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SF 3533

as introduced - 91st Legislature (2019 - 2020) Posted on 05/20/2020 10:18am

KEY: stricken = removed, old language.
underscored = added, new language.
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A bill for an act
relating to taxation; modifying individual income and corporate franchise taxes,
special taxes, and property taxes; modifying individual income tax brackets, the
K-12 education expense credit, and section 179 expensing provisions; providing
for a full subtraction of taxable Social Security income and ongoing funding for
the small business investment tax credit; modifying certain lawful gambling tax
and other provisions; modifying referendum equalization levy; appropriating
money; amending Minnesota Statutes 2018, sections 273.13, subdivision 25;
290.0674, subdivision 2; 297E.02, subdivision 6; 297E.021, subdivisions 2, 3, 4,
by adding a subdivision; 349.15, subdivision 1; 349.151, subdivision 4; Minnesota
Statutes 2019 Supplement, sections 116J.8737, subdivision 5; 126C.17, subdivision
6; 290.0132, subdivision 26; 290.06, subdivision 2c; repealing Minnesota Statutes
2018, sections 290.0131, subdivision 10; 290.0133, subdivision 12; 290.0674,
subdivision 2a; 290.0692, subdivision 6; Minnesota Statutes 2019 Supplement,
section 116J.8737, subdivision 12.

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

ARTICLE 1

PROPERTY TAXES AND AIDS AND CREDITS

Section 1.

Minnesota Statutes 2019 Supplement, section 126C.17, subdivision 6, is amended
to read:


Subd. 6.

Referendum equalization levy.

(a) A district's referendum equalization levy
equals the sum of the first tier referendum equalization levy and the second tier referendum
equalization levy.

(b) A district's first tier referendum equalization levy equals the district's first tier
referendum equalization revenue times the lesser of new text begin(1) new text endone deleted text beginordeleted text endnew text begin, (2)new text end the ratio of the district's
referendum market value per resident pupil unit to deleted text begin$567,000deleted text endnew text begin $650,000, or (3) the ratio of
the district's referendum market value per adjusted pupil unit to $650,000
new text end.

(c) A district's second tier referendum equalization levy equals the district's second tier
referendum equalization revenue times the lesser of new text begin(1) new text endone deleted text beginordeleted text endnew text begin, (2)new text end the ratio of the district's
referendum market value per resident pupil unit to deleted text begin$290,000deleted text endnew text begin $320,000, or (3) the ratio of
the district's referendum market value per adjusted pupil unit to $320,000
new text end.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for revenue in fiscal year 2021 and later.
new text end

Sec. 2.

Minnesota Statutes 2018, section 273.13, subdivision 25, is amended to read:


Subd. 25.

Class 4.

(a) Class 4a is residential real estate containing four or more units
and used or held for use by the owner or by the tenants or lessees of the owner as a residence
for rental periods of 30 days or more, excluding property qualifying for class 4d. Class 4a
also includes hospitals licensed under sections 144.50 to 144.56, other than hospitals exempt
under section 272.02, and contiguous property used for hospital purposes, without regard
to whether the property has been platted or subdivided. The market value of class 4a property
has a classification rate of 1.25 percent.

(b) Class 4b includes:

(1) residential real estate containing less than four units that does not qualify as class
4bb, other than seasonal residential recreational property;

(2) manufactured homes not classified under any other provision;

(3) a dwelling, garage, and surrounding one acre of property on a nonhomestead farm
classified under subdivision 23, paragraph (b) containing two or three units; and

(4) unimproved property that is classified residential as determined under subdivision
33.

The market value of class 4b property has a classification rate of 1.25 percent.

(c) Class 4bb includes:

(1) nonhomestead residential real estate containing one unit, other than seasonal
residential recreational property;

(2) a single family dwelling, garage, and surrounding one acre of property on a
nonhomestead farm classified under subdivision 23, paragraph (b); and

(3) a condominium-type storage unit having an individual property identification number
that is not used for a commercial purpose.

Class 4bb property has the same classification rates as class 1a property under subdivision
22.

Property that has been classified as seasonal residential recreational property at any time
during which it has been owned by the current owner or spouse of the current owner does
not qualify for class 4bb.

(d) Class 4c property includes:

