SF 3982

as introduced - 90th Legislature (2017 - 2018) Posted on 04/16/2018 03:53pm

A bill for an act
relating to taxation; making modifications to individual income, corporate franchise,
property, sales and use, estate, and tobacco taxes, and other tax provisions;
modifying the working family credit; providing for a personal and dependent care
credit; providing for certain conformity and nonconformity to federal provisions;
modifying the property tax refund; extending the small business investment credit;
preventing tax evasion; modifying the research and development credit; modifying
the apportionment sales factor; clarifying the dividend received deduction; changing
the qualified data center exemption; increasing the tax on certain nonadmitted
insurance providers; modifying tobacco sales license provisions; specifying the
application of tobacco taxes to vapor products; modifying tobacco stamp provisions;
modifying homestead classification provisions; changing qualification and
application provisions for the senior property tax deferral program; reinstating the
inflator for the state general levy; eliminating the increase in the estate tax exclusion
amount; reinstating the annual indexing for the cigarette tax; reinstating a higher
rate for premium cigars; providing for monetary and criminal penalties;
appropriating money; amending Minnesota Statutes 2016, sections 16D.08,
subdivision 2; 116J.8737, subdivisions 5, 12; 270C.03, subdivision 1; 270C.33,
subdivision 6; 270C.722, subdivision 1; 270C.728, by adding a subdivision;
273.124, subdivisions 13c, 14; 273.1245, subdivision 1; 273.1315, subdivision 2;
289A.60, by adding a subdivision; 290.01, subdivision 29a, by adding a subdivision;
290.0131, subdivisions 1, 3, 12, 13, by adding subdivisions; 290.0132, subdivisions
1, 7, 20, by adding subdivisions; 290.0133, subdivision 6, by adding a subdivision;
290.05, subdivision 3; 290.06, subdivisions 2c, 2d; 290.067, subdivision 2a;
290.0671, subdivision 7; 290.0672, subdivision 2; 290.0681, subdivisions 3, 4;
290.0802, subdivision 2; 290.091, subdivision 3; 290.0921, subdivision 2; 290.0922,
subdivision 1; 290.095, subdivision 2; 290.191, subdivision 5; 290.21, subdivision
4, by adding a subdivision; 290.92, subdivision 1; 290A.03, subdivision 12;
290A.04, subdivision 4; 290B.03, subdivision 1; 290B.04, subdivision 1; 297A.68,
subdivisions 25, 42; 297B.03; 297F.01, subdivisions 9a, 10, 14, 17, 19, 20, 21, by
adding subdivisions; 297F.03, subdivisions 1, 2, 3, 5, 6, 7, by adding a subdivision;
297F.04, subdivisions 1, 2; 297F.05, by adding subdivisions; 297F.06, by adding
a subdivision; 297F.08, subdivision 8a; 297F.09, subdivisions 2, 7, 10; 297F.12,
subdivision 3; 297F.13, subdivisions 2, 4, by adding a subdivision; 297F.15,
subdivision 9; 297F.19, by adding a subdivision; 297F.20, subdivisions 5, 6, 7, 9,
by adding subdivisions; 297F.21, subdivision 1; 297I.05, subdivision 7; 461.12,
subdivision 8; 469.316, subdivision 1; Minnesota Statutes 2017 Supplement,
sections 270A.03, subdivision 5; 273.124, subdivisions 13, 13d; 275.025,
subdivision 1; 289A.02, subdivision 7; 289A.10, subdivision 1; 289A.12,
subdivision 14; 289A.35; 290.01, subdivisions 19, 31; 290.0131, subdivision 10;
290.0132, subdivision 26; 290.0133, subdivision 12; 290.067, subdivision 2b;
290.0671, subdivision 1; 290.0672, subdivision 1; 290.068, subdivision 2; 290.0681,
subdivisions 1, 2; 290.0684, subdivisions 1, 2; 290.091, subdivision 2; 290.17,
subdivision 2; 290A.03, subdivisions 3, 15; 291.005, subdivision 1; 291.016,
subdivision 3; 297F.01, subdivision 13a; 297F.05, subdivisions 3, 3a, 4a; 462D.06,
subdivisions 1, 2; proposing coding for new law in Minnesota Statutes, chapters
270C; 290; 297F; repealing Minnesota Statutes 2016, sections 289A.50, subdivision
10; 290.0131, subdivisions 7, 11; 290.0133, subdivisions 13, 14; 290.10, subdivision
2; 297F.185.

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

ARTICLE 1

TAX RELIEF FOR MINNESOTA FAMILIES

Section 1.

Minnesota Statutes 2017 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 Code, except new text begin :
new text end

new text begin (1) new text end that a taxpayer with no qualifying children who has attained the age of 21, but not
attained age 65 before the close of the taxable year and is otherwise eligible for a credit
under section 32 of the Internal Revenue Code may also receive a credit deleted text begin . deleted text end new text begin ; and
new text end

new text begin (2) a taxpayer who is otherwise eligible for a credit under section 32 of the Internal
Revenue Code remains eligible for this credit even if the taxpayer's earned income or adjusted
gross income exceeds the income limitation under section 32 of the Internal Revenue Code.
new text end

(b) For individuals with no qualifying children, the credit equals deleted text begin 2.10 deleted text end new text begin three new text end percent of
the first deleted text begin $6,180 deleted text end new text begin $6,680 new text end of earned income. The credit is reduced by deleted text begin 2.01 deleted text end new text begin three new text end percent of
earned income or adjusted gross income, whichever is greater, in excess of deleted text begin $8,130 deleted text end new text begin $12,340 new 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 9.35 deleted text end new text begin 12.71 new text end percent of the
first deleted text begin $11,120 deleted text end new text begin $8,590 new text end of earned income. The credit is reduced by deleted text begin 6.02 deleted text end new text begin 5.20 new 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 $22,220 new text end , but
in no case is the credit less than zero.

(d) For individuals with two deleted text begin or more deleted text end qualifying children, the credit equals deleted text begin 11 deleted text end new text begin 14.94 new text end
percent of the first deleted text begin $18,240 deleted text end new text begin $14,080 new text end of earned income. The credit is reduced by deleted text begin 10.82 deleted text end new text begin 9.20 new text end
percent of earned income or adjusted gross income, whichever is greater, in excess of
deleted text begin $25,130 deleted text end new text begin $26,360 new text end , but in no case is the credit less than zero.

new text begin (e) For individuals with three or more qualifying children, the credit equals 15.78 percent
of the first $14,870 of earned income. The credit is reduced by 9.07 percent of earned income
or adjusted gross income, whichever is greater, in excess of $26,360, but in no case is the
credit less than zero.
new text end

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

deleted text begin (f) deleted text end new text begin (g) new text end 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 290.0132,
subdivision 10, 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 following clauses are not
considered "earned income not subject to tax under this chapter":

(1) the subtractions for military pay under section 290.0132, subdivisions 11 and 12;

(2) the exclusion of combat pay under section 112 of the Internal Revenue Code; and

(3) income derived from an Indian reservation by an enrolled member of the reservation
while living on the reservation.

deleted text begin (g) deleted text end new text begin (h) new text end For tax years beginning after December 31, deleted text begin 2013 deleted text end new text begin 2018 new text end , the deleted text begin $8,130 deleted text end new text begin $12,340 new text end in
paragraph (b), the deleted text begin $21,190 deleted text end new text begin $22,220 new text end in paragraph (c), deleted text begin and deleted text end the deleted text begin $25,130 deleted text end new text begin $26,360 new text end in paragraph
(d) new text begin , and the $26,360 in paragraph (e) new text end , after being adjusted for inflation under subdivision
7, are each increased by deleted text begin $5,000 deleted text end new text begin $5,570 new text end for married taxpayers filing joint returns. deleted text begin For tax
years beginning after December 31, 2013, 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." For 2014, the commissioner shall then determine the percent change from
the 12 months ending on August 31, 2008, to the 12 months ending on August 31, 2013,
and in each subsequent year, from the 12 months ending on August 31, 2008, 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

deleted text begin (h) deleted text end new text begin (i) 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, 2017.
new text end

Sec. 2.

Minnesota Statutes 2016, 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 new text begin , and the additional threshold amount for married taxpayers filing joint returns, new text end 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 new text begin , as amended through December
31, 2016 new text end , except that in section 1(f)(3)(B) the word deleted text begin "2013" deleted text end new text begin "2017" new text end shall be substituted for
the word "1992." For deleted text begin 2015 deleted text end new text begin 2019 new text end , the commissioner shall then determine the percent change
from the 12 months ending on August 31, deleted text begin 2013 deleted text end new text begin 2017 new text end , to the 12 months ending on August
31, deleted text begin 2014 deleted text end new text begin 2018 new text end , and in each subsequent year, from the 12 months ending on August 31, deleted text begin 2013 deleted text end new text begin
2017 new 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, 2017.
new text end

Sec. 3.

new text begin [290.0687] PERSONAL AND DEPENDENT CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Credit allowed. new text end

new text begin (a) A resident or part-year resident taxpayer is allowed
a credit against the income tax due under section 290.06, subdivision 2c, in an amount equal
to the sum of:
new text end

new text begin (1) $60, or in the case of a married couple filing a joint return $120; plus
new text end

new text begin (2) $60 multiplied by the number of dependents of the taxpayer, as defined under sections
151 and 152 of the Internal Revenue Code.
new text end

new text begin (b) The credit is not allowed to an individual who is eligible to be claimed as a dependent,
as defined in sections 151 and 152 of the Internal Revenue Code. The credit may not exceed
the liability for tax under this chapter.
new text end

new text begin Subd. 2. new text end

new text begin Credit amount. new text end

new text begin (a) The credit under subdivision 1 is reduced in the case of
married individuals filing a joint return by one percent for each $1,000, or fraction thereof,
above the threshold, and for all other taxpayers by two percent for each $1,000, or fraction
thereof, above the threshold amount.
new text end

new text begin (b) The threshold amounts are:
new text end

new text begin (1) $180,000 of federal adjusted gross income for married individuals filing a joint
return; and
new text end

new text begin (2) $90,000 of federal adjusted gross income for all other taxpayers.
new text end

new text begin (c) The thresholds must be increased by an amount equal to:
new text end

new text begin (1) the threshold dollar amount, multiplied by:
new text end

new text begin (2) the cost-of-living adjustment determined under section 1(f) of the Internal Revenue
Code, as amended through December 16, 2016, for the calendar year in which the taxable
year begins, by substituting "calendar year 2017" for "calendar year 1992" in subparagraph
(B) of section 1(f)(3).
new text end

new text begin (d) The determination of the commissioner pursuant to this subdivision shall not be
considered a rule and shall not be subject to the Administrative Procedure Act under chapter
14, including section 14.386.
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, 2017.
new text end

Sec. 4. new text begin APPROPRIATION.
new text end

new text begin $276,000 in fiscal year 2019 is appropriated from the general fund to the commissioner
of revenue to administer section 3. The base for this purpose is $428,000 in fiscal year 2020
and $428,000 in fiscal year 2021.
new text end

ARTICLE 2

RESPONSE TO THE 2017 FEDERAL LAW CHANGE

Section 1.

Minnesota Statutes 2017 Supplement, section 270A.03, subdivision 5, is
amended to read:

Subd. 5.

Debt.

(a) "Debt" means a legal obligation of a natural person to pay a fixed and
certain amount of money, which equals or exceeds $25 and which is due and payable to a
claimant agency. The term includes criminal fines imposed under section 609.10 or 609.125,
fines imposed for petty misdemeanors as defined in section 609.02, subdivision 4a, and
restitution. A debt may arise under a contractual or statutory obligation, a court order, or
other legal obligation, but need not have been reduced to judgment.

A debt includes any legal obligation of a current recipient of assistance which is based
on overpayment of an assistance grant where that payment is based on a client waiver or
an administrative or judicial finding of an intentional program violation; or where the debt
is owed to a program wherein the debtor is not a client at the time notification is provided
to initiate recovery under this chapter and the debtor is not a current recipient of food support,
transitional child care, or transitional medical assistance.

(b) A debt does not include any legal obligation to pay a claimant agency for medical
care, including hospitalization if the income of the debtor at the time when the medical care
was rendered does not exceed the following amount:

(1) for an unmarried debtor, an income of $12,560 or less;

(2) for a debtor with one dependent, an income of $16,080 or less;

(3) for a debtor with two dependents, an income of $19,020 or less;

(4) for a debtor with three dependents, an income of $21,580 or less;

(5) for a debtor with four dependents, an income of $22,760 or less; and

(6) for a debtor with five or more dependents, an income of $23,730 or less.

For purposes of this paragraph, "debtor" means the individual whose income, together
with the income of the individual's spouse, other than a separated spouse, brings the
individual within the income provisions of this paragraph. For purposes of this paragraph,
a spouse, other than a separated spouse, shall be considered a dependent.

(c) The commissioner shall adjust the income amounts in paragraph (b) by the percentage
determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, new text begin as
amended through December 16, 2016, new text end except that in section 1(f)(3)(B) the word "2014"
shall be substituted for the word "1992." For 2016, the commissioner shall then determine
the percent change from the 12 months ending on August 31, 2014, to the 12 months ending
on August 31, 2015, and in each subsequent year, from the 12 months ending on August
31, 2014, to the 12 months ending on August 31 of the year preceding the taxable year. The
determination of the commissioner pursuant to this subdivision shall not be considered a
"rule" and shall not be subject to the Administrative Procedure Act contained in chapter 14.
The income 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.

(d) Debt also includes an agreement to pay a MinnesotaCare premium, regardless of the
dollar amount of the premium authorized under section 256L.15, subdivision 1a.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 2.

Minnesota Statutes 2017 Supplement, section 289A.02, subdivision 7, is amended
to read:

Subd. 7.

Internal Revenue Code.

Unless specifically defined otherwise, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through deleted text begin December
16, 2016 deleted text end new text begin March 24, 2018 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, 2017.
new text end

Sec. 3.

Minnesota Statutes 2017 Supplement, section 289A.12, subdivision 14, is amended
to read:

Subd. 14.

Reporting exempt interest and exempt-interest dividends.

(a) A regulated
investment company paying $10 or more in exempt-interest dividends to an individual who
is a resident of Minnesota, or any person receiving $10 or more of exempt interest or
exempt-interest dividends and paying as nominee to an individual who is a resident of
Minnesota, must make a return indicating the amount of the exempt interest or
exempt-interest dividends, the name, address, and Social Security number of the recipient,
and any other information that the commissioner specifies. The return must be provided to
the recipient by February 15 of the year following the year of the payment. The return
provided to the recipient must include a clear statement, in the form prescribed by the
commissioner, that the exempt interest or exempt-interest dividends must be included in
the computation of Minnesota taxable income. By June 1 of each year, the payer must file
a copy of the return with the commissioner.

(b) For purposes of this subdivision, the following definitions apply.

(1) "Exempt-interest dividends" mean exempt-interest dividends as defined in section
852(b)(5) of the Internal Revenue Code, but does not include the portion of exempt-interest
dividends that are not required to be added to federal deleted text begin taxable deleted text end new text begin adjusted gross new text end income under
section 290.0131, subdivision 2, paragraph (b).

(2) "Regulated investment company" means regulated investment company as defined
in section 851(a) of the Internal Revenue Code or a fund of the regulated investment company
as defined in section 851(g) of the Internal Revenue Code.

(3) "Exempt interest" means 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, and exempt from federal income taxes
under the Internal Revenue Code or any other federal statute.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 4.

Minnesota Statutes 2017 Supplement, section 289A.35, is amended to read:

289A.35 ASSESSMENTS ON RETURNS.

(a) The commissioner may audit and adjust the taxpayer's computation of new text begin federal adjusted
gross income, new text end federal taxable income, items of federal tax preferences, or federal credit
amounts to make them conform with the provisions of chapter 290 or section 298.01. If a
return has been filed, the commissioner shall enter the liability reported on the return and
may make any audit or investigation that is considered necessary.

(b) Upon petition by a taxpayer, and when the commissioner determines that it is in the
best interest of the state, the commissioner may allow S corporations and partnerships to
receive orders of assessment issued under section 270C.33, subdivision 4, on behalf of their
owners, and to pay liabilities shown on such orders. In such cases, the owners' liability must
be calculated using the method provided in section 289A.08, subdivision 7, paragraph (b).

(c) A taxpayer may petition the commissioner for the use of the method described in
paragraph (b) after the taxpayer is notified that an audit has been initiated and before an
order of assessment has been issued.

(d) A determination of the commissioner under paragraph (b) to grant or deny the petition
of a taxpayer cannot be appealed to the Tax Court or any other court.

(e) The commissioner may audit and adjust the taxpayer's computation of tax under
chapter 291. In the case of a return filed pursuant to section 289A.10, the commissioner
shall notify the estate no later than nine months after the filing date, as provided by section
289A.38, subdivision 2, whether the return is under examination or the return has been
processed as filed.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 5.

Minnesota Statutes 2017 Supplement, section 290.01, subdivision 19, is amended
to read:

Subd. 19.

Net income.

new text begin For trusts and estates taxable under section 290.03, and
corporations taxable under section 290.02, new text end 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 sections 290.0131 to 290.0136.

new text begin For individuals, the term "net income" means federal adjusted gross income, as defined
in section 62 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 adjusted gross income for federal income tax purposes, and with the
modifications provided in sections 290.0131, 290.0132, 290.0135, and 290.0136.
new text end

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.

new text begin For corporations, resident individuals, and resident estates and trusts who make a valid
election under section 965(h) of the Internal Revenue Code, including any successor in
interest, net income for the tax year includes the ratable amount of deferred foreign income
on which the taxpayer makes a federal tax payment in that year.
new text end

The Internal Revenue Code of 1986, as amended through deleted text begin December 16, 2016 deleted text end new text begin March
24, 2018 new 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 this subdivision
and sections 290.0131 to 290.0136 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 became effective for federal purposes.
new text end

Sec. 6.

Minnesota Statutes 2016, section 290.01, subdivision 29a, is amended to read:

Subd. 29a.

State itemized deduction.

"State itemized deduction" means federal itemized
deductions, as defined in section 63(d) of the Internal Revenue Code, disregarding any
deleted text begin limitation under section 68 of the Internal Revenue Code deleted text end new text begin changes to itemized deductions
made by Public Law 115-97 other than the changes made by section 13705(a) new text end , and deleted text begin reduced
by the amount of the addition required under section 290.0131, subdivision 13 deleted text end new text begin disregarding
the federal itemized deduction of income or sales taxes under section 164 of the Internal
Revenue Code new text end .

new text begin For taxable years beginning after December 31, 2017, the amount that would have been
allowable as interest under section 163(h)(3)(E) of the Internal Revenue Code, disregarding
subparagraph 163(h)(3)(E)(iv), is allowed as a state itemized deduction.
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, 2017.
new text end

Sec. 7.

Minnesota Statutes 2016, section 290.01, is amended by adding a subdivision to
read:

new text begin Subd. 29b. new text end

new text begin State standard deduction. new text end

new text begin "State standard deduction" means the federal
standard deduction computed under section 63(c) and (f) of the Internal Revenue Code, as
amended through December 16, 2016.
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, 2017.
new text end

Sec. 8.

Minnesota Statutes 2017 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 deleted text begin December
16, 2016 deleted text end new text begin March 24, 2018 new 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

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

Sec. 9.

Minnesota Statutes 2016, section 290.0131, subdivision 1, is amended to read:

Subdivision 1.

Definition; scope.

(a) For the purposes of this section, "addition" means
an amount that must be added to federal taxable income new text begin in the case of a trust or an estate
or federal adjusted gross income in the case of an individual new text end in computing net income for
the taxable year to which the amounts relate.

(b) The additions in this section apply to individuals, estates, and trusts.

(c) Unless specifically indicated or unless the context clearly indicates otherwise, only
amounts that were deducted or excluded in computing federal taxable income new text begin in the case
of a trust or an estate or federal adjusted gross income in the case of individuals new text end are an
addition under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 10.

Minnesota Statutes 2016, section 290.0131, subdivision 3, is amended to read:

Subd. 3.

Income, sales and use, motor vehicle sales, or excise taxes paid.

deleted text begin (a) deleted text end new text begin For trusts
and estates, new text end 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, sales and use, motor vehicle sales, or excise taxes paid to any other state or to any
province or territory of Canada is an addition to the extent deducted under section 63(d) of
the Internal Revenue Code.

deleted text begin (b) The addition under paragraph (a) 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. For the purpose of this subdivision, income, sales and
use, motor vehicle sales, or excise taxes are the last itemized deductions disallowed under
subdivision 12.
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, 2017.
new text end

Sec. 11.

