended by adding a
subdivision to read:

new text begin Subd. 6. new text end

new text begin Inflation adjustment. new text end

new text begin The commissioner shall adjust the dollar amount of
the income threshold at which the credit begins to be reduced under subdivision 2 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 "2015" shall be substituted for the word
"1992." For 2017, the commissioner shall then determine the percent change from the
12 months ending on August 31, 2015, to the 12 months ending on August 31, 2016,
and in each subsequent year, from the 12 months ending on August 31, 2015, to the 12
months ending on August 31 of the year preceding the taxable year. The determination
of the commissioner pursuant to this subdivision must not be considered a "rule" and is
not subject to the Administrative Procedure Act contained in chapter 14. The threshold
amount as adjusted must be rounded to the nearest $10 amount. If the amount ends in
$5, the amount is rounded up to the nearest $10 amount.
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, 2016.
new text end

Sec. 11. new text begin APPROPRIATION.
new text end

new text begin $400,000 is appropriated in fiscal year 2017 from the general fund to the
commissioner of revenue to administer the expansion of the K-12 credit under sections 7
and 8 of this article. This amount is added to the agency's budget base for administering
the expansion of the K-12 credit under sections 7 and 8 of this article.
new text end

Sec. 12. new text begin REPEALER.
new text end

new text begin (a) new text end new text begin Minnesota Statutes 2015 Supplement, section 290.0671, subdivision 6a, new text end new text begin is
repealed.
new text end

new text begin (b) new text end new text begin Minnesota Statutes 2014, section 290.067, subdivision 2a, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Paragraph (a) is effective July 1, 2016. Paragraph (b) is
effective for taxable years beginning after December 31, 2015.
new text end

ARTICLE 3

RAILROAD RECODIFICATION

Section 1.

Minnesota Statutes 2014, section 270.80, subdivision 2, is amended to read:

Subd. 2.

Railroad company.

"Railroad company" means:

(1) any company which as a common carrier operates a railroad or a line or lines of
deleted text begin railwaydeleted text end new text begin railroadsnew text end situated within or partly within Minnesota; or

(2) any company owning or operating, other than as a common carrier, a deleted text begin railwaydeleted text end new text begin
railroadnew text end principally used for transportation of taconite concentrates from the plant at
which the taconite concentrates are produced in shipping form to a point of consumption
or port for shipment beyond the state; or

(3) any company that produces concentrates from taconite and transports that
taconite in the course of the concentrating process and before the concentrating process is
completed to a concentrating plant located within the state over a railroad that is not a
common carrier and deleted text begin shalldeleted text end new text begin doesnew text end not use a common carrier or taconite railroad company as
defined in clause (2) for the movement of the concentrate to a point of consumption or
port for shipment beyond the state.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 2.

Minnesota Statutes 2014, section 270.80, subdivision 3, is amended to read:

Subd. 3.

Operating property.

"Operating property" means all property owned
or used by a railroad company in the performance of railroad transportation services,
including deleted text begin without limitation franchises, rights-of-way, bridges, trestles, shops, docks,
wharves, buildings and structures.deleted text end new text begin but not limited to roads, locomotives, freight cars,
and improvements to leased property. Operating property is listed and assessed by the
commissioner where the property is located.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 3.

Minnesota Statutes 2014, section 270.80, subdivision 4, is amended to read:

Subd. 4.

Nonoperating property.

"Nonoperating property" means deleted text begin and includes
deleted text end all property other than property defined in subdivision 3. Nonoperating property deleted text begin shall
includedeleted text end new text begin includesnew text end real property deleted text begin whichdeleted text end new text begin thatnew text end is leased or rented or available for lease or rent
to any person deleted text begin whichdeleted text end new text begin thatnew text end is not a railroad company. Vacant land deleted text begin shall bedeleted text end new text begin isnew text end presumed to
be available for lease or rent if it has not been used as operating property for a period of
one year new text begin immediately new text end preceding the valuation date. Nonoperating property also includes
land deleted text begin whichdeleted text end new text begin thatnew text end is not necessary and integral to the performance of railroad transportation
services and deleted text begin whichdeleted text end new text begin thatnew text end is not used on a regular and continual basis in the performance of
these services. Nonoperating property also includes that portion of a deleted text begin general corporation
deleted text end office building and its proportionate share of land deleted text begin whichdeleted text end new text begin that new text end is not used for deleted text begin railwaydeleted text end new text begin
railroad new text end operation or purpose.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 4.

Minnesota Statutes 2014, section 270.80, is amended by adding a subdivision
to read:

new text begin Subd. 6. new text end

new text begin Company. new text end

new text begin "Company" means any corporation, limited liability company,
association, partnership, trust, estate, fiduciary, public or private organization of any
kind, or other legal entity.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 5.

Minnesota Statutes 2014, section 270.80, is amended by adding a subdivision
to read:

new text begin Subd. 7. new text end

new text begin Unit value. new text end

new text begin "Unit value" means the value of the system of a railroad
company taken as a whole, without regard to the value of its component parts.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 6.

Minnesota Statutes 2014, section 270.80, is amended by adding a subdivision
to read:

new text begin Subd. 8. new text end

new text begin Book depreciation. new text end

new text begin "Book depreciation" means the depreciation shown by
a railroad company on its accounting records and allowed the company by the Surface
Transportation Board.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 7.

Minnesota Statutes 2014, section 270.80, is amended by adding a subdivision
to read:

new text begin Subd. 9. new text end

new text begin Equalization. new text end

new text begin "Equalization" means the adjustment of the estimated
market value of railroad operating property to the apparent sales ratio accepted by the
State Board of Equalization.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 8.

Minnesota Statutes 2014, section 270.80, is amended by adding a subdivision
to read:

new text begin Subd. 10. new text end

new text begin Exempt property. new text end

new text begin "Exempt property" means property that is nontaxable
for ad valorem tax purposes under Minnesota Statutes, including personal property exempt
from taxation under chapter 272.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 9.

Minnesota Statutes 2014, section 270.80, is amended by adding a subdivision
to read:

new text begin Subd. 11. new text end

new text begin Original cost. new text end

new text begin "Original cost" means the amount paid for an asset as
recorded on the railroad's accounting records in accordance with Surface Transportation
Board accounting rules and regulations.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 10.

Minnesota Statutes 2014, section 270.80, is amended by adding a subdivision
to read:

new text begin Subd. 12. new text end

new text begin System. new text end

new text begin "System" means the total real and personal property of a railroad
that is used in its railroad operations in all states in which it operates.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 11.

Minnesota Statutes 2014, section 270.80, is amended by adding a subdivision
to read:

new text begin Subd. 13. new text end

new text begin Minnesota allocated value. new text end

new text begin "Minnesota allocated value" means the value
of a railroad company's operating property that is assigned to Minnesota for tax purposes.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 12.

Minnesota Statutes 2014, section 270.81, subdivision 3, is amended to read:

Subd. 3.

Determination of type of property.

new text begin (a) new text end The commissioner deleted text begin shall havedeleted text end new text begin has
new text end exclusive primary jurisdiction to determine deleted text begin whatdeleted text end new text begin whether railroad propertynew text end is operating
property deleted text begin and what isdeleted text end new text begin ornew text end nonoperating property. In making deleted text begin suchdeleted text end new text begin thisnew text end determination, the
commissioner deleted text begin shalldeleted text end new text begin maynew text end solicit information and opinions from outside the department
and afford all interested persons an opportunity to submit data or views on the subject
in writing or orally.

new text begin (b) new text end Local new text begin and county new text end assessors may submit written requests to the commissioner,
asking for a determination of deleted text begin the nature of specificdeleted text end new text begin whethernew text end property owned by a railroad
and located within their assessing jurisdictionnew text begin is operating or nonoperating propertynew text end .
deleted text begin Any determination made by the commissioner may be appealed by the assessor to the
Tax Court pursuant to chapter 271.deleted text end new text begin The requests must be submitted by April 1 of the
assessing year. Following a request, the commissioner must send the assessor a written
determination by May 1. Assessors may appeal determinations made by the commissioner
to the Tax Court pursuant to chapter 271.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 13.

Minnesota Statutes 2014, section 270.81, is amended by adding a subdivision
to read:

new text begin Subd. 6. new text end

new text begin Deduction for nonoperating and exempt property. new text end

new text begin Property located in
Minnesota that was part of the unit but is nonoperating property, or that is exempt from ad
valorem taxation, is deducted from the Minnesota allocated value under section 273.3718,
subdivision 1a. Only qualifying property located in Minnesota may be deducted from the
Minnesota allocated value. The railroad company has the burden of proof to establish
that the property should be deducted from the Minnesota allocated value. The railroad
company must submit schedules of exempt or nonoperating property as the commissioner
may require. The commissioner must determine if property claimed by the railroad as
nonoperating property or exempt property qualifies for deduction from the Minnesota
allocated value. The commissioner must determine the market value of the qualifying
property to be deducted by multiplying the book value of the qualifying property by
the market-to-book ratio of the unit. The remaining amount after this deduction is the
Minnesota apportionable market value.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 14.

Minnesota Statutes 2014, section 270.82, is amended to read:

270.82 REPORTS OF RAILROAD COMPANIES.

Subdivision 1.

Annual report required.

new text begin Before March 31, new text end every railroad company
doing business in Minnesota deleted text begin shalldeleted text end new text begin mustnew text end annually file with the commissioner deleted text begin on or before
March 31deleted text end a report under oath setting forth the information prescribed by the commissioner
to enable the commissioner to make the valuation and equalization required by sections
deleted text begin 270.80 to 270.87.deleted text end new text begin 273.3712 to 273.3719. The commissioner shall prescribe the content,
format, and manner of the report pursuant to section 270C.30. If a report is made
electronically, the taxpayer's signature is defined pursuant to section 270C.304, except that
a "law administered by the commissioner" includes the property tax laws.
new text end

Subd. 2.

Extension of time.

new text begin If new text end the commissioner deleted text begin for gooddeleted text end new text begin determines that there is
reasonable new text end causenew text begin , the commissionernew text end may extend new text begin the time for filing the report required by
subdivision 1 new text end for up to 15 days deleted text begin the time for filing the report required by subdivision 1deleted text end .

new text begin Subd. 3. new text end

new text begin Amended reports. new text end

new text begin A railroad company may file an amended report to
correct or add information to the original report. Amended reports must be filed with
the commissioner by April 30.
new text end

new text begin Subd. 4. new text end

new text begin Failure to file reports. new text end

new text begin (a) The commissioner may make a valuation
pursuant to sections 273.3712 to 273.3719 according to the commissioner's best judgment
based on available information if any railroad company does not:
new text end

new text begin (1) make the report required by this subdivision;
new text end

new text begin (2) permit an inspection and examination of its property, records, books, accounts,
or other papers when requested by the commissioner; or
new text end

new text begin (3) appear before the commissioner or a person appointed under section 273.3715
when required to do so.
new text end

new text begin (b) If the commissioner makes a valuation pursuant to paragraph (a), the
commissioner's valuation is final. Notwithstanding any other law to the contrary, a
valuation made pursuant to this subdivision is not appealable administratively.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 15.

Minnesota Statutes 2014, section 270.83, subdivision 1, is amended to read:

Subdivision 1.

Powers of commissioner.

