SF 455

as introduced - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to taxation; providing a franchise tax credit 
  1.3             for jobs training; increasing the subtraction for 
  1.4             certain educational expenses and providing an 
  1.5             education tax credit; providing for higher education 
  1.6             trusts and providing a subtraction for contributions 
  1.7             to the trust; abolishing the corporate alternative 
  1.8             minimum tax; abolishing the Minnesota unfair cigarette 
  1.9             sales act; exempting fuel used for certain purposes 
  1.10            from the motor fuels tax; providing for the exemption 
  1.11            of capital equipment from the sales and use tax; 
  1.12            exempting certain sales to hospitals and veterans 
  1.13            homes from the sales and use tax; dedicating tax 
  1.14            receipts from ticket sales to athletic events 
  1.15            sponsored by the University of Minnesota; eliminating 
  1.16            a local government aids inflation adjustment; 
  1.17            appropriating money; amending Minnesota Statutes 1996, 
  1.18            sections 290.01, subdivisions 19a, 19b, and 19c; 
  1.19            290.091, subdivisions 2 and 6; 290.0921, subdivision 
  1.20            8; 290.21, by adding a subdivision; 296.18, 
  1.21            subdivision 1; 297A.01, subdivision 16; 297A.02, 
  1.22            subdivision 5; 297A.25, subdivision 11, and by adding 
  1.23            a subdivision; 297A.44, subdivision 1; 298.01, 
  1.24            subdivision 4e; and 477A.03, subdivision 2; proposing 
  1.25            coding for new law in Minnesota Statutes, chapters 
  1.26            11A; 136A; and 290; repealing Minnesota Statutes 1996, 
  1.27            sections 290.0921, subdivisions 1, 2, 3, 3a, 4, 5, 6, 
  1.28            and 7; 297A.01, subdivision 20; 298.01, subdivisions 
  1.29            3c, 3d, and 4d; 325D.30; 325D.31; 325D.32; 325D.33; 
  1.30            325D.34; 325D.35; 325D.36; 325D.37; 325D.371; 325D.38; 
  1.31            325D.39; 325D.40; 325D.405; 325D.415; and 325D.42; 
  1.32            Laws 1995, chapter 264, article 4, as amended. 
  1.33  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.34     Section 1.  [11A.165] [EDUCATION INVESTMENT FUND.] 
  1.35     Subdivision 1.  [ESTABLISHMENT.] A fund called the 
  1.36  education investment fund is established in the state treasury 
  1.37  for the purpose of investing money for grants to post-secondary 
  1.38  students under section 136A.123.  Accounts may be established 
  1.39  within the fund for specific fields of study or geographical 
  2.1   areas to which a corporation or individual wishes to 
  2.2   contribute.  Accounts may not be established that discriminate 
  2.3   on the basis of race, ethnicity, or gender. 
  2.4      Subd. 2.  [ASSETS.] The assets of the education investment 
  2.5   fund shall consist of money contributed by private corporations, 
  2.6   foundations, or individuals, and all income from the investment 
  2.7   of contributions to the fund.  All assets of the fund are 
  2.8   appropriated for the purpose of supporting grants under section 
  2.9   136A.123. 
  2.10     Subd. 3.  [MANAGEMENT.] The education investment fund shall 
  2.11  be managed by the board. 
  2.12     Subd. 4.  [INVESTMENTS.] The education investment fund 
  2.13  shall be invested subject to the provisions of section 11A.24. 
  2.14     Subd. 5.  [DISTRIBUTION OF ASSETS.] The board shall 
  2.15  annually transfer appropriations from the fund to the higher 
  2.16  education services office for distribution to eligible students 
  2.17  under section 136A.123.  Appropriations transferred to the 
  2.18  higher education services office which are not spent do not 
  2.19  cancel but are available for grants in the following fiscal year.
  2.20     Sec. 2.  [136A.123] [EDUCATION INVESTMENT GRANT PROGRAM.] 
  2.21     Subdivision 1.  [ESTABLISHMENT.] An education investment 
  2.22  grant program is established to provide grants to low-income 
  2.23  students who withdraw funds from a qualified savings plan to pay 
  2.24  for their post-secondary education. 
  2.25     Subd. 2.  [ELIGIBILITY.] To be eligible to receive a grant 
  2.26  from an account within the fund, a student must: 
  2.27     (1) be a resident of the state of Minnesota; 
  2.28     (2) be enrolled at least half time in an undergraduate 
  2.29  program of instruction at a public or private post-secondary 
  2.30  institution; and 
  2.31     (3) expend funds withdrawn from a savings plan under 
  2.32  section 290.0803 to pay for post-secondary education expenses in 
  2.33  the award year. 
  2.34     Subd. 3.  [ALLOCATION; AWARDS.] Grants must be awarded on a 
  2.35  funds available basis from appropriations transferred to the 
  2.36  office by the state board of investment under section 11A.165.  
  3.1   The office shall establish rules to govern the size and 
  3.2   distribution of grant awards.  If insufficient funds are 
  3.3   available to award grants to all eligible applicants, the office 
  3.4   shall give priority to applicants who demonstrate the greatest 
  3.5   savings effort relative to income.  A grant awarded under this 
  3.6   section does not affect a recipient's eligibility for a state 
  3.7   grant under section 136A.121. 
  3.8      Sec. 3.  Minnesota Statutes 1996, section 290.01, 
  3.9   subdivision 19a, is amended to read: 
  3.10     Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
  3.11  individuals, estates, and trusts, there shall be added to 
  3.12  federal taxable income: 
  3.13     (1)(i) interest income on obligations of any state other 
  3.14  than Minnesota or a political or governmental subdivision, 
  3.15  municipality, or governmental agency or instrumentality of any 
  3.16  state other than Minnesota exempt from federal income taxes 
  3.17  under the Internal Revenue Code or any other federal statute, 
  3.18  and 
  3.19     (ii) exempt-interest dividends as defined in section 
  3.20  852(b)(5) of the Internal Revenue Code, except the portion of 
  3.21  the exempt-interest dividends derived from interest income on 
  3.22  obligations of the state of Minnesota or its political or 
  3.23  governmental subdivisions, municipalities, governmental agencies 
  3.24  or instrumentalities, but only if the portion of the 
  3.25  exempt-interest dividends from such Minnesota sources paid to 
  3.26  all shareholders represents 95 percent or more of the 
  3.27  exempt-interest dividends that are paid by the regulated 
  3.28  investment company as defined in section 851(a) of the Internal 
  3.29  Revenue Code, or the fund of the regulated investment company as 
  3.30  defined in section 851(h) of the Internal Revenue Code, making 
  3.31  the payment; and 
  3.32     (iii) for the purposes of items (i) and (ii), interest on 
  3.33  obligations of an Indian tribal government described in section 
  3.34  7871(c) of the Internal Revenue Code shall be treated as 
  3.35  interest income on obligations of the state in which the tribe 
  3.36  is located; 
  4.1      (2) the amount of income taxes paid or accrued within the 
  4.2   taxable year under this chapter and income taxes paid to any 
  4.3   other state or to any province or territory of Canada, to the 
  4.4   extent allowed as a deduction under section 63(d) of the 
  4.5   Internal Revenue Code, but the addition may not be more than the 
  4.6   amount by which the itemized deductions as allowed under section 
  4.7   63(d) of the Internal Revenue Code exceeds the amount of the 
  4.8   standard deduction as defined in section 63(c) of the Internal 
  4.9   Revenue Code.  For the purpose of this paragraph, the 
  4.10  disallowance of itemized deductions under section 68 of the 
  4.11  Internal Revenue Code of 1986, income tax is the last itemized 
  4.12  deduction disallowed; 
  4.13     (3) the capital gain amount of a lump sum distribution to 
  4.14  which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
  4.15  Reform Act of 1986, Public Law Number 99-514, applies; and 
  4.16     (4) the amount of income taxes paid or accrued within the 
  4.17  taxable year under this chapter and income taxes paid to any 
  4.18  other state or any province or territory of Canada, to the 
  4.19  extent allowed as a deduction in determining federal adjusted 
  4.20  gross income.  For the purpose of this paragraph, income taxes 
  4.21  do not include the taxes imposed by sections 290.0922, 
  4.22  subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 
  4.23  and 
  4.24     (5) the amount provided by section 290.0803, subdivision 3. 