Minnesota Statutes 2017 Supplement, section 290.0131, subdivision 10, is amended
to read:

Subd. 10.

Section 179 expensing.

new text begin For property placed in service in taxable years
beginning before December 31, 2017, new text end 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.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 12.

Minnesota Statutes 2016, section 290.0131, subdivision 12, is amended to read:

Subd. 12.

Disallowed itemized deductions.

(a) The amount of disallowed itemized
deductions is an addition. The amount of disallowed itemized deductions deleted text begin , plus the addition
required under subdivision 3, deleted text end may not be more than the amount by which the new text begin state new text end itemized
deductions deleted text begin , as allowed under section 63(d) of the Internal Revenue Code, deleted text end exceeds the amount
of the new text begin state new text end standard deduction deleted text begin as defined in section 63(c) of the Internal Revenue Code deleted text end .

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

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

(2) 80 percent of the amount of the new text begin state new text end itemized deductions otherwise allowable to the
taxpayer under the Internal Revenue Code for the taxable year.

(c) "Applicable amount" means $100,000, or $50,000 for a married individual filing a
separate return. Each dollar amount is increased by an amount equal to:

(1) that dollar amount, multiplied by

(2) the cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue
Code new text begin , as amended through December 16, 2016, new text end for the calendar year in which the taxable
year begins, by substituting "calendar year 1990" for "calendar year 1992" in subparagraph
(B) of section 1(f)(3).

(d) "Itemized deductions" excludes:

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

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

(3) 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.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 13.

Minnesota Statutes 2016, section 290.0131, subdivision 13, is amended to read:

Subd. 13.

Disallowed personal exemption amount.

(a) The amount of disallowed
personal exemptions for taxpayers with federal adjusted gross income over the threshold
amount is an addition.

(b) The disallowed personal exemption amount is equal to the deleted text begin number of deleted text end personal
deleted text begin exemptions deleted text end new text begin and dependent exemption subtraction new text end allowed under section deleted text begin 151(b) and (c) of
the Internal Revenue Code deleted text end new text begin 290.0132, subdivision 20, new text end multiplied by the deleted text begin 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 deleted text end
applicable percentage.

(c) For a married individual filing a separate return, "applicable percentage" means two
percentage points for each $1,250, or fraction of that amount, by which the taxpayer's federal
adjusted gross income for the taxable year exceeds the threshold amount. For all other filers,
applicable percentage means two percentage points for each $2,500, or fraction of that
amount, by which the taxpayer's federal adjusted gross income for the taxable year exceeds
the threshold amount. The applicable percentage must not exceed 100 percent.

(d) "Threshold amount" means:

(1) $150,000 for a joint return or a surviving spouse;

(2) $125,000 for a head of a household;

(3) $100,000 for an individual who is not married and who is not a surviving spouse or
head of a household; and

(4) $75,000 for a married individual filing a separate return.

(e) The thresholds must be increased by an amount equal to:

(1) the threshold dollar amount, multiplied by

(2) the cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue
Code new text begin , as amended through December 16, 2016, new text end for the calendar year in which the taxable
year begins, by substituting "calendar year 1990" for "calendar year 1992" in subparagraph
(B) of section 1(f)(3).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 14.

Minnesota Statutes 2016, section 290.0131, is amended by adding a subdivision
to read:

new text begin Subd. 15. new text end

new text begin 529 plan addition. new text end

new text begin (a) The definitions under section 290.0684 apply for the
purposes of this subdivision.
new text end

new text begin (b) The amount of a distribution attributed to gain from a qualified account that is not
used to pay qualified higher education expenses as defined in section 290.0684, subdivision
1, paragraph (e), is an addition to the distributee to the extent it is not included in federal
taxable income.
new text end

new text begin (c) The amount of distribution attributed to gain is determined by:
new text end

new text begin (1) the total amount of contributions minus any distributions made for qualified higher
education expenses made prior to the distribution that was not used to pay qualified higher
education expenses;
new text end

new text begin (2) divided by account value on the date of the distribution;
new text end

new text begin (3) multiplied by the amount of the distribution;
new text end

new text begin (4) the result of which is then subtracted from the amount of the distribution.
new text end

new text begin (d) "Distributee" means the person who received the benefit of the distribution, but in
the case of a dependent as defined under section 152 of the Internal Revenue Code, the
distributee is the taxpayer who claims the dependent under section 151 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, 2017.
new text end

Sec. 15.

Minnesota Statutes 2016, section 290.0131, is amended by adding a subdivision
to read:

new text begin Subd. 16. new text end

new text begin Alimony received. new text end

new text begin (a) Alimony received is an addition to the recipient to the
extent the alimony is not included in the recipient's federal adjusted gross income.
new text end

new text begin (b) For the purposes of this subdivision, "alimony" is defined pursuant to section 71 of
the Internal Revenue Code, as amended through December 16, 2016.
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, 2018.
new text end

Sec. 16.

Minnesota Statutes 2016, section 290.0131, is amended by adding a subdivision
to read:

new text begin Subd. 17. new text end

new text begin Section 199A addition. new text end

new text begin For trusts and estates, the amount deducted under
section 199A of the Internal Revenue Code in computing the trust or estate's federal taxable
income is an addition.
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, 2017.
new text end

Sec. 17.

Minnesota Statutes 2016, section 290.0132, subdivision 1, is amended to read:

Subdivision 1.

Definition; scope.

(a) For the purposes of this section, "subtraction"
means an amount that shall be subtracted from federal taxable income new text begin in the case of a trust
or an estate or federal adjusted gross income in the case of an individual new text end in computing net
income for the taxable year to which the amounts relate.

(b) The subtractions in this section apply to individuals, estates, and trusts.

(c) Unless specifically indicated or unless the context clearly indicates otherwise, no
amount deducted, subtracted, or otherwise excluded in computing federal taxable income
new text begin in the case of a trust or an estate or federal adjusted gross income in the case of an individual
new text end is a subtraction under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 18.

Minnesota Statutes 2016, section 290.0132, subdivision 7, is amended to read:

Subd. 7.

Charitable contributions for taxpayers who do not itemize.

To the extent
not deducted or not deductible under section 408(d)(8)(E) of the Internal Revenue Code in
determining federal deleted text begin taxable deleted text end new text begin adjusted gross new text end income deleted text begin by deleted text end new text begin for new text end an individual new text begin or for an individual new text end
who does not itemize deductions for deleted text begin federal deleted text end new text begin Minnesota new text end 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 is a subtraction.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 19.

Minnesota Statutes 2016, section 290.0132, subdivision 20, is amended to read:

Subd. 20.

deleted text begin Disallowed deleted text end Personal new text begin and dependent new text end exemption.

deleted text begin The amount of the phaseout
of personal exemptions under section 151(d) of the Internal Revenue Code is a subtraction. deleted text end new text begin
The amount of personal and dependent exemptions calculated under section 290.0138 is a
subtraction.
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, 2017.
new text end

Sec. 20.

Minnesota Statutes 2017 Supplement, section 290.0132, subdivision 26, is amended
to read:

Subd. 26.

Social Security benefits.

(a) A portion of Social Security benefits is allowed
as a subtraction. The subtraction equals the lesser of Social Security benefits or a maximum
subtraction subject to the limits under paragraphs (b), (c), and (d).

(b) For married taxpayers filing a joint return and surviving spouses, the maximum
subtraction equals $4,500. The maximum subtraction is reduced by 20 percent of provisional
income over $77,000. In no case is the subtraction less than zero.

(c) For single or head-of-household taxpayers, the maximum subtraction equals $3,500.
The maximum subtraction is reduced by 20 percent of provisional income over $60,200.
In no case is the subtraction less than zero.

(d) For married taxpayers filing separate returns, the maximum subtraction equals $2,250.
The maximum subtraction is reduced by 20 percent of provisional income over $38,500.
In no case is the subtraction less than zero.

(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 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.

(f) The commissioner shall adjust the maximum subtraction and threshold amounts in
paragraphs (b) to (d) by the percentage determined pursuant to the provisions of section
1(f) of the Internal Revenue Code new text begin , as amended through December 16, 2016 new text end , except that in
section 1(f)(3)(B) of the Internal Revenue Code the word "2016" shall be substituted for
the word "1992." For 2018, the commissioner shall then determine the percentage change
from the 12 months ending on August 31, 2016, to the 12 months ending on August 31,
2017, and in each subsequent year, from the 12 months ending on August 31, 2016, 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, including section
14.386. 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.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 21.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 27. new text end

new text begin Moving expenses. new text end

new text begin Moving expenses that qualify as a deduction under section
217(a) through (f) of the Internal Revenue Code to the extent the expenses are not deducted
in the computation of federal taxable income is a subtraction.
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, 2017.
new text end

Sec. 22.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 28. new text end

new text begin Alimony payments. new text end

new text begin (a) Alimony paid is a subtraction to the extent that the
alimony paid is not deducted in computing the individual's federal adjusted gross income.
new text end

new text begin (b) For the purposes of this subdivision, "alimony" is defined pursuant to section 215
of the Internal Revenue Code, as amended through December 16, 2016.
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, 2018.
new text end

Sec. 23.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 29. new text end

new text begin Standard or itemized deduction. new text end

new text begin The amount allowed under section 290.0803
is a subtraction.
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, 2017.
new text end

Sec. 24.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 30. new text end

new text begin Tuition subtraction. new text end

new text begin The amount that would have been allowable under
section 222 of the Internal Revenue Code, disregarding paragraph (e) and only to the extent
the amount is not deducted in computing federal adjusted gross income is a subtraction.
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, 2018.
new text end

Sec. 25.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 31. new text end

new text begin Deferred foreign income of nonresidents. new text end

new text begin In the case of a nonresident
individual the amount of deferred foreign income recognized because of section 965 of the
Internal Revenue Code is a subtraction.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2016, and before January 1, 2019.
new text end

Sec. 26.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 32. new text end

new text begin Employer reimbursement of employee bicycle commuting expense. new text end

new text begin The
amount of employer reimbursement excludable under section 132(f)(5)(F) of the Internal
Revenue Code, as amended through December 16, 2017, is a subtraction for the employee
receiving the reimbursement.
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, 2017.
new text end

Sec. 27.

Minnesota Statutes 2016, section 290.0133, subdivision 6, is amended to read:

Subd. 6.

Special deductions.

new text begin (a) new text end The amount of any special deductions under sections
241 to 247 and deleted text begin 965 deleted text end new text begin 250 new text end of the Internal Revenue Code is an addition.

new text begin (b) The addition under this subdivision is reduced by the amount of the deduction under
section 245A of the Internal Revenue Code that represents amounts included in federal
taxable income in a prior taxable year under section 965 of the Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Paragraph (a) is effective retroactively for taxable years beginning
after December 31, 2016. Paragraph (b) is effective for taxable years beginning after
December 31, 2017.
new text end

Sec. 28.

Minnesota Statutes 2017 Supplement, section 290.0133, subdivision 12, is amended
to read:

Subd. 12.

Section 179 expensing.

new text begin For property placed in service in taxable years
beginning before December 31, 2017, new text end 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.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 29.

Minnesota Statutes 2016, section 290.0133, is amended by adding a subdivision
to read:

new text begin Subd. 15. new text end

new text begin Deferred foreign income. new text end

new text begin (a) The amount of the deduction provided under
section 965(c) of the Internal Revenue Code is an addition.
new text end

new text begin (b) For a taxpayer making a valid election under section 965(h) of the Internal Revenue
Code, the addition under paragraph (a) must be applied ratably to the same tax periods in
which the taxpayer includes deferred foreign income in Minnesota net income pursuant to
section 290.01, subdivision 19.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2016.
new text end

Sec. 30.

new text begin [290.0138] PERSONAL AND DEPENDENT EXEMPTIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Personal and dependent exemptions. new text end

new text begin (a) A taxpayer is allowed (1) a
personal exemption in the amount of $4,150, and in the case of a married couple filing a
joint return an additional personal exemption of $4,150; plus (2) a dependent exemption of
$4,150 multiplied by the number of dependents of the taxpayer, as defined under sections
151 and 152 of the Internal Revenue Code.
new text end

new text begin (b) The personal and dependent exemptions are not allowed to an individual who is
eligible to be claimed as a dependent, as defined in sections 151 or 152 of the Internal
Revenue Code, by another taxpayer.
new text end

new text begin Subd. 2. new text end

new text begin Cost-of-living adjustment. new text end

new text begin For taxable years beginning after December 31,
2018, the commissioner shall annually adjust the amounts in subdivision 1 by the percentage
determined pursuant to the provisions of section 1(f) of the Internal Revenue Code as
amended through December 16, 2016, except that in section 1(f)(3)(B), the word "2017"
shall be substituted for the word "1992." The exemption amount as adjusted for inflation
must be rounded to the nearest $10. If the amount ends in $5, the commissioner shall round
up to the next $10 amount. The determination of the commissioner under this subdivision
is not a rule under the Administrative Procedure Act.
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, 2017.
new text end

Sec. 31.

Minnesota Statutes 2016, section 290.05, subdivision 3, is amended to read:

Subd. 3.

Taxes imposed on exempt entities.

(a) An organization exempt from taxation
under subdivision 2 shall, nevertheless, be subject to tax under this chapter to the extent
provided in the following provisions of the Internal Revenue Code:

(1) section 527 (dealing with political organizations);

(2) section 528 (dealing with certain homeowners associations);

(3) sections 511 to 515 (dealing with unrelated business income);

(4) section 521 (dealing with farmers' cooperatives); and

(5) section 6033(e)(2) (dealing with lobbying expense); but notwithstanding this
subdivision, shall be considered an organization exempt from income tax for the purposes
of any law which refers to organizations exempt from income taxes.

(b) The tax shall be imposed on the taxable income of political organizations or
homeowner associations or the unrelated business taxable income, as defined in section 512
of the Internal Revenue Code, of organizations defined in section 511 of the Internal Revenue
Code, provided that the tax is not imposed on:

(1) advertising revenues from a newspaper published by an organization described in
section 501(c)(4) of the Internal Revenue Code; or

(2) revenues from lawful gambling authorized under chapter 349 that are expended for
purposes that qualify for the deduction for charitable contributions under section 170 of the
Internal Revenue Code, disregarding the limitation under section 170(b)(2), but only to the
extent the contributions are not deductible in computing federal taxable income.

The tax shall be at the corporate rates. The tax shall only be imposed on income and
deductions assignable to this state under sections 290.17 to 290.20. To the extent deducted
in computing federal taxable income, the deductions contained in section 290.21 shall not
be allowed in computing Minnesota taxable net income.

(c) The tax shall be imposed on organizations subject to federal tax under section
6033(e)(2) of the Internal Revenue Code, in an amount equal to the corporate tax rate
multiplied by the amount of lobbying expenses taxed under section 6033(e)(2) which are
attributable to lobbying the Minnesota state government.

new text begin (d) In calculating unrelated business taxable income under section 512 of the Internal
Revenue Code, the amount of any net operating loss deduction claimed under section 172
of the Internal Revenue Code is an addition. Taxpayers making an addition under this
paragraph may deduct a net operating loss for the taxable year in the same manner as a
corporation under section 290.095, in a form and manner prescribed by the commissioner,
and may calculate the loss without the application of the limitation provided for under
section 512(a)(6) 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, 2017.
new text end

Sec. 32.

Minnesota Statutes 2016, 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 $35,480, 5.35 percent;

(2) On all over $35,480, but not over $140,960, 7.05 percent;

(3) On all over $140,960, but not over $250,000, 7.85 percent;

(4) On all over $250,000, 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.

(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 $24,270, 5.35 percent;

(2) On all over $24,270, but not over $79,730, 7.05 percent;

(3) On all over $79,730, but not over $150,000, 7.85 percent;

(4) On all over $150,000, 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 $29,880, 5.35 percent;

(2) On all over $29,880, but not over $120,070, 7.05 percent;

(3) On all over $120,070, but not over $200,000, 7.85 percent;

(4) On all over $200,000, 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 the additions required
under section 290.0131, subdivisions 2 deleted text begin and deleted text end new text begin , new text end 6 new text begin , and 8 new text end to deleted text begin 11 deleted text end new text begin 10 new text end , and reduced by the Minnesota
assignable portion of the subtraction for United States government interest under section
290.0132, subdivision 2, and the subtractions under section 290.0132, subdivisions 9, 10,
14, 15, 17, and 18, 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 the amounts specified in section 290.0131,
subdivisions 2 deleted text begin and deleted text end new text begin , new text end 6 new text begin , and 8 new text end to deleted text begin 11 deleted text end new text begin 10 new text end , and reduced by the amounts specified in section
290.0132, subdivisions 2, 9, 10, 14, 15, 17, deleted text begin and deleted text end 18 new text begin , and 31 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, 2017, except the amendment to the list of subdivisions of section 290.0132 in paragraph
(e), clause (2), is effective retroactively for taxable years beginning after December 31,
2016.
new text end

Sec. 33.

Minnesota Statutes 2016, section 290.06, subdivision 2d, is amended to read:

Subd. 2d.

Inflation adjustment of brackets.

(a) For taxable years beginning after
December 31, 2013, the minimum and maximum dollar amounts for each rate bracket for
which a tax is imposed in subdivision 2c shall be adjusted for inflation by the percentage
determined under paragraph (b). For the purpose of making the adjustment as provided in
this subdivision all of the rate brackets provided in subdivision 2c shall be the rate brackets
as they existed for taxable years beginning after December 31, 2012, and before January 1,
2014. The rate applicable to any rate bracket must not be changed. The dollar amounts
setting forth the tax shall be adjusted to reflect the changes in the rate brackets. The rate
brackets as adjusted must be rounded to the nearest $10 amount. If the rate bracket ends in
$5, it must be rounded up to the nearest $10 amount.

(b) The commissioner shall adjust the rate brackets and by the percentage determined
pursuant to the provisions of section 1(f) of the Internal Revenue Code new text begin , as amended through
December 16, 2016 new text end , except that in section 1(f)(3)(B) the word "2012" shall be substituted
for the word "1992." For 2014, the commissioner shall then determine the percent change
from the 12 months ending on August 31, 2012, to the 12 months ending on August 31,
2013, and in each subsequent year, from the 12 months ending on August 31, 2012, to the
12 months ending on August 31 of the year preceding the taxable year. The determination
of the commissioner pursuant to this subdivision shall not be considered a "rule" and shall
not be subject to the Administrative Procedure Act contained in chapter 14.

No later than December 15 of each year, the commissioner shall announce the specific
percentage that will be used to adjust the tax rate brackets.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 34.

Minnesota Statutes 2016, section 290.067, subdivision 2a, is amended to read:

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;

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

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

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

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

new text begin (xvi) alimony received to the extent not included in the recipient's income.
new text end

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; deleted text begin and
deleted text end

(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 deleted text begin . deleted text end new text begin ; and
new text end

new text begin (7) alimony subtracted under section 290.0132, subdivision 28.
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, 2017.
new text end

Sec. 35.

Minnesota Statutes 2017 Supplement, 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 maximum credit begins to be reduced under subdivision
1 by the percentage determined pursuant to the provisions of section 1(f) of the Internal
Revenue Code new text begin , as amended through December 16, 2016 new text end , except that in section 1(f)(3)(B)
the word "2016" shall be substituted for the word "1992." For 2018, the commissioner shall
then determine the percent change from the 12 months ending on August 31, 2016, to the
12 months ending on August 31, 2017, and in each subsequent year, from the 12 months
ending on August 31, 2016, 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, 2017.
new text end

Sec. 36.

Minnesota Statutes 2017 Supplement, section 290.0672, subdivision 1, is amended
to read:

Subdivision 1.

Definitions.

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

(b) "Long-term care insurance" means a policy that:

(1) qualifies for a deduction under section 213 of the Internal Revenue Code, disregarding
the adjusted gross income test; or meets the requirements given in section 62A.46; or provides
similar coverage issued under the laws of another jurisdiction; and

(2) has a lifetime long-term care benefit limit of not less than $100,000; and

(3) has been offered in compliance with the inflation protection requirements of section
62S.23.

(c) "Qualified beneficiary" means the taxpayer or the taxpayer's spouse.