The commissioner deleted text begin shall havedeleted text end new text begin hasnew text end the
power to examine or cause to be examined any books, papers, records, or memoranda
relevant to the determination of the valuation of operating property deleted text begin as herein provideddeleted text end .
The commissioner deleted text begin shall have the further power todeleted text end new text begin maynew text end require the attendance of any
person having knowledge or information deleted text begin in the premisesdeleted text end new text begin concerning the valuation of the
operating propertynew text end , deleted text begin todeleted text end compel the production of books, papers, records, or memoranda by
persons so required to attend, deleted text begin todeleted text end take testimony on matters material to deleted text begin such determination
deleted text end new text begin determining the valuation of operating property,new text end and administer oaths or affirmations.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 16.

Minnesota Statutes 2014, section 270.83, subdivision 2, is amended to read:

Subd. 2.

Appointment of persons; subpoenas.

deleted text begin For the purpose of making such
examinations,deleted text end The commissioner may appoint such persons as the commissioner deleted text begin may
deemdeleted text end new text begin deems new text end necessarynew text begin to make the examinations described in subdivision 1new text end . deleted text begin Such
persons shall have the rights and powers of the examining ofdeleted text end new text begin Persons appointed may
examinenew text end books, papers, recordsnew text begin ,new text end or memoranda, deleted text begin and of subpoenaingdeleted text end new text begin subpoenanew text end witnesses,
deleted text begin administeringdeleted text end new text begin administernew text end oaths and affirmations, and deleted text begin taking ofdeleted text end new text begin takenew text end testimonydeleted text begin , which are
conferred upon the commissioner herebydeleted text end . The court administrator of any court of record,
upon demand of any deleted text begin such deleted text end personnew text begin appointednew text end , shall issue a subpoena for the attendance of
any witness or the production of any books, papers, records, or memoranda before such
person. The commissioner may also issue subpoenas for the appearance of witnesses
deleted text begin before the commissioner or before such persons. Disobedience of subpoenas so issued
shall be punished by the district court of the district in which the subpoena is issued for a
contempt of the district courtdeleted text end .new text begin Failure to comply with a subpoena shall be punished in the
same manner as contempt of the district court.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 17.

Minnesota Statutes 2014, section 270.84, is amended to read:

270.84 ANNUAL VALUATION OF OPERATING PROPERTY.

Subdivision 1.

Annual valuation; rules.

new text begin (a) Before July 1, new text end the commissioner
deleted text begin shall annually between March 31 and May 31 make a determination ofdeleted text end new text begin must determine
new text end the deleted text begin fairdeleted text end market value of the operating property of every railroad company doing business
in this state as of January 2 of the year in which the valuation is made. deleted text begin In making
this determination,deleted text end The commissioner deleted text begin shalldeleted text end new text begin must new text end employ generally accepted appraisal
principles and practices which may include the unit method of determining valuenew text begin , and
approaches developed by the Western States Association of Tax Administrators, National
Conference of Unit Valuation States, and the International Association of Assessing
Officersnew text end .

new text begin (b) The unit value of railroad property is the reconciled value considering the
cost, income, and market approaches under subdivisions 1a, 1b, and 1c. Each approach
must be weighed in accordance with (1) the reliability of the information and (2) the
commissioner's judgment.
new text end

new text begin Subd. 1a. new text end

new text begin Cost approach. new text end

new text begin (a) The commissioner may use the cost approach,
including but not limited to original cost less book depreciation and replacement cost
less depreciation.
new text end

new text begin (b) Book depreciation is allowed as a deduction from original cost less book
depreciation. Book depreciation is assumed to include all forms of depreciation.
new text end

new text begin (c) Explicitly calculated appraisal depreciation, including physical, functional, and
external obsolescence, is allowed as a deduction from the replacement cost model.
new text end

new text begin Subd. 1b. new text end

new text begin Income approach. new text end

new text begin (a) The commissioner may use the income approach,
including but not limited to direct capitalization models and yield capitalization models.
new text end

new text begin (b) The yield rate is calculated using market data on selected comparable companies
in the band of investment method.
new text end

new text begin (1) Discounted cash flow is a yield capitalization model that calculates the present
value of explicit cash flow forecasts capitalized using the yield rate, plus reversion to
stable growth yield capitalization after the period of explicit forecasts.
new text end

new text begin (2) Stable growth yield capitalization is a yield capitalization model that calculates
the present value of anticipated future cash flows, capitalized using the yield rate and
considering growth.
new text end

new text begin (c) Direct capitalization is the expected net operating income for the following year,
divided by the direct capitalization rate. The direct capitalization rate is calculated by
using direct market observations from comparable sales or using market earning-to-price
information in the band of investment method.
new text end

new text begin Subd. 1c. new text end

new text begin Market approach. new text end

new text begin The commissioner may use the market approach,
including but not limited to a sales comparison model, a stock and debt model, or other
market models that are available and reliable.
new text end

Subd. 2.

Notice.

The commissioner, after determining the deleted text begin fairdeleted text end market value of the
operating property of each railroad company, deleted text begin shall give notice todeleted text end new text begin must notifynew text end the railroad
company of the valuation deleted text begin by first class mail, overnight delivery, or messenger servicedeleted text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 18.

Minnesota Statutes 2014, section 270.86, is amended to read:

270.86 APPORTIONMENT AND EQUALIZATION OF VALUATION.

Subdivision 1.

Apportionment of value.

deleted text begin Upon determiningdeleted text end new text begin (a) After allocating to
Minnesotanew text end the deleted text begin fairdeleted text end market value of the operating property of each railroad company, the
commissioner deleted text begin shalldeleted text end new text begin must new text end apportion deleted text begin suchdeleted text end new text begin the new text end value to deleted text begin the respective counties and to the
taxing districts therein in conformity with fair and reasonable rules and standards to be
established by the commissioner pursuant to notice and hearing, except as provided in
section 270.81. In establishing such rules and standards the commissioner may consider
(a) the physical situs of all station houses, depots, docks, wharves, and other buildings and
structures with an original cost in excess of $10,000; (b) the proportion that the length and
type of all the tracks used by the railroad in such county and taxing district bears to the
length and type of all the track used in the state; and (c) other facts as will result in a fair
and equitable apportionment of valuedeleted text end new text begin the operating parcels in Minnesotanew text end .

new text begin (b) The apportioned market value of each company's operating parcel in Minnesota
is the current original cost of each parcel as of the last assessment date plus original cost
of new construction minus the original cost of property retired since the last assessment
date. The total Minnesota apportionable market value of the railroad is divided by the
total current original cost of the railroad in Minnesota to determine a percentage. The
resulting percentage is multiplied by the current original cost of each parcel to determine
the apportioned market value of each parcel.
new text end

new text begin Subd. 1a. new text end

new text begin Allocation of value. new text end

new text begin After the market value of the operating property
has been estimated, the portion of the value that is attributable to Minnesota must be
determined by calculating an allocation percentage using factors relevant to the industry
segment of the railroad company. This allocation percentage must be multiplied by the
value of the operating property to determine the Minnesota allocated value.
new text end

new text begin The Minnesota allocated value is determined by averaging the following factors:
new text end

new text begin (1) the miles of railroad track operated in Minnesota divided by miles of railroad
track operated in all states;
new text end

new text begin (2) the ton miles of revenue freight transported in Minnesota divided by ton miles of
revenue freight transported in all states;
new text end

new text begin (3) the gross revenues from transportation operations within Minnesota divided by
gross revenues from transportation operations in all states; and
new text end

new text begin (4) the cost of railroad property in Minnesota divided by the cost of railroad property
in all states.
new text end

new text begin The average of the factors must be multiplied by the value of the railroad company's
operating property to calculate the Minnesota portion of the railroad's operating property.
new text end

Subd. 2.

Equalized valuation.

After making the apportionment provided in
subdivision 1, the commissioner deleted text begin shall determine the equalized valuation of the operating
property in each county by applying to the apportioned value an estimated current
year median sales ratio for all commercial and industrial property in that countydeleted text end new text begin must
equalize the values of the operating property to the level accepted by the State Board of
Equalization if the appropriate assessment-to-sales ratio for each county as conducted by
the Department of Revenue in section 270.12, subdivision 2, clause 6, is outside the
range accepted by the State Board of Equalizationnew text end . deleted text begin If the commissioner decides there are
insufficient sales to determine a median commercial-industrial sales ratio, an estimated
current year countywide median sales ratio for all property shall be applied to the
apportioned value. No equalization shall be made todeleted text end new text begin The commissioner must not equalize
new text end the market value of the operating property if the deleted text begin median sales ratiodeleted text end new text begin assessment-to-sales
rationew text end determined pursuant to this subdivision is within deleted text begin five percent of the assessment ratio
of the railroad operating propertydeleted text end new text begin the range accepted by the State Board of Equalizationnew text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 19.

Minnesota Statutes 2014, section 270.87, is amended to read:

270.87 CERTIFICATION TO COUNTY ASSESSORS.

deleted text begin After making an annual determination of the equalized fair market value of the
operating property of each company in each of the respective counties, and in the taxing
districts therein,deleted text end The commissioner deleted text begin shalldeleted text end new text begin must new text end certify the equalized deleted text begin fairdeleted text end market value new text begin of
the operating property new text end to the county assessor deleted text begin on ordeleted text end before deleted text begin June 30deleted text end new text begin August 1new text end . The equalized
deleted text begin fairdeleted text end market value of the operating property of the railroad company in the county and the
taxing districts therein is the value on which taxes must be levied and collected in the same
manner as on the commercial and industrial property deleted text begin of such county and the taxing districts
thereindeleted text end new text begin in the counties and taxing districtsnew text end . If the commissioner determines that the
equalized deleted text begin fairdeleted text end market value certified deleted text begin on or before June 30deleted text end new text begin before August 1new text end is in error, the
commissioner may issue a corrected certification deleted text begin on or before August 31deleted text end new text begin before October 1new text end .
The commissioner may correct errors that are merely clerical in nature until December 31.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 20.

Minnesota Statutes 2014, section 272.02, subdivision 9, is amended to read:

Subd. 9.

Personal property; exceptions.

Except for the taxable personal property
enumerated below, all personal property and the property described in section 272.03,
subdivision 1, paragraphs (c) and (d), shall be exempt.

The following personal property shall be taxable:

(a) personal property which is part of an electric generating, transmission, or
distribution system or a pipeline system transporting or distributing water, gas, crude
oil, or petroleum products or mains and pipes used in the distribution of steam or hot or
chilled water for heating or cooling buildings and structures;

(b) deleted text begin railroad docks and wharves which aredeleted text end new text begin personal property that isnew text end part of the
operating property of a railroad company as defined in section deleted text begin 270.80deleted text end new text begin 273.3712new text end ;

(d) leasehold or other personal property interests which are taxed pursuant to section
272.01, subdivision 2; 273.124, subdivision 7; or 273.19, subdivision 1; or any other law
providing the property is taxable as if the lessee or user were the fee owner;

(e) manufactured homes and sectional structures, including storage sheds, decks,
and similar removable improvements constructed on the site of a manufactured home,
sectional structure, park trailer or travel trailer as provided in section 273.125, subdivision
8, paragraph (f); and

(f) flight property as defined in section 270.071.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

Sec. 21.

Minnesota Statutes 2014, 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 amountnew text begin for commercial-industrial property
new text end is deleted text begin $592,000,000deleted text end new text begin $903,400,000new text end for taxes payable in deleted text begin 2002deleted text end new text begin 2018new 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.

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:

(1) an erroneous report of taxable value by a local official;

(2) an erroneous calculation by the commissioner; and

(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.

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.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2018 and
thereafter.
new text end

Sec. 22.

Minnesota Statutes 2014, section 275.025, subdivision 4, is amended to read:

Subd. 4.