  4.25     Sec. 4.  Minnesota Statutes 1996, section 290.01, 
  4.26  subdivision 19b, is amended to read: 
  4.27     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  4.28  individuals, estates, and trusts, there shall be subtracted from 
  4.29  federal taxable income: 
  4.30     (1) interest income on obligations of any authority, 
  4.31  commission, or instrumentality of the United States to the 
  4.32  extent includable in taxable income for federal income tax 
  4.33  purposes but exempt from state income tax under the laws of the 
  4.34  United States; 
  4.35     (2) if included in federal taxable income, the amount of 
  4.36  any overpayment of income tax to Minnesota or to any other 
  5.1   state, for any previous taxable year, whether the amount is 
  5.2   received as a refund or as a credit to another taxable year's 
  5.3   income tax liability; 
  5.4      (3) the amount paid to others, less the credit allowed 
  5.5   under section 290.0672, not to exceed $650 $1,950 for each 
  5.6   dependent in grades kindergarten to 6 and $1,000 $3,000 for each 
  5.7   dependent in grades 7 to 12, for tuition, textbooks, and 
  5.8   transportation of each dependent in attending an elementary or 
  5.9   secondary school situated in Minnesota, North Dakota, South 
  5.10  Dakota, Iowa, or Wisconsin, wherein a resident of this state may 
  5.11  legally fulfill the state's compulsory attendance laws, which is 
  5.12  not operated for profit, and which adheres to the provisions of 
  5.13  the Civil Rights Act of 1964 and chapter 363.  For the purposes 
  5.14  of this clause, "tuition" includes not only tuition and fees for 
  5.15  attendance needed to fulfill the requirements of sections 
  5.16  120.101 and 120.102, but also tuition and fees paid for a 
  5.17  dependent in kindergarten through grade 12 for any study 
  5.18  conducted by a person meeting the teaching licensing 
  5.19  requirements of section 120.101, subdivision 7, clauses (1) to 
  5.20  (5), designed to improve the dependent's knowledge of core 
  5.21  curriculum areas and to expand the dependent's knowledge and 
  5.22  skills beyond foundational skills pursuant to the graduation 
  5.23  rule under section 121.11, subdivision 7c.  As used in this 
  5.24  clause, "textbooks" includes books and other instructional 
  5.25  materials and equipment used in elementary and secondary schools 
  5.26  in teaching only those subjects legally and commonly taught in 
  5.27  public elementary and secondary schools in this state.  
  5.28  Equipment qualifying for deduction includes personal computer 
  5.29  hardware and educational software that assists a dependent to 
  5.30  improve knowledge of core curriculum areas and to expand 
  5.31  knowledge and skills pursuant to the graduation rule under 
  5.32  section 121.11, subdivision 7c, purchased for use in the 
  5.33  taxpayer's home and not used in a trade or business regardless 
  5.34  of whether the computer is required by the dependent's school.  
  5.35  "Textbooks" does not include instructional books and materials 
  5.36  used in the teaching of religious tenets, doctrines, or worship, 
  6.1   the purpose of which is to instill such tenets, doctrines, or 
  6.2   worship, nor does it include books or materials for, or 
  6.3   transportation to, extracurricular activities including sporting 
  6.4   events, musical or dramatic events, speech activities, driver's 
  6.5   education, or similar programs.  In order to qualify for the 
  6.6   subtraction under this clause the taxpayer must elect to itemize 
  6.7   deductions under section 63(e) of the Internal Revenue Code; 
  6.8      (4) to the extent included in federal taxable income, 
  6.9   distributions from a qualified governmental pension plan, an 
  6.10  individual retirement account, simplified employee pension, or 
  6.11  qualified plan covering a self-employed person that represent a 
  6.12  return of contributions that were included in Minnesota gross 
  6.13  income in the taxable year for which the contributions were made 
  6.14  but were deducted or were not included in the computation of 
  6.15  federal adjusted gross income.  The distribution shall be 
  6.16  allocated first to return of contributions until the 
  6.17  contributions included in Minnesota gross income have been 
  6.18  exhausted.  This subtraction applies only to contributions made 
  6.19  in a taxable year prior to 1985; 
  6.20     (5) income as provided under section 290.0802; 
  6.21     (6) the amount of unrecovered accelerated cost recovery 
  6.22  system deductions allowed under subdivision 19g; 
  6.23     (7) to the extent included in federal adjusted gross 
  6.24  income, income realized on disposition of property exempt from 
  6.25  tax under section 290.491; 
  6.26     (8) to the extent not deducted in determining federal 
  6.27  taxable income, the amount paid for health insurance of 
  6.28  self-employed individuals as determined under section 162(l) of 
  6.29  the Internal Revenue Code, except that the 25 percent limit does 
  6.30  not apply.  If the taxpayer deducted insurance payments under 
  6.31  section 213 of the Internal Revenue Code of 1986, the 
  6.32  subtraction under this clause must be reduced by the lesser of: 
  6.33     (i) the total itemized deductions allowed under section 
  6.34  63(d) of the Internal Revenue Code, less state, local, and 
  6.35  foreign income taxes deductible under section 164 of the 
  6.36  Internal Revenue Code and the standard deduction under section 
  7.1   63(c) of the Internal Revenue Code; or 
  7.2      (ii) the lesser of (A) the amount of insurance qualifying 
  7.3   as "medical care" under section 213(d) of the Internal Revenue 
  7.4   Code to the extent not deducted under section 162(1) of the 
  7.5   Internal Revenue Code or excluded from income or (B) the total 
  7.6   amount deductible for medical care under section 213(a); and 
  7.7      (9) the exemption amount allowed under Laws 1995, chapter 
  7.8   255, article 3, section 2, subdivision 3; and 
  7.9      (10) the subtraction provided by section 290.0803, 
  7.10  subdivision 2. 
  7.11     Sec. 5.  Minnesota Statutes 1996, section 290.01, 
  7.12  subdivision 19c, is amended to read: 
  7.13     Subd. 19c.  [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 
  7.14  INCOME.] For corporations, there shall be added to federal 
  7.15  taxable income: 
  7.16     (1) the amount of any deduction taken for federal income 
  7.17  tax purposes for income, excise, or franchise taxes based on net 
  7.18  income or related minimum taxes paid by the corporation to 
  7.19  Minnesota, another state, a political subdivision of another 
  7.20  state, the District of Columbia, or any foreign country or 
  7.21  possession of the United States; 
  7.22     (2) interest not subject to federal tax upon obligations 
  7.23  of:  the United States, its possessions, its agencies, or its 
  7.24  instrumentalities; the state of Minnesota or any other state, 
  7.25  any of its political or governmental subdivisions, any of its 
  7.26  municipalities, or any of its governmental agencies or 
  7.27  instrumentalities; the District of Columbia; or Indian tribal 
  7.28  governments; 
  7.29     (3) exempt-interest dividends received as defined in 
  7.30  section 852(b)(5) of the Internal Revenue Code; 
  7.31     (4) the amount of any windfall profits tax deducted under 
  7.32  section 164 or 471 of the Internal Revenue Code; 
  7.33     (5) the amount of any net operating loss deduction taken 
  7.34  for federal income tax purposes under section 172 or 832(c)(10) 
  7.35  of the Internal Revenue Code or operations loss deduction under 
  7.36  section 810 of the Internal Revenue Code; 
  8.1      (6) the amount of any special deductions taken for federal 
  8.2   income tax purposes under sections 241 to 247 of the Internal 
  8.3   Revenue Code; 
  8.4      (7) losses from the business of mining, as defined in 
  8.5   section 290.05, subdivision 1, clause (a), that are not subject 
  8.6   to Minnesota income tax; 
  8.7      (8) the amount of any capital losses deducted for federal 
  8.8   income tax purposes under sections 1211 and 1212 of the Internal 
  8.9   Revenue Code; 
  8.10     (9) the amount of any charitable contributions deducted for 
  8.11  federal income tax purposes under section 170 of the Internal 
  8.12  Revenue Code; 
  8.13     (10) the exempt foreign trade income of a foreign sales 
  8.14  corporation under sections 921(a) and 291 of the Internal 
  8.15  Revenue Code; 
  8.16     (11) the amount of percentage depletion deducted under 
  8.17  sections 611 through 614 and 291 of the Internal Revenue Code; 
  8.18     (12) for certified pollution control facilities placed in 
  8.19  service in a taxable year beginning before December 31, 1986, 
  8.20  and for which amortization deductions were elected under section 
  8.21  169 of the Internal Revenue Code of 1954, as amended through 
  8.22  December 31, 1985, the amount of the amortization deduction 
  8.23  allowed in computing federal taxable income for those 
  8.24  facilities; and 
  8.25     (13) the amount of any deemed dividend from a foreign 
  8.26  operating corporation determined pursuant to section 290.17, 
  8.27  subdivision 4, paragraph (g).; and 
  8.28     (14) the amount of deduction taken for federal tax purposes 
  8.29  that is a placement fee or retention fee paid to a qualified 
  8.30  jobs placement program for which a credit is allowed under 
  8.31  section 290.0673. 
  8.32     Sec. 6.  [290.0672] [MINNESOTA EDUCATION CREDIT.] 
  8.33     Subdivision 1.  [CREDIT ALLOWED.] A taxpayer may take as a 
  8.34  credit against the tax due from the taxpayer and a spouse, if 
  8.35  any, under this chapter in an amount equal to the amount the 
  8.36  taxpayer pays in tuition or fees for a dependent of the taxpayer 
  9.1   in kindergarten through grade 12 for the instruction of the 
  9.2   dependent by a person qualified to be an instructor pursuant to 
  9.3   section 120.101, subdivision 7, clauses (1) to (5), in the 
  9.4   curriculum core areas and knowledge and skills pursuant to the 
  9.5   graduation rule under section 121.11, subdivision 7c. 