(1) except as provided in subdivision 22, paragraph (c), real and personal property
devoted to commercial temporary and seasonal residential occupancy for recreation purposes,
for not more than 250 days in the year preceding the year of assessment. For purposes of
this clause, property is devoted to a commercial purpose on a specific day if any portion of
the property is used for residential occupancy, and a fee is charged for residential occupancy.
Class 4c property under this clause must contain three or more rental units. A "rental unit"
is defined as a cabin, condominium, townhouse, sleeping room, or individual camping site
equipped with water and electrical hookups for recreational vehicles. A camping pad offered
for rent by a property that otherwise qualifies for class 4c under this clause is also class 4c
under this clause regardless of the term of the rental agreement, as long as the use of the
camping pad does not exceed 250 days. In order for a property to be classified under this
clause, either (i) the business located on the property must provide recreational activities,
at least 40 percent of the annual gross lodging receipts related to the property must be from
business conducted during 90 consecutive days, and either (A) at least 60 percent of all paid
bookings by lodging guests during the year must be for periods of at least two consecutive
nights; or (B) at least 20 percent of the annual gross receipts must be from charges for
providing recreational activities, or (ii) the business must contain 20 or fewer rental units,
and must be located in a township or a city with a population of 2,500 or less located outside
the metropolitan area, as defined under section 473.121, subdivision 2, that contains a portion
of a state trail administered by the Department of Natural Resources. For purposes of item
(i)(A), a paid booking of five or more nights shall be counted as two bookings. Class 4c
property also includes commercial use real property used exclusively for recreational
purposes in conjunction with other class 4c property classified under this clause and devoted
to temporary and seasonal residential occupancy for recreational purposes, up to a total of
two acres, provided the property is not devoted to commercial recreational use for more
than 250 days in the year preceding the year of assessment and is located within two miles
of the class 4c property with which it is used. In order for a property to qualify for
classification under this clause, the owner must submit a declaration to the assessor
designating the cabins or units occupied for 250 days or less in the year preceding the year
of assessment by January 15 of the assessment year. Those cabins or units and a proportionate
share of the land on which they are located must be designated class 4c under this clause
as otherwise provided. The remainder of the cabins or units and a proportionate share of
the land on which they are located will be designated as class 3a. The owner of property
desiring designation as class 4c property under this clause must provide guest registers or
other records demonstrating that the units for which class 4c designation is sought were not
occupied for more than 250 days in the year preceding the assessment if so requested. The
portion of a property operated as a (1) restaurant, (2) bar, (3) gift shop, (4) conference center
or meeting room, and (5) other nonresidential facility operated on a commercial basis not
directly related to temporary and seasonal residential occupancy for recreation purposes
does not qualify for class 4c. For the purposes of this paragraph, "recreational activities"
means renting ice fishing houses, boats and motors, snowmobiles, downhill or cross-country
ski equipment; providing marina services, launch services, or guide services; or selling bait
and fishing tackle;

(2) qualified property used as a golf course if:

(i) it is open to the public on a daily fee basis. It may charge membership fees or dues,
but a membership fee may not be required in order to use the property for golfing, and its
green fees for golfing must be comparable to green fees typically charged by municipal
courses; and

(ii) it meets the requirements of section 273.112, subdivision 3, paragraph (d).

A structure used as a clubhouse, restaurant, or place of refreshment in conjunction with
the golf course is classified as class 3a property;

(3) real property up to a maximum of three acres of land owned and used by a nonprofit
community service oriented organization and not used for residential purposes on either a
temporary or permanent basis, provided that:

(i) the property is not used for a revenue-producing activity for more than six days in
the calendar year preceding the year of assessment; or

(ii) the organization makes annual charitable contributions and donations at least equal
to the property's previous year's property taxes and the property is allowed to be used for
public and community meetings or events for no charge, as appropriate to the size of the
facility.

For purposes of this clause:

(A) "charitable contributions and donations" has the same meaning as lawful gambling
purposes under section 349.12, subdivision 25, excluding those purposes relating to the
payment of taxes, assessments, fees, auditing costs, and utility payments;

(B) "property taxes" excludes the state general tax;

(C) a "nonprofit community service oriented organization" means any corporation,
society, association, foundation, or institution organized and operated exclusively for
charitable, religious, fraternal, civic, or educational purposes, and which is exempt from
federal income taxation pursuant to section 501(c)(3), (8), (10), or (19) of the Internal
Revenue Code; and

(D) "revenue-producing activities" shall include but not be limited to property or that
portion of the property that is used as an on-sale intoxicating liquor or 3.2 percent malt
liquor establishment licensed under chapter 340A, a restaurant open to the public, bowling
alley, a retail store, gambling conducted by organizations licensed under chapter 349, an
insurance business, or office or other space leased or rented to a lessee who conducts a
for-profit enterprise on the premises.

Any portion of the property not qualifying under either item (i) or (ii) is class 3a. The
use of the property for social events open exclusively to members and their guests for periods
of less than 24 hours, when an admission is not charged nor any revenues are received by
the organization shall not be considered a revenue-producing activity.

The organization shall maintain records of its charitable contributions and donations
and of public meetings and events held on the property and make them available upon
request any time to the assessor to ensure eligibility. An organization meeting the requirement
under item (ii) must file an application by May 1 with the assessor for eligibility for the
current year's assessment. The commissioner shall prescribe a uniform application form
and instructions;

(4) postsecondary student housing of not more than one acre of land that is owned by a
nonprofit corporation organized under chapter 317A and is used exclusively by a student
cooperative, sorority, or fraternity for on-campus housing or housing located within two
miles of the border of a college campus;

(5)(i) manufactured home parks as defined in section 327.14, subdivision 3, excluding
manufactured home parks described in items (ii) and (iii), (ii) manufactured home parks as
defined in section 327.14, subdivision 3, that are described in section 273.124, subdivision
3a
, and (iii) class I manufactured home parks as defined in section 327C.01, subdivision
13
;

(6) real property that is actively and exclusively devoted to indoor fitness, health, social,
recreational, and related uses, is owned and operated by a not-for-profit corporation, and is
located within the metropolitan area as defined in section 473.121, subdivision 2;

(7) a leased or privately owned noncommercial aircraft storage hangar not exempt under
section 272.01, subdivision 2, and the land on which it is located, provided that:

(i) the land is on an airport owned or operated by a city, town, county, Metropolitan
Airports Commission, or group thereof; and

(ii) the land lease, or any ordinance or signed agreement restricting the use of the leased
premise, prohibits commercial activity performed at the hangar.