Apportionment and levy of state general tax.

deleted text begin Ninety-fivedeleted text end new text begin 95.1new text end percent of
the state general tax must be levied by applying a uniform rate to all commercial-industrial
tax capacity and deleted text begin fivedeleted text end new text begin 4.9new text end percent of the state general tax must be levied by applying a
uniform rate to all seasonal residential recreational tax capacity. 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 2018 and
thereafter.
new text end

Sec. 23. new text begin APPROPRIATION.
new text end

new text begin $224,000 is appropriated in fiscal year 2017 from the general fund to the
commissioner of revenue to administer the provisions in this article. $56,000 of this
amount is added to the agency's budget base to administer the provisions of this article.
new text end

Sec. 24. new text begin SEVERABILITY.
new text end

new text begin If any part of this article is found to be invalid because it is in conflict with a
provision of the Minnesota Constitution or for any other reason, all other provisions of this
act shall remain valid and any rights, remedies, and privileges that have been otherwise
accrued by this act shall remain in effect and may be proceeded with and concluded
under the provisions of this act.
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

Sec. 25. new text begin REVISOR'S INSTRUCTION.
new text end

new text begin (a) The revisor of statutes shall renumber the statutory section in column A with
the section in column B. The revisor shall make necessary cross-reference changes in
Minnesota Statutes and Minnesota Rules.
new text end

	new text begin Column A new text end	new text begin Column B new text end
	new text begin 270.80 new text end	new text begin 273.3712 new text end
	new text begin 270.81 new text end	new text begin 273.3713 new text end
	new text begin 270.82 new text end	new text begin 273.3714 new text end
	new text begin 270.83 new text end	new text begin 273.3715 new text end
	new text begin 270.84 new text end	new text begin 273.3716 new text end
	new text begin 270.85 new text end	new text begin 273.3717 new text end
	new text begin 270.86 new text end	new text begin 273.3718 new text end
	new text begin 270.87 new text end	new text begin 273.3719 new text end

new text begin (b) The revisor shall make changes necessary to correct the punctuation, grammar,
or remaining text that result from implementing this instruction.
new text end

Sec. 26. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2014, sections 270.81, subdivision 4; and 270.83, subdivision 3,
new text end new text begin and new text end new text begin Minnesota Rules, parts 8106.0100, subparts 1, 2, 3, 4, 5, 6, 7, 8, 10, 12, 13, 14, 17,
17a, 18, 19, 20, and 21; 8106.0300, subparts 1 and 3; 8106.0400; 8106.0500; 8106.0600;
8106.0700; 8106.0800; and 8106.9900, new text end new text begin are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2017.
new text end

ARTICLE 4

SPECIAL TAXES

Section 1.

Minnesota Statutes 2014, section 296A.01, subdivision 12, is amended to
read:

Subd. 12.

Compressed natural gas or CNG.

"Compressed natural gas" or "CNG"
means natural gas, primarily methane, condensed under high pressure and stored in
specially designed storage tanks at between 2,000 and 3,600 pounds per square inch.
For purposes of this chapter, the energy content of CNG is considered to be deleted text begin 1,000deleted text end new text begin 900
new text end BTUs per cubic foot.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2016.
new text end

Sec. 2.

Minnesota Statutes 2014, section 296A.08, subdivision 2, is amended to read:

Subd. 2.

Rate of tax.

The special fuel excise tax is imposed at the following rates:

(a) Liquefied petroleum gas or propane is taxed at the rate of 18.75 cents per gallon.

(b) Liquefied natural gas is taxed at the rate of 15 cents per gallon.

(c) Compressed natural gas is taxed at the rate of deleted text begin $2.174deleted text end new text begin $1.974new text end per thousand cubic
feet; or 25 cents per gasoline equivalent. For purposes of this paragraph, "gasoline
equivalent," as defined by the National Conference on Weights and Measures, is 5.66
pounds new text begin or 126.67 cubic feet new text end of natural gas.

(d) All other special fuel is taxed at the same rate as the gasoline excise tax as
specified in section 296A.07, subdivision 2. The tax is payable in the form and manner
prescribed by the commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2016.
new text end

Sec. 3.

Minnesota Statutes 2014, section 297H.04, subdivision 2, is amended to read:

Subd. 2.

Rate.

(a) Commercial generators that generate nonmixed municipal
solid waste shall pay a solid waste management tax of 60 cents per noncompacted
cubic yard of periodic waste collection capacity purchased by the generator, based on
the size of the container for the nonmixed municipal solid waste, the actual volume,
or the weight-to-volume conversion schedule in paragraph (c). However, the tax must
be calculated by the waste management service provider using the same method for
calculating the waste management service fee so that both are calculated according to
container capacity, actual volume, or weight.

(b) Notwithstanding section 297H.02, a residential generator that generates
nonmixed municipal solid waste shall pay a solid waste management tax in the same
manner as provided in paragraph (a).

(1) construction debris as defined in section 115A.03, subdivision 7, is deleted text begin one ton
equals 3.33 cubic yards, or $2 per tondeleted text end new text begin equal to 60 cents per cubic yard. The commissioner
of revenue, after consultation with the commissioner of the Pollution Control Agency,
shall determine and may publish by notice a conversion schedule for construction debrisnew text end ;

(2) industrial waste as defined in section 115A.03, subdivision 13a, is equal to
60 cents per cubic yard. The commissioner of revenue after consultation with the
commissioner of the Pollution Control Agency, shall determine, and may publish by
notice, a conversion schedule for various industrial wastes; and

(3) infectious waste as defined in section 116.76, subdivision 12, and pathological
waste as defined in section 116.76, subdivision 14, is 150 pounds equals one cubic yard, or
60 cents per 150 pounds.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2016.
new text end

ARTICLE 5

TOBACCO TAXES

Section 1.

Minnesota Statutes 2014, section 270C.722, subdivision 1, is amended to
read:

Subdivision 1.

Notice of revocation; hearings.

(a) Ifdeleted text begin : (1)deleted text end a person fails to comply
with chapter 297A or the sales and use tax provisions of chapter 289A or the rules related
to sales tax, deleted text begin or (2) any retailer purchases for resale from an unlicensed seller more than
20,000 cigarettes or $500 or more worth of tobacco products, without reasonable cause,
deleted text end the commissioner may give the person 30 days' notice in writing, specifying the violations,
and stating that based on the violations the commissioner intends to revoke the person's
permit issued under section 297A.84. The notice must also advise the person of the right to
contest the revocation under this subdivision. It must also explain the general procedures
for a contested case hearing under chapter 14. The notice may be served personally or by
mail in the manner prescribed for service of an order of assessment.

(b) If the person does not request a hearing within 30 days after the date of the
notice of intent, the commissioner may serve a notice of revocation of permit upon the
person, and the permit is revoked. If a hearing is timely requested, and held, the permit
is revoked after the commissioner serves an order of revocation of permit under section
14.62, subdivision 1.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2016.
new text end

Sec. 2.

Minnesota Statutes 2014, section 270C.728, is amended by adding a
subdivision to read:

new text begin Subd. 8. new text end

new text begin Publication of revoked retail cigarette licenses. new text end

new text begin (a) Notwithstanding
any other law, the commissioner may publish a list of persons who have had their retail
licenses to sell cigarettes or tobacco products revoked under section 297F.186. In the case
of a license holder that is a business entity, the commissioner may also publish the name
of responsible persons of the license holder, as defined in section 297F.186, subdivision 1.
new text end

new text begin (b) At least 30 days before publishing the name of a license holder or responsible
person, the commissioner shall mail a written notice to the license holder and to
responsible persons of the license holder of the commissioner's intent to publish. This
notice may be included as part of the notice of intent to revoke a license as required under
section 297F.186, subdivision 3.
new text end

new text begin (c) The list may be published by any medium or method. The list must contain
the name and address of the license holder and the name of the responsible person and
the date the license was revoked.
new text end

new text begin (d) The commissioner shall remove the name of a license holder or responsible
person from the list five years from the date of the license revocation or upon the license
holder or responsible person receiving a license clearance under section 297F.186.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2016.
new text end

Sec. 3.

Minnesota Statutes 2014, section 297F.01, subdivision 14, is amended to read:

Subd. 14.

Retailer.

"Retailer" means a person deleted text begin required to be licensed under chapter
461deleted text end new text begin located in this state new text end engaged deleted text begin in this statedeleted text end in the business of selling, or offering to sell,
cigarettes or tobacco products to consumers.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2016.
new text end

Sec. 4.

Minnesota Statutes 2014, section 297F.03, subdivision 5, is amended to read:

Subd. 5.

License fees; cigarettes.

Each application for a cigarette distributor's
license must be accompanied by a fee of deleted text begin $300deleted text end new text begin $500new text end . Each application for a cigarette
subjobber's license must be accompanied by a fee of deleted text begin $24deleted text end new text begin $100new text end . A distributor or subjobber
applying for a license during the second year of a two-year licensing period is required to
pay only one-half of the license fee.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for license periods beginning after
December 31, 2016.
new text end

Sec. 5.

Minnesota Statutes 2014, section 297F.03, subdivision 6, is amended to read:

Subd. 6.

License fees; tobacco products.

Each application for a tobacco products
distributor's license must be accompanied by a fee of deleted text begin $75deleted text end new text begin $500new text end . Each application for
a tobacco products subjobber's license must be accompanied by a fee of deleted text begin $20deleted text end new text begin $100new text end . A
distributor or subjobber applying for a license during the second year of a two-year
licensing period is required to pay only one-half of the license fee.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for license periods beginning after
December 31, 2016.
new text end

Sec. 6.

Minnesota Statutes 2014, section 297F.04, subdivision 1, is amended to read:

Subdivision 1.

Powers of commissioner.

The commissioner may revoke deleted text begin ordeleted text end new text begin ,
new text end suspendnew text begin , or refuse to renewnew text end the license or licenses of any distributor or subjobbernew text begin , or
refuse to issue a license to an applicant for a distributor or subjobber license,new text end for violation
of this chapter, any other act applicable to the sale of cigarettes or tobacco products, or any
rule promulgated by the commissioner, in furtherance of this chapter.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2016.
new text end

Sec. 7.

Minnesota Statutes 2014, section 297F.13, subdivision 4, is amended to read:

Subd. 4.

Retailer and subjobber to preserve purchase invoices.

Every retailer and
subjobber shall procure itemized invoices of all cigarettes or tobacco products purchased.

The retailer and subjobber shall preserve a legible copy of each invoice for one
year from the date of the invoicenew text begin or as long as the cigarette or tobacco product listed on
the invoice is available for sale or in their possession, whichever period is longernew text end . The
retailer and subjobber shall preserve copies of the invoices at each retail location or at a
central location provided that the invoice must be produced and made available at a retail
location within one hour when requested by the commissioner or duly authorized agents
and employees. Copies should be numbered and kept in chronological order.