  9.6      Subd. 2.  [LIMITATIONS.] The credit is limited to $1,000 
  9.7   per child and $2,000 per family.  No credit is allowed if the 
  9.8   taxpayer's income, as defined in section 290.067, subdivision 
  9.9   2a, exceeds $39,000.  In the case of a married taxpayer, the 
  9.10  credit is not allowed unless a joint income tax return is 
  9.11  filed.  For a nonresident or part-year resident, the credit 
  9.12  determined under subdivision 1 and the $1,000-per-child and 
  9.13  $2,000-per-family limits are further limited to amounts 
  9.14  determined by multiplying the percentage calculated under 
  9.15  section 290.06, subdivision 2c, paragraph (e), by the credit 
  9.16  determined by subdivision 1 and the $1,000-per-child and 
  9.17  $2,000-per-family limits. 
  9.18     Subd. 3.  [HOME SCHOOL.] If a dependent is educated in a 
  9.19  school where the taxpayer or spouse provides the instruction 
  9.20  necessary to meet the compulsory instruction requirements of 
  9.21  sections 120.101 and 120.102 in the taxpayer's home, the family 
  9.22  of the dependent is deemed to have incurred $1,000 of tuition or 
  9.23  fees qualifying under subdivision 1.  The limit on income under 
  9.24  subdivision 2 does not apply to the credit allowed on the deemed 
  9.25  amount under this subdivision.  A family is limited to only one 
  9.26  deemed amount of $1,000 per year. 
  9.27     Subd. 4.  [CREDIT TO BE REFUNDABLE.] If the amount of 
  9.28  credit which a taxpayer would be eligible to receive pursuant to 
  9.29  this section exceeds the taxpayer's tax liability under this 
  9.30  chapter, the excess amount shall be refunded to the taxpayer by 
  9.31  the commissioner of revenue. 
  9.32     Subd. 5.  [INFLATION ADJUSTMENT.] The dollar amount of the 
  9.33  income threshold in subdivision 2 must be adjusted for 
  9.34  inflation.  The commissioner shall adjust the threshold amount 
  9.35  starting with tax years beginning after December 31, 1997, by 
  9.36  the percentage determined under section 290.06, subdivision 2d, 
 10.1   for the taxable year. 
 10.2      Sec. 7.  [290.0673] [JOBS TRAINING CREDIT.] 
 10.3      Subdivision 1.  [CREDIT ALLOWED.] (a) A credit is allowed 
 10.4   against the tax imposed by section 290.06, subdivision 1, equal 
 10.5   to the sum of: 
 10.6      (1) placement fees paid to a qualified jobs training 
 10.7   program upon hiring a qualified graduate of the program; and 
 10.8      (2) retention fees paid to a qualified jobs training 
 10.9   program for retention of the qualified graduate hired and 
 10.10  qualifying for a credit in clause (1). 
 10.11     (b) The maximum credit under this section is $8,000 upon 
 10.12  hiring a qualified graduate, and $6,000 per year per qualified 
 10.13  graduate after the retention requirements and periods of this 
 10.14  section are met. 
 10.15     (c) The credits against tax are allowed only after issuance 
 10.16  of credit certificates by the jobs training program and in the 
 10.17  amount issued. 
 10.18     Subd. 2.  [QUALIFIED JOBS TRAINING PROGRAM.] (a) To qualify 
 10.19  for credit certificates under this section, a jobs training 
 10.20  program must satisfy the following requirements: 
 10.21     (1) The jobs training program must be operated by a 
 10.22  nonprofit corporation qualifying under section 501(c)(3) of the 
 10.23  Internal Revenue Code. 
 10.24     (2) The jobs training program must spend at least $5,000 
 10.25  per graduate of the program. 
 10.26     (3) The jobs training program must provide education and 
 10.27  training in: 
 10.28     (i) basic skills such as reading, writing, mathematics, and 
 10.29  communications; 
 10.30     (ii) thinking skills, such as reasoning, creative thinking, 
 10.31  decision making, and problem solving; and 
 10.32     (iii) personal qualities, such as responsibility, 
 10.33  self-esteem, self-management, honesty, and integrity. 
 10.34     (4) The program must provide income supplements, when 
 10.35  needed, to participants for housing, counseling, tuition, and 
 10.36  other basic needs. 
 11.1      (5) The education and training course must last at least 
 11.2   six months. 
 11.3      (6) Individuals served by the program must: 
 11.4      (i) be at least 18 years old; 
 11.5      (ii) have had federal adjusted gross income of no more than 
 11.6   $10,000 per year in the last two years; and 
 11.7      (iii) not have been claimed as a dependent on the federal 
 11.8   tax return of another person in the taxable year prior to the 
 11.9   year the person enters the program. 
 11.10     (7) The program must charge placement and retention fees to 
 11.11  the employer that exceed the amount of credit certificates 
 11.12  provided to the employer by at least ten percent. 
 11.13     (8) Each qualified jobs training program must report to the 
 11.14  commissioner of children, families, and learning by January 1, 
 11.15  1999, on its use of the credit certificates for continued 
 11.16  qualification after January 1, 2000, and biannually thereafter.  
 11.17  The report must include, at least, information setting forth: 
 11.18     (i) the number of graduates placed; 
 11.19     (ii) demographic information on the graduates; 
 11.20     (iii) information setting forth the type of jobs in which 
 11.21  jobs training program graduates are placed, including 
 11.22  compensation; 
 11.23     (iv) the length of time a jobs training program graduate 
 11.24  has retained the job into which the graduate was placed; 
 11.25     (v) the amount of employer fees paid to the program; and 
 11.26     (vi) the amount of money raised by the program from other 
 11.27  sources. 
 11.28     (b) The commissioner of children, families, and learning 
 11.29  shall compile and summarize the information contained in the 
 11.30  reports and report to the legislature by June 30, 1999. 
 11.31     (c) The jobs training program must be certified by the 
 11.32  commissioner of children, families, and learning as meeting the 
 11.33  requirements of paragraph (a), clauses (1) to (7), as a 
 11.34  qualified jobs training program before it can issue credit 
 11.35  certificates, and must be certified by the commissioner of 
 11.36  children, families, and learning as continuing to meet those 
 12.1   requirements and the requirements of paragraph (a), clause (8), 
 12.2   before its authority to continue to issue credit certificates 
 12.3   may be renewed by the commissioner of children, families, and 
 12.4   learning in the calendar year following the year the biannual 
 12.5   report is required to be filed, under paragraph (a), clause (8). 
 12.6      Subd. 3.  [DUTIES OF THE PROGRAM.] Each qualified jobs 
 12.7   training program certified under subdivision 2 must maintain 
 12.8   records for each graduate who is employed in a job and for whom 
 12.9   a credit certificate is provided to the employer.  The records 
 12.10  must include information sufficient to verify the graduate's 
 12.11  eligibility under this section, the graduate's completion of the 
 12.12  jobs training program, identify the employer, describe the job 
 12.13  including the compensation paid and benefits, and determine the 
 12.14  amount of placement fees and retention fees. 
 12.15     Subd. 4.  [QUALIFIED GRADUATES.] A qualified graduate is a 
 12.16  graduate of a jobs training program qualifying under subdivision 
 12.17  2, who is placed in a job paying at least $9 per hour.  To 
 12.18  qualify for the placement fee tax credit under this section, the 
 12.19  job placement fee must be paid by an employer who hires a 
 12.20  qualified graduate for a job paying at least $9 per hour, and to 
 12.21  qualify for the retention fee tax credit, the qualified graduate 
 12.22  must still be employed by the employer to whom the placement fee 
 12.23  tax credit certificate was issued, and that employer must pay 
 12.24  the qualified graduate at least $10 per hour at the end of the 
 12.25  first and second years of employment. 
 12.26     Subd. 5.  [ISSUANCE OF CREDIT CERTIFICATES.] (a) The 
 12.27  commissioner of children, families, and learning shall issue 
 12.28  credit certificates under paragraph (b), in no more than the 
 12.29  amounts specified in each calendar year: 
 12.30             1998  $120,000 
 12.31             1999  $370,000 
 12.32             2000  $500,000 
 12.33             2001  $360,000 
 12.34             2002  $150,000
 12.35     (b) Tax credit certificates shall be issued by the 
 12.36  commissioner of children, families, and learning upon 
 13.1   certification of a jobs training program and application of the 
 13.2   jobs training program for tax credit certificates.  The 
 13.3   commissioner of children, families, and learning shall issue the 
 13.4   tax credit certificates in the order in which the applications 
 13.5   for certificates are approved, and the tax credit certificates 
 13.6   shall be in the dollar amount applied for unless a lesser amount 
 13.7   reflects the commissioner of children, families, and learning's 
 13.8   judgment of the jobs training program's projected fees for 
 13.9   placements and retentions of qualifying graduates.  Tax credit 
 13.10  certificates issued to the qualified jobs training programs can 
 13.11  be issued to employers of qualified graduates within a period of 
 13.12  one year from the date of issuance of those certificates to the 
 13.13  qualified jobs training program by the commissioner of children, 
 13.14  families, and learning.  Tax credit certificates that are not 
 13.15  issued by the qualified jobs training program to employers 
 13.16  within one year must be reported to the commissioner of 
 13.17  children, families, and learning, and cannot be issued after the 
 13.18  one-year period by the qualified jobs training program. 