If a hangar classified under this clause is sold after June 30, 2000, a bill of sale must be
filed by the new owner with the assessor of the county where the property is located within
60 days of the sale;

(8) a privately owned noncommercial aircraft storage hangar not exempt under section
272.01, subdivision 2, and the land on which it is located, provided that:

(i) the land abuts a public airport; and

(ii) the owner of the aircraft storage hangar provides the assessor with a signed agreement
restricting the use of the premises, prohibiting commercial use or activity performed at the
hangar; and

(9) residential real estate, a portion of which is used by the owner for homestead purposes,
and that is also a place of lodging, if all of the following criteria are met:

(i) rooms are provided for rent to transient guests that generally stay for periods of 14
or fewer days;

(ii) meals are provided to persons who rent rooms, the cost of which is incorporated in
the basic room rate;

(iii) meals are not provided to the general public except for special events on fewer than
seven days in the calendar year preceding the year of the assessment; and

(iv) the owner is the operator of the property.

The market value subject to the 4c classification under this clause is limited to five rental
units. Any rental units on the property in excess of five, must be valued and assessed as
class 3a. The portion of the property used for purposes of a homestead by the owner must
be classified as class 1a property under subdivision 22;

(10) real property up to a maximum of three acres and operated as a restaurant as defined
under section 157.15, subdivision 12, provided it: (i) is located on a lake as defined under
section 103G.005, subdivision 15, paragraph (a), clause (3); and (ii) is either devoted to
commercial purposes for not more than 250 consecutive days, or receives at least 60 percent
of its annual gross receipts from business conducted during four consecutive months. Gross
receipts from the sale of alcoholic beverages must be included in determining the property's
qualification under item (ii). The property's primary business must be as a restaurant and
not as a bar. Gross receipts from gift shop sales located on the premises must be excluded.
Owners of real property desiring 4c classification under this clause must submit an annual
declaration to the assessor by February 1 of the current assessment year, based on the
property's relevant information for the preceding assessment year;

(11) lakeshore and riparian property and adjacent land, not to exceed six acres, used as
a marina, as defined in section 86A.20, subdivision 5, which is made accessible to the public
and devoted to recreational use for marina services. The marina owner must annually provide
evidence to the assessor that it provides services, including lake or river access to the public
by means of an access ramp or other facility that is either located on the property of the
marina or at a publicly owned site that abuts the property of the marina. No more than 800
feet of lakeshore may be included in this classification. Buildings used in conjunction with
a marina for marina services, including but not limited to buildings used to provide food
and beverage services, fuel, boat repairs, or the sale of bait or fishing tackle, are classified
as class 3a property; and

(12) real and personal property devoted to noncommercial temporary and seasonal
residential occupancy for recreation purposes.

Class 4c property has a classification rate of 1.5 percent of market value, except that (i)
each parcel of noncommercial seasonal residential recreational property under clause (12)
has the same classification rates as class 4bb property, (ii) manufactured home parks assessed
under clause (5), item (i), have the same classification rate as class 4b property, the market
value of manufactured home parks assessed under clause (5), item (ii), have a classification
rate of 0.75 percent if more than 50 percent of the lots in the park are occupied by
shareholders in the cooperative corporation or association and a classification rate of one
percent if 50 percent or less of the lots are so occupied, and class I manufactured home
parks as defined in section 327C.01, subdivision 13, have a classification rate of 1.0 percent,
(iii) commercial-use seasonal residential recreational property and marina recreational land
as described in clause (11), has a classification rate of one percent for the first $500,000 of
market value, and 1.25 percent for the remaining market value, (iv) the market value of
property described in clause (4) has a classification rate of one percent, (v) the market value
of property described in clauses (2), (6), and (10) has a classification rate of 1.25 percent,
(vi) that portion of the market value of property in clause (9) qualifying for class 4c property
has a classification rate of 1.25 percent, and (vii) property qualifying for classification under
clause (3) that is owned or operated by a congressionally chartered veterans organization
has a classification rate of one percent. The commissioner of veterans affairs must provide
a list of congressionally chartered veterans organizations to the commissioner of revenue
by June 30, 2017, and by January 1, 2018, and each year thereafter.

(e) Class 4d property is qualifying low-income rental housing certified to the assessor
by the Housing Finance Agency under section 273.128, subdivision 3. If only a portion of
the units in the building qualify as low-income rental housing units as certified under section
273.128, subdivision 3, only the proportion of qualifying units to the total number of units
in the building qualify for class 4d. The remaining portion of the building shall be classified
by the assessor based upon its use. Class 4d also includes the same proportion of land as
the qualifying low-income rental housing units are to the total units in the building. For all
properties qualifying as class 4d, the market value determined by the assessor must be based
on the normal approach to value using normal unrestricted rents.new text begin Class 4d property has a
classification rate of 0.25 percent.
new text end

deleted text begin (f) The first tier of market value of class 4d property has a classification rate of 0.75
percent. The remaining value of class 4d property has a classification rate of 0.25 percent.
For the purposes of this paragraph, the "first tier of market value of class 4d property" means
the market value of each housing unit up to the first tier limit. For the purposes of this
paragraph, all class 4d property value must be assigned to individual housing units. The
first tier limit is $100,000 for assessment year 2014. For subsequent years, the limit is
adjusted each year by the average statewide change in estimated market value of property
classified as class 4a and 4d under this section for the previous assessment year, excluding
valuation change due to new construction, rounded to the nearest $1,000, provided, however,
that the limit may never be less than $100,000. Beginning with assessment year 2015, the
commissioner of revenue must certify the limit for each assessment year by November 1
of the previous year.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with taxes payable in 2021.
new text end

Sec. 3. new text beginAPPROPRIATION.
new text end

new text begin $20,500,000 in fiscal year 2021 is appropriated from the general fund to the commissioner
of education for additional general education aid.
new text end

ARTICLE 2

INCOME AND MISCELLANEOUS TAXES

Section 1.