To determine whether the business is in compliance with the provisions of this
chapter, at any time during usual business hours, the commissioner, or duly authorized
agents and employees, may enter any place of business of a retailer or subjobber without
a search warrant and inspect the premises, the records required to be kept under this
chapter, and the packages of cigarettes, tobacco products, and vending devices contained
on the premises.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases by subjobbers
and retailers made on or after August 1, 2016.
new text end

Sec. 8.

new text begin [297F.186] REVOCATION OF CIGARETTE AND TOBACCO RETAIL
LICENSE.
new text end

new text begin Subdivision 1. new text end

new text begin Cigarette and tobacco retail revocation. new text end

new text begin (a) A licensing authority
must not issue, transfer, or renew, and must revoke, a license if the commissioner has
notified the licensing authority that the license holder or applicant has been in possession
of contraband cigarettes or tobacco products as defined under section 297F.21 at the
location covered by the license.
new text end

new text begin (b) Within ten days after receipt of the notification from the commissioner under
paragraph (a), the licensing authority must notify the license holder by mail of the
revocation of the license or an applicant of the denial to issue a license. The notice must
include a copy of the commissioner's notice to the licensing authority and information, in
the form specified by the commissioner, on the licensee's option for receiving a license
clearance from the commissioner. The licensing authority must revoke the license within
30 days after receiving the notice from the commissioner, unless it receives a license
clearance from the commissioner as provided in subdivision 2, paragraph (b).
new text end

new text begin (c) For purposes of this section, the following terms have the meanings given.
new text end

new text begin (1) "License holder" means an individual or legal entity who has a license to sell
cigarettes or tobacco products issued under chapter 461.
new text end

new text begin (2) "License" means a license to sell cigarettes or tobacco products under chapter 461.
new text end

new text begin (3) "Licensing authority" means a town board, county board, governing body of a
home rule charter or statutory city, or state agricultural society authorized to issue licenses
under chapter 461.
new text end

new text begin (4) "Applicant" means any individual, corporation, partnership, or any other legal
entity that is a holder of a license or that has filed an application to obtain a license.
new text end

new text begin (5) "Responsible person" means any individual who, either singly or jointly with
others, has the control of, supervision of, or responsibility for filing tax returns or reports,
paying taxes, or collecting or withholding and remitting taxes to the commissioner for
a license holder, or who has authority to purchase cigarettes or tobacco products, or
supervises a person who has authority to purchase cigarettes or tobacco products for
the license holder.
new text end

new text begin Subd. 2. new text end

new text begin New licenses after revocation. new text end

new text begin (a) An applicant who has had a
license revoked under this section, or an applicant with a responsible person who was
a responsible person for another entity for which a license was revoked under this
section, may not apply for a license or seek the reinstatement of a revoked license
unless the applicant presents to the licensing authority a license clearance issued by the
commissioner. A licensing authority must not issue a new license to an applicant with
such a responsible person or to an applicant who has had a license revoked under this
section or reinstate a revoked license unless the applicant presents to the authority a
license clearance issued by the commissioner.
new text end

new text begin (b) Except as provided in paragraph (f), the commissioner may issue a license
clearance if the applicant and all responsible persons of the applicant:
new text end

new text begin (1) sign an agreement that acknowledges that the applicant and the responsible
person will follow all laws related to the taxation of cigarettes and tobacco products,
including the requirements to:
new text end

new text begin (i) purchase all cigarettes and tobacco products from distributors and subjobbers
licensed by the commissioner;
new text end

new text begin (ii) maintain invoices of all cigarettes or tobacco products purchased as required
under section 297F.13, subdivision 4, and produce those invoices within one hour when
requested by the commissioner or duly authorized agents and employees; and
new text end

new text begin (iii) timely file and pay to the commissioner all returns and all sales taxes related to
the sale of tobacco products; and
new text end

new text begin (2) deposit with the commissioner security or a surety bond in an amount equal
to ten times the amount of tax on the contraband cigarettes or tobacco products. The
commissioner must hold the security deposit for two years.
new text end

new text begin (c) The commissioner must pay interest on any money deposited as security. The
interest is calculated from the date of deposit to the date of refund, or date of application
to any outstanding tax liability, at a rate specified in section 270C.405. The commissioner
must refund the security deposit to the applicant at the end of the two-year period
unless the applicant has any unpaid tax liabilities payable to the commissioner. The
commissioner may apply the security deposit to unpaid tax liabilities of the applicant
owed to the commissioner and to the tax on contraband cigarettes or tobacco products
owned, possessed, sold, or offered for sale by the applicant after the license clearance
has been issued.
new text end

new text begin (d) The commissioner may refund the security deposit before the end of the two-year
holding period if the license holder no longer has a license to sell cigarettes or tobacco
products issued by a licensing authority in the state.
new text end

new text begin (e) If the commissioner determines that a licensing authority has issued a new license
or reinstated a revoked license without the applicant submitting a license clearance, the
commissioner may notify the licensing authority to revoke the license. Revocations under
this subdivision are controlled by the provisions of subdivisions 1, paragraph (b), and 3.
The commissioner must send notice of intent to require revocation to the license holder
and to the responsible person of the license holder.
new text end

new text begin (f) If an applicant has had, or if a person has been a responsible person to, a
cumulative number of two or more licenses revoked under this subdivision in a five-year
period by licensing authorities within the state, the commissioner may refuse to issue a
license clearance until 24 months have elapsed after the last revocation and the applicant
has satisfied the conditions for reinstatement of a revoked license or issuance of a new
license imposed by this subdivision.
new text end

new text begin Subd. 3. new text end

new text begin Notice and hearing. new text end

new text begin (a) Prior to notifying a licensing authority to revoke
a license pursuant to subdivision 1, the commissioner must send a notice to the license
holder and to any known responsible person of the license holder of the commissioner's
intent to require revocation of the license and of the license holder's or responsible person's
right to a hearing. If the license holder or responsible person requests a hearing in writing
within 30 days of the date of the notice, a contested case hearing must be held. The hearing
must be held within 45 days of the date the commissioner refers the case to the Office of
Administrative Hearings. Notwithstanding any law to the contrary, the license holder or
responsible person must be served in writing specifying the time and place of the hearing
and the allegations against the license holder or responsible person. The notice may be
served at least 20 days before the hearing personally or by mail. A license is subject to
revocation when 30 days have passed following the date of the notice in this paragraph
without the license holder requesting a hearing, or, if a hearing is timely requested, upon
adverse final determination of the case after the hearing under section 14.62, subdivision 1.
new text end

new text begin (b) The commissioner may notify a licensing authority under subdivision 1 only
after the requirements of paragraph (a) have been satisfied.
new text end

new text begin (c) A hearing under this subdivision is in lieu of any other hearing or proceeding
provided by law arising from any action taken under subdivision 1.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2016, and applies to
revocations based on contraband seized on or after August 1, 2016.
new text end

Sec. 9.

Minnesota Statutes 2014, section 297F.19, is amended by adding a subdivision
to read:

new text begin Subd. 10. new text end

new text begin Penalty for retailers who fail to comply. new text end

new text begin (a) A retailer who fails to
produce an itemized invoice from a licensed seller within one hour of being requested by
the commissioner to do so as required under section 297F.13, subdivision 4, or who offers
for sale or holds in inventory cigarettes or tobacco products without a license required
under chapter 461 is subject to a penalty of $1,000 for the first violation, $3,000 for the
second violation, and $5,000 for the third and each subsequent violation occurring during
any 36-month period.
new text end

new text begin (b) A retailer who offers for sale or holds in inventory untaxed cigarettes or tobacco
products is subject to a penalty equal to the greater of $2,000, or 150 percent of the tax
due on the cigarettes or tobacco products.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for violations occurring on or after
August 1, 2016.
new text end

Sec. 10.

Minnesota Statutes 2014, section 297F.20, is amended by adding a subdivision
to read:

new text begin Subd. 2a. new text end

new text begin Penalties for willful failure to file or pay. new text end

new text begin (a) A person or consumer
required to file a return, report, or other document with the commissioner who willfully
attempts in any manner to evade or defeat a tax under this chapter by failing to do so
when required is guilty of a felony.
new text end

new text begin (b) A person or consumer required to pay or to collect and remit a tax under this
chapter, who willfully attempts to evade or defeat a tax by failing to do so when required,
is guilty of a felony.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for offenses committed on or after
August 1, 2016.
new text end

Sec. 11.

Minnesota Statutes 2014, section 297F.20, is amended by adding a subdivision
to read:

new text begin Subd. 13. new text end

new text begin Aggregation and consolidation of venue. new text end

new text begin In any prosecution under this
section, the number of unstamped cigarettes or the value of the untaxed tobacco products
possessed, received, transported, sold, offered to be sold, or purchased in violation of
this section within any six-month period may be aggregated and the defendant charged
accordingly in applying the provisions of this section. When two or more offenses are
committed by the same individual in two or more counties, the accused may be prosecuted
in any county in which one of the offenses was committed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for offenses committed on or after
August 1, 2016.
new text end

Sec. 12.

Minnesota Statutes 2014, section 297F.21, subdivision 1, is amended to read:

Subdivision 1.

Contraband defined.

The following are declared to be contraband
and therefore subject to civil and criminal penalties under this chapter:

(a) Cigarette packages which do not have stamps affixed to them as provided in this
chapter, including but not limited to (i) packages with illegible stamps and packages with
stamps that are not complete or whole even if the stamps are legible, and (ii) all devices
for the vending of cigarettes in which packages as defined in item (i) are found, including
all contents contained within the devices.

(b) A device for the vending of cigarettes and all packages of cigarettes, where the
device does not afford at least partial visibility of contents. Where any package exposed
to view does not carry the stamp required by this chapter, it shall be presumed that all
packages contained in the device are unstamped and contraband.

(c) A device for the vending of cigarettes to which the commissioner or authorized
agents have been denied access for the inspection of contents. In lieu of seizure, the
commissioner or an agent may seal the device to prevent its use until inspection of
contents is permitted.

(d) A device for the vending of cigarettes which does not carry the name and address
of the owner, plainly marked and visible from the front of the machine.

(e) A device including, but not limited to, motor vehicles, trailers, snowmobiles,
airplanes, and boats used with the knowledge of the owner or of a person operating with
the consent of the owner for the storage or transportation of more than 5,000 cigarettes
which are contraband under this subdivision. When cigarettes are being transported in
the course of interstate commerce, or are in movement from either a public warehouse to
a distributor upon orders from a manufacturer or distributor, or from one distributor to
another, the cigarettes are not contraband, notwithstanding the provisions of clause (a).

(f) A device including, but not limited to, motor vehicles, trailers, snowmobiles,
airplanes, and boats used with the knowledge of the owner, or of a person operating with
the consent of the owner, for the storage or transportation of untaxed tobacco products
intended for sale in Minnesota other than those in the possession of a licensed distributor
on or before the due date for payment of the tax under section 297F.09, subdivision 2.

(g) Cigarette packages or tobacco products obtained from an unlicensed seller.

(h) Cigarette packages offered for sale or held as inventory in violation of section
297F.20, subdivision 7.

(i) Tobacco products on which the tax has not been paid by a licensed distributor.

(j) Any cigarette packages or tobacco products offered for sale or held as inventory
for which deleted text begin there is not an invoice from a licensed sellerdeleted text end new text begin the retailer or subjobber does not
produce an itemized invoice from a licensed seller within one hour after being requested
by the commissioner to do sonew text end as required under section 297F.13, subdivision 4.

(k) Cigarette packages which have been imported into the United States in violation
of United States Code, title 26, section 5754. All cigarettes held in violation of that section
shall be presumed to have entered the United States after December 31, 1999, in the
absence of proof to the contrary.

(l) Cigarettes subject to forfeiture under section 299F.854, subdivision 5, and
cigarette packaging and markings, including the cigarettes contained therein, which do not
meet the requirements under section 299F.853, paragraph (a).

new text begin (m) All cigarettes and tobacco products, including those for which the tax has
been paid, offered for sale, or held as inventory by a retailer operating without a license
required under chapter 461.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2016.
new text end

Sec. 13.

Minnesota Statutes 2014, section 461.12, subdivision 8, is amended to read:

Subd. 8.

Notice to commissioner.