 13.19     (c) Tax credits must be issued by the jobs training 
 13.20  programs to employers of its qualified graduates up to the 
 13.21  limits contained in this section, to the extent the tax credit 
 13.22  certificates are made available to the jobs training program. 
 13.23     Subd. 6.  [USE OF THE TAX CREDITS.] (a) The corporation 
 13.24  employing the qualified jobs training program graduate must use 
 13.25  the tax credit according to the provisions and limitations in 
 13.26  this subdivision. 
 13.27     (b) The credit allowed under this section must be used in 
 13.28  the employer's tax year in which it is issued to the employer, 
 13.29  and the credit taken and allowed in a tax year may not exceed 
 13.30  the tax liability for that year under section 290.06, 
 13.31  subdivision 1, reduced by the sum of nonrefundable credits 
 13.32  allowed under this chapter. 
 13.33     (c) If the credit allowed for a tax year under this section 
 13.34  exceeds the limitation in paragraph (b), the amount of the tax 
 13.35  credit not allowed may be carried over to each of the five 
 13.36  succeeding tax years of the employer.  The carryover must be 
 14.1   carried to the earliest of the tax years to which it may be 
 14.2   carried and then to each successive year.  The carryover credit 
 14.3   used in each tax year may not exceed the taxpayer's tax under 
 14.4   section 290.06, subdivision 1, reduced by the sum of 
 14.5   nonrefundable credits allowed under this chapter for the tax 
 14.6   year. 
 14.7      Subd. 7.  [EXPIRATION.] No credit certificates may be 
 14.8   issued by a jobs training program after December 31, 2003, and 
 14.9   tax credits issued under this section may not be taken and 
 14.10  allowed on an employer's tax return for a tax year beginning 
 14.11  after December 31, 2009. 
 14.12     Sec. 8.  [290.0803] [HIGHER EDUCATION TRUSTS.] 
 14.13     Subdivision 1.  [DEFINITIONS.] (a) For the purposes of this 
 14.14  section, the following terms have the meanings given them.  
 14.15     (b) "Higher education trust" means a grantor trust created 
 14.16  or organized in Minnesota for the purpose of funding the 
 14.17  qualified education expenses of the grantor, but only if the 
 14.18  written governing instrument creating the trust meets the 
 14.19  following requirements: 
 14.20     (1) No contribution shall be accepted unless it is in cash, 
 14.21  and contributions shall not be accepted for the taxable year in 
 14.22  excess of $2,000. 
 14.23     (2) The trustee is a bank or other person who demonstrates 
 14.24  to the satisfaction of the commissioner that the manner in which 
 14.25  the other person will administer the trust will be consistent 
 14.26  with the requirements of this section. 
 14.27     (3) No part of the trust funds shall be invested in life 
 14.28  insurance contracts. 
 14.29     (4) The interest of an individual in the balance of the 
 14.30  individual's account is nonforfeitable. 
 14.31     (5) The assets of the trust shall not be commingled with 
 14.32  other property, except in a common trust fund or common 
 14.33  investment fund. 
 14.34     (6) The trust is not taxed for federal tax purposes as an 
 14.35  individual retirement account under section 408 of the Internal 
 14.36  Revenue Code. 
 15.1      (c) "Qualified education expense of the grantor" means 
 15.2   tuition, books, and fees required for the enrollment or 
 15.3   attendance at an eligible education institution of the grantor; 
 15.4   the grantor's spouse; or any child, grandchild, or ancestor of 
 15.5   the grantor or grantor's spouse.  A qualified education expense 
 15.6   of the grantor does not include expenses with respect to any 
 15.7   course or other education involving sports, games, or hobbies, 
 15.8   other than as part of a degree program. 
 15.9      The amount of qualified higher education expenses otherwise 
 15.10  taken into account under this paragraph with respect to the 
 15.11  education of an individual shall be reduced, before the 
 15.12  application of this paragraph, by the sum of the amounts 
 15.13  received with respect to the individual for the taxable year as: 
 15.14     (1) a qualified scholarship which under section 117 of the 
 15.15  Internal Revenue Code of 1986 is not includable in gross income; 
 15.16     (2) an educational assistance allowance under United States 
 15.17  Code, title 38, chapter 30, 31, 32, 34, or 35; 
 15.18     (3) a payment, other than a gift, bequest, devise, or 
 15.19  inheritance within the meaning of section 102(a) of the Internal 
 15.20  Revenue Code for educational expenses, or attributable to 
 15.21  attendance at an eligible educational institution, which is 
 15.22  exempt from income taxation by any law of the United States; or 
 15.23     (4) amounts excluded from federal taxable income under 
 15.24  section 135 of the Internal Revenue Code. 
 15.25     (d) For the purposes of paragraph (c), "eligible 
 15.26  educational institution" means: 
 15.27     (1) an institution described in section 1201(a) or 
 15.28  subparagraph (C) or (D) of section 481(a)(1) of the Higher 
 15.29  Education Act of 1965; or 
 15.30     (2) an area vocational education school, as defined in 
 15.31  subparagraph (C) or (D) of section 521(3) of the Carl D. 
 15.32  Perkins' Vocational Education Act, that is in any state, as 
 15.33  defined in section 521(27) of the Carl D. Perkins' Vocational 
 15.34  Education Act. 
 15.35     Subd. 2.  [SUBTRACTION.] The grantor is allowed a 
 15.36  subtraction from federal taxable income in the amount of (1) the 
 16.1   contribution made by the grantor to a higher education trust in 
 16.2   the grantor's taxable year, and (2) any net income or net 
 16.3   capital gain other than income which is excluded from Minnesota 
 16.4   tax by section 290.01, subdivision 19b, clause (1), generated by 
 16.5   the higher education trust that is included in the grantor's 
 16.6   federal taxable income for the year. 
 16.7      Subd. 3.  [ADDITION.] The net income or capital loss of a 
 16.8   higher education trust for a tax year which is included in the 
 16.9   computation of the grantor's federal taxable income must be 
 16.10  added to federal taxable income to the extent the loss is 
 16.11  included in the grantor's computation of federal taxable income. 
 16.12     Subd. 4.  [TAX ON DISTRIBUTION FROM A HIGHER EDUCATION 
 16.13  TRUST.] In the event of distribution from a higher education 
 16.14  trust within five years of the establishment of the higher 
 16.15  education trust or in a year in which the distribution exceeds 
 16.16  the qualified education expense of the grantor for the year, 
 16.17  notwithstanding any provision to the contrary, there is imposed 
 16.18  on the grantor or the grantor's estate an additional tax in the 
 16.19  amount of (1) two percent plus the highest marginal tax rate 
 16.20  applicable to the grantor's net income in the year of 
 16.21  distribution under section 290.06, subdivision 2c, paragraph 
 16.22  (a), multiplied by the amount of the distribution if the 
 16.23  distribution is made within five years of the establishment of 
 16.24  the trust; or (2) the percentage determined under clause (1) 
 16.25  multiplied by the amount of the distribution which exceeds the 
 16.26  qualified education expense of the grantor for the year for 
 16.27  distributions from a trust in existence for more than five years.
 16.28     This tax applies regardless of whether the true grantor is 
 16.29  a resident or nonresident of Minnesota in the year of 
 16.30  distribution. 
 16.31     In no event shall the cumulative distributions subject to 
 16.32  the tax in this subdivision exceed the cumulative amount of 
 16.33  subtractions less cumulative additions claimed by the grantor on 
 16.34  the grantor's Minnesota individual income tax returns for tax 
 16.35  years prior to the year of distribution.  Notwithstanding the 
 16.36  filing requirements of section 289A.08, subdivision 1, a grantor 
 17.1   is required to file a Minnesota individual tax return for any 
 17.2   year in which the tax provided by this subdivision is imposed. 
 17.3      Subd. 5.  [RETURNS OF HIGHER EDUCATION TRUSTS.] For each 
 17.4   year a higher education trust is in existence, the grantor of 
 17.5   the trust is required to file a return with the commissioner by 
 17.6   October 15 of the year following the tax year.  The return must 
 17.7   include the social security number of the grantor, the amount of 
 17.8   the contributions made to the trust by the grantor in the year, 
 17.9   the amount of net income or loss of the trust for the year, the 
 17.10  amount of distributions made in the year, and the amount of the 
 17.11  qualified higher education expense incurred by the grantor in 
 17.12  the year. 
