SF 4161

as introduced - 91st Legislature (2019 - 2020) Posted on 03/10/2020 08:59am

A bill for an act
relating to taxation; individual income and corporate franchise; providing
subtractions for certain capital gains and interest; amending Minnesota Statutes
2018, sections 290.0132, by adding a subdivision; 290.0134, by adding a
subdivision.

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

Section 1.

Minnesota Statutes 2018, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 30. new text end

new text begin Capital gain and loan interest; employee stock ownership plans and
worker cooperatives. new text end

new text begin (a) Subject to the requirements of paragraph (b), the sum of the
following amounts is a subtraction:
new text end

new text begin (1) net capital gain from the sale of employer securities of an eligible Minnesota
corporation directly or indirectly to a qualified Minnesota employee stock ownership plan
or an eligible Minnesota worker cooperative; and
new text end

new text begin (2) interest earned from a qualified ownership succession loan.
new text end

new text begin (b) The subtraction allowed under paragraph (a), clause (1), applies if:
new text end

new text begin (1) immediately after the taxpayer sells stock to the qualified Minnesota employee stock
ownership plan, the plan owns at least 30 percent of:
new text end

new text begin (i) each class of outstanding stock of the corporation; or
new text end

new text begin (ii) the total value of all outstanding stock of the corporation;
new text end

new text begin (2) within 60 days after the taxpayer sells stock to the eligible Minnesota worker
cooperative, members of the cooperative own at least 30 percent of:
new text end

new text begin (i) each class of outstanding stock of the corporation; or
new text end

new text begin (ii) the total value of all outstanding stock of the corporation;
new text end

new text begin (3) the taxpayer has continuously held the employer securities for at least three years as
of the date of sale; and
new text end

new text begin (4) the employer securities were not received by the individual in:
new text end

new text begin (i) a distribution from a plan described in section 401(a) of the Internal Revenue Code;
or
new text end

new text begin (ii) a transfer pursuant to an option or other right to acquire stock to which section 83,
422, or 423 of the Internal Revenue Code applies.
new text end

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

new text begin (1) "eligible Minnesota corporation" means a corporation that, on the date of the sale,
employs 500 or fewer full-time equivalent employees and:
new text end

new text begin (i) has its principal place of business in Minnesota;
new text end

new text begin (ii) employs at least 20 Minnesota residents who met the requirements for participation
in the qualified Minnesota employee stock ownership plan; or
new text end

new text begin (iii) employs at least five Minnesota residents who are eligible to purchase membership
in the eligible Minnesota worker cooperative;
new text end

new text begin (2) "eligible Minnesota worker cooperative" means an eligible worker-owned cooperative
that is a cooperative within the meaning of section 308A.005, subdivision 5, and has its
principal place of business in Minnesota;
new text end

new text begin (3) "eligible worker-owned cooperative" has the meaning given in section 1042(c)(2)
of the Internal Revenue Code;
new text end

new text begin (4) "employee stock ownership plan" has the meaning given in section 4975(e)(7) of
the Internal Revenue Code;
new text end

new text begin (5) "employer securities" has the meaning given in section 409(l) of the Internal Revenue
Code, excluding stock that is readily tradable on an established securities market;
new text end

new text begin (6) "qualified Minnesota employee stock ownership plan" means an employee stock
ownership plan that is maintained by an eligible Minnesota corporation; and
new text end

new text begin (7) "qualified ownership succession loan" means:
new text end

new text begin (i) a single loan, a part of a series of loans, or an extension of credit to the trustee of a
qualified Minnesota employee stock ownership plan of which all proceeds are applied to
the acquisition of employer securities of an eligible Minnesota corporation for the qualified
Minnesota employee stock ownership plan;
new text end

new text begin (ii) a single loan, a part of a series of loans, or an extension of credit to an eligible
Minnesota corporation that maintains a qualified Minnesota employee stock ownership plan
of which all proceeds are loaned to the trustee of the qualified Minnesota employee stock
ownership plan and applied to the acquisition of employer securities of the eligible Minnesota
corporation for the qualified Minnesota employee stock ownership plan;
new text end

new text begin (iii) a single loan, a part of a series of loans, or an extension of credit to an eligible
Minnesota corporation of which at least 90 percent of the proceeds are applied to the
redemption of employer securities as part of a plan to convert the corporation to an eligible
Minnesota worker cooperative; or
new text end

new text begin (iv) a loan used to refinance a qualified ownership succession loan described in item (i),
(ii), or (iii).
new text end

new text begin (d) For purposes of paragraph (c), clause (7), an employee stock ownership plan must
not be treated as a qualified Minnesota employee stock ownership plan, and an eligible
worker-owned cooperative must not be treated as an eligible Minnesota worker cooperative,
unless the plan or cooperative meets the minimum ownership requirement described in
paragraph (b), clause (1) or (2), as applicable, and in the case of paragraph (c) clause (7),
item (iv), the minimum ownership requirement is still satisfied on the date of the refinancing.
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, 2019.
new text end

Sec. 2.

Minnesota Statutes 2018, section 290.0134, is amended by adding a subdivision
to read:

new text begin Subd. 20. new text end

new text begin Loan interest; employee stock ownership plans and worker
cooperatives. new text end

new text begin (a) The amount equal to the interest earned from a qualified ownership
succession loan by the following entities is a subtraction:
new text end

new text begin (1) a bank, as defined in section 581 of the Internal Revenue Code;
new text end

new text begin (2) an insurance company;
new text end

new text begin (3) a corporation actively engaged in the business of lending money; or
new text end

new text begin (4) a regulated investment company, as defined in section 851 of the Internal Revenue
Code.
new text end

new text begin (b) The definitions under section 290.0132, subdivision 30, paragraph (c), apply to this
subdivision.
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, 2019.
new text end