The licensing authority under this section shall,
within 30 days of the issuance new text begin or renewal new text end of a license, deleted text begin informdeleted text end new text begin providenew text end the commissioner of
revenue deleted text begin ofdeleted text end new text begin , on a form prescribed by the commissioner and completed by the applicant,
new text end the licensee's name, address, trade name, new text begin Minnesota business identification number, the
name of the individual or individuals who will be responsible for purchasing cigarettes or
tobacco products for the licensee, new text end and the effective and expiration dates of the license.
The commissioner of revenue must also be informed of a license deleted text begin renewal,deleted text end transfer,
cancellation, suspension, or revocation during the license period.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for licenses issued, renewed,
transferred, canceled, suspended, or revoked after December 31, 2016.
new text end

Sec. 14. new text begin APPROPRIATION.
new text end

new text begin $1,036,000 in fiscal year 2017, $1,036,000 in fiscal year 2018, and $1,036,000 in
fiscal year 2019 are appropriated from the general fund to the commissioner of revenue
to carry out the provisions of this article. This is an ongoing appropriation and shall be
added to the base.
new text end

Sec. 15. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2014, section 297F.185, 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 August 1, 2016.
new text end

ARTICLE 6

CORPORATE TAX REFORM

Section 1.

Minnesota Statutes 2014, section 16D.08, subdivision 2, is amended to read:

Subd. 2.

Powers.

(a) In addition to the collection remedies available to private
collection agencies in this state, the commissioner, with legal assistance from the attorney
general, may utilize any statutory authority granted to a referring agency for purposes of
collecting debt owed to that referring agency. The commissioner may also use the tax
collection remedies in sections 270C.03, subdivision 1, clause deleted text begin (8)deleted text end new text begin (9)new text end , 270C.31, 270C.32,
270C.52, subdivisions 2 and 3, 270C.63, 270C.65, and 270C.67 to 270C.72. A debtor
may take advantage of any administrative or appeal rights contained in the listed sections.
For administrative and appeal rights for nontax debts, references to administrative
appeals or to the taxpayer rights advocate shall be construed to be references to the case
reviewer, references to Tax Court shall be construed to mean district court, and offers
in compromise shall be submitted to the referring agency. A debtor who qualifies for
cancellation of collection costs under section 16D.11, subdivision 3, clause (1), can apply
to the commissioner for reduction or release of a continuous wage levy, if the debtor
establishes that the debtor needs all or a portion of the wages being levied upon to pay
for essential living expenses, such as food, clothing, shelter, medical care, or expenses
necessary for maintaining employment. The commissioner's determination not to reduce
or release a continuous wage levy is appealable to district court. The word "tax" or "taxes"
when used in the tax collection statutes listed in this subdivision also means debts referred
under this chapter.

(b) Before using the tax collection remedies listed in this subdivision, notice and
demand for payment of the amount due must be given to the person liable for the payment
or collection of the debt at least 30 days prior to the use of the remedies. The notice must
be sent to the person's last known address and must include a brief statement that sets forth
in simple and nontechnical terms the amount and source of the debt, the nature of the
available collection remedies, and remedies available to the debtor.

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 2014, section 270C.03, subdivision 1, is amended to read:

Subdivision 1.

Powers and duties.

The commissioner shall have and exercise
the following powers and duties:

(1) administer and enforce the assessment and collection of taxes;

(2) make determinations, corrections, and assessments with respect to taxes,
including interest, additions to taxes, and assessable penalties;

new text begin (3) disallow the tax effects of a transaction that does not have economic substance;
new text end

deleted text begin (3)deleted text end new text begin (4)new text end use statistical or other sampling techniques consistent with generally accepted
auditing standards in examining returns or records and making assessments;

deleted text begin (4)deleted text end new text begin (5)new text end investigate the tax laws of other states and countries, and formulate and
submit to the legislature such legislation as the commissioner may deem expedient
to prevent evasions of state revenue laws and to secure just and equal taxation and
improvement in the system of state revenue laws;

deleted text begin (5)deleted text end new text begin (6)new text end consult and confer with the governor upon the subject of taxation, the
administration of the laws in regard thereto, and the progress of the work of the
department, and furnish the governor, from time to time, such assistance and information
as the governor may require relating to tax matters;

deleted text begin (6)deleted text end new text begin (7)new text end execute and administer any agreement with the secretary of the treasury or the
Bureau of Alcohol, Tobacco, Firearms and Explosives in the Department of Justice of the
United States or a representative of another state regarding the exchange of information
and administration of the state revenue laws;

deleted text begin (7)deleted text end new text begin (8)new text end require town, city, county, and other public officers to report information
as to the collection of taxes received from licenses and other sources, and such other
information as may be needful in the work of the commissioner, in such form as the
commissioner may prescribe;

deleted text begin (8)deleted text end new text begin (9)new text end authorize the use of unmarked motor vehicles to conduct seizures or criminal
investigations pursuant to the commissioner's authority;

deleted text begin (9)deleted text end new text begin (10)new text end authorize the participation in audits performed by the Multistate Tax
Commission. For the purposes of chapter 270B, the Multistate Tax Commission will be
considered to be a state for the purposes of auditing corporate sales, excise, and income
tax returns;

deleted text begin (10)deleted text end new text begin (11)new text end maintain toll-free telephone access for taxpayer assistance for calls from
locations within the state; and

deleted text begin (11)deleted text end new text begin (12)new text end exercise other powers and authority and perform other duties required of or
imposed upon the commissioner by law.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 3.

Minnesota Statutes 2014, section 270C.33, subdivision 6, is amended to read:

Subd. 6.

Assessment presumed valid.

new text begin (a) new text end A return or assessment of tax made
by the commissioner is prima facie correct and valid. The taxpayer has the burden of
establishing its incorrectness or invalidity in any related action or proceeding.

new text begin (b) To overcome the presumption that an order of the commissioner that disallows
the tax effects of a transaction because the commissioner determined the transaction does
not have economic substance pursuant to section 270C.03, subdivision 1, clause (3),
is prima facie correct and valid, the taxpayer must prove the transaction has economic
substance with clear and convincing evidence.
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, 2015.
new text end

Sec. 4.

new text begin [270C.331] ECONOMIC SUBSTANCE.
new text end

new text begin Subdivision 1. new text end

new text begin Economic substance. new text end

new text begin (a) For the purposes of disallowing the
tax effects of a transaction that does not have substance pursuant to section 270C.03,
subdivision 1, clause (3), a transaction shall be treated as having economic substance
only if:
new text end

new text begin (1) the transaction changes in a meaningful way, apart from tax effects, the taxpayer's
economic position; and
new text end

new text begin (2) the taxpayer has a substantial purpose, apart from tax effects, for entering into
the transaction.
new text end

new text begin (b) In determining whether the requirements of paragraph (a), clauses (1) and (2),
are met, the potential for profit of a transaction shall be taken into account only if the
present value of the reasonable expected pretax profit from the transaction is substantial
in relation to the present value of the expected net tax benefits that would be allowed if
the transaction were respected. Fees and other transaction expenses shall be taken into
account as expenses in determining pretax profit.
new text end

new text begin (c) For the purposes of paragraph (a), clause (2), achieving a financial accounting
benefit shall not be taken into account as a purpose for entering into a transaction if the
origin of such financial accounting benefit is a reduction of federal, state, or local tax.
new text end

new text begin Subd. 2. new text end

new text begin Apart from tax effects. new text end

new text begin For purposes of this section, "apart from tax
effects" means without regard to the state and local tax effects arising from the application
of the laws of any state or local unit of government to the form of the transaction, the
federal tax effects, or both.
new text end

new text begin Subd. 3. new text end

new text begin Transaction. new text end

new text begin For purposes of this section and section 270C.03, subdivision
1, clause (3), "transaction" includes a series of transactions.
new text end

new text begin Subd. 4. new text end

new text begin Personal transactions of individuals. new text end

new text begin In the case of an individual,
subdivision 1 shall only apply to transactions entered into in connection with the trade or
business activity engaged in for the production of income.
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, 2015.
new text end

Sec. 5.

Minnesota Statutes 2014, section 289A.60, is amended by adding a subdivision
to read:

new text begin Subd. 27a. new text end

new text begin Noneconomic substance transaction understatement penalty. new text end

new text begin (a) If a
transaction is disallowed pursuant to section 270C.03, subdivision 1, clause (3), a penalty
equal to 20 percent of the amount of the disclosed noneconomic substance transaction
understatement must be added to the tax. This subdivision applies to any income or item
of income that is attributable to any transaction disallowed pursuant to section 270C.03,
subdivision 1, clause (3).
new text end

new text begin (b) If a transaction is disallowed pursuant to section 270C.03, subdivision 1, clause
(3), a penalty equal to 40 percent of the amount of the undisclosed noneconomic substance
transaction understatement must be added to the tax. This subdivision applies to any
income or item of income that is attributable to any transaction disallowed pursuant to
section 270C.03, subdivision 1, clause (3).
new text end

new text begin (c) For purposes of this subdivision, the term "disclosed noneconomic substance
transaction" means a transaction that fails to meet the criteria for having economic
substance as described in section 270C.03, subdivision 1, clause (3), with respect to which
the relevant facts affecting tax treatment are adequately disclosed in the return or in a
statement attached to the return.
new text end

new text begin (d) For purposes of this subdivision, the term "undisclosed noneconomic substance
transaction" means a transaction that fails to meet the criteria for having economic
substance as described in section 270C.03, subdivision 1, clause (3), with respect to which
the relevant facts affecting tax treatment are not adequately disclosed in the return or in a
statement attached to the return.
new text end

new text begin (e) For purposes of this subdivision, if amendments or supplements to a return of
tax are filed after the date the taxpayer is first contacted by the commissioner regarding
examination of the return, the amendments or supplements may not be taken into account
to reduce the noneconomic substance transaction understatement.
new text end

new text begin (f) For purposes of this subdivision, "understatement" means the product of:
new text end

new text begin (1) the amount of increase, if any, in taxable income that results from a difference
between the proper tax treatment of an item to which section 270C.03, subdivision 1,
clause (3), applies and the taxpayer's treatment of that item as shown on the taxpayer's
tax return. For the purposes of this paragraph, any reduction of the excess of deductions
allowed for the taxable year over gross income for that year, and any reduction in the
amount of capital losses that would, without regard to section 1211 of the Internal Revenue
Code, be allowed for that year, must be treated as an increase in taxable income; and
new text end

new text begin (2) the highest rate of tax imposed on the taxpayer under section 290.06, determined
without regard to the understatement.
new text end

new text begin (g) If the noneconomic substance transaction understatement penalty is imposed
under this subdivision, the penalties imposed under subdivision 27 do not apply.
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, 2015.
new text end

Sec. 6.

Minnesota Statutes 2014, section 290.01, subdivision 4a, is amended to read:

Subd. 4a.

Financial institution.