 17.13     Subd. 6.  [SUNSET OF THE SUBTRACTION AND ADDITION.] If the 
 17.14  federal government enacts an income tax provision providing for 
 17.15  nondeductible individual retirement accounts similar to the 
 17.16  provision proposed by Congress in section 11015 of Revenue 
 17.17  Reconciliation and Tax Simplification Provisions from Conference 
 17.18  Report on HR 2491, Seven-Year Balanced Budget Reconciliation Act 
 17.19  of 1995, filed November 16, 1995, the subtraction and additions 
 17.20  provided by subdivisions 2 and 3 will not be allowed for tax 
 17.21  years beginning after the year of federal enactment. 
 17.22     Subd. 7.  [ROLLOVER OF DISTRIBUTIONS FROM HIGHER EDUCATION 
 17.23  TRUSTS MADE AFTER THE YEAR OF THE SUNSET OF SUBDIVISION 2.] If 
 17.24  the federal government enacts a tax provision as provided in 
 17.25  subdivision 6, the tax imposed by subdivision 4 will be reduced 
 17.26  by 8.5 percent of the amount contributed by the grantor to the 
 17.27  nondeductible individual retirement account established by the 
 17.28  grantor, other than the rollover proceeds from an individual 
 17.29  retirement account governed by section 407 of the Internal 
 17.30  Revenue Code, in the year of distribution. 
 17.31     Sec. 9.  Minnesota Statutes 1996, section 290.091, 
 17.32  subdivision 2, is amended to read: 
 17.33     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
 17.34  this section, the following terms have the meanings given: 
 17.35     (a) "Alternative minimum taxable income" means the sum of 
 17.36  the following for the taxable year: 
 18.1      (1) the taxpayer's federal alternative minimum taxable 
 18.2   income as defined in section 55(b)(2) of the Internal Revenue 
 18.3   Code; 
 18.4      (2) the taxpayer's itemized deductions allowed in computing 
 18.5   federal alternative minimum taxable income, but excluding the 
 18.6   Minnesota charitable contribution deduction and the medical 
 18.7   expense deduction; 
 18.8      (3) for depletion allowances computed under section 613A(c) 
 18.9   of the Internal Revenue Code, with respect to each property (as 
 18.10  defined in section 614 of the Internal Revenue Code), to the 
 18.11  extent not included in federal alternative minimum taxable 
 18.12  income, the excess of the deduction for depletion allowable 
 18.13  under section 611 of the Internal Revenue Code for the taxable 
 18.14  year over the adjusted basis of the property at the end of the 
 18.15  taxable year (determined without regard to the depletion 
 18.16  deduction for the taxable year); 
 18.17     (4) to the extent not included in federal alternative 
 18.18  minimum taxable income, the amount of the tax preference for 
 18.19  intangible drilling cost under section 57(a)(2) of the Internal 
 18.20  Revenue Code determined without regard to subparagraph (E); 
 18.21     (5) to the extent not included in federal alternative 
 18.22  minimum taxable income, the amount of interest income as 
 18.23  provided by section 290.01, subdivision 19a, clause (1); 
 18.24     less the sum of the amounts determined under the following 
 18.25  clauses (1) to (3) (4): 
 18.26     (1) interest income as defined in section 290.01, 
 18.27  subdivision 19b, clause (1); 
 18.28     (2) an overpayment of state income tax as provided by 
 18.29  section 290.01, subdivision 19b, clause (2), to the extent 
 18.30  included in federal alternative minimum taxable income; and 
 18.31     (3) the amount of investment interest paid or accrued 
 18.32  within the taxable year on indebtedness to the extent that the 
 18.33  amount does not exceed net investment income, as defined in 
 18.34  section 163(d)(4) of the Internal Revenue Code.  Interest does 
 18.35  not include amounts deducted in computing federal adjusted gross 
 18.36  income.; and 
 19.1      (4) the amount provided in section 290.01, subdivision 19b, 
 19.2   clause (10). 
 19.3      In the case of an estate or trust, alternative minimum 
 19.4   taxable income must be computed as provided in section 59(c) of 
 19.5   the Internal Revenue Code. 
 19.6      (b) "Investment interest" means investment interest as 
 19.7   defined in section 163(d)(3) of the Internal Revenue Code. 
 19.8      (c) "Tentative minimum tax" equals seven percent of 
 19.9   alternative minimum taxable income after subtracting the 
 19.10  exemption amount determined under subdivision 3. 
 19.11     (d) "Regular tax" means the tax that would be imposed under 
 19.12  this chapter (without regard to this section and section 
 19.13  290.032), reduced by the sum of the nonrefundable credits 
 19.14  allowed under this chapter.  
 19.15     (e) "Net minimum tax" means the minimum tax imposed by this 
 19.16  section. 
 19.17     (f) "Minnesota charitable contribution deduction" means a 
 19.18  charitable contribution deduction under section 170 of the 
 19.19  Internal Revenue Code to or for the use of an entity described 
 19.20  in section 290.21, subdivision 3, clauses (a) to (e).  When the 
 19.21  federal deduction for charitable contributions is limited under 
 19.22  section 170(b) of the Internal Revenue Code, the allowable 
 19.23  contributions in the year of contribution are deemed to be first 
 19.24  contributions to entities described in section 290.21, 
 19.25  subdivision 3, clauses (a) to (e). 
 19.26     Sec. 10.  Minnesota Statutes 1996, section 290.091, 
 19.27  subdivision 6, is amended to read: 
 19.28     Subd. 6.  [CREDIT FOR PRIOR YEARS' LIABILITY.] (a) A credit 
 19.29  is allowed against the tax imposed by this chapter on 
 19.30  individuals, trusts, and estates equal to the minimum tax credit 
 19.31  for the taxable year.  The minimum tax credit equals the 
 19.32  adjusted net minimum tax for taxable years beginning after 
 19.33  December 31, 1988, reduced by the minimum tax credits allowed in 
 19.34  a prior taxable year.  The credit may not exceed the excess (if 
 19.35  any) for the taxable year of 
 19.36     (1) the regular tax, over 
 20.1      (2) the greater of (i) the tentative alternative minimum 
 20.2   tax, or (ii) zero. 
 20.3      (b) The adjusted net minimum tax for a taxable year equals 
 20.4   the lesser of the net minimum tax or the excess (if any) of 
 20.5      (1) the tentative minimum tax, over 
 20.6      (2) seven percent of the sum of 
 20.7      (i) adjusted gross income as defined in section 62 of the 
 20.8   Internal Revenue Code, 
 20.9      (ii) interest income as defined in section 290.01, 
 20.10  subdivision 19a, clause (1), 
 20.11     (iii) interest on specified private activity bonds, as 
 20.12  defined in section 57(a)(5) of the Internal Revenue Code, to the 
 20.13  extent not included under clause (ii), 
 20.14     (iv) depletion as defined in section 57(a)(1), determined 
 20.15  without regard to the last sentence of paragraph (1), of the 
 20.16  Internal Revenue Code, less 
 20.17     (v) the deductions provided in subdivision 2, paragraph 
 20.18  (a), clauses (5), items (i), (ii), and (iii) (1) to (4), of the 
 20.19  second series of clauses, and 
 20.20     (vi) the exemption amount determined under subdivision 3. 
 20.21     In the case of an individual who is not a Minnesota 
 20.22  resident for the entire year, adjusted net minimum tax must be 
 20.23  multiplied by the fraction defined in section 290.06, 
 20.24  subdivision 2c, paragraph (e).  In the case of a trust or 
 20.25  estate, adjusted net minimum tax must be multiplied by the 
 20.26  fraction defined under subdivision 4, paragraph (b). 
 20.27     Sec. 11.  Minnesota Statutes 1996, section 290.0921, 
 20.28  subdivision 8, is amended to read: 
 20.29     Subd. 8.  [CARRYOVER CREDIT.] (a) A corporation is allowed 
 20.30  a credit against qualified regular tax for qualified alternative 
 20.31  minimum tax previously paid.  The credit is allowable only if 
 20.32  the corporation has no tax liability under this section for the 
 20.33  taxable year and if the corporation has an alternative minimum 
 20.34  tax credit carryover from a previous year.  The credit allowable 
 20.35  in a taxable year equals the lesser of 
 20.36     (1) the excess of the qualified regular tax for the taxable 
 21.1   year over the amount computed under subdivision 1, clause (1), 
 21.2   for the taxable year or 
 21.3      (2) the carryover credit to the taxable year. 
 21.4      (b) For purposes of this subdivision, the following terms 
 21.5   have the meanings given. 
 21.6      (1) "Qualified alternative minimum tax" equals the amount 
 21.7   determined under subdivision 1 for the taxable year.  