(d) "Premiums deducted in determining deleted text begin federal taxable deleted text end new text begin net new text end income" means the lesser of
(1) long-term care insurance premiums that qualify as deductions under section 213 of the
Internal Revenue Code; and (2) the total amount deductible for medical care under deleted text begin section
213 of the Internal Revenue Code deleted text end new text begin sections 290.01, subdivision 29a, and 290.0132,
subdivision 29 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, 2017.
new text end

Sec. 37.

Minnesota Statutes 2016, section 290.0672, subdivision 2, is amended to read:

Subd. 2.

Credit.

A taxpayer is allowed a credit against the tax imposed by this chapter
for long-term care insurance policy premiums paid during the tax year. The credit for each
policy equals 25 percent of premiums paid to the extent not deducted in determining deleted text begin federal
taxable deleted text end new text begin net new text end income. A taxpayer may claim a credit for only one policy for each qualified
beneficiary. A maximum of $100 applies to each qualified beneficiary. The maximum total
credit allowed per year is $200 for married couples filing joint returns and $100 for all other
filers. For a nonresident or part-year resident, the credit determined under this section must
be allocated based on the percentage calculated under 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, 2017.
new text end

Sec. 38.

Minnesota Statutes 2017 Supplement, section 290.0681, subdivision 1, is amended
to read:

Subdivision 1.

Definitions.

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

(b) "Account" means the historic credit administration account in the special revenue
fund.

(c) "Office" means the State Historic Preservation Office of the Department of
Administration.

(d) "Project" means rehabilitation of a certified historic structure, as defined in section
47(c)(3)(A) of the Internal Revenue Code, that is located in Minnesota and is allowed a
federal credit.

(e) "Federal credit" means the credit allowed under section deleted text begin 47(a)(2) deleted text end new text begin 47(a) new text end of the Internal
Revenue Code new text begin , except that the amount allowed is deemed to be allocated in the taxable year
that the project is placed in service new text end .

(f) "Placed in service" has the meaning used in section 47 of the Internal Revenue Code.

(g) "Qualified rehabilitation expenditures" has the meaning given in section 47 of the
Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for applications for allocation certificates
submitted after December 31, 2017.
new text end

Sec. 39.

Minnesota Statutes 2017 Supplement, section 290.0681, subdivision 2, is amended
to read:

Subd. 2.

Credit or grant allowed; certified historic structure.

(a) A credit is allowed
against the tax imposed under this chapter equal to not more than 100 percent of the credit
allowed under section deleted text begin 47(a)(2) deleted text end new text begin 47(a) new text end of the Internal Revenue Code for a project. new text begin The credit
is payable in an amount equal to one-fifth of the total credit amount allowed in the five
taxable years beginning with the year the project is placed in service. new text end To qualify for the
credit:

(1) the project must receive Part 3 certification and be placed in service during the taxable
year; and

(2) the taxpayer must be allowed the federal credit and be issued a credit certificate for
the taxable year as provided in subdivision 4.

(b) The commissioner of administration may pay a grant in lieu of the credit. The grant
equals 90 percent of the credit that would be allowed for the project. new text begin The grant is payable
in an amount equal to one-fifth of 90 percent of the credit that would be allowed for the
project in the five taxable years beginning with the year the project is placed in service.
new text end

(c) In lieu of the credit under paragraph (a), an insurance company may claim a credit
against the insurance premiums tax imposed under chapter 297I.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for applications for allocation certificates
submitted after December 31, 2017.
new text end

Sec. 40.

Minnesota Statutes 2016, section 290.0681, subdivision 3, is amended to read:

Subd. 3.

Applications; allocations.

(a) To qualify for a credit or grant under this section,
the developer of a project must apply to the office before the rehabilitation begins. The
application must contain the information and be in the form prescribed by the office. The
office may collect a fee for application of up to 0.5 percent of qualified rehabilitation
expenditures, up to $40,000, based on estimated qualified rehabilitation expenditures, to
offset costs associated with personnel and administrative expenses related to administering
the credit and preparing the economic impact report in subdivision 9. Application fees are
deposited in the account. The application must indicate if the application is for a credit or
a grant in lieu of the credit or a combination of the two and designate the taxpayer qualifying
for the credit or the recipient of the grant.

(b) Upon approving an application for credit, the office shall issue allocation certificates
that:

(1) verify eligibility for the credit or grant;

(2) state the amount of credit or grant anticipated with the project, with the credit amount
equal to 100 percent and the grant amount equal to 90 percent of the federal credit anticipated
in the application;

(3) state that the credit or grant allowed may increase or decrease if the federal credit
the project receives at the time it is placed in service is different than the amount anticipated
at the time the allocation certificate is issued; and

(4) state the fiscal year in which the credit or grant is allocated, and that the taxpayer or
grant recipient is entitled to receive new text begin one-fifth of the total amount of either new text end the credit or new text begin the
new text end grant at the time the project is placed in service, provided that date is within three calendar
years following the issuance of the allocation certificate.

(c) The office, in consultation with the commissioner, shall determine if the project is
eligible for a credit or a grant under this section and must notify the developer in writing
of its determination. Eligibility for the credit is subject to review and audit by the
commissioner.

(d) The federal credit recapture and repayment requirements under section 50 of the
Internal Revenue Code do not apply to the credit allowed under this section.

(e) Any decision of the office under paragraph (c) may be challenged as a contested case
under chapter 14. The contested case proceeding must be initiated within 45 days of the
date of written notification by the office.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for applications for allocation certificates
submitted after December 31, 2017.
new text end

Sec. 41.

Minnesota Statutes 2016, section 290.0681, subdivision 4, is amended to read:

Subd. 4.

Credit certificates; grants.

(a)(1) The developer of a project for which the
office has issued an allocation certificate must notify the office when the project is placed
in service. Upon verifying that the project has been placed in service, and was allowed a
federal credit, the office must issue a credit certificate to the taxpayer designated in the
application or must issue a grant to the recipient designated in the application. The credit
certificate must state the amount of the credit.

(2) The credit amount equals the federal credit allowed for the project.

(3) The grant amount equals 90 percent of the federal credit allowed for the project.

(b) The recipient of a credit certificate may assign the certificate to another taxpayer new text begin
before the first one-fifth payment is claimed new text end , which is then allowed the credit under this
section or section 297I.20, subdivision 3. An assignment is not valid unless the assignee
notifies the commissioner within 30 days of the date that the assignment is made. The
commissioner shall prescribe the forms necessary for notifying the commissioner of the
assignment of a credit certificate and for claiming a credit by assignment.

(c) Credits passed through to partners, members, shareholders, or owners pursuant to
subdivision 5 are not an assignment of a credit certificate under this subdivision.

(d) A grant agreement between the office and the recipient of a grant may allow the
grant to be issued to another individual or entity.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for applications for allocation certificates
submitted after December 31, 2017.
new text end

Sec. 42.

Minnesota Statutes 2017 Supplement, section 290.0684, subdivision 1, is amended
to read:

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have
the meanings given them.

(b) "Contribution" means the amount contributed to one or more qualified accounts
except that the amount:

(1) is reduced by any withdrawals or distributions, other than transfers or rollovers to
another qualified account, from a qualified account during the taxable year; and

(2) excludes the amount of any transfers or rollovers from a qualified account made
during the taxable year.

(c) "Federal adjusted gross income" has the meaning given under section 62(a) of the
Internal Revenue Code.

(d) "Qualified account" means an account qualifying under section 529 of the Internal
Revenue Code.

(e) "Qualified higher education expenses" has the meaning given in section deleted text begin 529 deleted text end new text begin 529(e)(3) new text end
of the Internal Revenue Code new text begin , except section 529(c)(7) of the Internal Revenue Code does
not apply to the definition of qualified higher education expenses 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, 2017.
new text end

Sec. 43.

Minnesota Statutes 2017 Supplement, section 290.0684, subdivision 2, is amended
to read:

Subd. 2.

Credit allowed.

(a) An individual who is a resident of Minnesota is allowed a
credit against the tax imposed by this chapter. The credit is not allowed to an individual
who is eligible to be claimed as a dependent, as defined in sections 151 and 152 of the
Internal Revenue Code. The credit may not exceed the liability for tax under this chapter.

(b) The amount of the credit allowed equals 50 percent of contributions for the taxable
year. The maximum credit is $500, subject to the phaseout in paragraphs (c) and (d). In no
case is the credit less than zero.

(c) For individual filers, the maximum credit is reduced by two percent of adjusted gross
income in excess of $75,000.

(d) For married couples filing a joint return, the maximum credit is phased out as follows:

(1) for married couples with adjusted gross income in excess of $75,000, but not more
than $100,000, the maximum credit is reduced by one percent of adjusted gross income in
excess of $75,000;

(2) for married couples with adjusted gross income in excess of $100,000, but not more
than $135,000, the maximum credit is $250; and

(3) for married couples with adjusted gross income in excess of $135,000, the maximum
credit is $250, reduced by one percent of adjusted gross income in excess of $135,000.

(e) The income thresholds in paragraphs (c) and (d) used to calculate the maximum
credit must be adjusted for inflation. The commissioner shall adjust the income thresholds
by the percentage determined under the provisions of section 1(f) of the Internal Revenue
Code new text begin , as amended through December 16, 2016 new text end , except that in section 1(f)(3)(B) the word
"2016" is substituted for the word "1992." For 2018, the commissioner shall then determine
the percent change from the 12 months ending on August 31, 2016, to the 12 months ending
on August 31, 2017, and in each subsequent year, from the 12 months ending on August
31, 2016, to the 12 months ending on August 31 of the year preceding the taxable year. The
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 subject to chapter 14,
including section 14.386.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 44.

Minnesota Statutes 2016, section 290.0802, subdivision 2, is amended to read:

Subd. 2.

Subtraction.

(a) A qualified individual is allowed a subtraction from federal
deleted text begin taxable deleted text end new text begin adjusted gross new text end income of the individual's subtraction base amount. The excess of
the subtraction base amount over the taxable net income computed without regard to the
subtraction for the elderly or disabled under section 290.0132, subdivision 5, may be used
to reduce the amount of a lump sum distribution subject to tax under section 290.032.

(b)(1) The initial subtraction base amount equals

(i) $12,000 for a married taxpayer filing a joint return if a spouse is a qualified individual,

(ii) $9,600 for a single taxpayer, and

(iii) $6,000 for a married taxpayer filing a separate federal return.

(2) The qualified individual's initial subtraction base amount, then, must be reduced by
the sum of nontaxable retirement and disability benefits and one-half of the amount of
adjusted gross income in excess of the following thresholds:

(i) $18,000 for a married taxpayer filing a joint return if both spouses are qualified
individuals,

(ii) $14,500 for a single taxpayer or for a married couple filing a joint return if only one
spouse is a qualified individual, and

(iii) $9,000 for a married taxpayer filing a separate federal return.

(3) In the case of a qualified individual who is under the age of 65, the maximum amount
of the subtraction base may not exceed the taxpayer's disability income.

(4) The resulting amount is the subtraction base amount.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 45.

new text begin [290.0803] STANDARD OR ITEMIZED DEDUCTION.
new text end

new text begin Subdivision 1. new text end

new text begin Election. new text end

new text begin An individual may elect to claim a state standard deduction in
lieu of state itemized deductions. However, in the case of a married individual filing a
separate return, if one spouse elects to claim state itemized deductions, the other spouse is
not allowed a state standard deduction.
new text end

new text begin Subd. 2. new text end

new text begin Subtraction. new text end

new text begin Based on the election under subdivision 1, individuals are allowed
to subtract from federal adjusted gross income the state standard deduction or the state
itemized deduction.
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, 2017.
new text end

Sec. 46.

Minnesota Statutes 2017 Supplement, 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 290.0131, subdivision 2; deleted text begin and
deleted text end

(6) the amount of addition required by section 290.0131, subdivisions 9 deleted text begin to 11; deleted text end new text begin , 10, and
16; and
new text end

new text begin (7) the deduction allowed under section 199A of the Internal Revenue Code;
new text end

less the sum of the amounts determined under the following:

(i) interest income as defined in section 290.0132, subdivision 2;

(ii) an overpayment of state income tax as provided by section 290.0132, subdivision
3, to the extent included in federal alternative minimum taxable income;

(iii) 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;

(iv) amounts subtracted from federal taxable income as provided by section 290.0132,
subdivisions 7, 9 to 15, 17, 21, 24, deleted text begin and deleted text end 26 new text begin to 28, and 30 new text end ; deleted text begin and
deleted text end

(v) the amount of the net operating loss allowed under section 290.095, subdivision 11,
paragraph (c) deleted text begin . deleted text end new text begin ; and
new text end

new text begin (vi) the amount which would have been an allowable deduction under section 165(h) of
the Internal Revenue Code, as amended through December 16, 2016, and which was taken
as a Minnesota itemized deduction under section 290.01, subdivision 29.
new text end

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 new text begin , except alternative minimum
taxable income must be increased by the addition in section 290.0131, subdivision 17 new text end .

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

(c) "Net minimum tax" means the minimum tax imposed by this section.

(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

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 47.

Minnesota Statutes 2016, section 290.091, subdivision 3, is amended to read:

Subd. 3.

Exemption amount.

(a) For purposes of computing the alternative minimum
tax, the exemption amount is, for taxable years beginning after December 31, 2005, $60,000
for married couples filing joint returns, $30,000 for married individuals filing separate
returns, estates, and trusts, and $45,000 for unmarried individuals.

(b) The exemption amount determined under this subdivision is subject to the phase out
under section deleted text begin 55(d)(3) deleted text end new text begin 55(d)(2) and (4) new text end of the Internal Revenue Code, except that alternative
minimum taxable income as determined under this section must be substituted in the
computation of the phase out.

(c) For taxable years beginning after December 31, 2006, the exemption amount under
paragraph (a) must be adjusted for inflation. The commissioner shall adjust the exemption
amount by the percentage determined pursuant to the provisions of section 1(f) of the Internal
Revenue Code new text begin , as amended through December 16, 2016 new text end , except that in section 1(f)(3)(B)
the word "2005" shall be substituted for the word "1992." For 2007, the commissioner shall
then determine the percent change from the 12 months ending on August 31, 2005, to the
12 months ending on August 31, 2006, and in each subsequent year, from the 12 months
ending on August 31, 2005, to the 12 months ending on August 31 of the year preceding
the taxable year. The exemption amount as adjusted must be rounded to the nearest $10. If
the amount ends in $5, it must be 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, 2017.
new text end

Sec. 48.

Minnesota Statutes 2016, section 290.0921, subdivision 2, is amended to read:

Subd. 2.

Definitions.

(a) For purposes of this section, the following terms have the
meanings given them.

(b) "Alternative minimum taxable net income" is alternative minimum taxable income,

(1) less the exemption amount, and

(2) apportioned or allocated to Minnesota under section 290.17, 290.191, or 290.20.

(c) The "exemption amount" is $40,000, reduced, but not below zero, by 25 percent of
the excess of alternative minimum taxable income over $150,000.

(d) "Minnesota alternative minimum taxable income" is alternative minimum taxable
net income, less the deductions for alternative tax net operating loss under subdivision 4;
and dividends received under subdivision 6. The sum of the deductions under this paragraph
may not exceed 90 percent of alternative minimum taxable net income. This limitation does
not apply to:

(1) a deduction for dividends paid to or 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; or

(2) a deduction for dividends 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: (i) the dividend is eliminated in
consolidation under Treasury Regulation 1.1502-14(a), as amended through December 31,
1989; or (ii) the dividend is deducted under an election under section 243(b) of the Internal
Revenue Code.

new text begin (e) "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
through December 16, 2016.
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, 2017.
new text end

Sec. 49.

Minnesota Statutes 2016, section 290.0922, subdivision 1, is amended to read:

Subdivision 1.

Imposition.

(a) In addition to the tax imposed by this chapter without
regard to this section, the franchise tax imposed on a corporation required to file under
section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation under
section 290.9725 for the taxable year includes a tax equal to the following amounts:

If the sum of the corporation's Minnesota property, payrolls, and sales or receipts is:							the tax equals:
		less than		$	930,000		$	0
	$	930,000	to	$	1,869,999		$	190
	$	1,870,000	to	$	9,339,999		$	560
	$	9,340,000	to	$	18,679,999		$	1,870
	$	18,680,000	to	$	37,359,999		$	3,740
	$	37,360,000	or	more			$	9,340

(b) A tax is imposed for each taxable year on a corporation required to file a return under
section 289A.12, subdivision 3, that is treated as an "S" corporation under section 290.9725
and on a partnership required to file a return under section 289A.12, subdivision 3, other
than a partnership that derives over 80 percent of its income from farming. The tax imposed
under this paragraph is due on or before the due date of the return for the taxpayer due under
section 289A.18, subdivision 1. The commissioner shall prescribe the return to be used for
payment of this tax. The tax under this paragraph is equal to the following amounts:

If the sum of the S corporation's or partnership's Minnesota property, payrolls, and sales or receipts is:							the tax equals:
		less than		$	930,000		$	0
	$	930,000	to	$	1,869,999		$	190
	$	1,870,000	to	$	9,339,999		$	560
	$	9,340,000	to	$	18,679,999		$	1,870
	$	18,680,000	to	$	37,359,999		$	3,740
	$	37,360,000	or	more			$	9,340

(c) The commissioner shall adjust the dollar amounts of both the tax and the property,
payrolls, and sales or receipts thresholds in paragraphs (a) and (b) by the percentage
determined pursuant to the provisions of section 1(f) of the Internal Revenue Code new text begin , as
amended through December 16, 2016 new text end , except that in section 1(f)(3)(B) the word "2012"
must be substituted for the word "1992." For 2014, the commissioner shall determine the
percentage change from the 12 months ending on August 31, 2012, to the 12 months ending
on August 31, 2013, and in each subsequent year, from the 12 months ending on August
31, 2012, to the 12 months ending on August 31 of the year preceding the taxable year. The
determination of the commissioner pursuant to this subdivision is not a "rule" subject to the
Administrative Procedure Act contained in chapter 14. The tax amounts as adjusted must
be rounded to the nearest $10 amount and the threshold amounts must be adjusted to the
nearest $10,000 amount. For tax amounts that end in $5, the amount is rounded up to the
nearest $10 amount and for the threshold amounts that end in $5,000, the amount is rounded
up to the nearest $10,000.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 50.

Minnesota Statutes 2016, section 290.095, subdivision 2, is amended to read:

Subd. 2.

Defined and limited.

(a) The term "net operating loss" as used in this section
shall mean a net operating loss as defined in section 172(c) of the Internal Revenue Code,
with the modifications specified in subdivision 4. The deductions provided in section 290.21
cannot be used in the determination of a net operating loss.

(b) The term "net operating loss deduction" as used in this section means the aggregate
of the net operating loss carryovers to the taxable year, computed in accordance with
subdivision 3. The provisions of section 172(b) of the Internal Revenue Code relating to
the carryback of net operating losses, do not apply.

new text begin (c) The net operating loss deduction under this section may not offset more than 80
percent of taxable net income in a single taxable year.
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, 2017.
new text end

Sec. 51.

Minnesota Statutes 2017 Supplement, section 290.17, subdivision 2, is amended
to read:

Subd. 2.

Income not derived from conduct of a trade or business.

The income of a
taxpayer subject to the allocation rules that is not derived from the conduct of a trade or
business must be assigned in accordance with paragraphs (a) to (f):

(a)(1) Subject to paragraphs (a)(2) and (a)(3), income from wages as defined in section
3401(a) deleted text begin and deleted text end new text begin , new text end (f) new text begin , and (i) new text end of the Internal Revenue Code is assigned to this state if, and to the
extent that, the work of the employee is performed within it; all other income from such
sources is treated as income from sources without this state.

Severance pay shall be considered income from labor or personal or professional services.

(2) In the case of an individual who is a nonresident of Minnesota and who is an athlete
or entertainer, income from compensation for labor or personal services performed within
this state shall be determined in the following manner:

(i) the amount of income to be assigned to Minnesota for an individual who is a
nonresident salaried athletic team employee shall be determined by using a fraction in which
the denominator contains the total number of days in which the individual is under a duty
to perform for the employer, and the numerator is the total number of those days spent in
Minnesota. For purposes of this paragraph, off-season training activities, unless conducted
at the team's facilities as part of a team imposed program, are not included in the total number
of duty days. Bonuses earned as a result of play during the regular season or for participation
in championship, play-off, or all-star games must be allocated under the formula. Signing
bonuses are not subject to allocation under the formula if they are not conditional on playing
any games for the team, are payable separately from any other compensation, and are
nonrefundable; and

(ii) the amount of income to be assigned to Minnesota for an individual who is a
nonresident, and who is an athlete or entertainer not listed in item (i), for that person's athletic
or entertainment performance in Minnesota shall be determined by assigning to this state
all income from performances or athletic contests in this state.