Minnesota Statutes 2019 Supplement, section 116J.8737, subdivision 5, is
amended to read:


Subd. 5.

Credit allowed.

(a) A qualified investor or qualified fund is eligible for a credit
equal to 25 percent of the qualified investment in a qualified small business. Investments
made by a pass-through entity qualify for a credit only if the entity is a qualified fund. The
commissioner must not allocate more than $10,000,000 in credits to qualified investors or
qualified funds for the taxable years listed in paragraph (i). For each taxable year, 50 percent
must be allocated to credits for qualifying investments in qualified greater Minnesota
businesses and minority-owned, women-owned, or veteran-owned qualified small businesses
in Minnesota. Any portion of a taxable year's credits that is reserved for qualifying
investments in greater Minnesota businesses and minority-owned, women-owned, or
veteran-owned qualified small businesses in Minnesota that is not allocated by September
30 of the taxable year is available for allocation to other credit applications beginning on
October 1. Any portion of a taxable year's credits that is not allocated by the commissioner
does not cancel and may be carried forward to subsequent taxable years until all credits
have been allocated.

(b) The commissioner may not allocate more than a total maximum amount in credits
for a taxable year to a qualified investor for the investor's cumulative qualified investments
as an individual qualified investor and as an investor in a qualified fund; for married couples
filing joint returns the maximum is $250,000, and for all other filers the maximum is
$125,000. The commissioner may not allocate more than a total of $1,000,000 in credits
over all taxable years for qualified investments in any one qualified small business.

(c) The commissioner may not allocate a credit to a qualified investor either as an
individual qualified investor or as an investor in a qualified fund if, at the time the investment
is proposed:

(1) the investor is an officer or principal of the qualified small business; or

(2) the investor, either individually or in combination with one or more members of the
investor's family, owns, controls, or holds the power to vote 20 percent or more of the
outstanding securities of the qualified small business.

A member of the family of an individual disqualified by this paragraph is not eligible for a
credit under this section. For a married couple filing a joint return, the limitations in this
paragraph apply collectively to the investor and spouse. For purposes of determining the
ownership interest of an investor under this paragraph, the rules under section 267(c) and
267(e) of the Internal Revenue Code apply.

(d) Applications for tax credits for 2010 must be made available on the department's
website by September 1, 2010, and the department must begin accepting applications by
September 1, 2010. Applications for subsequent years must be made available by November
1 of the preceding year.

(e) Qualified investors and qualified funds must apply to the commissioner for tax credits.
Tax credits must be allocated to qualified investors or qualified funds in the order that the
tax credit request applications are filed with the department. The commissioner must approve
or reject tax credit request applications within 15 days of receiving the application. The
investment specified in the application must be made within 60 days of the allocation of
the credits. If the investment is not made within 60 days, the credit allocation is canceled
and available for reallocation. A qualified investor or qualified fund that fails to invest as
specified in the application, within 60 days of allocation of the credits, must notify the
commissioner of the failure to invest within five business days of the expiration of the
60-day investment period.

(f) All tax credit request applications filed with the department on the same day must
be treated as having been filed contemporaneously. If two or more qualified investors or
qualified funds file tax credit request applications on the same day, and the aggregate amount
of credit allocation claims exceeds the aggregate limit of credits under this section or the
lesser amount of credits that remain unallocated on that day, then the credits must be allocated
among the qualified investors or qualified funds who filed on that day on a pro rata basis
with respect to the amounts claimed. The pro rata allocation for any one qualified investor
or qualified fund is the product obtained by multiplying a fraction, the numerator of which
is the amount of the credit allocation claim filed on behalf of a qualified investor and the
denominator of which is the total of all credit allocation claims filed on behalf of all
applicants on that day, by the amount of credits that remain unallocated on that day for the
taxable year.

(g) A qualified investor or qualified fund, or a qualified small business acting on their
behalf, must notify the commissioner when an investment for which credits were allocated
has been made, and the taxable year in which the investment was made. A qualified fund
must also provide the commissioner with a statement indicating the amount invested by
each investor in the qualified fund based on each investor's share of the assets of the qualified
fund at the time of the qualified investment. After receiving notification that the investment
was made, the commissioner must issue credit certificates for the taxable year in which the
investment was made to the qualified investor or, for an investment made by a qualified
fund, to each qualified investor who is an investor in the fund. The certificate must state
that the credit is subject to revocation if the qualified investor or qualified fund does not
hold the investment in the qualified small business for at least three years, consisting of the
calendar year in which the investment was made and the two following years. The three-year
holding period does not apply if:

(1) the investment by the qualified investor or qualified fund becomes worthless before
the end of the three-year period;

(2) 80 percent or more of the assets of the qualified small business is sold before the end
of the three-year period;

(3) the qualified small business is sold before the end of the three-year period;

(4) the qualified small business's common stock begins trading on a public exchange
before the end of the three-year period; or

(5) the qualified investor dies before the end of the three-year period.

(h) The commissioner must notify the commissioner of revenue of credit certificates
issued under this section.

(i) The credit allowed under this subdivision is effective for deleted text begineach of the following taxable
years:
deleted text end

deleted text begin (1)deleted text end taxable years beginning after December 31, 2018deleted text begin, and before January 1, 2020; anddeleted text endnew text begin.
new text end

deleted text begin (2) taxable years beginning after December 31, 2020, and before January 1, 2022.
deleted 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. 2.