 21.8      (2) "Qualified regular tax" means the tax imposed under 
 21.9   section 290.06, subdivision 1. 
 21.10     (c) The qualified alternative minimum tax for a taxable 
 21.11  year is an alternative minimum tax credit carryover to each of 
 21.12  the taxable years succeeding the taxable year.  The entire 
 21.13  amount of the credit must be carried to the earliest taxable 
 21.14  year to which the amount may be carried.  Any unused portion of 
 21.15  the credit must be carried to the following taxable year.  No 
 21.16  credit may be carried to a taxable year in which alternative 
 21.17  minimum tax was paid.  The credit allowable in a taxable year 
 21.18  equals the alternative minimum tax previously paid pursuant to 
 21.19  this section and not used as a credit against qualified regular 
 21.20  tax in tax years beginning before January 1, 1997, and must be 
 21.21  used by the corporation as a credit against regular tax.  The 
 21.22  credit carryover is available for ten years, and the maximum 
 21.23  amount of credit available in any year is the lesser of: 
 21.24     (1) 40 percent of regular tax liability; or 
 21.25     (2) 15 percent of the amount of credit available, paid but 
 21.26  not previously used, in tax years beginning before January 1, 
 21.27  1997. 
 21.28     This credit is not refundable. 
 21.29     (d) (b) An acquiring corporation may carry over this credit 
 21.30  from a transferor or distributor corporation in a corporate 
 21.31  acquisition.  The provisions of section 381 of the Internal 
 21.32  Revenue Code apply in determining the amount of the carryover, 
 21.33  if any. 
 21.34     Sec. 12.  Minnesota Statutes 1996, section 290.21, is 
 21.35  amended by adding a subdivision to read: 
 21.36     Subd. 9.  [LIMITATION.] No deduction shall be allowed under 
 22.1   this section for placement fees or retention fees paid to a 
 22.2   qualified jobs placement program for which a credit is allowed 
 22.3   under section 290.0673. 
 22.4      Sec. 13.  Minnesota Statutes 1996, section 296.18, 
 22.5   subdivision 1, is amended to read: 
 22.6      Subdivision 1.  [CLAIM; FUEL USED IN OTHER VEHICLES.] Any 
 22.7   person who shall buy and use gasoline for a qualifying purpose 
 22.8   other than use in motor vehicles, snowmobiles except as provided 
 22.9   in clause (2), or motorboats, or special fuel for a qualifying 
 22.10  purpose other than use in licensed motor vehicles, and who shall 
 22.11  have paid the Minnesota excise tax directly or indirectly 
 22.12  through the amount of the tax being included in the price of the 
 22.13  gasoline or special fuel, or otherwise, shall be reimbursed and 
 22.14  repaid the amount of the tax paid upon filing with the 
 22.15  commissioner a claim in the form and manner prescribed by the 
 22.16  commissioner, and containing the information the commissioner 
 22.17  shall require.  By signing any such claim which is false or 
 22.18  fraudulent, the applicant shall be subject to the penalties 
 22.19  provided in this section for knowingly making a false claim.  
 22.20  The claim shall set forth the total amount of the gasoline so 
 22.21  purchased and used by the applicant other than in motor 
 22.22  vehicles, or special fuel so purchased and used by the applicant 
 22.23  other than in licensed motor vehicles, and shall state when and 
 22.24  for what purpose it was used.  When a claim contains an error in 
 22.25  computation or preparation, the commissioner is authorized to 
 22.26  adjust the claim in accordance with the evidence shown on the 
 22.27  claim or other information available to the commissioner.  The 
 22.28  commissioner, on being satisfied that the claimant is entitled 
 22.29  to the payments, shall approve the claim and transmit it to the 
 22.30  commissioner of finance.  No repayment shall be made unless the 
 22.31  claim and invoice shall be filed with the commissioner within 
 22.32  one year from the date of the purchase.  The postmark on the 
 22.33  envelope in which a written claim is mailed shall determine its 
 22.34  date of filing.  The words "gasoline" or "special fuel" as used 
 22.35  in this subdivision do not include aviation gasoline or special 
 22.36  fuel for aircraft.  Gasoline or special fuel bought and used for 
 23.1   a "qualifying purpose" means: 
 23.2      (1) Gasoline or special fuel used in carrying on a trade or 
 23.3   business, used on a farm situated in Minnesota, and used for a 
 23.4   farming purpose.  "Farm" and "farming purpose" have the meanings 
 23.5   given them in section 6420(c)(2), (3), and (4) of the Internal 
 23.6   Revenue Code of 1986, as amended through December 31, 1988.  
 23.7      (2) Gasoline or special fuel used for off-highway business 
 23.8   use.  "Off-highway business use" means any use off the public 
 23.9   highway by a person in that person's trade, business, or 
 23.10  activity for the production of income.  "Off-highway business 
 23.11  use" includes: 
 23.12     (a) use of a passenger snowmobile off the public highways 
 23.13  as part of the operations of a resort as defined in section 
 23.14  157.15.; and 
 23.15     (b) use of gasoline or special fuel to operate a power 
 23.16  takeoff unit on a vehicle, but not including fuel consumed 
 23.17  during idling time. 
 23.18     "Off-highway business use" does not include use as a fuel 
 23.19  in a motor vehicle which, at the time of use, is registered or 
 23.20  is required to be registered for highway use under the laws of 
 23.21  any state or foreign country.  
 23.22     (3) Gasoline or special fuel placed in the fuel tanks of 
 23.23  new motor vehicles, manufactured in Minnesota, and shipped by 
 23.24  interstate carrier to destinations in other states or foreign 
 23.25  countries. 
 23.26     By July 1, 1998, the commissioner shall adopt rules that 
 23.27  determine the rates and percentages necessary to develop 
 23.28  formulas for calculating and administering the refund under 
 23.29  clause (2)(b). 
 23.30     Sec. 14.  Minnesota Statutes 1996, section 297A.01, 
 23.31  subdivision 16, is amended to read: 
 23.32     Subd. 16.  [CAPITAL EQUIPMENT.] (a) Capital equipment means 
 23.33  machinery and equipment purchased or leased for use in this 
 23.34  state and used by the purchaser or lessee primarily for 
 23.35  manufacturing, fabricating, mining, or refining tangible 
 23.36  personal property to be sold ultimately at retail and for 
 24.1   electronically transmitting results retrieved by a customer of 
 24.2   an on-line computerized data retrieval system.  
 24.3      (b) Capital equipment includes all machinery and equipment 
 24.4   that is essential to the integrated production process.  Capital 
 24.5   equipment includes, but is not limited to: 
 24.6      (1) machinery and equipment used or required to operate, 
 24.7   control, or regulate the production equipment; 
 24.8      (2) machinery and equipment used for research and 
 24.9   development, design, quality control, and testing activities; 
 24.10     (3) environmental control devices that are used to maintain 
 24.11  conditions such as temperature, humidity, light, or air pressure 
 24.12  when those conditions are essential to and are part of the 
 24.13  production process; or 
 24.14     (4) materials and supplies necessary to construct and 
 24.15  install machinery or equipment.; 
 24.16     (5) repair and replacement parts, including accessories, 
 24.17  whether purchased as spare parts, repair parts, or as upgrades 
 24.18  or modifications to machinery or equipment; 
 24.19     (6) materials used for foundations that support machinery 
 24.20  or equipment; or 
 24.21     (7) materials used to construct and install special purpose 
 24.22  buildings used in the production process. 
 24.23     (c) Capital equipment does not include the following: 
 24.24     (1) repair or replacement parts, including accessories, 
 24.25  whether purchased as spare parts, repair parts, or as upgrades 
 24.26  or modifications, and whether purchased before or after the 
 24.27  machinery or equipment is placed into service.  Parts or 
 24.28  accessories are treated as capital equipment only to the extent 
 24.29  that they are a part of and are essential to the operation of 
 24.30  the machinery or equipment as initially purchased; 
 24.31     (2) motor vehicles taxed under chapter 297B; 
 24.32     (3) (2) machinery or equipment used to receive or store raw 
 24.33  materials; 
 24.34     (4) (3) building materials; 
 24.35     (5) (4) machinery or equipment used for nonproduction 
 24.36  purposes, including, but not limited to, the following:  
 25.1   machinery and equipment used for plant security, fire 
 25.2   prevention, first aid, and hospital stations; machinery and 
 25.3   equipment used in support operations or for administrative 
 25.4   purposes; machinery and equipment used solely for pollution 
 25.5   control, prevention, or abatement; and machinery and equipment 
 25.6   used in plant cleaning, disposal of scrap and waste, plant 
 25.7   communications, space heating, lighting, or safety; 
 25.8      (6) (5) "farm machinery" as defined by subdivision 15, and 
 25.9   "aquaculture production equipment" as defined by subdivision 19, 
 25.10  and "replacement capital equipment" as defined by subdivision 
 25.11  20; or 
 25.12     (7) (6) any other item that is not essential to the 
 25.13  integrated process of manufacturing, fabricating, mining, or 
 25.14  refining. 