(3) For purposes of this section, amounts received by a nonresident as "retirement income"
as defined in section (b)(1) of the State Income Taxation of Pension Income Act, Public
Law 104-95, are not considered income derived from carrying on a trade or business or
from wages or other compensation for work an employee performed in Minnesota, and are
not taxable under this chapter.

(b) Income or gains from tangible property located in this state that is not employed in
the business of the recipient of the income or gains must be assigned to this state.

(c) Income or gains from intangible personal property not employed in the business of
the recipient of the income or gains must be assigned to this state if the recipient of the
income or gains is a resident of this state or is a resident trust or estate.

Gain on the sale of a partnership interest is allocable to this state in the ratio of the
original cost of partnership tangible property in this state to the original cost of partnership
tangible property everywhere, determined at the time of the sale. If more than 50 percent
of the value of the partnership's assets consists of intangibles, gain or loss from the sale of
the partnership interest is allocated to this state in accordance with the sales factor of the
partnership for its first full tax period immediately preceding the tax period of the partnership
during which the partnership interest was sold.

Gain on the sale of an interest in a single member limited liability company that is
disregarded for federal income tax purposes is allocable to this state as if the single member
limited liability company did not exist and the assets of the limited liability company are
personally owned by the sole member.

Gain on the sale of goodwill or income from a covenant not to compete that is connected
with a business operating all or partially in Minnesota is allocated to this state to the extent
that the income from the business in the year preceding the year of sale was allocable to
Minnesota under subdivision 3.

When an employer pays an employee for a covenant not to compete, the income allocated
to this state is in the ratio of the employee's service in Minnesota in the calendar year
preceding leaving the employment of the employer over the total services performed by the
employee for the employer in that year.

(d) Income from winnings on a bet made by an individual while in Minnesota is assigned
to this state. In this paragraph, "bet" has the meaning given in section 609.75, subdivision
2, as limited by section 609.75, subdivision 3, clauses (1), (2), and (3).

(e) All items of gross income not covered in paragraphs (a) to (d) and not part of the
taxpayer's income from a trade or business shall be assigned to the taxpayer's domicile.

(f) For the purposes of this section, working as an employee shall not be considered to
be conducting a trade or business.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for wages paid after December 31, 2017.
new text end

Sec. 52.

Minnesota Statutes 2016, section 290.21, is amended by adding a subdivision to
read:

new text begin Subd. 9. new text end

new text begin Controlled foreign corporations. new text end

new text begin For the purposes of this chapter, the net
income of a domestic corporation that is included pursuant to sections 951, 951A, and 965
of the Internal Revenue Code is dividend income.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 21, 2016.
new text end

Sec. 53.

Minnesota Statutes 2016, section 290.92, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(1) Wages. For purposes of this section, the term "wages"
means the same as that term is defined in section 3401(a) deleted text begin and deleted text end new text begin , new text end (f) new text begin , and (i) new text end of the Internal
Revenue Code.

(2) Payroll period. For purposes of this section the term "payroll period" means a period
for which a payment of wages is ordinarily made to the employee by the employee's
employer, and the term "miscellaneous payroll period" means a payroll period other than a
daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual, or annual payroll
period.

(3) Employee. For purposes of this section the term "employee" means any resident
individual performing services for an employer, either within or without, or both within and
without the state of Minnesota, and every nonresident individual performing services within
the state of Minnesota, the performance of which services constitute, establish, and determine
the relationship between the parties as that of employer and employee. As used in the
preceding sentence, the term "employee" includes an officer of a corporation, and an officer,
employee, or elected official of the United States, a state, or any political subdivision thereof,
or the District of Columbia, or any agency or instrumentality of any one or more of the
foregoing.

(4) Employer. For purposes of this section the term "employer" means any person,
including individuals, fiduciaries, estates, trusts, partnerships, limited liability companies,
and corporations transacting business in or deriving any income from sources within the
state of Minnesota for whom an individual performs or performed any service, of whatever
nature, as the employee of such person, except that if the person for whom the individual
performs or performed the services does not have control of the payment of the wages for
such services, the term "employer," except for purposes of paragraph (1), means the person
having control of the payment of such wages. As used in the preceding sentence, the term
"employer" includes any corporation, individual, estate, trust, or organization which is
exempt from taxation under section 290.05 and further includes, but is not limited to, officers
of corporations who have control, either individually or jointly with another or others, of
the payment of the wages.

(5) Number of withholding exemptions claimed. For purposes of this section, the term
"number of withholding exemptions claimed" means the number of withholding exemptions
claimed in a withholding exemption certificate in effect under subdivision 5, except that if
no such certificate is in effect, the number of withholding exemptions claimed shall be
considered to be zero.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for wages paid after July 1, 2018.
new text end

Sec. 54.

Minnesota Statutes 2017 Supplement, section 290A.03, subdivision 3, is amended
to read:

Subd. 3.

Income.

(a) "Income" means the sum of the following:

(1) federal adjusted gross income as defined in 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, to the extent the sum of amounts exceeds the retirement base amount for
the claimant and spouse;

(xii) to the extent not included in federal adjusted gross income, distributions received
by the claimant or spouse from a traditional or Roth style retirement account or plan;

(xiii) nontaxable scholarship or fellowship grants;

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

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

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

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

new text begin (xvii) alimony to the extent not included in the recipient's income.
new text end

In the case of an individual who files an income tax return on a fiscal year basis, the
term "federal adjusted gross income" shall mean federal adjusted gross income reflected in
the fiscal year ending in the calendar year. Federal adjusted gross income shall 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 which was exclusively funded by the claimant
or spouse and which funding payments were not excluded from federal adjusted gross
income in the years when the payments were made;

(3) to the extent included in federal adjusted gross income, amounts contributed by the
claimant or spouse to a traditional or Roth style retirement account or plan, but not to exceed
the retirement base amount reduced by the amount of contributions excluded from federal
adjusted gross income, but not less than zero;

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

(5) relief granted under this chapter;

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

(7) 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 deleted text begin . deleted text end new text begin ; or
new text end

new text begin (8) alimony subtracted under section 290.0132, subdivision 28.
new text end

(c) The sum of the following amounts may be subtracted from income:

(1) for the claimant's first dependent, the exemption amount multiplied by 1.4;

(2) for the claimant's second dependent, the exemption amount multiplied by 1.3;

(3) for the claimant's third dependent, the exemption amount multiplied by 1.2;

(4) for the claimant's fourth dependent, the exemption amount multiplied by 1.1;

(5) for the claimant's fifth dependent, the exemption amount; and

(6) if the claimant or claimant's spouse was disabled or attained the age of 65 on or
before December 31 of the year for which the taxes were levied or rent paid, the exemption
amount.

(d) new text begin (1) new text end For purposes of this subdivision, the "exemption amount" means deleted text begin the exemption
amount under section 151(d) of the Internal Revenue Code for the taxable year for which
the income is reported; "retirement base amount" means the deductible amount for the
taxable year for the claimant and spouse under section 219(b)(5)(A) of the Internal Revenue
Code, adjusted for inflation as provided in section 219(b)(5)(C) of the Internal Revenue
Code, without regard to whether the claimant or spouse claimed a deduction; and "traditional
or Roth style retirement account or plan" means retirement plans under sections 401, 403,
408, 408A, and 457 of the Internal Revenue Code. deleted text end new text begin : $4,150. For taxable years beginning
after December 31, 2018, the commissioner shall annually adjust the $4,150 by the percentage
determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, as
amended through December 16, 2016, except that in section 1(f)(3)(B), the word "2017"
shall be substituted for the word "1992." The exemption amount as adjusted for inflation
must be rounded to the nearest $10. The determination of the commissioner under this
subdivision is not a rule under the Administrative Procedure Act, including section 14.386;
and
new text end

new text begin (2) "retirement base amount" means the deductible amount for the taxable year for the
claimant and spouse under section 219(b)(5)(A) of the Internal Revenue Code, adjusted for
inflation as provided in section 219(b)(5)(C) of the Internal Revenue Code, without regard
to whether the claimant or spouse claimed a deduction, and "traditional or Roth-style
retirement account or plan" means retirement plans under sections 401, 403, 408, 408A,
and 457 of the Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property tax refunds based on property
taxes payable after December 31, 2018, and rent constituting property taxes payable after
December 31, 2017.
new text end

Sec. 55.

Minnesota Statutes 2016, section 290A.03, subdivision 12, is amended to read:

Subd. 12.

Gross rent.

(a) "Gross rent" means rental paid for the right of occupancy, at
arm's length, of a homestead, exclusive of charges for any medical services furnished by
the landlord as a part of the rental agreement, whether expressly set out in the rental
agreement or not.

(b) The gross rent of a resident of a nursing home or intermediate care facility is $350
per month. The gross rent of a resident of an adult foster care home is $550 per month.
Beginning for rent paid in 2002, the commissioner shall annually adjust for inflation the
gross rent amounts stated in this paragraph. The adjustment must be made in accordance
with section 1(f) of the Internal Revenue Code new text begin , as amended through December 16, 2016 new text end ,
except that for purposes of this paragraph the percentage increase shall be determined from
the year ending on June 30, 2001, to the year ending on June 30 of the year in which the
rent is paid. The commissioner shall round the gross rents to the nearest $10 amount. If the
amount ends in $5, the commissioner shall round it up to the next $10 amount. The
determination of the commissioner under this paragraph is not a rule under the Administrative
Procedure Act.

(c) If the landlord and tenant have not dealt with each other at arm's length and the
commissioner determines that the gross rent charged was excessive, the commissioner may
adjust the gross rent to a reasonable amount for purposes of this chapter.

(d) Any amount paid by a claimant residing in property assessed pursuant to section
273.124, subdivision 3, 4, 5, or 6 for occupancy in that property shall be excluded from
gross rent for purposes of this chapter. However, property taxes imputed to the homestead
of the claimant or the dwelling unit occupied by the claimant that qualifies for homestead
treatment pursuant to section 273.124, subdivision 3, 4, 5, or 6 shall be included within the
term "property taxes payable" as defined in subdivision 13, notwithstanding the fact that
ownership is not in the name of the claimant.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 56.

Minnesota Statutes 2017 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 deleted text begin December 16, 2016 deleted text end new text begin March 24, 2018 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment, except
the changes to household income adopted by the federal changes are effective retroactively
at the same time the changes became effective for federal purposes.
new text end

Sec. 57.

Minnesota Statutes 2016, section 290A.04, subdivision 4, is amended to read:

Subd. 4.

Inflation adjustment.

(a) Beginning for property tax refunds payable in calendar
year 2002, the commissioner shall annually adjust the dollar amounts of the income thresholds
and the maximum refunds under subdivisions 2 and 2a for inflation. The commissioner
shall make the inflation adjustments in accordance with section 1(f) of the Internal Revenue
Code new text begin , as amended through December 16, 2016 new text end , except that for purposes of this subdivision
the percentage increase shall be determined as provided in this subdivision.

(b) In adjusting the dollar amounts of the income thresholds and the maximum refunds
under subdivision 2 for inflation, the percentage increase shall be determined from the year
ending on June 30, 2013, to the year ending on June 30 of the year preceding that in which
the refund is payable.

(c) In adjusting the dollar amounts of the income thresholds and the maximum refunds
under subdivision 2a for inflation, the percentage increase shall be determined from the
year ending on June 30, 2013, to the year ending on June 30 of the year preceding that in
which the refund is payable.

(d) The commissioner shall use the appropriate percentage increase to annually adjust
the income thresholds and maximum refunds under subdivisions 2 and 2a for inflation
without regard to whether or not the income tax brackets are adjusted for inflation in that
year. The commissioner shall round the thresholds and the maximum amounts, as adjusted
to the nearest $10 amount. If the amount ends in $5, the commissioner shall round it up to
the next $10 amount.

(e) The commissioner shall annually announce the adjusted refund schedule at the same
time provided under section 290.06. 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, 2017.
new text end

Sec. 58.

Minnesota Statutes 2017 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 deleted text begin December 16, 2016 deleted text end new text begin March 24, 2018 new 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. The provisions of section 290.01, subdivision 7, paragraphs (c) and (d), apply
to determinations of domicile under this chapter.

(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 retroactively for estates of decedents
dying after December 31, 2017.
new text end

Sec. 59.

Minnesota Statutes 2016, section 297A.68, subdivision 25, is amended to read:

Subd. 25.

Sale of property used in a trade or business.

(a) The sale of tangible personal
property primarily used in a trade or business is exempt if the sale is not made in the normal
course of business of selling that kind of property and if one of the following conditions is
satisfied:

(1) the sale occurs in a transaction subject to or described in section 118, 331, 332, 336,
337, 338, 351, 355, 368, 721, 731, 1031, or 1033 of the Internal Revenue Code new text begin , as amended
through December 16, 2016 new text end ;

(2) the sale is between members of a controlled group as defined in section 1563(a) of
the Internal Revenue Code;

(3) the sale is a sale of farm machinery;

(4) the sale is a farm auction sale;

(5) the sale is a sale of substantially all of the assets of a trade or business; or

(6) the total amount of gross receipts from the sale of trade or business property made
during the calendar month of the sale and the preceding 11 calendar months does not exceed
$1,000.

The use, storage, distribution, or consumption of tangible personal property acquired as
a result of a sale exempt under this subdivision is also exempt.

(b) For purposes of this subdivision, the following terms have the meanings given.

(1) A "farm auction" is a public auction conducted by a licensed auctioneer if substantially
all of the property sold consists of property used in the trade or business of farming and
property not used primarily in a trade or business.

(2) "Trade or business" includes the assets of a separate division, branch, or identifiable
segment of a trade or business if, before the sale, the income and expenses attributable to
the separate division, branch, or identifiable segment could be separately ascertained from
the books of account or record (the lease or rental of an identifiable segment does not qualify
for the exemption).

(3) A "sale of substantially all of the assets of a trade or business" must occur as a single
transaction or a series of related transactions within the 12-month period beginning on the
date of the first sale of assets intended to qualify for the exemption provided in paragraph
(a), clause (5).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for sales and purchases
made after December 31, 2017.
new text end

Sec. 60.

Minnesota Statutes 2016, section 297B.03, is amended to read:

297B.03 EXEMPTIONS.

There is specifically exempted from the provisions of this chapter and from computation
of the amount of tax imposed by it the following:

(1) purchase or use, including use under a lease purchase agreement or installment sales
contract made pursuant to section 465.71, of any motor vehicle by the United States and its
agencies and instrumentalities and by any person described in and subject to the conditions
provided in section 297A.67, subdivision 11;

(2) purchase or use of any motor vehicle by any person who was a resident of another
state or country at the time of the purchase and who subsequently becomes a resident of
Minnesota, provided the purchase occurred more than 60 days prior to the date such person
began residing in the state of Minnesota and the motor vehicle was registered in the person's
name in the other state or country;

(3) purchase or use of any motor vehicle by any person making a valid election to be
taxed under the provisions of section 297A.90;

(4) purchase or use of any motor vehicle previously registered in the state of Minnesota
when such transfer constitutes a transfer within the meaning of section 118, 331, 332, 336,
337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 1563(a) of the Internal Revenue Code new text begin ,
as amended through December 16, 2016 new text end ;

(5) purchase or use of any vehicle owned by a resident of another state and leased to a
Minnesota-based private or for-hire carrier for regular use in the transportation of persons
or property in interstate commerce provided the vehicle is titled in the state of the owner or
secured party, and that state does not impose a sales tax or sales tax on motor vehicles used
in interstate commerce;

(6) purchase or use of a motor vehicle by a private nonprofit or public educational
institution for use as an instructional aid in automotive training programs operated by the
institution. "Automotive training programs" includes motor vehicle body and mechanical
repair courses but does not include driver education programs;

(7) purchase of a motor vehicle by an ambulance service licensed under section 144E.10
when that vehicle is equipped and specifically intended for emergency response or for
providing ambulance service;

(8) purchase of a motor vehicle by or for a public library, as defined in section 134.001,
subdivision 2, as a bookmobile or library delivery vehicle;

(9) purchase of a ready-mixed concrete truck;

(10) purchase or use of a motor vehicle by a town for use exclusively for road
maintenance, including snowplows and dump trucks, but not including automobiles, vans,
or pickup trucks;

(11) purchase or use of a motor vehicle by a corporation, society, association, foundation,
or institution organized and operated exclusively for charitable, religious, or educational
purposes, except a public school, university, or library, but only if the vehicle is:

(i) a truck, as defined in section 168.002, a bus, as defined in section 168.002, or a
passenger automobile, as defined in section 168.002, if the automobile is designed and used
for carrying more than nine persons including the driver; and

(ii) intended to be used primarily to transport tangible personal property or individuals,
other than employees, to whom the organization provides service in performing its charitable,
religious, or educational purpose;

(12) purchase of a motor vehicle for use by a transit provider exclusively to provide
transit service is exempt if the transit provider is either (i) receiving financial assistance or
reimbursement under section 174.24 or 473.384, or (ii) operating under section 174.29,
473.388, or 473.405;

(13) purchase or use of a motor vehicle by a qualified business, as defined in section
469.310, located in a job opportunity building zone, if the motor vehicle is principally
garaged in the job opportunity building zone and is primarily used as part of or in direct
support of the person's operations carried on in the job opportunity building zone. The
exemption under this clause applies to sales, if the purchase was made and delivery received
during the duration of the job opportunity building zone. The exemption under this clause
also applies to any local sales and use tax;

(14) purchase of a leased vehicle by the lessee who was a participant in a lease-to-own
program from a charitable organization that is:

(i) described in section 501(c)(3) of the Internal Revenue Code; and

(ii) licensed as a motor vehicle lessor under section 168.27, subdivision 4; and

(15) purchase of a motor vehicle used exclusively as a mobile medical unit for the
provision of medical or dental services by a federally qualified health center, as defined
under title 19 of the Social Security Act, as amended by Section 4161 of the Omnibus Budget
Reconciliation Act of 1990.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for sales and purchases
made after December 31, 2017.
new text end

Sec. 61.

Minnesota Statutes 2017 Supplement, section 462D.06, subdivision 1, is amended
to read:

Subdivision 1.

Subtraction.

(a) As provided in section 290.0132, subdivision 25, an
account holder is allowed a subtraction from deleted text begin the deleted text end federal deleted text begin taxable deleted text end new text begin adjusted gross new text end income equal
to interest or dividends earned on the first-time home buyer savings account during the
taxable year.

(b) The subtraction under paragraph (a) is allowed each year for the taxable years
including and following the taxable year in which the account was established. No person
other than the account holder is allowed a subtraction under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 62.

Minnesota Statutes 2017 Supplement, section 462D.06, subdivision 2, is amended
to read:

Subd. 2.

Addition.

(a) As provided in section 290.0131, subdivision 14, an account
holder must add to federal deleted text begin taxable deleted text end new text begin adjusted gross new text end income the following amounts:

(1) the amount in excess of the total contributions for all taxable years that is withdrawn
and used for other than eligible costs, or for a transfer permitted under section 462D.04,
subdivision 2; and

(2) the amount remaining in the first-time home buyer savings account at the close of
the tenth taxable year that exceeds the total contributions to the account for all taxable years.

(b) For an account that received a transfer under section 462D.04, subdivision 2, the
ten-year period under paragraph (a), clause (2), ends at the close of the earliest taxable year
that applies to either account under that clause.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 63.

Minnesota Statutes 2016, section 469.316, subdivision 1, is amended to read:

Subdivision 1.

Application.