Minnesota Statutes 2019 Supplement, section 290.0132, subdivision 26, is amended
to read:


Subd. 26.

Social Security benefits.

deleted text begin(a) A portion ofdeleted text end new text beginThe amount of new text endtaxable Social
Security benefits new text beginreceived by a taxpayer in the taxable year new text endis allowed as a subtraction. deleted text beginThe
subtraction equals the lesser of taxable Social Security benefits or a maximum subtraction
subject to the limits under paragraphs (b), (c), and (d).
deleted text end

deleted text begin (b) For married taxpayers filing a joint return and surviving spouses, the maximum
subtraction equals $5,150. The maximum subtraction is reduced by 20 percent of provisional
income over $78,180. In no case is the subtraction less than zero.
deleted text end

deleted text begin (c) For single or head-of-household taxpayers, the maximum subtraction equals $4,020.
The maximum subtraction is reduced by 20 percent of provisional income over $61,080.
In no case is the subtraction less than zero.
deleted text end

deleted text begin (d) For married taxpayers filing separate returns, the maximum subtraction equals
one-half the maximum subtraction for joint returns under paragraph (b). The maximum
subtraction is reduced by 20 percent of provisional income over one-half the threshold
amount specified in paragraph (b). In no case is the subtraction less than zero.
deleted text end

deleted text begin (e) For purposes of this subdivision, "provisional income" means modified adjusted
gross income as defined in section 86(b)(2) of the Internal Revenue Code, plus one-half of
the taxable Social Security benefits received during the taxable year, and "Social Security
benefits" has the meaning given in section 86(d)(1) of the Internal Revenue Code.
deleted text end

deleted text begin (f) The commissioner shall adjust the maximum subtraction and threshold amounts in
paragraphs (b) to (d) as provided in section 270C.22. The statutory year is taxable year
2019. The maximum subtraction and threshold amounts 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.
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, 2019.
new text end

Sec. 3.

Minnesota Statutes 2019 Supplement, section 290.06, subdivision 2c, is amended
to read:


Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

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

(1) On the first $38,770, deleted text begin5.35deleted text endnew text begin 4.9new text end percent;

(2) On all over $38,770, but not over $154,020, 6.8 percent;

(3) On all over $154,020, but not over $269,010, 7.85 percent;

(4) On all over $269,010, 9.85 percent.

Married individuals filing separate returns, estates, and trusts must compute their income
tax by applying the above rates to their taxable income, except that the income brackets
will be one-half of the above amounts after the adjustment required in subdivision 2d.

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

(1) On the first $26,520, deleted text begin5.35deleted text endnew text begin 4.9new text end percent;

(2) On all over $26,520, but not over $87,110, 6.8 percent;

(3) On all over $87,110, but not over $161,720, 7.85 percent;

(4) On all over $161,720, 9.85 percent.

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

(1) On the first $32,650, deleted text begin5.35deleted text endnew text begin 4.9new text end percent;

(2) On all over $32,650, but not over $131,190, 6.8 percent;

(3) On all over $131,190, but not over $214,980, 7.85 percent;

(4) On all over $214,980, 9.85 percent.

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

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

(1) the numerator is the individual's Minnesota source federal adjusted gross income as
defined in section 62 of the Internal Revenue Code and increased by:

(i) the additions required under sections 290.0131, subdivisions 2, 6, 8 to 10, 16, and
17, and 290.0137, paragraph (a); and reduced by

(ii) the Minnesota assignable portion of the subtraction for United States government
interest under section 290.0132, subdivision 2, the subtractions under sections 290.0132,
subdivisions 9
, 10, 14, 15, 17, 18, and 27, and 290.0137, paragraph (c), after applying the
allocation and assignability provisions of section 290.081, clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted gross income as defined in section
62 of the Internal Revenue Code, increased by:

(i) the additions required under sections 290.0131, subdivisions 2, 6, 8 to 10, 16, and
17, and 290.0137, paragraph (a); and reduced by

(ii) the subtractions under sections 290.0132, subdivisions 2, 9, 10, 14, 15, 17, 18, and
27, and 290.0137, paragraph (c).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2019.
new text end

Sec. 4.

Minnesota Statutes 2018, section 290.0674, subdivision 2, is amended to read:


Subd. 2.

Limitations.

(a) For claimants with new text beginadjusted gross new text endincome not greater than
deleted text begin $33,500deleted text endnew text begin the income eligibility guidelinenew 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 deleted text beginhouseholddeleted text end new text beginadjusted gross new text endincome over deleted text begin$33,500deleted text endnew text begin
the income eligibility guideline
new 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
deleted text begin householddeleted text end new text beginadjusted gross new text endincome over deleted text begin$33,500deleted text endnew text begin the income eligibility guidelinenew text end, but in no
case is the credit less than zero.

new text begin (b) For purposes of this subdivision, "income eligibility guideline" means the greater of
$33,500 or the amounts determined under United States Code, title 42, section 1758(b)(1),
for reduced-price lunch as of July 1 of the taxable year. For purposes of determining the
income eligibility guideline, the taxpayer's household size equals the sum of:
new text end

new text begin (1) two for a married couple filing a joint return, or one for all other taxpayers; plus
new text end

new text begin (2) the number of the taxpayer's dependents, as defined in section 152 of the Internal
Revenue Code.
new text end

deleted text begin (b)deleted text endnew text begin (c)new text end In the case of a married claimant, a credit is not allowed unless a joint income
tax return is filed.

deleted text begin (c)deleted text endnew text begin (d)new text end 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, 2019.
new text end

Sec. 5.