(a) "Financial institution" means:

(1) deleted text begin a holding companydeleted text end new text begin any corporation or other business entity registered (i) under
state law as a bank holding company; (ii) under the federal Bank Holding Company Act
of 1956, as amended; or (iii) as a savings and loan holding company under the federal
National Housing Act, as amendednew text end ;

(2) deleted text begin any regulated financial corporation; ordeleted text end new text begin a national bank organized and existing
as a national bank association pursuant to the provisions of United States Code, title
12, chapter 2;
new text end

(3) deleted text begin any other corporation organized under the laws of the United States or organized
under the laws of this state or any other state or country that is carrying on the business of
a financial institution.deleted text end new text begin a savings association or federal savings bank as defined in United
States Code, title 12, section 1813(b)(1);
new text end

new text begin (4) any bank or thrift institution incorporated or organized under the laws of any state;
new text end

new text begin (5) any corporation organized under United States Code, title 12, sections 611 to 631;
new text end

new text begin (6) any agency or branch of a foreign depository as defined under United States
Code, title 12, section 3101;
new text end

new text begin (7) any corporation or other business entity that is more than 50 percent owned,
directly or indirectly, by any person or business entity described in clauses (1) to (6), other
than an insurance company taxable under chapter 297I;
new text end

new text begin (8) a corporation or other business entity that derives more than 50 percent of its
total gross income for financial accounting purposes from finance leases. For the purposes
of this clause, "gross income" is the average from the current tax year and immediately
preceding two years and excludes gross income from incidental or occasional transactions.
For purposes of this clause, "finance lease" means any lease transaction that is the
functional equivalent of an extension of credit, and that transfers substantially all of the
benefits and risks incident to the ownership of property, including any direct financing
lease or leverage lease that meets the criteria of Financial Accounting Standards Board
Statement No. 13, accounting for leases, or any other lease that is accounted for as
financing by a lessor under generally accepted accounting principles; or
new text end

new text begin (9) any other person or business entity, other than an insurance company taxable
under chapter 297I, that derives more than 50 percent of its gross income from activities that
an entity described in clauses (2) to (6) or (8), is authorized to transact. For the purposes of
this clause, gross income does not include income from nonrecurring, extraordinary items.
new text end

(b) deleted text begin "Holding company" means any corporation registered under the Federal Bank
Holding Company Act of 1956, as amended, or registered as a savings and loan holding
company under the Federal National Housing Act, as amended, or a federal savings
bank holding company.deleted text end new text begin The commissioner is authorized to exclude any person from the
application of paragraph (a), clause (9), if the person proves by clear and convincing
evidence that the person's income-producing activity is not in substantial competition with
any person described in paragraph (a), clauses (2) to (6) or (8).
new text end

deleted text begin (c) "Regulated financial corporation" means an institution, the deposits or accounts
of which are insured under the Federal Deposit Insurance Act or by the Federal Savings
and Loan Insurance Corporation, any institution which is a member of a Federal Home
Loan Bank, any other bank or thrift institution incorporated or organized under the laws of
any state or any foreign country which is engaged in the business of receiving deposits,
any corporation organized under the provisions of United States Code, title 12, sections
611 to 631 (Edge Act Corporations), and any agency of a foreign depository as defined in
United States Code, title 12, section 3101.
deleted text end

deleted text begin (d) "Business of a financial institution" means:
deleted text end

deleted text begin (1) the business that any corporation organized under the authority of the United
States or organized under the laws of this state or any other state or country does or has
authority to do which is substantially similar to the business which a corporation may be
created to do under chapters 46 to 55 or any business which a corporation is authorized
to do by those laws; or
deleted text end

deleted text begin (2) the business that any corporation organized under the authority of the United
States or organized under the laws of this state or any other state or country does or has
authority to do if the corporation derives more than 50 percent of its gross income from
lending activities (including discounting obligations) in substantial competition with the
businesses described in clause (1). For purposes of this clause, the computation of the gross
income of a corporation does not include income from nonrecurring, extraordinary items.
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, 2015.
new text end

Sec. 7.

Minnesota Statutes 2014, section 290.01, is amended by adding a subdivision
to read:

new text begin Subd. 19i. new text end

new text begin Accelerated recognition of certain installment sale gains. new text end

new text begin (a) For the
purposes of this subdivision, the following definitions apply:
new text end

new text begin (1) "realized" means realized as defined by section 1001(b) of the Internal Revenue
Code; and
new text end

new text begin (2) "installment sale" means any installment sale under section 453 of the Internal
Revenue Code, and any other sale that is reported utilizing a method of accounting
authorized under subchapter E of the Internal Revenue Code, that allows taxpayers to
delay reporting or recognition of a realized gain until a future year.
new text end

new text begin (b) In the case of a nonresident individual or a person who becomes a nonresident
individual during the tax year, net income includes the full amount realized upon a
sale of the assets of, or the sale of any interest in, an S corporation or partnership that
operated in Minnesota during the taxable year of sale, including any income or gain to be
recognized in future years pursuant to an installment sale method of reporting under the
Internal Revenue Code.
new text end

new text begin (c) An individual who becomes a nonresident of Minnesota in any year after an
installment sale is required to recognize the full amount of any income or gain not
recognized in a prior year on the individual's final Minnesota resident tax return.
new text end

new text begin (d) Notwithstanding paragraphs (b) and (c), taxpayers may elect to defer the
recognition of installment sale gains by making an election under this paragraph. The
election must be filed on a form prescribed by the commissioner and must be filed by
the due date of the individual tax return, including any extension. Electing taxpayers
are required to:
new text end

new text begin (1) file Minnesota tax returns in all subsequent years when gains from the installment
sale are recognized and reported to the Internal Revenue Service;
new text end

new text begin (2) allocate gains to the state of Minnesota as though the gains were incurred in the
year of sale under section 290.17 or 290.191; and
new text end

new text begin (3) include all relevant federal tax documents reporting the installment sale with
subsequent Minnesota tax returns.
new text end

new text begin (e) Income or gain recognized for Minnesota purposes under paragraphs (b) and (c)
and subjected to tax, is excluded from net income in future years.
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, 2015.
new text end

Sec. 8.

Minnesota Statutes 2014, section 290.068, subdivision 2, is amended to read:

Subd. 2.

Definitions.

For purposes of this section, the following terms have the
meanings given.

(a) "Qualified research expenses" means (i) qualified research expenses and basic
research payments as defined in section 41(b) and (e) of the Internal Revenue Code, except
it does not include expenses incurred for qualified research or basic research conducted
outside the state of Minnesota pursuant to section 41(d) and (e) of the Internal Revenue
Code; and (ii) contributions to a nonprofit corporation established and operated pursuant
to the provisions of chapter 317A for the purpose of promoting the establishment and
expansion of business in this state, provided the contributions are invested by the nonprofit
corporation for the purpose of providing funds for small, technologically innovative
enterprises in Minnesota during the early stages of their development.

(b) "Qualified research" means qualified research as defined in section 41(d) of the
Internal Revenue Code, except that the term does not include qualified research conducted
outside the state of Minnesota.

(c) "Base amount" means base amount as defined in section 41(c) of the Internal
Revenue Code, except that the average annual gross receipts must be calculated using
Minnesota sales or receipts under section 290.191 and the definitions contained in clauses
(a) and (b) shall apply.new text begin If there are inadequate records or the records are unavailable to
compute or verify the base percentage, a fixed base percentage of 16 percent must be used.
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, 2015.
new text end

Sec. 9.

Minnesota Statutes 2014, 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, a corporation, 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 does not exist when two or more corporations are involved
unless more than 50 percent of the voting stock of each corporation 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
foreign corporations and other 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;
except that the income and apportionment factors of a foreign entity, other than an entity
treated as a C corporation for federal income tax purposes, that are included in the federal
taxable income, as defined in section 63 of the Internal Revenue Code as amended through
the date named in section 290.01, subdivision 19, of a domestic corporation, domestic
entity, or individual must be included in determining net income and the factors to be used
in the apportionment of net income pursuant to section 290.191 or 290.20. A foreign
corporation or other foreign entity which is not included on a combined report and which
is required to file a return under this chapter shall file on a separate return basis.

(g) 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 domestic corporations
or other domestic entities that are determined to be part of the unitary business pursuant
to this subdivision, notwithstanding that foreign corporations or other foreign entities
might be included in the unitary business; except that the income and apportionment
factors of a foreign entity, other than an entity treated as a C corporation for federal
income tax purposes, that is included in the federal taxable income, as defined in section
63 of the Internal Revenue Code as amended through the date named in section 290.01,
subdivision 19, of a domestic corporation, domestic entity, or individual must be included
in determining net income and the factors to be used in the apportionment of net income
pursuant to section 290.191 or 290.20.

(h) Each corporation or other 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
(g) 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 (g) in the denominators of the apportionment formula. Except as otherwise
provided by paragraph (f), all sales of the unitary business made within this state pursuant
to section 290.191 or 290.20 must be included on the combined report of a corporation or
other entity that is a member of the unitary business and is subject to the jurisdiction of
this state to impose tax under this chapter.

(i) 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:

(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

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

new text begin (j) For purposes of this subdivision, "insurance company" means any company that is:
new text end

new text begin (1) licensed to engage in the business of insurance in Minnesota pursuant to chapter
60A; or
new text end

new text begin (2) domiciled and licensed to engage in the business of insurance in another state
or country that imposes retaliatory taxes, and that does not grant, on a reciprocal basis,
exemption from such retaliatory taxes to insurance companies or their agents domiciled
in Minnesota.
new text end

new text begin (k) For the purposes of this subdivision, "retaliatory taxes" means taxes imposed on
insurance companies organized in another state or country that result from the fact that an
insurance company organized in the taxing jurisdiction and doing business in the other
jurisdiction is subject to taxes, fines, deposits, penalties, licenses, or fees in an amount
exceeding that imposed by the taxing jurisdiction upon an insurance company organized in
the other state or country and doing business to the same extent in the taxing jurisdiction.
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, 2015.
new text end

Sec. 10.

Minnesota Statutes 2014, section 290.191, subdivision 5, is amended to read:

Subd. 5.

Determination of sales factor.

For purposes of this section, the following
rules apply in determining the sales factor.

(a) The sales factor includes all sales, gross earnings, or receipts received in the
ordinary course of the business, except that the following types of income are not included
in the sales factor:

(1) interest;

(2) dividends;

(3) sales of capital assets as defined in section 1221 of the Internal Revenue Code;

(4) sales of property used in the trade or business, except sales of leased property of
a type which is regularly sold as well as leased; deleted text begin and
deleted text end

(5) sales of debt instruments as defined in section 1275(a)(1) of the Internal Revenue
Code or sales of stockdeleted text begin .deleted text end new text begin ; and
new text end

new text begin (6) sales of derivatives including but not limited to swaps, options, futures, and
forwards.
new text end

(b) Sales of tangible personal property are made within this state if the property is
received by a purchaser at a point within this state, regardless of the f.o.b. point, other
conditions of the sale, or the ultimate destination of the property.

(c) Tangible personal property delivered to a common or contract carrier or foreign
vessel for delivery to a purchaser in another state or nation is a sale in that state or nation,
regardless of f.o.b. point or other conditions of the sale.

(d) Notwithstanding paragraphs (b) and (c), when intoxicating liquor, wine,
fermented malt beverages, cigarettes, or tobacco products are sold to a purchaser who is
licensed by a state or political subdivision to resell this property only within the state of
ultimate destination, the sale is made in that state.

(e) Sales made by or through a corporation that is qualified as a domestic
international sales corporation under section 992 of the Internal Revenue Code are not
considered to have been made within this state.

(f) Sales, rents, royalties, and other income in connection with real property is
attributed to the state in which the property is located.

(g) Receipts from the lease or rental of tangible personal property, including finance
leases and true leases, must be attributed to this state if the property is located in this
state and to other states if the property is not located in this state. Receipts from the
lease or rental of moving property including, but not limited to, motor vehicles, rolling
stock, aircraft, vessels, or mobile equipment are included in the numerator of the receipts
factor to the extent that the property is used in this state. The extent of the use of moving
property is determined as follows:

(1) A motor vehicle is used wholly in the state in which it is registered.

(2) The extent that rolling stock is used in this state is determined by multiplying
the receipts from the lease or rental of the rolling stock by a fraction, the numerator of
which is the miles traveled within this state by the leased or rented rolling stock and the
denominator of which is the total miles traveled by the leased or rented rolling stock.