An individual, estate, or trust operating a trade or business
in a job opportunity building zone, and an individual, estate, or trust making a qualifying
investment in a qualified business operating in a job opportunity building zone qualifies for
the exemptions from taxes imposed under chapter 290, as provided in this section. The
exemptions provided under this section apply only to the extent that the income otherwise
would be taxable under chapter 290. Subtractions under this section from new text begin federal adjusted
gross income, new text end federal taxable income, alternative minimum taxable income, or any other
base subject to tax are limited to the amount that otherwise would be included in the tax
base absent the exemption under this section. This section applies only to taxable years
beginning during the duration of the job opportunity building zone.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 64. new text begin APPROPRIATIONS.
new text end

new text begin $97,000 in fiscal year 2018 and $3,054,000 in fiscal year 2019 are appropriated from
the general fund to the commissioner of revenue to administer the provisions of this article.
The base for this purpose is $1,631,000 in fiscal year 2020 and $1,447,000 in fiscal year
2021.
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. 65. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2016, sections 289A.50, subdivision 10; 290.0131, subdivisions 7
and 11; 290.0133, subdivisions 13 and 14; and 290.10, subdivision 2, 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 for taxable years beginning after December
31, 2017.
new text end

ARTICLE 3

ANGEL TAX CREDIT

Section 1.

Minnesota Statutes 2016, section 116J.8737, subdivision 5, is amended to read:

Subd. 5.

Credit allowed.

(a)(1) 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 deleted text begin $15,000,000 deleted text end new text begin $10,000,000 new text end in credits
to qualified investors or qualified funds for taxable years beginning after December 31,
deleted text begin 2013 deleted text end new text begin 2017 new text end , and before January 1, deleted text begin 2017, and must not allocate more than $10,000,000 in
credits to qualified investors or qualified funds for taxable years beginning after December
31, 2016, and before January 1, 2018 deleted text end new text begin 2019 new text end ; and

(2) deleted text begin for taxable years beginning after December 31, 2014, and before January 1, 2018, deleted text end
50 percent must be allocated to credits for qualifying investments in qualified greater
Minnesota businesses and minority- or women-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- or women-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
Web site 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.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 2.

Minnesota Statutes 2016, section 116J.8737, subdivision 12, is amended to read:

Subd. 12.

Sunset.

This section expires for taxable years beginning after December 31,
deleted text begin 2017 deleted text end new text begin 2018 new text end , except that reporting requirements under subdivision 6 and revocation of credits
under subdivision 7 remain in effect through deleted text begin 2019 deleted text end new text begin 2020 new text end for qualified investors and qualified
funds, and through deleted text begin 2021 deleted text end new text begin 2022 new text end for qualified small businesses, reporting requirements under
subdivision 9 remain in effect through deleted text begin 2022 deleted text end new text begin 2023 new text end , and the appropriation in subdivision 11
remains in effect through deleted text begin 2021 deleted text end new text begin 2022 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, 2017.
new text end

ARTICLE 4

CORPORATE TAX REFORM

Section 1.

Minnesota Statutes 2016, 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 for taxable years beginning after December
31, 2017.
new text end

Sec. 2.

Minnesota Statutes 2016, 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, 2017.
new text end

Sec. 3.

Minnesota Statutes 2016, 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 l, clause (3), is prima
facie correct and valid, the taxpayer must prove with clear and convincing evidence that
the transaction has economic substance.
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, 2017.
new text end

Sec. 4.

new text begin [270C.331] PREVENTING TAX EVASION.
new text end

new text begin Subdivision 1. new text end

new text begin Economic substance. new text end

new text begin (a) For purposes of disallowing the tax effects of
a transaction that does not have economic substance pursuant to section 270C.03, subdivision
l, 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
was 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 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 apart from 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
resulting from the transaction, 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 l,
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 applies only to transactions entered into in connection with a trade or business or an
activity engaged in for the production of income.
new text end

new text begin Subd. 5. new text end

new text begin Commissioner to issue guidance. new text end

new text begin (a) The commissioner shall promulgate
guidance on how the provisions of this section will be applied. The guidance must include,
at a minimum, examples of transactions that will not be challenged as not having economic
substance and examples of transactions that may be challenged as not having economic
substance.
new text end

new text begin (b) The commissioner shall establish and publish a formal departmental procedure for
uniform application of this section, except the publishing of such procedure is subject to
limitations of protected nonpublic data in section 270B.02.
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, 2017.
new text end

Sec. 5.

Minnesota Statutes 2016, 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 the
tax effects of a transaction are 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 that is attributable to any transaction disallowed pursuant to section 270C.03,
subdivision 1, clause (3).
new text end

new text begin (b) If the tax effects of a transaction are disallowed pursuant to section 270C.03,
subdivision l, clause (3), a penalty equal to 40 percent of the amount of the nondisclosed
noneconomic substance transaction understatement must be added to the tax. This subdivision
applies to any income or item 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, "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
the 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, "nondisclosed 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
the tax treatment are not adequately disclosed in the return nor in a statement attached to
the return.
new text end

new text begin (e) In no event shall any amendment or supplement to a tax return be taken into account
for purposes of this subdivision to reduce the noneconomic substance transaction
understatement if the amendment or supplement is filed after the date the taxpayer is first
contacted by the commissioner regarding examination of the return.
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 the 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 purposes of this clause, 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 imposable 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 noneconomic substance transaction understatement penalty applies in
lieu of the penalties imposed under subdivision 27.
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, 2017.
new text end

Sec. 6.

Minnesota Statutes 2017 Supplement, 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 and aggregate gross receipts must be
calculated using Minnesota sales or receipts under section 290.191 and the definitions
contained in paragraphs (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, 2017.
new text end

Sec. 7.

Minnesota Statutes 2016, 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 stock deleted text begin . deleted text end new text begin ; and
new text end

new text begin (6) receipts from trading options, futures contracts, forward contracts, notional principal
contracts such as swaps, equities, and foreign currency transactions.
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 new text begin person or new text end corporation
deleted text begin or trust deleted text end for a fund of a new text begin person or new text end corporation deleted text begin or trust deleted text end regulated under United States Code,
title 15, deleted text begin sections 80a-1 through 80a-64 deleted text end new text begin chapter 2D, subchapter I new text end , 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, 2017.
new text end

Sec. 8.

Minnesota Statutes 2016, 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, 2017.
new text end

Sec. 9.

Minnesota Statutes 2016, section 297A.68, subdivision 42, is amended to read:

Subd. 42.

Qualified data centers.

(a) new text begin The following purchases of enterprise information
technology equipment and computer software are exempt:
new text end

new text begin (1) new text end purchases of enterprise information technology equipment deleted text begin and computer software deleted text end new text begin ,
and replacements or upgrades to the equipment, new text end for use in a qualified data center, or a
qualified refurbished data center deleted text begin , are exempt, except that computer software deleted text end new text begin ;
new text end

new text begin (2) purchases of computer software, and replacements or upgrades to the software, that
exclusively operates, maintains, or monitors the enterprise information technology equipment
exempted by clause (1);
new text end

new text begin (3) for a constructed qualified data center, where the total cost of construction and
investment in enterprise information technology equipment and computer software is at
least $200,000,000 within a 48-month period, purchases of computer software, and
replacements or upgrades to the software, that manages, manipulates, analyzes, collects,
stores, processes, distributes, or allows access to large amounts of data, or any other similar
functions related to the data, at the data center. The exemption in this clause applies only
to constructed qualified data centers, and not to data centers that are refurbished, substantially
refurbished, rebuilt, or modified; and
new text end

new text begin (4) purchases of new text end maintenance agreements deleted text begin are exempt deleted text end new text begin for computer software exempt
under this paragraph, but only new text end for deleted text begin purchases made deleted text end new text begin agreements purchased new text end after June 30,
2013.

The tax on purchases exempt under this paragraph must be imposed and collected as if the
rate under section 297A.62, subdivision 1, applied, and then refunded after June 30, 2013,
in the manner provided in section 297A.75. deleted text begin This exemption includes enterprise information
technology equipment and computer software purchased to replace or upgrade enterprise
information technology equipment and computer software in a qualified data center, or a
qualified refurbished data center.
deleted text end

(b) Electricity used or consumed in the operation of a qualified data center or qualified
refurbished data center is exempt.

(c) For purposes of this subdivision, "qualified data center" means a facility in Minnesota:

(1) that is comprised of one or more buildings that consist in the aggregate of at least
25,000 square feet, and that are located on a single parcel or on contiguous parcels, where
the total cost of construction or refurbishment, investment in enterprise information
technology equipment, and computer software is at least $30,000,000 within a 48-month
period. The 48-month period begins no sooner than July 1, 2012, except that costs for
computer software maintenance agreements purchased before July 1, 2013, are not included
in determining if the $30,000,000 threshold has been met;

(2) that is constructed or substantially refurbished after June 30, 2012, where
"substantially refurbished" means that at least 25,000 square feet have been rebuilt or
modified, including:

(i) installation of enterprise information technology equipment; environmental control,
computer software, and energy efficiency improvements; and

(ii) building improvements; and

(3) that is used to house enterprise information technology equipment, where the facility
has the following characteristics:

(i) uninterruptible power supplies, generator backup power, or both;

(ii) sophisticated fire suppression and prevention systems; and

(iii) enhanced security. A facility will be considered to have enhanced security if it has
restricted access to the facility to selected personnel; permanent security guards; video
camera surveillance; an electronic system requiring pass codes, keycards, or biometric scans,
such as hand scans and retinal or fingerprint recognition; or similar security features.

In determining whether the facility has the required square footage, the square footage
of the following spaces shall be included if the spaces support the operation of enterprise
information technology equipment: office space, meeting space, and mechanical and other
support facilities. For purposes of this subdivision, "computer software" includes, but is not
limited to, software utilized or loaded at a qualified data center or qualified refurbished data
center, including maintenance, licensing, and software customization.

(d) For purposes of this subdivision, a "qualified refurbished data center" means an
existing facility that qualifies as a data center under paragraph (c), clauses (2) and (3), but
that is comprised of one or more buildings that consist in the aggregate of at least 25,000
square feet, and that are located on a single parcel or contiguous parcels, where the total
cost of construction or refurbishment, investment in enterprise information technology
equipment, and computer software is at least $50,000,000 within a 24-month period.

(e) For purposes of this subdivision, "enterprise information technology equipment"
means computers and equipment supporting computing, networking, or data storage,
including servers and routers. It includes, but is not limited to: cooling systems, cooling
towers, and other temperature control infrastructure; power infrastructure for transformation,
distribution, or management of electricity used for the maintenance and operation of a
qualified data center or qualified refurbished data center, including but not limited to exterior
dedicated business-owned substations, backup power generation systems, battery systems,
and related infrastructure; and racking systems, cabling, and trays, which are necessary for
the maintenance and operation of the qualified data center or qualified refurbished data
center.

(f) A qualified data center or qualified refurbished data center may claim the exemptions
in this subdivision for purchases made either within 20 years of the date of its first purchase
qualifying for the exemption under paragraph (a), or by June 30, 2042, whichever is earlier.

(g) The purpose of this exemption is to create jobs in the construction and data center
industries.

(h) This subdivision is effective for sales and purchases made before July 1, 2042.

(i)(1) The commissioner of employment and economic development must certify to the
commissioner of revenue, in a format approved by the commissioner of revenue, when a
qualified data center has met the requirements under paragraph (c) or a qualified refurbished
data center has met the requirements under paragraph (d). The certification must provide
the following information regarding each qualified data center or qualified refurbished data
center:

(i) the total square footage amount;

(ii) the total amount of construction or refurbishment costs and the total amount of
qualifying investments in enterprise information technology equipment and computer
software; and

(iii) the beginning and ending of the applicable period under either paragraph (c) or (d)
in which the qualifying expenditures and purchases under item (ii) were made, but in no
case shall the period begin before July 1, 2012;

(2) Any refund for sales tax paid on qualifying purchases under this subdivision must
not be issued unless the commissioner of revenue has received the certification required
under clause (1) either from the commissioner of employment and economic development
or the qualified data center or qualified refurbished data center claiming the refund; and

(3) The commissioner of employment and economic development must annually notify
the commissioner of revenue of the qualified data centers that are projected to meet the
requirements under paragraph (c) and the qualified refurbished data centers that are projected
to meet the requirements under paragraph (d) in each of the next four years. The notification
must provide the information required under clause (1), items (i) to (iii), for each qualified
data center or qualified refurbished data center.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2018.
new text end

Sec. 10.

Minnesota Statutes 2016, section 297I.05, subdivision 7, is amended to read:

Subd. 7.

Nonadmitted insurance premium tax.

(a) A tax is imposed on surplus lines
brokers. The rate of tax is equal to three percent of the gross premiums less return premiums
paid by an insured whose home state is Minnesota.

(b) A tax is imposed on a person, firm, corporation, or purchasing group as defined in
section 60E.02, or any member of a purchasing group, that procures insurance directly from
a nonadmitted insurer. The rate of tax is equal to deleted text begin two deleted text end new text begin three new text end percent of the gross premiums
less return premiums paid by an insured whose home state is Minnesota.

(c) No state other than the home state of an insured may require any premium tax payment
for nonadmitted insurance. When Minnesota is the home state of the insured, as provided
under section 297I.01, 100 percent of the gross premiums are taxable in Minnesota with no
allocation of the tax to other states.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for nonadmitted insurance policies that
go into effect after December 31, 2018.
new text end

ARTICLE 5

TOBACCO TAX MODIFICATIONS

Section 1.

Minnesota Statutes 2016, section 270C.722, subdivision 1, is amended to read:

Subdivision 1.

Notice of revocation; hearings.

(a) If deleted 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, 2018.
new text end

Sec. 2.

Minnesota Statutes 2016, 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 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, 2018.
new text end

Sec. 3.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to
read:

new text begin Subd. 6a. new text end

new text begin Consumable material. new text end

new text begin "Consumable material" means any liquid nicotine
solution or other material containing nicotine that is depleted as a vapor product is used.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 4.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to
read:

new text begin Subd. 7a. new text end

new text begin Consumer packaging. new text end

new text begin "Consumer packaging" means any container of vapor
product that is of an appropriate size for sale to a consumer.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 5.

Minnesota Statutes 2016, section 297F.01, subdivision 9a, is amended to read:

Subd. 9a.

Invoice.

"Invoice" means a detailed list of cigarettes and tobacco products
purchased or sold in this state that contains the following information:

(1) name of seller;

(2) name of purchaser;

(3) date of sale;

(4) invoice number;

(5) itemized list of goods sold including brands of cigarettes and number of cartons of
each brand, unit price, and identification of tobacco products by name, quantity, and unit
price; deleted text begin and
deleted text end

(6) any rebates, discounts, or other reductions deleted text begin . deleted text end new text begin ; and
new text end

new text begin (7) the weight or volume of the consumable material and concentration level of nicotine
of each vapor product sold.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for invoices issued for vapor products
purchased or sold after December 31, 2018.
new text end

Sec. 6.

Minnesota Statutes 2016, section 297F.01, subdivision 10, is amended to read:

Subd. 10.

Manufacturer.

"Manufacturer" means a person who produces and sells
cigarettes or tobacco products new text begin and includes a manufacturer of vapor products new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 7.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to
read:

new text begin Subd. 10c. new text end

new text begin Manufacturer of vapor products. new text end

new text begin "Manufacturer of vapor products" means
a person who makes, modifies, mixes, fabricates, assembles, processes, repacks, or relabels
a vapor product in Minnesota to sell.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 8.

Minnesota Statutes 2016, 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 461 deleted text end
new text begin located in this state new text end engaged deleted text begin in this state deleted 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, 2018.
new text end

Sec. 9.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to
read:

new text begin Subd. 16a. new text end

new text begin Sales price of vapor products. new text end

new text begin (a) "Sales price of vapor products" means
the price at which a distributor or retailer purchases a vapor product or the price at which
a subjobber purchases vapor products from a manufacturer of vapor products.
new text end

new text begin (b) For the purposes of section 297F.05, subdivision 3b, paragraph (a), clause (5), "sales
price of vapor product" means the price at which the manufacturer sells the product minus
a retailer markup equal to ten percent of that price.
new text end

new text begin (c) If a vapor product described in section 297F.01, subdivision 22b, paragraph (b),
includes a cartridge, bottle, or other package of nicotine solution which is available for
purchase as a separate item by the distributor, retailer, subjobber, or consumer, then the
price at which the vapor product is purchased or sold for purposes of paragraphs (a) and (b)
is limited to the usual price, without regard to any discount or reduction, at which the
cartridge, bottle, or other package of nicotine solution is separately sold to a distributor,
retailer, subjobber, or consumer.
new text end

new text begin (d) Sales price of vapor products includes the applicable federal excise tax, freight
charges, and packaging costs, regardless of whether they were included in the purchase
price, but does not include the tax imposed under section 297F.05, subdivision 3b.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for vapor products subject to tax after
December 31, 2018.
new text end

Sec. 10.

Minnesota Statutes 2016, section 297F.01, subdivision 17, is amended to read:

Subd. 17.

Stamp.

"Stamp" means the adhesive stamp supplied by the commissioner of
revenue for use on cigarette packages new text begin or packages of moist snuff or other tobacco products
new text end or any other indicia adopted by the commissioner to indicate that the tax has been paid.

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 2016, section 297F.01, subdivision 19, is amended to read:

Subd. 19.

Tobacco products.

(a) "Tobacco products" means any product containing,
made, or derived from tobacco that is intended for human consumption, whether chewed,
smoked, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by any other means, or
any component, part, or accessory of a tobacco product, including, but not limited to, cigars;
cheroots; stogies; periques; granulated, plug cut, crimp cut, ready rubbed, and other smoking
tobacco; snuff; snuff flour; cavendish; plug and twist tobacco; fine-cut and other chewing
tobacco; shorts; refuse scraps, clippings, cuttings and sweepings of tobacco, and other kinds
and forms of tobacco; but does not include cigarettes as defined in this section. new text begin Tobacco
products includes vapor products. new text end Tobacco products excludes any tobacco product that has
been approved by the United States Food and Drug Administration for sale as a tobacco
cessation product, as a tobacco dependence product, or for other medical purposes, and is
being marketed and sold solely for such an approved purpose.

(b) Except for the imposition of tax under section 297F.05, subdivisions 3 and 4, tobacco
products includes a premium cigar, as defined in subdivision 13a.

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.

Minnesota Statutes 2016, section 297F.01, subdivision 20, is amended to read:

Subd. 20.

Tobacco products distributor.

new text begin (a) new text end "Tobacco products distributor" means deleted text begin any
of the following deleted text end :

(1) a person engaged in the business of selling tobacco products in this state who brings,
or causes to be brought, into this state from outside the state any tobacco products for sale; new text begin
or
new text end

(2) deleted text begin a person who makes, manufactures, or fabricates tobacco products in this state for
sale in this state;
deleted text end

deleted text begin (3) deleted text end a person engaged in the business of selling tobacco products outside this state who
ships or transports tobacco products to retailers in this state, to be sold by those retailers.

new text begin (b) "Tobacco products distributor" includes a person who makes, manufactures, or
fabricates tobacco products, other than vapor products, in this state for sale in this state.
new text end

new text begin (c) "Tobacco products distributor" includes a manufacturer of vapor products only to
the extent that the manufacturer brings tobacco products into this state for use other than in
manufacturing vapor products.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 13.

Minnesota Statutes 2016, section 297F.01, subdivision 21, is amended to read:

Subd. 21.

Tobacco products subjobber.

"Tobacco products subjobber" means new text begin :
new text end

new text begin (1) new text end a person, other than a manufacturer or distributor, who buys new text begin , new text end from a new text begin manufacturer
of vapor products or a new text end distributor new text begin , new text end tobacco products upon which the tax imposed by this
chapter has been paid and sells them to persons other than the ultimate consumers deleted text begin , deleted text end new text begin ; new text end and

new text begin (2) new text end any licensed distributor who delivers, sells, or distributes tobacco products upon
which the tax imposed by this chapter has been paid from a place of business other than
that licensed in the distributor's license.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 14.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision
to read:

new text begin Subd. 22b. new text end

new text begin Vapor products. new text end

new text begin (a) "Vapor products" means any cartridge, bottle, or other
package that contains nicotine made or derived from tobacco, that is in a solution that is
consumed, or meant to be consumed, through the use of a heating element, power source,
electronic circuit, or other electronic, chemical, or mechanical means that produces vapor
from the nicotine. This paragraph expires December 31, 2018.
new text end

new text begin (b) Beginning January 1, 2019, "vapor products" means any cartridge, bottle, or other
package that contains nicotine, including nicotine produced from sources other than tobacco,
that is in a solution that is consumed, or meant to be consumed, through the use of a heating
element, power source, electronic circuit, or other electronic, chemical, or mechanical means
that produces vapor from the nicotine.
new text end

new text begin (c) Vapor products includes any electronic cigarette, electronic cigar, electronic cigarillo,
electronic pipe, or similar product or device, and any batteries, heating elements, or other
components, parts, or accessories sold with and meant to be used in the consumption of the
nicotine solution.
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. 15.