Minnesota Statutes 2018, section 297E.02, subdivision 6, is amended to read:


Subd. 6.

Combined net receipts tax.

(a) In addition to the taxes imposed under
subdivision 1, a tax is imposed on the combined net receipts of the organization. As used
in this section, "combined net receipts" is the sum of the organization's gross receipts from
lawful gambling less gross receipts directly derived from the conduct of paper bingo, raffles,
and paddlewheels, as defined in section 297E.01, subdivision 8, and less the net prizes
actually paid, other than prizes actually paid for paper bingo, raffles, and paddlewheels, for
the fiscal year. The combined net receipts of an organization are subject to a tax computed
according to the following schedule:

If the combined net receipts
for the fiscal year are:
The tax is:
Not over $87,500
deleted text beginninedeleted text endnew text begin eightnew text end percent
Over $87,500, but not over
$122,500
deleted text begin$7,875deleted text endnew text begin $7,000new text end plus deleted text begin18deleted text endnew text begin 16new text end percent of
the amount over $87,500, but not over
$122,500
Over $122,500, but not
over $157,500
deleted text begin$14,175deleted text endnew text begin $12,600new text end plus deleted text begin27deleted text endnew text begin 24new text end percent
of the amount over $122,500, but not
over $157,500
Over $157,500
deleted text begin$23,625deleted text endnew text begin $21,000new text end plus deleted text begin36deleted text endnew text begin 32new text end percent
of the amount over $157,500

deleted text begin (b) On or before April 1, 2016, the commissioner shall estimate the total amount of
revenue, including interest and penalties, that will be collected for fiscal year 2016 from
taxes imposed under this chapter. If the amount estimated by the commissioner equals or
exceeds $94,800,000, the commissioner shall certify that effective July 1, 2016, the rates
under this paragraph apply in lieu of the rates under paragraph (a) and shall publish a notice
to that effect in the State Register and notify each taxpayer by June 1, 2016. If the rates
under this section apply, the combined net receipts of an organization are subject to a tax
computed according to the following schedule:
deleted text end

deleted text begin If the combined net receipts
for the fiscal year are:
deleted text end
deleted text begin The tax is:
deleted text end
deleted text begin Not over $87,500
deleted text end
deleted text begin 8.5 percent
deleted text end
deleted text begin Over $87,500, but not over
$122,500
deleted text end
deleted text begin $7,438 plus 17 percent of the amount
over $87,500, but not over $122,500
deleted text end
deleted text begin Over $122,500, but not
over $157,500
deleted text end
deleted text begin $13,388 plus 25.5 percent of the
amount over $122,500, but not over
$157,500
deleted text end
deleted text begin Over $157,500
deleted text end
deleted text begin $22,313 plus 34 percent of the amount
over $157,500
deleted text end

deleted text begin (c)deleted text endnew text begin (b)new text end Gross receipts derived from sports-themed tipboards are exempt from taxation
under this section. For purposes of this paragraph, a sports-themed tipboard means a
sports-themed tipboard as defined in section 349.12, subdivision 34, under which the winning
numbers are determined by the numerical outcome of a professional sporting event.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2020.
new text end

Sec. 6.

Minnesota Statutes 2018, section 297E.021, subdivision 2, is amended to read:


Subd. 2.

Determination of revenue increase.

By March 15 of each fiscal year, the
commissioner of management and budget, in consultation with the commissioner, shall
determine the estimated increase in revenues received from taxes imposed under this chapter
over deleted text beginthe estimated revenues under the February 2012 state budget forecast for that fiscal
year. For fiscal years after fiscal year 2015, the commissioner of management and budget
shall use the February 2012 state budget forecast for fiscal year 2015 as the
deleted text endnew text begin anew text end baselinenew text begin of:
(1) $....... in fiscal year 2021; (2) $....... in fiscal year 2022; and (3) $....... in fiscal year 2023
and thereafter
new text end. All calculations under this subdivision must be made net of estimated refunds
of the taxes required to be paid.

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.

Minnesota Statutes 2018, section 297E.021, subdivision 3, is amended to read:


Subd. 3.

Available revenues.

For purposes of this section, "available revenues" equals
the amount determined under subdivision 2deleted text begin, plus up to $20,000,000 each fiscal year from
the taxes imposed under section 290.06, subdivision 1
deleted text end:

(1) reduced by the following amounts paid for the fiscal year under:

(i) the appropriation to principal and interest on appropriation bonds under section
16A.965, subdivision 8;

(ii) the appropriation from the general fund to make operating expense payments under
section 473J.13, subdivision 2, paragraph (b);

(iii) the appropriation for contributions to the capital reserve fund under section 473J.13,
subdivision 4
, paragraph (c);

(iv) the appropriations under Laws 2012, chapter 299, article 4, for administration and
any successor appropriation;

(v) the reduction in revenues resulting from the sales tax exemptions under section
297A.71, subdivision 43;

(vi) reimbursements authorized by section 473J.15, subdivision 2, paragraph (d);

(vii) the compulsive gambling appropriations under section 297E.02, subdivision 3,
paragraph (c), and any successor appropriation; and

(viii) the appropriation for the city of St. Paul under section 16A.726, paragraph (c); and

(2) increased by the revenue deposited in the general fund under section 297A.994,
subdivision 4, clauses (1) to (3), for the fiscal year.

new text begin EFFECTIVE DATE. new text end

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

Sec. 8.