 25.15     (d) For purposes of this subdivision: 
 25.16     (1) "Equipment" means independent devices or tools separate 
 25.17  from machinery but essential to an integrated production 
 25.18  process, including computers and software, used in operating, 
 25.19  controlling, or regulating machinery and equipment; and any 
 25.20  subunit or assembly comprising a component of any machinery or 
 25.21  accessory or attachment parts of machinery, such as tools, dies, 
 25.22  jigs, patterns, and molds. 
 25.23     (2) "Fabricating" means to make, build, create, produce, or 
 25.24  assemble components or property to work in a new or different 
 25.25  manner. 
 25.26     (3) "Machinery" means mechanical, electronic, or electrical 
 25.27  devices, including computers and software, that are purchased or 
 25.28  constructed to be used for the activities set forth in paragraph 
 25.29  (a), beginning with the removal of raw materials from inventory 
 25.30  through the completion of the product, including packaging of 
 25.31  the product. 
 25.32     (4) "Manufacturing" means an operation or series of 
 25.33  operations where raw materials are changed in form, composition, 
 25.34  or condition by machinery and equipment and which results in the 
 25.35  production of a new article of tangible personal property.  For 
 25.36  purposes of this subdivision, "manufacturing" includes the 
 26.1   generation of electricity or steam to be sold at retail. 
 26.2      (5) "Mining" means the extraction of minerals, ores, stone, 
 26.3   and peat. 
 26.4      (6) "On-line data retrieval system" means a system whose 
 26.5   cumulation of information is equally available and accessible to 
 26.6   all its customers. 
 26.7      (7) "Pollution control equipment" means machinery and 
 26.8   equipment used to eliminate, prevent, or reduce pollution 
 26.9   resulting from an activity described in paragraph (a). 
 26.10     (8) "Primarily" means machinery and equipment used 50 
 26.11  percent or more of the time in an activity described in 
 26.12  paragraph (a). 
 26.13     (9) "Refining" means the process of converting a natural 
 26.14  resource to a product, including the treatment of water to be 
 26.15  sold at retail. 
 26.16     (e) For purposes of this subdivision the requirement that 
 26.17  the machinery or equipment "must be used by the purchaser or 
 26.18  lessee" means that the person who purchases or leases the 
 26.19  machinery or equipment must be the one who uses it for the 
 26.20  qualifying purpose.  When a contractor buys and installs 
 26.21  machinery or equipment as part of an improvement to real 
 26.22  property, only the contractor is considered the purchaser. 
 26.23     (f) Notwithstanding prior provisions of this subdivision, 
 26.24  machinery and equipment purchased or leased to replace machinery 
 26.25  and equipment used in the mining or production of taconite shall 
 26.26  qualify as capital equipment. 
 26.27     Sec. 15.  Minnesota Statutes 1996, section 297A.02, 
 26.28  subdivision 5, is amended to read: 
 26.29     Subd. 5.  [REPLACEMENT CAPITAL EQUIPMENT.] Notwithstanding 
 26.30  the provisions of subdivision 1, the rate of excise tax imposed 
 26.31  upon retail sales of replacement capital equipment is: 
 26.32     for purchases after June 30, 1994, and prior to July 1, 
 26.33  1995, 5.0 percent, 
 26.34     for purchases after June 30, 1995, and prior to July 1, 
 26.35  1996, 4.0 percent, 
 26.36     for purchases after June 30, 1996, and prior to July 1, 
 27.1   1997, 3.8 percent, 
 27.2      for purchases after June 30, 1997, and prior to July 1, 
 27.3   1998, 2.9 1.5 percent, and 
 27.4      for purchases after June 30, 1998, 2.0 percent exempt. 
 27.5      This subdivision shall cease to be operative on July 1, 
 27.6   2001, or on July 1 of the earliest year thereafter, if the total 
 27.7   employment in the manufacturing sector in this state, as 
 27.8   determined by the commissioner of economic security on the 
 27.9   preceding January 1, does not exceed by 4,500 the total 
 27.10  employment in the manufacturing sector in the state on January 
 27.11  1, 1994. 
 27.12     Sec. 16.  Minnesota Statutes 1996, section 297A.25, 
 27.13  subdivision 11, is amended to read: 
 27.14     Subd. 11.  [SALES TO GOVERNMENT.] The gross receipts from 
 27.15  all sales, including sales in which title is retained by a 
 27.16  seller or a vendor or is assigned to a third party under an 
 27.17  installment sale or lease purchase agreement under section 
 27.18  465.71, of tangible personal property to, and all storage, use 
 27.19  or consumption of such property by, the United States and its 
 27.20  agencies and instrumentalities, the University of Minnesota, 
 27.21  state universities, community colleges, technical colleges, 
 27.22  state academies, the Lola and Rudy Perpich Minnesota center for 
 27.23  arts education, and school districts are exempt. 
 27.24     As used in this subdivision, "school districts" means 
 27.25  public school entities and districts of every kind and nature 
 27.26  organized under the laws of the state of Minnesota, including, 
 27.27  without limitation, school districts, intermediate school 
 27.28  districts, education districts, service cooperatives, secondary 
 27.29  vocational cooperative centers, special education cooperatives, 
 27.30  joint purchasing cooperatives, telecommunication cooperatives, 
 27.31  regional management information centers, and any instrumentality 
 27.32  of a school district, as defined in section 471.59. 
 27.33     Sales exempted by this subdivision include sales under 
 27.34  section 297A.01, subdivision 3, paragraph (f), but do not 
 27.35  include sales under section 297A.01, subdivision 3, paragraph 
 27.36  (j), clause (vii).  
 28.1      Sales to veterans homes operated by the veterans homes 
 28.2   board of directors or hospitals and nursing homes owned and 
 28.3   operated by the state or any of its political subdivisions of 
 28.4   the state are exempt under this subdivision.  
 28.5      The sales to and exclusively for the use of libraries of 
 28.6   books, periodicals, audio-visual materials and equipment, 
 28.7   photocopiers for use by the public, and all cataloguing and 
 28.8   circulation equipment, and cataloguing and circulation software 
 28.9   for library use are exempt under this subdivision.  For purposes 
 28.10  of this paragraph "libraries" means libraries as defined in 
 28.11  section 134.001, county law libraries under chapter 134A, the 
 28.12  state library under section 480.09, and the legislative 
 28.13  reference library. 
 28.14     Sales of supplies and equipment used in the operation of an 
 28.15  ambulance service owned and operated by a political subdivision 
 28.16  of the state are exempt under this subdivision provided that the 
 28.17  supplies and equipment are used in the course of providing 
 28.18  medical care.  Sales to a political subdivision of repair and 
 28.19  replacement parts for emergency rescue vehicles and fire trucks 
 28.20  and apparatus are exempt under this subdivision.  
 28.21     Sales to a political subdivision of machinery and 
 28.22  equipment, except for motor vehicles, used directly for mixed 
 28.23  municipal solid waste management services at a solid waste 
 28.24  disposal facility as defined in section 115A.03, subdivision 10, 
 28.25  are exempt under this subdivision.  
 28.26     Sales to political subdivisions of chore and homemaking 
 28.27  services to be provided to elderly or disabled individuals are 
 28.28  exempt. 
 28.29     Sales of telephone services to the department of 
 28.30  administration that are used to provide telecommunications 
 28.31  services through the intertechnologies revolving fund are exempt 
 28.32  under this subdivision. 
 28.33     This exemption shall not apply to building, construction or 
 28.34  reconstruction materials purchased by a contractor or a 
 28.35  subcontractor as a part of a lump-sum contract or similar type 
 28.36  of contract with a guaranteed maximum price covering both labor 
 29.1   and materials for use in the construction, alteration, or repair 
 29.2   of a building or facility.  This exemption does not apply to 
 29.3   construction materials purchased by tax exempt entities or their 
 29.4   contractors to be used in constructing buildings or facilities 
 29.5   which will not be used principally by the tax exempt entities. 
 29.6      This exemption does not apply to the leasing of a motor 
 29.7   vehicle as defined in section 297B.01, subdivision 5, except for 
 29.8   leases entered into by the United States or its agencies or 
 29.9   instrumentalities.  
 29.10     The tax imposed on sales to political subdivisions of the 
 29.11  state under this section applies to all political subdivisions 
 29.12  other than those explicitly exempted under this subdivision, 
 29.13  notwithstanding section 115A.69, subdivision 6, 116A.25, 
 29.14  360.035, 458A.09, 458A.30, 458D.23, 469.101, subdivision 2, 
 29.15  469.127, 473.448, 473.545, or 473.608 or any other law to the 
 29.16  contrary enacted before 1992. 