Minnesota Statutes 2016, section 297F.03, subdivision 1, is amended to read:

Subdivision 1.

Selling without license illegal.

No person shall engage in the business
of a new text begin manufacturer of vapor products, new text end distributor new text begin , new text end or subjobber at any place of business
without first having received a license from the commissioner to engage in that business at
that place of business.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 16.

Minnesota Statutes 2016, section 297F.03, subdivision 2, is amended to read:

Subd. 2.

Form of application.

Every application for a cigarette deleted text begin or deleted text end new text begin , new text end tobacco products new text begin ,
or manufacturer of vapor products new text end license shall be made on a form prescribed by the
commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 17.

Minnesota Statutes 2016, section 297F.03, subdivision 3, is amended to read:

Subd. 3.

Place of application.

A separate application for a distributor's license new text begin or a
manufacturer of vapor products license new text end shall be made for each place of business at which
a distributor proposes to engage in business new text begin or a manufacturer proposes to manufacture
vapor products new text end .

A separate application for a subjobber's license may be made by a licensed distributor
for each place of business, other than that licensed in the distributor's license, to which the
distributor sells or distributes stamped cigarettes or tobacco products.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 18.

Minnesota Statutes 2016, 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 $300 deleted text end new text begin $500 new text end . Each application for a cigarette subjobber's
license must be accompanied by a fee of deleted text begin $24 deleted text end new text begin $100 new 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, 2018.
new text end

Sec. 19.

Minnesota Statutes 2016, 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 $75 deleted text end new text begin $500 new text end . Each application for a
tobacco products subjobber's license must be accompanied by a fee of deleted text begin $20 deleted text end new text begin $100 new 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, 2018.
new text end

Sec. 20.

Minnesota Statutes 2016, section 297F.03, is amended by adding a subdivision
to read:

new text begin Subd. 6a. new text end

new text begin License fees, vapor products. new text end

new text begin Each application for a manufacturer of vapor
products license must be accompanied by a fee equal to the fee for a tobacco products
distributor license under subdivision 6. A manufacturer of vapor products is not required
to obtain a distributor license under subdivision 6 to sell vapor products manufactured by
the licensee and sold in consumer packaging to a tobacco products distributor, a tobacco
products subjobber, or a retailer.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 21.

Minnesota Statutes 2016, section 297F.03, subdivision 7, is amended to read:

Subd. 7.

Issuance of license.

The commissioner, upon receipt of the application in proper
form, and payment of the license fee required by this chapter, shall, unless otherwise provided
by this chapter, issue the applicant a license in the form prescribed by the commissioner.
The license permits the applicant to engage in business as a new text begin manufacturer of vapor products, new text end
distributor new text begin , new text end or subjobber at the place of business shown in the application.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 22.

Minnesota Statutes 2016, section 297F.04, subdivision 1, is amended to read:

Subdivision 1.

Powers of commissioner.

The commissioner may revoke or suspend the
license or licenses of any new text begin manufacturer of vapor products, new text end distributor new text begin , new text end or subjobber 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 January 1, 2019.
new text end

Sec. 23.

Minnesota Statutes 2016, section 297F.04, subdivision 1, is amended to read:

Subdivision 1.

Powers of commissioner.

The commissioner may revoke deleted text begin or deleted text end new text begin , new text end suspend new text begin ,
or refuse to renew new text end the license or licenses of any distributor or subjobber new 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, 2018.
new text end

Sec. 24.

Minnesota Statutes 2016, section 297F.04, subdivision 2, is amended to read:

Subd. 2.

Refusal to issue or renew; revocation.

The commissioner must not issue or
renew a license under this chapter, and may revoke a license under this chapter, if the
applicant or licensee:

(1) owes $500 or more in delinquent taxes as defined in section 270C.72, subdivision
2;

(2) after demand, has not filed tax returns required by the commissioner;

(3) had a deleted text begin cigarette or tobacco deleted text end license new text begin under this chapter new text end revoked by the commissioner
within the past two years;

(4) had a sales and use tax permit revoked by the commissioner within the past two
years; or

(5) has been convicted of a crime involving cigarettes, including but not limited to:
selling stolen cigarettes or tobacco products, receiving stolen cigarettes or tobacco products,
or involvement in the smuggling of cigarettes or tobacco products.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 25.

Minnesota Statutes 2017 Supplement, section 297F.05, subdivision 3, is amended
to read:

Subd. 3.

Rates; tobacco products.

(a) Except as provided in paragraphs (b) and (c) and
deleted text begin subdivision deleted text end new text begin subdivisions new text end 3a new text begin and 3b new text end , a tax is imposed upon all tobacco products in this state
and upon any person engaged in business as a distributor, at the rate of 95 percent of the
wholesale sales price of the tobacco products. The tax is imposed at the time the distributor:

(1) brings, or causes to be brought, into this state from outside the state tobacco products
for sale;

(2) makes, manufactures, or fabricates tobacco products in this state for sale in this state;
or

(3) ships or transports tobacco products to retailers in this state, to be sold by those
retailers.

(b) A tax equal to the greater of the tax imposed under paragraph (a) or a minimum tax
equal to the rate imposed on a pack of 20 cigarettes weighing not more than three pounds
per thousand, as established under subdivision 1, is imposed on each container of moist
snuff weighing not more than 1.2 ounces. When more than one container subject to tax
under this paragraph is packaged together, each container is subject to the minimum tax.

(c) Except as provided in paragraph (b), a tax equal to the greater of the tax imposed
under paragraph (a) or a minimum tax equal to the rate imposed on a pack of 20 cigarettes
weighing not more than three pounds per thousand, as established under subdivision 1,
multiplied by the number of ounces of moist snuff in the container, divided by 1.2, is imposed
on each container of moist snuff weighing more than 1.2 ounces.

(d) For purposes of this subdivision, a "container" means a consumer-size can, package,
or other container that is marketed or packaged for sale to a retail purchaser.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 26.

Minnesota Statutes 2016, section 297F.05, is amended by adding a subdivision
to read:

new text begin Subd. 3b. new text end

new text begin Rates; vapor products. new text end

new text begin (a) In lieu of the tax imposed under subdivision 3, a
tax is imposed upon all vapor products in this state equal to:
new text end

new text begin (1) in the case of a Minnesota distributor who brings, or causes to be brought, vapor
products into this state, 95 percent of the sales price of vapor products paid by the distributor;
new text end

new text begin (2) in the case of a distributor who sells vapor products from outside this state to a
retailer, 95 percent of the sales price of vapor products paid by the retailer;
new text end

new text begin (3) in the case of a manufacturer of vapor products who sells the manufactured product
to retailers or subjobbers, 95 percent of the sales price of vapor products paid by the retailer
or subjobber;
new text end

new text begin (4) in the case of a Minnesota distributor who purchases vapor products from a
manufacturer of vapor products, 95 percent of the sales price of vapor products paid by the
distributor; and
new text end

new text begin (5) in the case of a manufacturer of vapor products who is also a retailer who sells the
manufactured product to consumers, 95 percent of the sales price of vapor products.
new text end

new text begin (b) The tax under this subdivision is imposed:
new text end

new text begin (1) on the distributor at the time the vapor products in consumer packaging are brought
into the state or received by the distributor who brings, or causes to be brought, into this
state the vapor products for sale in this state;
new text end

new text begin (2) on the distributor at the time the distributor ships or transports the vapor products in
consumer packaging from outside this state to retailers in this state;
new text end

new text begin (3) on the manufacturer of vapor products at the time the vapor products are sold to a
retailer or subjobber;
new text end

new text begin (4) on the distributor at the time a Minnesota distributor purchases the vapor products
in consumer packaging that were manufactured by a Minnesota manufacturer of vapor
products; and
new text end

new text begin (5) on the manufacturer of vapor products who is also a retailer of vapor products, at
the time the vapor products manufactured in this state are sold to the consumer.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for vapor products bought, sold, or
manufactured in Minnesota after December 31, 2018.
new text end

Sec. 27.

Minnesota Statutes 2016, section 297F.06, is amended by adding a subdivision
to read:

new text begin Subd. 6. new text end

new text begin Exempt sales of vapor products to licensed manufacturers of vapor
products. new text end

new text begin (a) A tobacco products distributor or manufacturer of vapor products, who at the
time of sale accepts in good faith a valid exemption certificate from a purchaser that is a
licensed manufacturer of vapor products, may sell vapor products in consumer packaging
containing more than 50 milliliters of nicotine solution to the purchaser exempt from the
tax imposed under section 297F.05, subdivision 3b.
new text end

new text begin (b) An exemption certificate is valid if it:
new text end

new text begin (1) is substantially in the form prescribed by the commissioner;
new text end

new text begin (2) bears the name and address of the purchaser;
new text end

new text begin (3) indicates the manufacturer of vapor products identification number issued to the
purchaser by the commissioner;
new text end

new text begin (4) is signed by the purchaser if it is in paper form, or meets the requirements of section
270C.304 if it is in electronic form; and
new text end

new text begin (5) indicates that the purchaser:
new text end

new text begin (i) intends to use the product to manufacture vapor products;
new text end

new text begin (ii) agrees to pay the applicable tax on the finished manufactured vapor products; and
new text end

new text begin (iii) agrees to pay the applicable tax if the purchaser does not use the product to
manufacture vapor product, but sells the product to a consumer or retailer.
new text end

new text begin (c) For determining the tax due under paragraph (b), clause (5), item (iii), any product
subject to tax is treated as if it was manufactured by the purchaser.
new text end

new text begin (d) A purchaser may use a blanket exemption certificate for continuing purchases. A
purchaser using a blanket exemption certificate must update the certificate as needed to
accurately reflect the information required under paragraph (b).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 28.

Minnesota Statutes 2016, section 297F.08, subdivision 8a, is amended to read:

Subd. 8a.

Revolving account.

A deleted text begin cigarette deleted text end tax stamp revolving account is created. The
commissioner shall use the amounts in this fund to purchase stamps for resale. The
commissioner shall charge distributors for the tax value of the stamps they receive along
with the commissioner's cost to purchase the stamps and ship them to the distributor. The
stamp purchase and shipping costs recovered must be credited to the revolving account and
are appropriated to the commissioner for the further purchases and shipping costs. The
revolving account is initially funded by a $40,000 transfer from the Department of Revenue.

new text begin EFFECTIVE DATE. new text end

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

Sec. 29.

new text begin [297F.081] TOBACCO PRODUCTS STAMPS.
new text end

new text begin Subdivision 1. new text end

new text begin Stamp affixed by distributor. new text end

new text begin (a) Before delivering, or causing to be
delivered, a package of moist snuff to a distributor, subjobber, retailer, or consumer in this
state, a distributor in this state must firmly affix to each package of moist snuff a tax stamp
obtained from the commissioner.
new text end

new text begin (b) When moist snuff is shipped into this state by any distributor from outside this state
to a retailer or subjobber, the appropriate stamp must be affixed to the package at the time
the package enters the state.
new text end

new text begin Subd. 2. new text end

new text begin Stamps; design; printing. new text end

new text begin The commissioner shall adopt the design of the
moist snuff stamp. At least one stamp must be designed for application to packages of moist
snuff destined for retail sale on an Indian reservation that is a party to an agreement under
section 270C.19, subdivision 2, and only to those packages. The commissioner shall arrange
for the printing of stamps in such amounts and denominations as the commissioner deems
necessary.
new text end

new text begin Subd. 3. new text end

new text begin Deposit of proceeds. new text end

new text begin The commissioner shall use the amounts appropriated
by law to purchase stamps for resale. The commissioner shall charge the purchasers for the
commissioner's cost to purchase the stamps along with the tax value of the stamps plus
shipping costs. The tax value of the stamps must be deposited in the general fund. The
portion of the charge to the purchaser that represents the commissioner's cost to purchase
the stamps and the shipping costs must be deposited in the revolving stamp fund under
section 297F.08, subdivision 8a.
new text end

new text begin Subd. 4. new text end

new text begin Sale of stamps. new text end

new text begin (a) The commissioner shall sell moist snuff stamps only to
persons licensed as a tobacco products distributor.
new text end

new text begin (b) The commissioner may prescribe the method of shipment of the stamps to the
distributor.
new text end

new text begin (c) The commissioner shall charge the purchaser for the commissioner's cost to purchase
the stamps along with the tax value plus shipping costs.
new text end

new text begin (d)(1) The commissioner may sell moist snuff stamps on a credit basis to a distributor
unless:
new text end

new text begin (i) the distributor has been licensed by the commissioner as a tobacco products distributor
for less than one year;
new text end

new text begin (ii) the distributor has failed, without reasonable cause, to timely file tax returns or
reports required to be filed with the commissioner under a law administered by the
commissioner at any time during the prior 24 months; or
new text end

new text begin (iii) the distributor has failed, without reasonable cause, to timely pay taxes and fees
payable to the commissioner under a law administered by the commissioner at any time
during the prior 24 months.
new text end

new text begin (2) A distributor may purchase on a credit basis in any calendar month no more than the
number of stamps needed to affix to 15 percent of the number of moist snuff packages
reported to the commissioner as sold by the distributor during the previous 12-month period.
new text end

new text begin (3) A distributor who purchases stamps on a credit basis must pay the cost of the stamps
determined under paragraph (c) to the commissioner no later than the due date of the return
required under section 297F.09, subdivision 2, for the month that the order for the stamps
was received by the commissioner.
new text end

new text begin Subd. 5. new text end

new text begin Tax stamping machines. new text end

new text begin The commissioner may require any person licensed
as a distributor to stamp packages of moist snuff with a tax stamping machine, approved
by the commissioner, which shall be provided by the distributor. The commissioner shall
also supervise and check the operation of the machines. If the commissioner finds that a
stamping machine is not affixing a legible stamp on the package, the commissioner may
order the distributor to immediately cease the stamping process until the machine is
functioning properly.
new text end

new text begin Subd. 6. new text end

new text begin Resale or transfer of stamps prohibited. new text end

new text begin (a) No distributor shall resell or
transfer any moist snuff stamps purchased by the distributor from the commissioner. A
distributor may transfer another state's stamped moist snuff to another distributor for the
purpose of resale in the other state.
new text end

new text begin (b) A distributor who has on hand any moist snuff stamps when its tobacco products
distributor license is revoked, canceled, or not renewed may return the stamps to the
commissioner and receive a refund of the amount paid for the stamps.
new text end

new text begin (c) Moist snuff stamps that have become mutilated or unfit for use, or are affixed to
moist snuff packages being returned to the manufacturer, or are affixed to packages of moist
snuff that, or the contents of which, have become damaged and unfit for sale, shall be
replaced by the commissioner, upon application by the distributor owning the stamps or
moist snuff if the commissioner determines the stamps have not evidenced a taxable
transaction.
new text end

new text begin Subd. 7. new text end

new text begin Rulemaking for stamps on other tobacco products. new text end

new text begin The commissioner may
promulgate rules that require tax stamps to be affixed to tobacco products other than moist
snuff. The rules may apply to one or more classes or types of tobacco product.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Subdivision 1 is effective for moist snuff delivered, caused to be
delivered, or shipped after June 30, 2020. Subdivisions 2 to 7 are effective January 1, 2020.
new text end

Sec. 30.

Minnesota Statutes 2016, section 297F.09, subdivision 2, is amended to read:

Subd. 2.

Monthly return; tobacco products distributor.

On or before the 18th day of
each calendar month, a distributor with a place of business in this state new text begin or a manufacturer
of vapor products new text end shall file a return with the commissioner showing the quantity and
wholesale sales price new text begin or sales price of vapor product new text end of each tobacco product:

(1) brought, or caused to be brought, into this state for sale; and

(2) made, manufactured, or fabricated in this state for sale in this state, during the
preceding calendar month.

Every licensed distributor outside this state shall in like manner file a return showing
the quantity and wholesale sales price new text begin or sales of vapor product new text end of each tobacco product
shipped or transported to retailers in this state to be sold by those retailers, during the
preceding calendar month. Returns must be made in the form and manner prescribed by the
commissioner and must contain any other information required by the commissioner. The
return must be accompanied by a remittance for the full tax liability shown. For distributors
subject to the accelerated tax payment requirements in subdivision 10, the return for the
May liability is due two business days before June 30th of the year and the return for the
June liability is due on or before August 18th of the year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes imposed on vapor products
brought into the state or manufactured in the state after December 31, 2018.
new text end

Sec. 31.

Minnesota Statutes 2016, section 297F.09, subdivision 7, is amended to read:

Subd. 7.

Electronic payment.

A cigarette or tobacco products distributor new text begin or a
manufacturer of vapor products new text end having a liability of $10,000 or more during a fiscal year
ending June 30 must remit all liabilities in all subsequent calendar years by electronic means.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 32.

Minnesota Statutes 2016, section 297F.09, subdivision 10, is amended to read:

Subd. 10.

Accelerated tax payment; cigarette or tobacco products distributor new text begin or
manufacturer of vapor products new text end .

A cigarette or tobacco products distributor new text begin or a
manufacturer of vapor products new text end having a liability of $250,000 or more during a fiscal year
ending June 30, shall remit the June liability for the next year in the following manner:

(a) Two business days before June 30 of the year, the distributor new text begin or manufacturer new text end shall
remit the actual May liability and 81.4 percent of the estimated June liability to the
commissioner and file the return in the form and manner prescribed by the commissioner.

(b) On or before August 18 of the year, the distributor new text begin or manufacturer new text end shall submit a
return showing the actual June liability and pay any additional amount of tax not remitted
in June. A penalty is imposed equal to ten percent of the amount of June liability required
to be paid in June, less the amount remitted in June. However, the penalty is not imposed
if the amount remitted in June equals the lesser of:

(1) 81.4 percent of the actual June liability; or

(2) 81.4 percent of the preceding May liability.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 33.

Minnesota Statutes 2016, section 297F.12, subdivision 3, is amended to read:

Subd. 3.

Manufacturers.

new text begin (a) new text end A manufacturer of tobacco products as defined by this
chapter shall report in the form and manner prescribed by the commissioner all sales of
tobacco products to Minnesota licensed distributors, subjobbers, retailers, or to any locations
within the state. The report is due on the 18th day of the month following the reporting
period.

new text begin (b) A manufacturer of vapor products must file a report with the commissioner no later
than the 18th day of each month identifying all vapor products placed into consumer
packaging and all sales of vapor products made by the manufacturer during the preceding
month. The report must identify the names and addresses of the persons within the state to
whom shipments to tobacco products distributors, subjobbers, or retailers were made, and
the quantity of vapor products manufactured or sold by type of product, brand, and size.
The reports must also include information related to sales and purchases of tax exempt vapor
products. If the manufacturer is also a retailer, the report must include the quantity of vapor
products sold to customers by type of product, brand, and size.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 34.

Minnesota Statutes 2016, section 297F.13, subdivision 2, is amended to read:

Subd. 2.

Tobacco products distributor.

(a) A distributor shall keep at each licensed
place of business complete and accurate records for that place of business, including itemized
invoices of tobacco products held, purchased, manufactured, brought in or caused to be
brought in from outside the state, or shipped or transported to retailers in this state, and all
sales of tobacco products made, except sales to the ultimate consumer. new text begin These records must
show the names and addresses of purchasers, the inventory of all moist snuff stamps affixed
and unaffixed to packages of moist snuff, and all moist snuff on hand at the close of each
period for which a return is required, and any other pertinent papers and documents relating
to the purchase, sale, or disposition of moist snuff.
new text end

(b) When a licensed distributor sells tobacco products exclusively to the ultimate
consumer at the address given in the license, no invoice of those sales is required, but
itemized invoices must be made of all tobacco products transferred to other retail outlets
owned or controlled by that licensed distributor.

(c) All books, records, and other documents required by this chapter must be preserved
for a period of at least 3-1/2 years after the date of the documents or the date of the entries
appearing in the records, unless the commissioner authorizes in writing their destruction or
disposal at an earlier date.

(d) To determine whether the distributor is in compliance with the provisions of this
chapter, at any time during usual business hours the commissioner, or duly authorized agents
or employees, may enter a place of business of a distributor, without a search warrant, and
inspect the premises, the records required to be kept under this chapter, and the tobacco
products in that place of business. If the commissioner, or an agent or employee of the
commissioner, is denied free access or is hindered or interfered with in making the
examination, the commissioner may revoke the distributor's license.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for moist snuff purchased, sold, or
disposed of after June 30, 2020.
new text end

Sec. 35.