Minnesota Statutes 2018, section 297E.021, is amended by adding a subdivision
to read:


new text begin Subd. 3a. new text end

new text begin Revenue dedication. new text end

new text begin If the commissioner of management and budget
determines that the available revenues determined under subdivision 2 are insufficient, the
commissioner may add up to $20,000,000 each fiscal year from the taxes imposed under
section 290.06, subdivision 1, to the available revenues under subdivision 3. The
commissioner must notify the chairs and ranking minority members of the house of
representatives Ways and Means Committee and the senate Finance Committee at least 15
days prior to increasing the available revenue under subdivision 3. Any increase made under
this subdivision must continue in subsequent fiscal years.
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. 9.

Minnesota Statutes 2018, section 297E.021, subdivision 4, is amended to read:


Subd. 4.

Appropriation; general reserve account.

To the extent the commissioner
determines that revenues are available under deleted text beginsubdivisiondeleted text endnew text begin subdivisionsnew text end 3 new text beginand 3a new text endfor the fiscal
year, those amounts are appropriated from the general fund for deposit in a general reserve
account established by order of the commissioner of management and budget. Amounts in
this reserve are appropriated as necessary for application against any shortfall in the amounts
deposited to the general fund under section 297A.994 or, after consultation with the
Legislative Commission on Planning and Fiscal Policy, amounts in this reserve are
appropriated to the commissioner of management and budget for other uses related to the
stadium authorized under section 473J.03, subdivision 8, that the commissioner deems
financially prudent including but not limited to reimbursements for capital and operating
costs relating to the stadium, refundings, and prepayment of debt. In no event, shall available
revenues be pledged, nor shall the appropriations of available revenues made by this section
constitute a pledge of available revenues as security for the prepayment of principal and
interest on the appropriation bonds under section 16A.965.

new text begin EFFECTIVE DATE. new text end

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

Sec. 10.

Minnesota Statutes 2018, section 349.15, subdivision 1, is amended to read:


Subdivision 1.

Expenditure restrictions, requirements, and civil penalties.

(a) Gross
profits from lawful gambling may be expended only for lawful purposes or allowable
expenses as authorized by the membership of the conducting organization at a monthly
meeting of the organization's membership.

(b) For each 12-month period beginning July 1, a licensed organization will be evaluated
by the board to determine a rating based on the percentage of annual lawful purpose
expenditures when compared to available gross profits for the same period. The rating will
be used to determine the organization's profitability percent and is not a rating of the
organization's lawful gambling operation. An organization will be evaluated according to
the following criteria:

(1) an organization that expends deleted text begin50deleted text endnew text begin 70new text end percent or more of gross profits on lawful purposes
will receive a five-star rating;

(2) an organization that expends deleted text begin40deleted text endnew text begin 55new text end percent or more but less than deleted text begin50deleted text endnew text begin 70new text end percent of
gross profits on lawful purposes will receive a four-star rating;

(3) an organization that expends deleted text begin30deleted text endnew text begin 40new text end percent or more but less than deleted text begin40deleted text endnew text begin 55new text end percent of
gross profits on lawful purposes will receive a three-star rating;

(4) an organization that expends deleted text begin20deleted text endnew text begin 25new text end percent or more but less than deleted text begin30deleted text endnew text begin 40new text end percent of
gross profits on lawful purposes will receive a two-star rating; and

(5) an organization that expends less than deleted text begin20deleted text end new text begin25new text end percent of gross profits on lawful
purposes will receive a one-star rating.

(c) An organization that fails to expend a minimum of deleted text begin30deleted text endnew text begin 40new text end percent annually of gross
profits on lawful purposes, or deleted text begin20deleted text endnew text begin 25new text end percent annually for organizations that conduct lawful
gambling in a location where the primary business is bingo, is automatically on probation
effective July 1 for a period of one year. The organization must increase its rating to the
required minimum or be subject to sanctions by the board. If an organization fails to meet
the minimum after a one-year probation, the board may suspend the organization's license
or impose a civil penalty as follows:

(1) in determining any suspension or penalty for a violation of this paragraph, the board
must consider any unique factors or extraordinary circumstances that caused the organization
to not meet the minimum rate of profitability. Unique factors or extraordinary circumstances
include, but are not limited to, the purchase of capital assets necessary to conduct lawful
gambling; road or other construction causing impaired access to the lawful gambling
premises; and flood, tornado, or other catastrophe that had a direct impact on the continuing
lawful gambling operation; and

(2) notwithstanding section 349.151, subdivision 4, paragraph (a), clause (10), the board
may impose a civil penalty under this subdivision up to $10,000.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2020.
new text end

Sec. 11.

Minnesota Statutes 2018, section 349.151, subdivision 4, is amended to read:


Subd. 4.

Powers and duties.

(a) The board has the following powers and duties:

(1) to regulate lawful gambling to ensure it is conducted in the public interest;

(2) to issue licenses to organizations and gambling managers, and to issue licenses and
renewals to distributors, distributor salespersons, manufacturers, and linked bingo game
providers;

(3) to collect and deposit fees due under this chapter;

(4) to receive reports required by this chapter and inspect all premises, records, books,
and other documents of organizations, distributors, manufacturers, and linked bingo game
providers to insure compliance with all applicable laws and rules;

(5) to make rules authorized by this chapter;

(6) to register gambling equipment and issue registration stamps;

(7) to provide by rule for the mandatory posting by organizations conducting lawful
gambling of rules of play and the odds and/or house percentage on each form of lawful
gambling;