(3) The extent that an aircraft is used in this state is determined by multiplying the
receipts from the lease or rental of the aircraft by a fraction, the numerator of which is
the number of landings of the aircraft in this state and the denominator of which is the
total number of landings of the aircraft.

(4) The extent that a vessel, mobile equipment, or other mobile property is used in
the state is determined by multiplying the receipts from the lease or rental of the property
by a fraction, the numerator of which is the number of days during the taxable year the
property was in this state and the denominator of which is the total days in the taxable year.

(h) Royalties and other income received for the use of or for the privilege of using
intangible property, including patents, know-how, formulas, designs, processes, patterns,
copyrights, trade names, service names, franchises, licenses, contracts, customer lists, or
similar items, must be attributed to the state in which the property is used by the purchaser.
If the property is used in more than one state, the royalties or other income must be
apportioned to this state pro rata according to the portion of use in this state. If the portion
of use in this state cannot be determined, the royalties or other income must be excluded
from both the numerator and the denominator. Intangible property is used in this state if
the purchaser uses the intangible property or the rights therein in the regular course of its
business operations in this state, regardless of the location of the purchaser's customers.

(i) Sales of intangible property are made within the state in which the property is
used by the purchaser. If the property is used in more than one state, the sales must be
apportioned to this state pro rata according to the portion of use in this state. If the
portion of use in this state cannot be determined, the sale must be excluded from both the
numerator and the denominator of the sales factor. Intangible property is used in this
state if the purchaser used the intangible property in the regular course of its business
operations in this state.

(j) Receipts from the performance of services must be attributed to the state where
the services are received. For the purposes of this section, receipts from the performance
of services provided to a corporation, partnership, or trust may only be attributed to a state
where it has a fixed place of doing business. If the state where the services are received is
not readily determinable or is a state where the corporation, partnership, or trust receiving
the service does not have a fixed place of doing business, the services shall be deemed
to be received at the location of the office of the customer from which the services were
ordered in the regular course of the customer's trade or business. If the ordering office
cannot be determined, the services shall be deemed to be received at the office of the
customer to which the services are billed.

(k) For the purposes of this subdivision and subdivision 6, paragraph (l), receipts
from management, distribution, or administrative services performed by a corporation
or trust for a fund of a corporation or trust regulated under United States Code, title 15,
sections 80a-1 through 80a-64, must be attributed to the state where the shareholder of
the fund resides. Under this paragraph, receipts for services attributed to shareholders are
determined on the basis of the ratio of: (1) the average of the outstanding shares in the
fund owned by shareholders residing within Minnesota at the beginning and end of each
year; and (2) the average of the total number of outstanding shares in the fund at the
beginning and end of each year. Residence of the shareholder, in the case of an individual,
is determined by the mailing address furnished by the shareholder to the fund. Residence
of the shareholder, when the shares are held by an insurance company as a depositor for
the insurance company policyholders, is the mailing address of the policyholders. In
the case of an insurance company holding the shares as a depositor for the insurance
company policyholders, if the mailing address of the policyholders cannot be determined
by the taxpayer, the receipts must be excluded from both the numerator and denominator.
Residence of other shareholders is the mailing address of the shareholder.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 11.

Minnesota Statutes 2014, section 290.21, subdivision 4, is amended to read:

Subd. 4.

Dividends received from another corporation.

(a)(1) Eighty percent
of dividends received by a corporation during the taxable year from another corporation,
in which the recipient owns 20 percent or more of the stock, by vote and value, not
including stock described in section 1504(a)(4) of the Internal Revenue Code when the
corporate stock with respect to which dividends are paid does not constitute the stock in
trade of the taxpayer or would not be included in the inventory of the taxpayer, or does not
constitute property held by the taxpayer primarily for sale to customers in the ordinary
course of the taxpayer's trade or business, or when the trade or business of the taxpayer
does not consist principally of the holding of the stocks and the collection of the income
and gains therefrom; and

(2)(i) the remaining 20 percent of dividends if the dividends received are the stock in
an affiliated company transferred in an overall plan of reorganization and the dividend
is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as
amended through December 31, 1989;

(ii) the remaining 20 percent of dividends if the dividends are received from a
corporation which is subject to tax under section 290.36 and which is a member of an
affiliated group of corporations as defined by the Internal Revenue Code and the dividend
is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as
amended through December 31, 1989, or is deducted under an election under section
243(b) of the Internal Revenue Code; or

(iii) the remaining 20 percent of the dividends if the dividends are received from a
property and casualty insurer as defined under section 60A.60, subdivision 8, which is a
member of an affiliated group of corporations as defined by the Internal Revenue Code
and either: (A) the dividend is eliminated in consolidation under Treasury Regulation
1.1502-14(a), as amended through December 31, 1989; or (B) the dividend is deducted
under an election under section 243(b) of the Internal Revenue Code.

(b) Seventy percent of dividends received by a corporation during the taxable year
from another corporation in which the recipient owns less than 20 percent of the stock,
by vote or value, not including stock described in section 1504(a)(4) of the Internal
Revenue Code when the corporate stock with respect to which dividends are paid does not
constitute the stock in trade of the taxpayer, or does not constitute property held by the
taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or
business, or when the trade or business of the taxpayer does not consist principally of the
holding of the stocks and the collection of income and gain therefrom.

(c) The dividend deduction provided in this subdivision shall be allowed only with
respect to dividends that are included in a corporation's Minnesota taxable net income
for the taxable year.

The dividend deduction provided in this subdivision does not apply to a dividend
from a corporation which, for the taxable year of the corporation in which the distribution
is made or for the next preceding taxable year of the corporation, is a corporation exempt
from tax under section 501 of the Internal Revenue Code.

The dividend deduction provided in this subdivision does not apply to a dividend
received from a real estate investment trust as defined in section 856 of the Internal
Revenue Code.

The dividend deduction provided in this subdivision applies to the amount of
regulated investment company dividends only to the extent determined under section
854(b) of the Internal Revenue Code.

The dividend deduction provided in this subdivision shall not be allowed with
respect to any dividend for which a deduction is not allowed under the provisions of
section 246(c) new text begin or 246A new text end of the Internal Revenue Code.

(d) If dividends received by a corporation that does not have nexus with Minnesota
under the provisions of Public Law 86-272 are included as income on the return of
an affiliated corporation permitted or required to file a combined report under section
290.17, subdivision 4, or 290.34, subdivision 2, then for purposes of this subdivision the
determination as to whether the trade or business of the corporation consists principally
of the holding of stocks and the collection of income and gains therefrom shall be made
with reference to the trade or business of the affiliated corporation having a nexus with
Minnesota.

(e) The deduction provided by this subdivision does not apply if the dividends are
paid by a FSC as defined in section 922 of the Internal Revenue Code.

(f) If one or more of the members of the unitary group whose income is included on
the combined report received a dividend, the deduction under this subdivision for each
member of the unitary business required to file a return under this chapter is the product
of: (1) 100 percent of the dividends received by members of the group; (2) the percentage
allowed pursuant to paragraph (a) or (b); and (3) the percentage of the taxpayer's business
income apportionable to this state for the taxable year under section 290.191 or 290.20.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

ARTICLE 7

MISCELLANEOUS

Section 1.

Minnesota Statutes 2014, section 290A.03, subdivision 13, is amended to
read:

Subd. 13.

Property taxes payable.

"Property taxes payable" means the property tax
exclusive of special assessments, penalties, and interest payable on a claimant's homestead
after deductions made under sections 273.135, 273.1384, 273.1391, 273.42, subdivision 2,
and any other state paid property tax credits in any calendar year, and after any refund
claimed and allowable under section 290A.04, subdivision 2h, that is first payable in
the year that the property tax is payable. In the case of a claimant who makes ground
lease payments, "property taxes payable" includes the amount of the payments directly
attributable to the property taxes assessed against the parcel on which the house is located.
No apportionment or reduction of the "property taxes payable" shall be required for the
use of a portion of the claimant's homestead for a business purpose if the claimant does
not deduct any business depreciation expenses for the use of a portion of the homesteadnew text begin ,
or does not deduct expenses under section 280A of the Internal Revenue Code for a
business operated in the home,new text end in the determination of federal adjusted gross income. For
homesteads which are manufactured homes as defined in section 273.125, subdivision 8,
and for homesteads which are park trailers taxed as manufactured homes under section
168.012, subdivision 9, "property taxes payable" shall also include 17 percent of the gross
rent paid in the preceding year for the site on which the homestead is located. When
a homestead is owned by two or more persons as joint tenants or tenants in common,
such tenants shall determine between them which tenant may claim the property taxes
payable on the homestead. If they are unable to agree, the matter shall be referred to the
commissioner of revenue whose decision shall be final. Property taxes are considered
payable in the year prescribed by law for payment of the taxes.

In the case of a claim relating to "property taxes payable," the claimant must have
owned and occupied the homestead on January 2 of the year in which the tax is payable
and (i) the property must have been classified as homestead property pursuant to section
273.124, on or before December 15 of the assessment year to which the "property taxes
payable" relate; or (ii) the claimant must provide documentation from the local assessor
that application for homestead classification has been made on or before December 15
of the year in which the "property taxes payable" were payable and that the assessor has
approved the application.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for refunds based on rent paid after
December 31, 2014, and property taxes payable after December 31, 2015.
new text end

Sec. 2.

Minnesota Statutes 2014, section 290B.03, subdivision 1, is amended to read:

Subdivision 1.

Program qualifications.

The qualifications for the senior citizens'
property tax deferral program are as follows:

(1) the property must be owned and occupied as a homestead by a person 65 years of
age or older. In the case of a married couple, at least one of the spouses must be at least 65
years old at the time the first property tax deferral is granted, regardless of whether the
property is titled in the name of one spouse or both spouses, or titled in another way that
permits the property to have homestead status, and the other spouse must be at least 62
years of age;

(2) the total household income of the qualifying homeowners, as defined in section
290A.03, subdivision 5, for the calendar year preceding the year of the initial application
may not exceed $60,000;

(3) the homestead must have been owned and occupied as the homestead of at least
one of the qualifying homeowners for at least deleted text begin 15deleted text end new text begin fivenew text end years prior to the year the initial
application is filed;

(4) there are no state or federal tax liens or judgment liens on the homesteaded
property;

(5) there are no mortgages or other liens on the property that secure future advances,
except for those subject to credit limits that result in compliance with clause (6); and

(6) the total unpaid balances of debts secured by mortgages and other liens on the
property, including unpaid and delinquent special assessments and interest and any
delinquent property taxes, penalties, and interest, but not including property taxes payable
during the year, does not exceed 75 percent of the assessor's estimated market value for
the year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for application for deferral of taxes
payable in 2017 and thereafter.
new text end

Sec. 3.

Minnesota Statutes 2014, section 290B.04, subdivision 1, is amended to read:

Subdivision 1.

Initial application.

(a) A taxpayer meeting the program
qualifications under section 290B.03 may apply to the commissioner of revenue for the
deferral of taxes. Applications are due on or before deleted text begin July 1deleted text end new text begin November 1new text end for deferral of
any of the following year's property taxes. A taxpayer may apply in the year in which the
taxpayer becomes 65 years old, provided that no deferral of property taxes will be made
until the calendar year after the taxpayer becomes 65 years old. The application, which
shall be prescribed by the commissioner of revenue, shall include the following items and
any other information which the commissioner deems necessary:

(1) the name, address, and Social Security number of the owner or owners;

(2) a copy of the property tax statement for the current payable year for the
homesteaded property;

(3) the initial year of ownership and occupancy as a homestead;

(4) the owner's household income for the previous calendar year; and

(5) information on any mortgage loans or other amounts secured by mortgages or
other liens against the property, for which purpose the commissioner may require the
applicant to provide a copy of the mortgage note, the mortgage, or a statement of the
balance owing on the mortgage loan provided by the mortgage holder. The commissioner
may require the appropriate documents in connection with obtaining and confirming
information on unpaid amounts secured by other liens.