Minnesota Statutes 2016, section 297F.13, is amended by adding a subdivision
to read:

new text begin Subd. 2a. new text end

new text begin Manufacturers of vapor products. new text end

new text begin (a) A manufacturer of vapor products
shall keep at each licensed place of business complete and accurate records for that place
of business, including itemized invoices of vapor products held, purchased, manufactured,
brought in or caused to be brought in from outside the state, or shipped or transported to
distributors, subjobbers, or retailers in this state.
new text end

new text begin (b) A manufacturer of vapor products who is also a retailer must keep records of all sales
made to the ultimate customer. These records must include cash register tapes or other
similar electronic records and any other records which involve purchases or sales of vapor
products which are required to be kept by a retailer who makes sales subject to tax under
chapter 297A.
new text end

new text begin (c) When a manufacturer of vapor products sells vapor products exclusively to the
ultimate consumer at the address given in the license, no invoice of those sales is required,
but itemized invoices must be made of all vapor products transferred to other retail outlets
owned or controlled by that manufacturer.
new text end

new text begin (d) All books, records, and other documents required by this subdivision must be
preserved for a period of at least 3-1/2 years after the date of the documents or the date of
the entries appearing in the records, unless the commissioner authorizes in writing the
destruction or disposal at an earlier date.
new text end

new text begin (e) To determine whether the manufacturer is in compliance with the provisions of this
chapter, at any time during usual business hours the commissioner, or duly authorized agents
or employees, may enter a place of business of a manufacturer, without a search warrant,
and inspect the premises, the records required to be kept under this chapter, and the vapor
products in that place of business. If the commissioner, or an agent or employee of the
commissioner, is denied free access or is hindered or interfered with in making the
examination, the commissioner may revoke the manufacturer's license.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 36.

Minnesota Statutes 2016, 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 invoice new 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 longer new 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, 2018.
new text end

Sec. 37.

Minnesota Statutes 2016, section 297F.15, subdivision 9, is amended to read:

Subd. 9.

Physical inventory.

The commissioner or the commissioner's authorized agents
may, as considered necessary, require a cigarette or tobacco products distributor new text begin or a
manufacturer of vapor products new text end to furnish a physical inventory of all cigarettes or tobacco
products in stock. The inventory must contain the information that the commissioner requests
and must be certified by an officer of the corporation.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 38.

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 notifies the
licensing authority that the license holder has been in possession of contraband cigarettes
or tobacco products 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. 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" is 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 any unpaid tax liabilities of the applicant owed to the
commissioner as well as the tax on any 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 any 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 subdivision 1, paragraph (b), and
subdivision 3. Notice of intent to require revocation from the commissioner must be sent
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 licenses revoked under this subdivision in a five-year period by all 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 pursuant to
subdivision 1 to revoke a license, 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 within 20 days' notice 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 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 final determination of 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, 2018.
new text end

Sec. 39.

Minnesota Statutes 2016, 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 $100 for the first violation, $2,000 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, 2018.
new text end

Sec. 40.

Minnesota Statutes 2016, 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 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, 2018.
new text end

Sec. 41.

Minnesota Statutes 2016, section 297F.20, subdivision 5, is amended to read:

Subd. 5.

Unstamped cigarettes new text begin or moist snuff new text end ; presumption.

(a) Except as provided
in paragraph (b), whenever a package of cigarettes new text begin or moist snuff new text end is found in the place of
business or in the possession of any person without a proper stamp affixed as required by
this chapter, it is presumed that those cigarettes new text begin or moist snuff new text end are kept there or held by that
person illegally.

(b) This presumption does not apply to:

(1) cigarettes new text begin or moist snuff new text end in the place of business or in the possession of a licensed
distributor;

(2) cigarettes new text begin or moist snuff new text end in the possession of a common carrier or sleeping car
company engaged in interstate commerce;

(3) cigarettes new text begin or moist snuff new text end held in a public warehouse of first destination in this state,
in the unbroken, original shipping containers, subject to delivery or shipping instructions
from the manufacturer or a distributor;

(4) cigarettes new text begin or moist snuff new text end in the possession of a person other than a distributor in
quantities of 200 cigarettes or less new text begin or $50 or less of moist snuff new text end , when those cigarettes new text begin or
moist snuff new text end have had the individual packages or seals broken, and when they are intended
for personal use and not to be sold or offered for sale;

(5) cigarettes new text begin or moist snuff new text end sold under circumstances in which the tax cannot legally
be imposed because of the laws or Constitution of the United States.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for moist snuff possessed after December
31, 2020.
new text end

Sec. 42.

Minnesota Statutes 2016, section 297F.20, subdivision 6, is amended to read:

Subd. 6.

Unstamped cigarettes; untaxed tobacco products.

(a) A person, other than
a licensed distributor new text begin , a licensed manufacturer of vapor products, new text end or a consumer, who
possesses, receives, or transports fewer than 5,000 unstamped cigarettes, or up to $350
worth of untaxed tobacco products is guilty of a misdemeanor.

(b) A person, other than a licensed distributor new text begin , a licensed manufacturer of vapor products, new text end
or a consumer, who possesses, receives, or transports 5,000 or more, but fewer than 20,001
unstamped cigarettes, or more than $350 but less than $1,400 worth of untaxed tobacco
products is guilty of a gross misdemeanor.

(c) A person, other than a licensed distributor new text begin , a licensed manufacturer of vapor products, new text end
or a consumer, who possesses, receives, or transports more than 20,000 unstamped cigarettes,
or $1,400 or more worth of untaxed tobacco products is guilty of a felony.

(d) For purposes of this subdivision, an individual in possession of more than 4,999
unstamped cigarettes, or more than $350 worth of untaxed tobacco products, is presumed
not to be a consumer.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 43.

Minnesota Statutes 2016, section 297F.20, subdivision 6, is amended to read:

Subd. 6.

Unstamped cigarettes; untaxed tobacco products.

(a) A person, other than
a licensed distributor or a consumer, who possesses, receives, or transports fewer than 5,000
unstamped cigarettes, or up to $350 worth of untaxed tobacco products new text begin or unstamped moist
snuff new text end is guilty of a misdemeanor.

(b) A person, other than a licensed distributor or a consumer, who possesses, receives,
or transports 5,000 or more, but fewer than 20,001 unstamped cigarettes, or more than $350
but less than $1,400 worth of untaxed tobacco products new text begin or unstamped moist snuff new text end is guilty
of a gross misdemeanor.

(c) A person, other than a licensed distributor or a consumer, who possesses, receives,
or transports more than 20,000 unstamped cigarettes, or $1,400 or more worth of untaxed
tobacco products new text begin or unstamped moist snuff new text end is guilty of a felony.

(d) For purposes of this subdivision, an individual in possession of more than 4,999
unstamped cigarettes, or more than $350 worth of untaxed tobacco products new text begin or unstamped
moist snuff new text end , is presumed not to be a consumer.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for moist snuff possessed after December
31, 2020, or for moist snuff received or transported after June 30, 2020.
new text end

Sec. 44.

Minnesota Statutes 2016, section 297F.20, subdivision 7, is amended to read:

Subd. 7.

Sale of deleted text begin cigarette deleted text end packages with Indian stamp.

(a) A retailer doing business
off of an Indian reservation who sells or offers to sell more than 200 but fewer than 5,000
cigarettes new text begin or up to $350 worth of tobacco products new text end with Indian stamps is guilty of a
misdemeanor.

(b) A retailer doing business off of an Indian reservation who sells or offers to sell 5,000
or more, but fewer than 20,001 cigarettes new text begin or more than $350 but less than $1,400 worth of
tobacco products new text end with Indian stamps is guilty of a gross misdemeanor.

(c) A retailer doing business off of an Indian reservation who sells or offers to sell more
than 20,000 cigarettes new text begin or $1,400 or more worth of tobacco products new text end with Indian stamps is
guilty of a felony.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales of tobacco products, or offers
to sell tobacco products, after June 30, 2020.
new text end

Sec. 45.

Minnesota Statutes 2016, section 297F.20, subdivision 9, is amended to read:

Subd. 9.

Purchases from unlicensed sellers.

(a) No retailer or subjobber shall purchase
cigarettes or tobacco products from any person who is not licensed under section 297F.03
as a licensed distributor new text begin , manufacturer of vapor products, new text end or subjobber.

(b) A retailer or subjobber who purchases from an unlicensed seller fewer than 5,000
cigarettes or up to $350 worth of tobacco products is guilty of a misdemeanor.

(c) A retailer or subjobber who purchases from an unlicensed seller 5,000 or more, but
fewer than 20,001 cigarettes or more than $350 but less than $1,400 worth of tobacco
products is guilty of a gross misdemeanor.

(d) A retailer or subjobber who purchases from an unlicensed seller more than 20,000
cigarettes or $1,400 or more worth of tobacco products is guilty of a felony.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 46.

Minnesota Statutes 2016, 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, 2018.
new text end

Sec. 47.

Minnesota Statutes 2016, 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 new text begin or
manufacturer of vapor products new text end .

(j) Any cigarette packages or tobacco products offered for sale or held as inventory for
which there is not an invoice from a licensed seller 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) Vapor products purchased exempt from tax under section 297F.06, subdivision 6,
by a person other than a licensed manufacturer of vapor products.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 48.

Minnesota Statutes 2016, 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 seller deleted 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 so new 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, 2018.
new text end

Sec. 49.

Minnesota Statutes 2016, 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 new text begin or tobacco products new text end 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 deleted text begin clause deleted text end new text begin paragraph new text end (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 new text begin or tobacco products new text end 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 there is not an invoice from a licensed seller 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 EFFECTIVE DATE. new text end

new text begin The amendment to paragraph (a) is effective January 1, 2021.
The amendment to paragraph (h) is effective for packages of tobacco products offered for
sale or held as inventory after June 30, 2020.
new text end

Sec. 50.

Minnesota Statutes 2016, 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 inform deleted text end new text begin provide new text end the commissioner of revenue
deleted text begin of deleted 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, 2018.
new text end

Sec. 51. new text begin APPROPRIATIONS.
new text end

new text begin $417,000 in fiscal year 2019 is appropriated from the general fund to the commissioner
of revenue to carry out the provisions of this article. $462,000 in fiscal year 2020 and
$425,000 in fiscal year 2021 shall be added to the base appropriations to the Department
of Revenue.
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. 52. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2016, 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, 2018.
new text end

ARTICLE 6

PROPERTY TAX UPDATES

Section 1.

Minnesota Statutes 2017 Supplement, section 273.124, subdivision 13, is
amended to read:

Subd. 13.

Homestead application.

(a) A person who meets the homestead requirements
under subdivision 1 must file a homestead application with the county assessor to initially
obtain homestead classification.

(b) The commissioner shall prescribe the content, format, and manner of the homestead
application required to be filed under this chapter pursuant to section 270C.30. The
application must clearly inform the taxpayer that this application must be signed by all
owners who occupy the property or by the qualifying relative and returned to the county
assessor in order for the property to receive homestead treatment.

(c) Every property owner applying for homestead classification must furnish to the
county assessor the Social Security number new text begin or individual tax identification number new text end of each
occupant who is listed as an owner of the property on the deed of record, the name and
address of each owner who does not occupy the property, and the name and Social Security
number new text begin or individual tax identification number new text end of each owner's spouse. The application
must be signed by each owner who occupies the property and by each owner's spouse who
occupies the property, or, in the case of property that qualifies as a homestead under
subdivision 1, paragraph (c), by the qualifying relative.

If a property owner occupies a homestead, the property owner's spouse may not claim
another property as a homestead unless the property owner and the property owner's spouse
file with the assessor an affidavit or other proof required by the assessor stating that the
property qualifies as a homestead under subdivision 1, paragraph (e).

Owners or spouses occupying residences owned by their spouses and previously occupied
with the other spouse, either of whom fail to include the other spouse's name and Social
Security number new text begin or individual tax identification number new text end on the homestead application or
provide the affidavits or other proof requested, will be deemed to have elected to receive
only partial homestead treatment of their residence. The remainder of the residence will be
classified as nonhomestead residential. When an owner or spouse's name and Social Security
number new text begin or individual tax identification number new text end appear on homestead applications for two
separate residences and only one application is signed, the owner or spouse will be deemed
to have elected to homestead the residence for which the application was signed.

(d) If residential real estate is occupied and used for purposes of a homestead by a relative
of the owner and qualifies for a homestead under subdivision 1, paragraph (c), in order for
the property to receive homestead status, a homestead application must be filed with the
assessor. The Social Security number new text begin or individual tax identification number new text end of each relative
occupying the property and the name and Social Security number new text begin or individual tax
identification number new text end of the spouse of a relative occupying the property shall be required
on the homestead application filed under this subdivision. If a different relative of the owner
subsequently occupies the property, the owner of the property must notify the assessor
within 30 days of the change in occupancy. The Social Security number new text begin or individual tax
identification number new text end of a relative occupying the property or the spouse of a relative
occupying the property is private data on individuals as defined by section 13.02, subdivision
12, but may be disclosed to the commissioner of revenue, or, for the purposes of proceeding
under the Revenue Recapture Act to recover personal property taxes owing, to the county
treasurer.

(e) The homestead application shall also notify the property owners that if the property
is granted homestead status for any assessment year, that same property shall remain
classified as homestead until the property is sold or transferred to another person, or the
owners, the spouse of the owner, or the relatives no longer use the property as their
homestead. Upon the sale or transfer of the homestead property, a certificate of value must
be timely filed with the county auditor as provided under section 272.115. Failure to notify
the assessor within 30 days that the property has been sold, transferred, or that the owner,
the spouse of the owner, or the relative is no longer occupying the property as a homestead,
shall result in the penalty provided under this subdivision and the property will lose its
current homestead status.

(f) If a homestead application has not been filed with the county by December 15, the
assessor shall classify the property as nonhomestead for the current assessment year for
taxes payable in the following year, provided that the owner may be entitled to receive the
homestead classification by proper application under section 375.192.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for applications for homestead filed in
2018 and thereafter.
new text end

Sec. 2.

Minnesota Statutes 2016, section 273.124, subdivision 13c, is amended to read:

Subd. 13c.

Property lists.

In addition to lists of homestead properties, the commissioner
may ask the counties to furnish lists of all properties and the record owners. The Social
Security numbers new text begin , individual tax identification numbers, new text end and federal identification numbers
that are maintained by a county or city assessor for property tax administration purposes,
and that may appear on the lists retain their classification as private or nonpublic data; but
may be viewed, accessed, and used by the county auditor or treasurer of the same county
for the limited purpose of assisting the commissioner in the preparation of microdata samples
under section 270C.12. The commissioner shall use the information provided on the lists
as appropriate under the law, including for the detection of improper claims by owners, or
relatives of owners, under chapter 290A.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for homestead data provided to the
commissioner of revenue in 2019 and thereafter.
new text end

Sec. 3.

Minnesota Statutes 2017 Supplement, section 273.124, subdivision 13d, is amended
to read:

Subd. 13d.

Homestead data.

On or before April 30 each year beginning in 2007, each
county must provide the commissioner with the following data for each parcel of homestead
property by electronic means as defined in section 289A.02, subdivision 8:

(1) the property identification number assigned to the parcel for purposes of taxes payable
in the current year;

(2) the name and Social Security number new text begin or individual tax identification number new text end of each
occupant of homestead property who is the property owner or qualifying relative of a property
owner, and the spouse of the property owner who occupies homestead property or spouse
of a qualifying relative of a property owner who occupies homestead property;

(3) the classification of the property under section 273.13 for taxes payable in the current
year and in the prior year;

(4) an indication of whether the property was classified as a homestead for taxes payable
in the current year because of occupancy by a relative of the owner or by a spouse of a
relative;

(5) the property taxes payable as defined in section 290A.03, subdivision 13, for the
current year and the prior year;

(6) the market value of improvements to the property first assessed for tax purposes for
taxes payable in the current year;

(7) the assessor's estimated market value assigned to the property for taxes payable in
the current year and the prior year;

(8) the taxable market value assigned to the property for taxes payable in the current
year and the prior year;

(9) whether there are delinquent property taxes owing on the homestead;

(10) the unique taxing district in which the property is located; and

(11) such other information as the commissioner decides is necessary.

The commissioner shall use the information provided on the lists as appropriate under
the law, including for the detection of improper claims by owners, or relatives of owners,
under chapter 290A.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for homestead data provided to the
commissioner of revenue in 2019 and thereafter.
new text end

Sec. 4.

Minnesota Statutes 2016, section 273.124, subdivision 14, is amended to read:

Subd. 14.

Agricultural homesteads; special provisions.

(a) Real estate of less than ten
acres that is the homestead of its owner must be classified as class 2a under section 273.13,
subdivision 23, paragraph (a), if:

(1) the parcel on which the house is located is contiguous on at least two sides to (i)
agricultural land, (ii) land owned or administered by the United States Fish and Wildlife
Service, or (iii) land administered by the Department of Natural Resources on which in lieu
taxes are paid under sections 477A.11 to 477A.14;

(2) its owner also owns a noncontiguous parcel of agricultural land that is at least 20
acres;

(3) the noncontiguous land is located not farther than four townships or cities, or a
combination of townships or cities from the homestead; and

(4) the agricultural use value of the noncontiguous land and farm buildings is equal to
at least 50 percent of the market value of the house, garage, and one acre of land.

Homesteads initially classified as class 2a under the provisions of this paragraph shall
remain classified as class 2a, irrespective of subsequent changes in the use of adjoining
properties, as long as the homestead remains under the same ownership, the owner owns a
noncontiguous parcel of agricultural land that is at least 20 acres, and the agricultural use
value qualifies under clause (4). Homestead classification under this paragraph is limited
to property that qualified under this paragraph for the 1998 assessment.

(b)(i) Agricultural property shall be classified as the owner's homestead, to the same
extent as other agricultural homestead property, if all of the following criteria are met:

(1) the agricultural property consists of at least 40 acres including undivided government
lots and correctional 40's;

(2) the owner, the owner's spouse, or a grandchild, child, sibling, or parent of the owner
or of the owner's spouse, is actively farming the agricultural property, either on the person's
own behalf as an individual or on behalf of a partnership operating a family farm, family
farm corporation, joint family farm venture, or limited liability company of which the person
is a partner, shareholder, or member;

(3) both the owner of the agricultural property and the person who is actively farming
the agricultural property under clause (2), are Minnesota residents;

(4) neither the owner nor the spouse of the owner claims another agricultural homestead
in Minnesota; and

(5) neither the owner nor the person actively farming the agricultural property lives
farther than four townships or cities, or a combination of four townships or cities, from the
agricultural property, except that if the owner or the owner's spouse is required to live in
employer-provided housing, the owner or owner's spouse, whichever is actively farming
the agricultural property, may live more than four townships or cities, or combination of
four townships or cities from the agricultural property.

The relationship under this paragraph may be either by blood or marriage.

(ii) Agricultural property held by a trustee under a trust is eligible for agricultural
homestead classification under this paragraph if the qualifications in clause (i) are met,
except that "owner" means the grantor of the trust.

(iii) Property containing the residence of an owner who owns qualified property under
clause (i) shall be classified as part of the owner's agricultural homestead, if that property
is also used for noncommercial storage or drying of agricultural crops.

(iv) As used in this paragraph, "agricultural property" means class 2a property and any
class 2b property that is contiguous to and under the same ownership as the class 2a property.

(c) Noncontiguous land shall be included as part of a homestead under section 273.13,
subdivision 23, paragraph (a), only if the homestead is classified as class 2a and the detached
land is located in the same township or city, or not farther than four townships or cities or
combination thereof from the homestead. Any taxpayer of these noncontiguous lands must
notify the county assessor that the noncontiguous land is part of the taxpayer's homestead,
and, if the homestead is located in another county, the taxpayer must also notify the assessor
of the other county.

(d) Agricultural land used for purposes of a homestead and actively farmed by a person
holding a vested remainder interest in it must be classified as a homestead under section
273.13, subdivision 23, paragraph (a). If agricultural land is classified class 2a, any other
dwellings on the land used for purposes of a homestead by persons holding vested remainder
interests who are actively engaged in farming the property, and up to one acre of the land
surrounding each homestead and reasonably necessary for the use of the dwelling as a home,
must also be assessed class 2a.