 29.17     Sales exempted by this subdivision include sales made to 
 29.18  other states or political subdivisions of other states, if the 
 29.19  sale would be exempt from taxation if it occurred in that state, 
 29.20  but do not include sales under section 297A.01, subdivision 3, 
 29.21  paragraphs (c) and (e). 
 29.22     Sec. 17.  Minnesota Statutes 1996, section 297A.25, is 
 29.23  amended by adding a subdivision to read: 
 29.24     Subd. 62.  [HOSPITALS.] The gross receipts from the sale of 
 29.25  tangible personal property to, and the storage, use, or 
 29.26  consumption of such property by, a hospital are exempt, if the 
 29.27  property purchased is to be used for the hospitalization of 
 29.28  human beings.  For purposes of this subdivision, "hospital" 
 29.29  means a hospital licensed under chapter 144 or a hospital 
 29.30  licensed by any other jurisdiction.  This exemption does not 
 29.31  apply to purchases made by a clinic, physician's office, or any 
 29.32  other medical facility not operating as a hospital, even though 
 29.33  the clinic, office, or facility may be owned and operated by a 
 29.34  hospital.  Sales exempted by this subdivision do not include 
 29.35  sales under section 297A.01, subdivision 3, paragraphs (c), (e), 
 29.36  and (i), clause (vii).  This exemption does not apply to 
 30.1   building, construction, or reconstruction materials purchased by 
 30.2   a contractor or a subcontractor as a part of a lump-sum contract 
 30.3   or similar type of contract with a guaranteed maximum price 
 30.4   covering both labor and materials for use in the construction, 
 30.5   alteration, or repair of a hospital.  This exemption does not 
 30.6   apply to construction materials to be used in constructing 
 30.7   buildings or facilities which will not be used principally by a 
 30.8   hospital.  This exemption does not apply to the leasing of a 
 30.9   motor vehicle as defined in section 297B.01, subdivision 5. 
 30.10     Sec. 18.  Minnesota Statutes 1996, section 297A.44, 
 30.11  subdivision 1, is amended to read: 
 30.12     Subdivision 1.  (a) Except as provided in paragraphs (b), 
 30.13  (c), and (d) to (e), all revenues, including interest and 
 30.14  penalties, derived from the excise and use taxes imposed by 
 30.15  sections 297A.01 to 297A.44 shall be deposited by the 
 30.16  commissioner in the state treasury and credited to the general 
 30.17  fund.  
 30.18     (b) All excise and use taxes derived from sales and use of 
 30.19  property and services purchased for the construction and 
 30.20  operation of an agricultural resource project, from and after 
 30.21  the date on which a conditional commitment for a loan guaranty 
 30.22  for the project is made pursuant to section 41A.04, subdivision 
 30.23  3, shall be deposited in the Minnesota agricultural and economic 
 30.24  account in the special revenue fund.  The commissioner of 
 30.25  finance shall certify to the commissioner the date on which the 
 30.26  project received the conditional commitment.  The amount 
 30.27  deposited in the loan guaranty account shall be reduced by any 
 30.28  refunds and by the costs incurred by the department of revenue 
 30.29  to administer and enforce the assessment and collection of the 
 30.30  taxes.  
 30.31     (c) All revenues, including interest and penalties, derived 
 30.32  from the excise and use taxes imposed on sales and purchases 
 30.33  included in section 297A.01, subdivision 3, paragraphs (d) and 
 30.34  (l), clauses (1) and (2), must be deposited by the commissioner 
 30.35  in the state treasury, and credited as follows: 
 30.36     (1) first to the general obligation special tax bond debt 
 31.1   service account in each fiscal year the amount required by 
 31.2   section 16A.661, subdivision 3, paragraph (b); and 
 31.3      (2) after the requirements of clause (1) have been met, the 
 31.4   balance must be credited to the general fund. 
 31.5      (d) The revenues, including interest and penalties, derived 
 31.6   from the taxes imposed on solid waste collection services as 
 31.7   described in section 297A.45, shall be deposited by the 
 31.8   commissioner in the state treasury and credited to the general 
 31.9   fund to be used for funding solid waste reduction and recycling 
 31.10  programs. 
 31.11     (e) All revenues derived from the sales tax on the sale of 
 31.12  admission tickets to athletic events sponsored by the University 
 31.13  of Minnesota shall be credited to the University of Minnesota.  
 31.14     Sec. 19.  Minnesota Statutes 1996, section 298.01, 
 31.15  subdivision 4e, is amended to read: 
 31.16     Subd. 4e.  [ALTERNATIVE MINIMUM TAX CREDIT.] A credit is 
 31.17  allowed against qualified regular tax for qualified alternative 
 31.18  minimum tax previously paid.  The amount of the credit allowed 
 31.19  under this paragraph is determined under section 290.0921, 
 31.20  subdivision 8.  For purposes of calculating this credit, the 
 31.21  following terms have the meanings given: 
 31.22     (1) "Qualified alternative minimum tax" means the amount 
 31.23  determined under subdivision 4d and section 290.0921, 
 31.24  subdivision 1. 
 31.25     (2) "Qualified regular tax" means the tax imposed under 
 31.26  subdivision 4 and section 290.06, subdivision 1. 
 31.27     Sec. 20.  Minnesota Statutes 1996, section 477A.03, 
 31.28  subdivision 2, is amended to read: 
 31.29     Subd. 2.  [ANNUAL APPROPRIATION.] A sum sufficient to 
 31.30  discharge the duties imposed by sections 477A.011 to 477A.014 is 
 31.31  annually appropriated from the general fund to the commissioner 
 31.32  of revenue.  For aids payable in 1996 and thereafter, the total 
 31.33  aids paid under sections 477A.013, subdivision 9, and section 
 31.34  477A.0122 are the amounts certified to be paid in the previous 
 31.35  year, adjusted for inflation as provided under subdivision 3.  
 31.36  Aid payments to counties under section 477A.0121 are limited to 
 32.1   $20,265,000 in 1996.  Aid payments to counties under section 
 32.2   477A.0121 are limited to $27,571,625 in 1997.  For aid payable 
 32.3   in 1998 and thereafter, the total aids paid under section 
 32.4   477A.0121 are the amounts certified to be paid in the previous 
 32.5   year, adjusted for inflation as provided under subdivision 
 32.6   3.  For aid payable in 1998 and thereafter, the total amount of 
 32.7   aids under section 477A.013, subdivision 9, is the total amount 
 32.8   of aids determined under that section for payment in the 
 32.9   previous year. 
 32.10     Sec. 21.  [APPROPRIATION.] 
 32.11     $16,600,000 is appropriated in fiscal year 1998 from the 
 32.12  general fund to the commissioner of revenue to pay claims filed 
 32.13  under the Cambridge Bank Judgment. 
 32.14     Sec. 22.  [REPEALER.] 
 32.15     (a) Minnesota Statutes 1996, sections 290.0921, 
 32.16  subdivisions 1, 2, 3, 3a, 4, 5, 6, and 7; and 298.01, 
 32.17  subdivisions 3c, 3d, and 4d, are repealed. 
 32.18     (b) Minnesota Statutes 1996, section 297A.01, subdivision 
 32.19  20, is repealed. 
 32.20     (c) Minnesota Statutes 1996, sections 325D.30; 325D.31; 
 32.21  325D.32; 325D.33; 325D.34; 325D.35; 325D.36; 325D.37; 325D.371; 
 32.22  325D.38; 325D.39; 325D.40; 325D.405; 325D.415; and 325D.42, are 
 32.23  repealed. 
 32.24     (d) Laws 1995, chapter 264, article 4, as amended by Laws 
 32.25  1996, chapter 471, article 3, is repealed.  Notwithstanding 
 32.26  Minnesota Statutes 1996, section 645.34, the sections of 
 32.27  statutes amended by the repealed Laws 1995, chapter 264, article 
 32.28  4, and amended by Laws 1996, chapter 471, article 3, remain in 
 32.29  effect as if not so amended. 
 32.30     Sec. 23.  [EFFECTIVE DATE.] 
 32.31     Sections 5, 7, and 12 are effective for tax credit 
 32.32  certificates issued after December 31, 1997, and used in tax 
 32.33  years beginning after December 31, 1997. 
 32.34     Sections 3, 4, 6, 8 to 11, 19, and 22, paragraph (a), are 
 32.35  effective for taxable years beginning after December 31, 1996. 
 32.36     Section 13 is effective on July 1, 1997, or upon adoption 
 33.1   of the corresponding rules, whichever occurs earlier. 
 33.2      Sections 14 and 22, paragraph (b), are effective for sales 
 33.3   and purchases made after June 30, 1998. 
 33.4      Sections 15 and 18 are effective for sales and purchases 
 33.5   made after June 30, 1997. 
 33.6      Sections 16 and 17 are effective for sales and purchases 
 33.7   occurring after December 31, 1995. 
 33.8      Section 20 is effective for aid payable in 1998 and 
 33.9   thereafter.  Section 22, paragraphs (c) and (d), are effective 
 33.10  the day following final enactment.