(8) to report annually to the governor and legislature on its activities and on recommended
changes in the laws governing gamblingnew text begin, including an annual report that provides: a tabulation
of the number of compliance reviews completed; the percentage of organizations reviewed;
an average of the number of months between reviews; the number, location, and organization
of site inspections; and the number of allegations awaiting investigation by the board
new text end;

(9) to report annually to the governor and legislature a financial summary for each
licensed organization identifying the gross receipts, prizes paid, allowable expenses, lawful
purpose expenditures including charitable contributions and all taxes and fees as per section
349.12, subdivision 25, paragraph (a), clauses (8) and (18), and the percentage of annual
gross profit used for lawful purposes;

(10) to impose civil penalties of not more than $1,000 per violation on organizations,
distributors, distributor salespersons, manufacturers, linked bingo game providers, and
gambling managers for violating or failing to comply with any provision of this chapter,
chapter 297E, or any rule or order of the board;

(11) to issue premises permits to organizations licensed to conduct lawful gambling;

(12) to delegate to the director the authority to issue or deny license and premises permit
applications and renewals under criteria established by the board;

(13) to delegate to the director the authority to approve or deny fund loss requests,
contribution of gambling funds to another licensed organization, and property expenditure
requests under criteria established by the board;

(14) to suspend or revoke licenses and premises permits of organizations, distributors,
distributor salespersons, manufacturers, linked bingo game providers, or gambling managers
as provided in this chapter;

(15) to approve or deny requests from licensees for:

(i) waivers from fee requirements as provided in section 349.16, subdivision 6; and

(ii) variances from Gambling Control Board rules under section 14.055; and

(16) to register employees of organizations licensed to conduct lawful gambling;

(17) to require fingerprints from persons determined by board rule to be subject to
fingerprinting;

(18) to delegate to a compliance review group of the board the authority to investigate
alleged violations, issue consent orders, and initiate contested cases on behalf of the board;

(19) to order organizations, distributors, distributor salespersons, manufacturers, linked
bingo game providers, and gambling managers to take corrective actions; and

(20) to take all necessary steps to ensure the integrity of and public confidence in lawful
gambling.

(b) The board, or director if authorized to act on behalf of the board, may by citation
assess any organization, distributor, distributor salesperson, manufacturer, linked bingo
game provider, or gambling manager a civil penalty of not more than $1,000 per violation
for a failure to comply with any provision of this chapter, chapter 297E, or any rule adopted
or order issued by the board. Any organization, distributor, distributor salesperson, gambling
manager, linked bingo game provider, or manufacturer assessed a civil penalty under this
paragraph may request a hearing before the board. Appeals of citations imposing a civil
penalty are not subject to the provisions of the Administrative Procedure Act.

(c) All penalties received by the board must be deposited in the general fund.

(d) All fees imposed by the board under sections 349.16 to 349.167 must be deposited
in the state treasury and credited to a lawful gambling regulation account in the special
revenue fund. Receipts in this account are available for the operations of the board up to
the amount authorized in biennial appropriations from the legislature.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2020.
new text end

Sec. 12. new text beginREPEALER.
new text end

new text begin (a) new text end new text begin Minnesota Statutes 2018, sections 290.0131, subdivision 10; 290.0133, subdivision
12; and 290.0674, subdivision 2a,
new text end new text begin are repealed.
new text end

new text begin (b) new text end new text begin Minnesota Statutes 2019 Supplement, section 116J.8737, subdivision 12, new text end new text begin is repealed.
new text end

new text begin (c) new text end new text begin Minnesota Statutes 2018, section 290.0692, subdivision 6, 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 for taxable years beginning after
December 31, 2019. Paragraphs (b) and (c) are effective the day following final enactment.
new text end

APPENDIX

Repealed Minnesota Statutes: 20-7321

116J.8737 SMALL BUSINESS INVESTMENT TAX CREDIT.

Subd. 12.

Sunset.

This section expires for taxable years beginning after December 31, 2021, except that reporting requirements under subdivision 6 and revocation of credits under subdivision 7 remain in effect through 2023 for qualified investors and qualified funds, and through 2025 for qualified small businesses, reporting requirements under subdivision 9 remain in effect through 2021, and the appropriation in subdivision 11 remains in effect through 2025.

290.0131 INDIVIDUALS; ADDITIONS TO FEDERAL TAXABLE INCOME.

Subd. 10.

Section 179 expensing.

80 percent of the amount by which the deduction allowed under the dollar limits of section 179 of the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal Revenue Code, as amended through December 31, 2003, is an addition.

290.0133 CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE INCOME.

Subd. 12.

Section 179 expensing.

80 percent of the amount by which the deduction allowed under the dollar limits of section 179 of the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal Revenue Code, as amended through December 31, 2003, is an addition.

290.0674 MINNESOTA EDUCATION CREDIT.

Subd. 2a.

Income.

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

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

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

(i) all nontaxable income;

(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;

(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;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement benefits, all payments received under the federal Social Security Act, Supplemental Security Income, and veterans benefits), which was not exclusively funded by the claimant or spouse, or which was 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;

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

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(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;

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

(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;

(xii) nontaxable scholarship or fellowship grants;

(xiii) the amount of deduction allowed under section 199 of the Internal Revenue Code;

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

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

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

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.

(b) "Income" does not include:

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

(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;

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

(4) relief granted under chapter 290A;

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

(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.

290.0692 SMALL BUSINESS INVESTMENT CREDIT.

Subd. 6.

Sunset.

This section expires at the same time and on the same terms as section 116J.8737, except that the expiration of this section does not affect the commissioner of revenue's authority to audit or power of examination and assessment for credits claimed under this section.