(e) Agricultural land and buildings that were class 2a homestead property under section
273.13, subdivision 23, paragraph (a), for the 1997 assessment shall remain classified as
agricultural homesteads for subsequent assessments if:

(1) the property owner abandoned the homestead dwelling located on the agricultural
homestead as a result of the April 1997 floods;

(2) the property is located in the county of Polk, Clay, Kittson, Marshall, Norman, or
Wilkin;

(3) the agricultural land and buildings remain under the same ownership for the current
assessment year as existed for the 1997 assessment year and continue to be used for
agricultural purposes;

(4) the dwelling occupied by the owner is located in Minnesota and is within 30 miles
of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the 1997 floods,
and the owner furnishes the assessor any information deemed necessary by the assessor in
verifying the change in dwelling. Further notifications to the assessor are not required if the
property continues to meet all the requirements in this paragraph and any dwellings on the
agricultural land remain uninhabited.

(f) Agricultural land and buildings that were class 2a homestead property under section
273.13, subdivision 23, paragraph (a), for the 1998 assessment shall remain classified
agricultural homesteads for subsequent assessments if:

(1) the property owner abandoned the homestead dwelling located on the agricultural
homestead as a result of damage caused by a March 29, 1998, tornado;

(2) the property is located in the county of Blue Earth, Brown, Cottonwood, LeSueur,
Nicollet, Nobles, or Rice;

(3) the agricultural land and buildings remain under the same ownership for the current
assessment year as existed for the 1998 assessment year;

(4) the dwelling occupied by the owner is located in this state and is within 50 miles of
one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to a March 29,
1998, tornado, and the owner furnishes the assessor any information deemed necessary by
the assessor in verifying the change in homestead dwelling. For taxes payable in 1999, the
owner must notify the assessor by December 1, 1998. Further notifications to the assessor
are not required if the property continues to meet all the requirements in this paragraph and
any dwellings on the agricultural land remain uninhabited.

(g) Agricultural property of a family farm corporation, joint family farm venture, family
farm limited liability company, or partnership operating a family farm as described under
subdivision 8 shall be classified homestead, to the same extent as other agricultural homestead
property, if all of the following criteria are met:

(1) the property consists of at least 40 acres including undivided government lots and
correctional 40's;

(2) a shareholder, member, or partner of that entity is actively farming the agricultural
property;

(3) that shareholder, member, or partner who is actively farming the agricultural property
is a Minnesota resident;

(4) neither that shareholder, member, or partner, nor the spouse of that shareholder,
member, or partner claims another agricultural homestead in Minnesota; and

(5) that shareholder, member, or partner does not live farther than four townships or
cities, or a combination of four townships or cities, from the agricultural property.

Homestead treatment applies under this paragraph for property leased to a family farm
corporation, joint farm venture, limited liability company, or partnership operating a family
farm if legal title to the property is in the name of an individual who is a member, shareholder,
or partner in the entity.

(h) To be eligible for the special agricultural homestead under this subdivision, an initial
full application must be submitted to the county assessor where the property is located.
Owners and the persons who are actively farming the property shall be required to complete
only a one-page abbreviated version of the application in each subsequent year provided
that none of the following items have changed since the initial application:

(1) the day-to-day operation, administration, and financial risks remain the same;

(2) the owners and the persons actively farming the property continue to live within the
four townships or city criteria and are Minnesota residents;

(3) the same operator of the agricultural property is listed with the Farm Service Agency;

(4) a Schedule F or equivalent income tax form was filed for the most recent year;

(5) the property's acreage is unchanged; and

(6) none of the property's acres have been enrolled in a federal or state farm program
since the initial application.

The owners and any persons who are actively farming the property must include the
appropriate Social Security numbers new text begin or individual tax identification numbers new text end , and sign and
date the application. If any of the specified information has changed since the full application
was filed, the owner must notify the assessor, and must complete a new application to
determine if the property continues to qualify for the special agricultural homestead. The
commissioner of revenue shall prepare a standard reapplication form for use by the assessors.

(i) Agricultural land and buildings that were class 2a homestead property under section
273.13, subdivision 23, paragraph (a), for the 2007 assessment shall remain classified
agricultural homesteads for subsequent assessments if:

(1) the property owner abandoned the homestead dwelling located on the agricultural
homestead as a result of damage caused by the August 2007 floods;

(2) the property is located in the county of Dodge, Fillmore, Houston, Olmsted, Steele,
Wabasha, or Winona;

(3) the agricultural land and buildings remain under the same ownership for the current
assessment year as existed for the 2007 assessment year;

(4) the dwelling occupied by the owner is located in this state and is within 50 miles of
one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the August 2007
floods, and the owner furnishes the assessor any information deemed necessary by the
assessor in verifying the change in homestead dwelling. For taxes payable in 2009, the
owner must notify the assessor by December 1, 2008. Further notifications to the assessor
are not required if the property continues to meet all the requirements in this paragraph and
any dwellings on the agricultural land remain uninhabited.

(j) Agricultural land and buildings that were class 2a homestead property under section
273.13, subdivision 23, paragraph (a), for the 2008 assessment shall remain classified as
agricultural homesteads for subsequent assessments if:

(1) the property owner abandoned the homestead dwelling located on the agricultural
homestead as a result of the March 2009 floods;

(2) the property is located in the county of Marshall;

(3) the agricultural land and buildings remain under the same ownership for the current
assessment year as existed for the 2008 assessment year and continue to be used for
agricultural purposes;

(4) the dwelling occupied by the owner is located in Minnesota and is within 50 miles
of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the 2009 floods,
and the owner furnishes the assessor any information deemed necessary by the assessor in
verifying the change in dwelling. Further notifications to the assessor are not required if the
property continues to meet all the requirements in this paragraph and any dwellings on the
agricultural land remain uninhabited.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for applications for homestead filed in
2018 and thereafter.
new text end

Sec. 5.

Minnesota Statutes 2016, section 273.1245, subdivision 1, is amended to read:

Subdivision 1.

Private or nonpublic data.

The following data are private or nonpublic
data as defined in section 13.02, subdivisions 9 and 12, when they are submitted to a county
or local assessor under section 273.124, 273.13, or another section, to support a claim for
the property tax homestead classification under section 273.13, or other property tax
classification or benefit:

(1) Social Security numbers;

new text begin (2) individual tax identification numbers;
new text end

deleted text begin (2) deleted text end new text begin (3) new text end copies of state or federal income tax returns; and

deleted text begin (3) deleted text end new text begin (4) new text end state or federal income tax return information, including the federal income tax
schedule F.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for applications for homestead filed in
2018 and thereafter.
new text end

Sec. 6.

Minnesota Statutes 2016, section 273.1315, subdivision 2, is amended to read:

Subd. 2.

Class 1b homestead declaration 2009 and thereafter.

(a) Any property owner
seeking classification and assessment of the owner's homestead as class 1b property pursuant
to section 273.13, subdivision 22, paragraph (b), after October 1, 2008, shall file with the
county assessor a class 1b homestead declaration, on a form prescribed by the commissioner
of revenue. The declaration must contain the following information:

(1) the information necessary to verify that, on or before June 30 of the filing year, the
property owner or the owner's spouse satisfies the requirements of section 273.13, subdivision
22, paragraph (b), for class 1b classification; and

(2) any additional information prescribed by the commissioner.

(b) The declaration must be filed on or before October 1 to be effective for property
taxes payable during the succeeding calendar year. The Social Security numbers new text begin , individual
tax identification numbers, new text end and income and medical information received from the property
owner pursuant to this subdivision are private data on individuals as defined in section
13.02. If approved by the assessor, the declaration remains in effect until the property no
longer qualifies under section 273.13, subdivision 22, paragraph (b). Failure to notify the
assessor within 30 days that the property no longer qualifies under that paragraph because
of a sale, change in occupancy, or change in the status or condition of an occupant shall
result in the penalty provided in section 273.124, subdivision 13b, computed on the basis
of the class 1b benefits for the property, and the property shall lose its current class 1b
classification.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for applications for homestead filed in
2018 and thereafter.
new text end

Sec. 7.

Minnesota Statutes 2016, 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 15 deleted text end new text begin five new 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 applications for deferral of taxes
payable in 2019 and thereafter.
new text end

Sec. 8.

Minnesota Statutes 2016, 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 deleted text end new text begin November new text end 1 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 2019 and thereafter.
new text end

ARTICLE 7

SUSTAINABLE FOREST INCENTIVE ACT PRIVATE LANDS TIMBER HARVEST
CREDIT

Section 1. new text begin INCENTIVE CREDITS FOR HARVESTING TIMBER.
new text end

new text begin Subdivision 1. new text end

new text begin Eligibility. new text end

new text begin An individual, estate, or trust that is a fee title owner of at
least 20 acres in the state may apply for a credit under this section for timber harvested and
sold to a timber mill located in the state. No more than one owner is entitled to a payment
under this section with respect to any tract, parcel, or piece of land that has been assigned
the same parcel identification number. When eligible land is owned by two or more persons,
the owners must determine between them which person is eligible to claim the credit provided
under this section.
new text end

new text begin Subd. 2. new text end

new text begin Application. new text end

new text begin (a) An eligible owner may apply to the commissioner of natural
resources to confirm eligibility and to verify the availability of funds before proceeding
with a timber sale.
new text end

new text begin (b) To receive a credit under this section, an eligible owner must harvest and sell timber
from the owner's land located in the state and submit an application to the commissioner of
natural resources that includes:
new text end

new text begin (1) the name of the eligible owner and the owner's mailing address; and
new text end

new text begin (2) a receipt for the timber sold, according to paragraph (c).
new text end

new text begin (c) The receipt required under paragraph (b) must be from a timber mill located in the
state, be dated on or after July 1, 2018, but no later than December 31, 2020, and must
include:
new text end

new text begin (1) the name of the eligible owner;
new text end

new text begin (2) a legal description of the land from which the timber was harvested; and
new text end

new text begin (3) the number of cords sold.
new text end

new text begin Subd. 3. new text end

new text begin Credit amount. new text end

new text begin The commissioner of natural resources must authorize payment
of a credit of $5 per cord of timber sold for timber sales verified by application and receipt
according to subdivision 2. The maximum payment to an eligible owner under this section
is $5,000.
new text end

new text begin Subd. 4. new text end

new text begin Payment. new text end

new text begin The commissioner of natural resources must administer and issue
payment of each credit authorized under subdivision 3 to the extent money is available for
that purpose. When credits are authorized, but insufficient funds remain to satisfy full
payment of the credits, the commissioner must pay the credits pro rata until all funds are
expended. The commissioner of natural resources must pay credits quarterly.
new text end

new text begin Subd. 5. new text end

new text begin Appropriation. new text end

new text begin $8,720,000 in fiscal year 2019 is appropriated from the general
fund to the commissioner of natural resources for purposes of this section. Of this amount,
$8,000,000 is for payment of credits to eligible owners and $720,000 is for administration
of this section by the commissioner of natural resources. This appropriation is available
until June 30, 2021.
new text end

ARTICLE 8

NEEDED CORRECTIONS TO 2017 TAX BILL

Section 1.

Minnesota Statutes 2017 Supplement, 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 new text begin base amount new text end for commercial-industrial property is
$784,590,000 for taxes payable in 2018 deleted text begin and thereafter deleted text end . The state general levy new text begin base amount
new text end for seasonal-recreational property is $44,190,000 for taxes payable in 2018 deleted text begin and thereafter deleted text end .
new text begin For taxes payable in subsequent years, the levy base amount for commercial-industrial
property and seasonal-recreational property 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. new text end 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 2019 and thereafter.
new text end

Sec. 2.

Minnesota Statutes 2017 Supplement, section 289A.10, subdivision 1, is amended
to read:

Subdivision 1.

Return required.

In the case of a decedent who has an interest in property
with a situs in Minnesota, the personal representative must submit a Minnesota estate tax
return to the commissioner, on a form prescribed by the commissioner, if:

(1) a federal estate tax return is required to be filed; or

(2) the sum of the federal gross estate and federal adjusted taxable gifts, as defined in
section 2001(b) of the Internal Revenue Code, made within three years of the date of the
decedent's death exceeds deleted text begin $1,200,000 for estates of decedents dying in 2014; $1,400,000 for
estates of decedents dying in 2015; $1,600,000 for estates of decedents dying in 2016; deleted text end
$2,100,000 for estates of decedents dying in 2017 deleted text begin ; deleted text end new text begin or new text end $2,400,000 for estates of decedents
dying in 2018 deleted text begin ; $2,700,000 for estates of decedents dying in 2019; and $3,000,000 for estates
of decedents dying in 2020 deleted text end and thereafter.

The return must contain a computation of the Minnesota estate tax due. The return must
be signed by the personal representative.

new text begin EFFECTIVE DATE. new text end

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

Sec. 3.

Minnesota Statutes 2017 Supplement, section 291.016, subdivision 3, is amended
to read:

Subd. 3.

Subtraction.

(a) For estates of decedents dying after December 31, 2016, A
subtraction is allowed in computing the Minnesota taxable estate, equal to the sum of:

(1) the exclusion amount for the year of death under paragraph (b); and

(2) the lesser of:

(i) the value of qualified small business property under section 291.03, subdivision 9,
and the value of qualified farm property under section 291.03, subdivision 10; or

(ii) $5,000,000 minus the exclusion amount for the year of death under paragraph (b).

(b) The following exclusion amounts apply for the year of death:

(1) $2,100,000 for decedents dying in 2017; new text begin and
new text end

(2) $2,400,000 for decedents dying in 2018 deleted text begin ; deleted text end new text begin and thereafter.
new text end

deleted text begin (3) $2,700,000 for decedents dying in 2019; and
deleted text end

deleted text begin (4) $3,000,000 for decedents dying in 2020 and thereafter.
deleted text end

(c) The subtraction under this subdivision must not reduce the Minnesota taxable estate
to less than zero.

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

Minnesota Statutes 2017 Supplement, section 297F.01, subdivision 13a, is amended
to read:

Subd. 13a.

Premium cigar.

"Premium cigar" means any cigar that is hand-constructed new text begin
and hand-rolled new text end , has a wrapper that is made entirely from whole tobacco leaf, has a filler
and binder that is made entirely of tobacco, except for adhesives or other materials used to
maintain size, texture, or flavor, and has a wholesale price of no less than $2.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2018.
new text end

Sec. 5.

Minnesota Statutes 2016, section 297F.05, is amended by adding a subdivision to
read:

new text begin Subd. 1b. new text end

new text begin Annual indexing. new text end

new text begin (a) Each year the commissioner shall adjust the tax rates
under subdivision 1, including any adjustment made in prior years under this subdivision,
by multiplying the mill rates for the current calendar year by an adjustment factor and
rounding the result to the nearest mill. The adjustment factor equals the in-lieu sales tax
rate that applies to the following calendar year divided by the in-lieu sales tax rate for the
current calendar year. For purposes of this subdivision, "in-lieu sales tax rate" means the
tax rate established under section 297F.25, subdivision 1. For purposes of the calculations
under this subdivision to be made in any year in which an increase in the federal or state
excise tax on cigarettes is implemented, the commissioner shall exclude from the calculated
average price for the current year an amount equal to any increase in the state or federal
excise tax rate.
new text end

new text begin (b) The commissioner shall publish the resulting rate by November 1 and the rate applies
to sales made on or after January 1 of the following year.
new text end

new text begin (c) The determination of the commissioner under this subdivision is not a rule and is
not subject to the Administrative Procedure Act in chapter 14.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies beginning with rates calculated for calendar year 2019.
new text end

Sec. 6.

Minnesota Statutes 2017 Supplement, section 297F.05, subdivision 3a, is amended
to read:

Subd. 3a.

Rates; premium cigars.

(a) A tax is imposed upon all premium cigars in this
state and upon any person engaged in business as a tobacco product distributor, at the lesser
of:

(1) the rate of 95 percent of the wholesale sales price of the premium cigars; or

(2) deleted text begin $0.50 deleted text end new text begin $3.50 new text end per premium cigar.

(b) The tax imposed under paragraph (a) is imposed at the time the tobacco products
distributor:

(1) brings, or causes to be brought, into this state from outside the state premium cigars
for sale;

(2) makes, manufactures, or fabricates premium cigars in this state for sale in this state;
or

(3) ships or transports premium cigars to retailers in this state, to be sold by those retailers.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for cigars brought into the state or
manufactured in the state after June 30, 2018.
new text end

Sec. 7.

Minnesota Statutes 2017 Supplement, section 297F.05, subdivision 4a, is amended
to read:

Subd. 4a.

Use tax; premium cigars.

A tax is imposed upon the use or storage by
consumers of all premium cigars in this state, and upon such consumers, at the lesser of:

(1) the rate of 95 percent of the cost to the consumer of the premium cigars; or

(2) deleted text begin $0.50 deleted text end new text begin $3.50 new text end per premium cigar.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for cigars for which the consumer has
acquired title to, or possession of, after June 30, 2018.
new text end

APPENDIX

Repealed Minnesota Statutes: 18-4983

289A.50 CLAIMS FOR REFUNDS.

Subd. 10.

Limitation on refund.

(a) If an addition to federal taxable income under section 290.0131, subdivision 2, is judicially determined to discriminate against interstate commerce with respect to obligations of a certain character or type, the legislature intends that the discrimination be remedied by adding to federal taxable income interest on comparable obligations of Minnesota governmental units and Indian tribes. For purposes of this subdivision, "comparable obligation" means obligations of the character or type that the court found to be unconstitutionally favored by section 290.0131, subdivision 2, whether based on the security for payment, use of the proceeds, or any other factor identified as determinative by the court.

(b) This subdivision applies beginning with the taxable years that begin during the calendar year in which the court's decision is final. Other remedies apply for previous taxable years.

290.0131 INDIVIDUALS; ADDITIONS TO FEDERAL TAXABLE INCOME.

Subd. 7.

Fines, fees, and penalties.

The amount of expenses disallowed under section 290.10, subdivision 2, is an addition.

Subd. 11.

Income attributable to domestic production activities.

The amount of the deduction allowable under section 199 of the Internal Revenue Code is an addition.

290.0133 CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE INCOME.

Subd. 13.

Income attributable to domestic production activities.

The amount of the deduction allowable under section 199 of the Internal Revenue Code is an addition.

Subd. 14.

Fines, fees, and penalties.

The amount of expenses disallowed under section 290.10, subdivision 2, is an addition.

290.10 NONDEDUCTIBLE ITEMS.

Subd. 2.

Fines, fees, and penalties.

(a) Except as provided in this subdivision, no deduction from taxable income for a trade or business expense under section 162(a) of the Internal Revenue Code shall be allowed for any amount paid or incurred, whether by suit, agreement, or otherwise, to, or at the direction of, a government or entity described in paragraph (d) in relation to the violation of any law or the investigation or inquiry by such government or entity into the potential violation of any law.

(b) Exception for amounts constituting restitution or paid to come into compliance with the law. Paragraph (a) does not apply to any amount which:

(1) the taxpayer establishes:

(i) constitutes restitution, including remediation of property for damage or harm caused by or which may be caused by the violation of any law or the potential violation of any law; or

(ii) is paid to come into compliance with any law which was violated or involved in the investigation or inquiry; and

(2) is identified as restitution or as an amount paid to come into compliance with the law, as the case may be, in the court order or settlement agreement.

This paragraph does not apply to any amount paid or incurred as reimbursement to the government or entity for the costs of any investigation or litigation.

(c) Paragraph (a) does not apply to any amount paid or incurred by order of a court in a suit in which no government or entity described in paragraph (d) is a party.

(d) An entity is described in this paragraph if it is:

(1) a nongovernmental entity which exercises self-regulatory powers, including imposing sanctions, in connection with a qualified board or exchange, as defined in section 1256(g)(7) of the Internal Revenue Code, or;

(2) to the extent provided in federal regulations, a nongovernmental entity which exercises self-regulatory powers, including imposing sanctions, as part of performing an essential governmental function.

(e) Paragraph (a) does not apply to any amount paid or incurred as taxes due.

297F.185 REVOCATION OF SALES AND USE TAX PERMITS.

(a) If a retailer purchases for resale from an unlicensed seller more than 20,000 cigarettes or $500 or more worth of tobacco products, the commissioner may revoke the person's sales and use tax permit as provided in section 270C.722.

(b) The commissioner may revoke a retailer's sales or use permit as provided in section 270C.722 if the retailer, directly or indirectly, purchases for resale cigarettes without the proper stamp affixed.