The application must state that program participation is voluntary. The application
must also state that the deferred amount depends directly on the applicant's household
income, and that program participation includes authorization for the annual deferred
amount, the cumulative deferral and interest that appear on each year's notice prepared by
the county under subdivision 6, is public data.

The application must state that program participants may claim the property tax
refund based on the full amount of property taxes eligible for the refund, including any
deferred amounts. The application must also state that property tax refunds will be used to
offset any deferral and interest under this program, and that any other amounts subject to
revenue recapture under section 270A.03, subdivision 7, will also be used to offset any
deferral and interest under this program.

(b) As part of the initial application process, the commissioner may require the
applicant to obtain at the applicant's own cost and submit:

(1) if the property is registered property under chapter 508 or 508A, a copy of the
original certificate of title in the possession of the county registrar of titles (sometimes
referred to as "condition of register"); or

(2) if the property is abstract property, a report prepared by a licensed abstracter
showing the last deed and any unsatisfied mortgages, liens, judgments, and state and
federal tax lien notices which were recorded on or after the date of that last deed with
respect to the property or to the applicant.

The certificate or report under clauses (1) and (2) need not include references to
any documents filed or recorded more than 40 years prior to the date of the certification
or report. The certification or report must be as of a date not more than 30 days prior
to submission of the application.

The commissioner may also require the county recorder or county registrar of the
county where the property is located to provide copies of recorded documents related to
the applicant or the property, for which the recorder or registrar shall not charge a fee. The
commissioner may use any information available to determine or verify eligibility under
this section. The household income from the application is private data on individuals as
defined in section 13.02, subdivision 12.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for applications for deferral of taxes
payable in 2017 and thereafter.
new text end

Sec. 4.

Minnesota Statutes 2014, section 291.03, subdivision 11, is amended to read:

Subd. 11.

Recapture tax.

(a) If, within three years after the decedent's death and
before the death of the qualified heir, the qualified heir disposes of any interest in the
qualified property, other than by a disposition to a family member, or a family member
ceases to satisfy the requirement under subdivision 9, clause (7); or 10, clause (5), an
additional estate tax is imposed on the property. In the case of a sole proprietor, if the
qualified heir replaces qualified small business property excluded under subdivision 9
with similar property, then the qualified heir will not be treated as having disposed of an
interest in the qualified property.

(b) The amount of the additional tax equals the amount of the exclusion claimed by
the estate under subdivision 8, paragraph (d), multiplied by 16 percent.

(c) The additional tax under this subdivision is due on the day which is six months
after the date of the disposition or cessation in paragraph (a).

new text begin (d) The tax under this subdivision does not apply to acquisitions of title or possession
of the qualified property for a public purpose as defined in section 117.025, subdivision 11,
by a federal, state, or local government unit, or any other entity with the power of eminent
domain within the three-year holding period.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after June 30, 2011.
new text end

Sec. 5.

Minnesota Statutes 2014, section 297A.815, subdivision 3, is amended to read:

Subd. 3.

Motor vehicle lease sales tax revenue.

(a) For purposes of this subdivision,
"net revenue" means an amount equal to the revenues, including interest and penalties,
collected under this section, during the fiscal year; less $32,000,000 in each fiscal year.

(b) On or before June 30 of each fiscal year, the commissioner of revenue shall
estimate the amount of the net revenue for the current fiscal year.

(c) On or after July 1 of the subsequent fiscal year, the commissioner of management
and budget shall transfer the net revenue as estimated in paragraph (b) from the general
fund, as follows:

(1) $9,000,000 annually until January 1, 2015, and 50 percent annually thereafter to
the county state-aid highway fund. Notwithstanding any other law to the contrary, the
commissioner of transportation shall allocate the funds transferred under this clause to the
counties in the metropolitan area, as defined in section 473.121, subdivision 4, excluding
the counties of Hennepin and Ramsey, so that each county shall receive of such amount
the percentage that its population, as defined in section 477A.011, subdivision 3, estimated
or established by July 15 of the year prior to the current calendar year, bears to the total
population of the counties receiving funds under this clause; and

(2) the remainder to the greater Minnesota transit account.

new text begin (d) The revenues deposited under this subdivision do not include the revenues,
including interest and penalties, generated by the sales tax imposed under section 297A.62,
subdivision 1a, that must be deposited as provided under the Minnesota Constitution,
article XI, section 15.
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

Sec. 6.

Minnesota Statutes 2014, section 297A.94, is amended to read:

297A.94 DEPOSIT OF REVENUES.

(a) Except as provided in this section, the commissioner shall deposit the revenues,
including interest and penalties, derived from the taxes imposed by this chapter in the state
treasury and credit them to the general fund.

(b) The commissioner shall deposit taxes in the Minnesota agricultural and economic
account in the special revenue fund if:

(1) the taxes are derived from sales and use of property and services purchased for
the construction and operation of an agricultural resource project; and

(2) the purchase was made on or after the date on which a conditional commitment
was made for a loan guaranty for the project under section 41A.04, subdivision 3.

The commissioner of management and budget shall certify to the commissioner the date
on which the project received the conditional commitment. The amount deposited in
the loan guaranty account must be reduced by any refunds and by the costs incurred by
the Department of Revenue to administer and enforce the assessment and collection of
the taxes.

(c) The commissioner shall deposit the revenues, including interest and penalties,
derived from the taxes imposed on sales and purchases included in section 297A.61,
subdivision 3, paragraph (g), clauses (1) and (4), in the state treasury, and credit them
as follows:

(1) first to the general obligation special tax bond debt service account in each fiscal
year the amount required by section 16A.661, subdivision 3, paragraph (b); and

(2) after the requirements of clause (1) have been met, the balance to the general fund.

(d) The commissioner shall deposit the revenues, including interest and penalties,
collected under section 297A.64, subdivision 5, in the state treasury and credit them to the
general fund. By July 15 of each year the commissioner shall transfer to the highway user
tax distribution fund an amount equal to the excess fees collected under section 297A.64,
subdivision 5, for the previous calendar year.

(e) 72.43 percent of the revenues, including interest and penalties, transmitted to
the commissioner under section 297A.65, must be deposited by the commissioner in the
state treasury as follows:

(1) 50 percent of the receipts must be deposited in the heritage enhancement account
in the game and fish fund, and may be spent only on activities that improve, enhance, or
protect fish and wildlife resources, including conservation, restoration, and enhancement
of land, water, and other natural resources of the state;

(2) 22.5 percent of the receipts must be deposited in the natural resources fund, and
may be spent only for state parks and trails;

(3) 22.5 percent of the receipts must be deposited in the natural resources fund, and
may be spent only on metropolitan park and trail grants;

(4) three percent of the receipts must be deposited in the natural resources fund, and
may be spent only on local trail grants; and

(5) two percent of the receipts must be deposited in the natural resources fund,
and may be spent only for the Minnesota Zoological Garden, the Como Park Zoo and
Conservatory, and the Duluth Zoo.

(f) The revenue dedicated under paragraph (e) may not be used as a substitute
for traditional sources of funding for the purposes specified, but the dedicated revenue
shall supplement traditional sources of funding for those purposes. Land acquired with
money deposited in the game and fish fund under paragraph (e) must be open to public
hunting and fishing during the open season, except that in aquatic management areas or
on lands where angling easements have been acquired, fishing may be prohibited during
certain times of the year and hunting may be prohibited. At least 87 percent of the money
deposited in the game and fish fund for improvement, enhancement, or protection of fish
and wildlife resources under paragraph (e) must be allocated for field operations.

(g) The revenues deposited deleted text begin under paragraphs (a) to (f)deleted text end new text begin in, transferred to, or credited
to a fund other than the general fund by a provision in this chapternew text end do not include the
revenues, including interest and penalties, generated by the sales tax imposed under
section 297A.62, subdivision 1a, which must be deposited as provided under the
Minnesota Constitution, article XI, section 15.

new text begin EFFECTIVE DATE. new text end

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

Sec. 7. new text begin SUPPLEMENTAL CITY FORMULA AID.
new text end

new text begin (a) For aids payable in 2016 only, the total aid payable to cities under Minnesota
Statutes, section 477A.03, subdivision 2a, is increased by $21,500,000.
new text end

new text begin (b) The increase in a city's formula aid due to the aid provided in paragraph (a) is
deemed to be supplemental aid.
new text end

new text begin (c) For aids payable in 2017 and thereafter, the commissioner of revenue shall
calculate the formula aid for a city under Minnesota Statutes, section 477A.013,
subdivision 8, as though a city had not received supplemental aid under this section.
new text end

new text begin (d) The commissioner of revenue shall notify a city of any supplemental increase in
its city formula aid under this section by June 30, 2016.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2016.
new text end

Sec. 8. new text begin SUPPLEMENTAL COUNTY PROGRAM AID.
new text end

new text begin (a) For aids payable in 2016 only, the total aid payable to counties under Minnesota
Statutes, section 477A.03, subdivision 2b, paragraph (a), is increased by $12,500,000.
new text end

new text begin (b) For aids payable in 2016 only, the total aid payable to counties under Minnesota
Statutes, section 477A.03, subdivision 2b, paragraph (b), is increased by $12,500,000.
new text end

new text begin (c) The commissioner of revenue shall notify a county of any increase to its county
program aid under this section by June 30, 2016.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2016.
new text end

SF 3255

Bill Text Versions

ARTICLE 1

FEDERAL UPDATE

Section 1.

Subd. 7.

Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

Sec. 2.

Subd. 19.

Net income.

new text begin EFFECTIVE DATE. new text end

Sec. 3.

Subd. 19a.

Additions to federal taxable income.

new text begin EFFECTIVE DATE. new text end

Sec. 4.

Subd. 19b.

Subtractions from federal taxable income.

new text begin EFFECTIVE DATE. new text end

Sec. 5.

Subd. 19c.

Corporations; additions to federal taxable income.

new text begin EFFECTIVE DATE. new text end

Sec. 6.

Subd. 31.

Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

Sec. 7.

Subdivision 1.

Credit allowed.

new text begin EFFECTIVE DATE. new text end

Sec. 8.

Subd. 2.

Definitions.

new text begin EFFECTIVE DATE. new text end

Sec. 9.

Subd. 15.

Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

Sec. 10.

Subdivision 1.

Scope.

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Sec. 11. new text begin AMENDED RETURNS.new text end

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new text begin Certain IRA rollovers. new text end

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new text begin Exclusion for certain incarcerated individuals. new text end

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Sec. 12. new text begin APPROPRIATION.new text end

ARTICLE 2

INDIVIDUAL INCOME TAX CREDITS

Section 1.

Subdivision 1.

Amount of credit.

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Sec. 2.

Subd. 2.

Limitations.

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Sec. 3.

Subd. 2b.

Inflation adjustment.

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Sec. 4.

Subd. 3.

Credit to be refundable.

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Sec. 5.

Subdivision 1.

Credit allowed.

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Sec. 6.

Subd. 6.

Appropriation.

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Sec. 7.

Subd. 7.

Inflation adjustment.

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Sec. 12. new text begin APPROPRIATION.
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Sec. 11. new text begin APPROPRIATION.
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Sec. 12. new text begin REPEALER.
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