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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language


  

                         Laws of Minnesota 1983 

                        CHAPTER 207--H.F.No. 381
           An act relating to taxation; adopting certain federal 
          provisions relating to income taxes; updating certain 
          references to the Internal Revenue Code; adopting 
          certain federal provisions relating to the 
          determination of interest rates on taxes; imposing 
          penalties; amending Minnesota Statutes 1982, sections 
          270.75, subdivision 5; 290.01, subdivisions 20, 20a, 
          as amended, 20b, as amended, 20c, and 20f; 290.05, 
          subdivision 6; 290.068, subdivisions 3 and 4; 290.09, 
          subdivisions 2, 7, as amended, and 29; 290.091; 
          290.10; 290.135, subdivision 1, as amended; 290.16, 
          subdivisions 7 and 16; 290.17, subdivision 1; 290.26, 
          subdivision 2; 290.37, by adding a subdivision; 
          290.41, subdivisions 3, 8, and by adding a subdivision;
          290.45, subdivision 1; 290.48, by adding a 
          subdivision; 290.53, subdivision 2, and by adding 
          subdivisions; 290.92, subdivisions 7, 13, 15, and by 
          adding a subdivision; 290.93, subdivisions 9, 10, and 
          11; 290.934, subdivision 4; 290.9725; 290.9726, 
          subdivisions 5 and 6; 290.974; 290A.03, subdivision 3; 
          proposing new law coded in Minnesota Statutes, chapter 
          290; repealing Minnesota Statutes 1982, section 
          290.01, subdivision 28. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1982, section 270.75, 
subdivision 5, is amended to read: 
    Subd. 5.  The rates of interest or amount in lieu of 
interest contained in subdivisions 1 to 4 shall be adjusted by 
the commissioner of revenue not later than October 15 of 1982 
1983 and any year thereafter if the adjusted prime rate charged 
by banks during September the six-month period ending on 
September 30 of that year, rounded to the nearest full percent, 
is at least a full percentage point more or less than the 
interest rate which is then in effect.  The adjusted rate of 
interest or amount in lieu of interest shall be equal to the 
adjusted prime rate charged by banks, rounded to the nearest 
full percent, and shall become effective on January 1 of the 
immediately succeeding year except as provided in subdivision 
4.  For purposes of this subdivision, the term "adjusted prime 
rate charged by banks" means the average predominant prime rate 
quoted by commercial banks to large businesses, as determined by 
the Board of Governors of the Federal Reserve System.  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.  
    Sec. 2.  Minnesota Statutes 1982, section 290.01, 
subdivision 20, is amended to read: 
    Subd. 20.  [GROSS INCOME.] Except as otherwise provided in 
this chapter, the term "gross income," as applied to 
corporations includes every kind of compensation for labor or 
personal services of every kind from any private or public 
employment, office, position or services; income derived from 
the ownership or use of property; gains or profits derived from 
every kind of disposition of, or every kind of dealing in, 
property; income derived from the transaction of any trade or 
business; and income derived from any source.  
    The term "gross income" in its application to individuals, 
estates, and trusts shall mean the adjusted gross income as 
defined in the Internal Revenue Code of 1954, as amended through 
the date specified herein for the applicable taxable year, with 
the modifications specified in this subdivision and in 
subdivisions 20a to 20f.  For estates and trusts the adjusted 
gross income shall be their federal taxable income as defined in 
the Internal Revenue Code of 1954, as amended through the date 
specified herein for the applicable taxable year, with the 
modifications specified in this subdivision and in subdivisions 
20a to 20f, and with the modification that the federal deduction 
for personal exemptions for trusts and estates shall not be 
allowed.  
    (i) The Internal Revenue Code of 1954, as amended through 
December 31, 1976, including the amendments made to section 280A 
(relating to licensed day care centers) in H.R. 3477 as it 
passed the Congress on May 16, 1977, shall be in effect for the 
taxable years beginning after December 31, 1976.  The provisions 
of the Tax Reform Act of 1976, P.L. 94-455, which affect 
adjusted gross income shall become effective for purposes of 
this chapter at the same time they become effective for federal 
income tax purposes.  
    The provisions of section 4 of P.L. 95-458, sections 131, 
133, 134, 141, 152, 156, 157, 405, and 543 of P.L. 95-600, and 
section 2 of P.L. 96-608 (relating to pensions, individual 
retirement accounts, deferred compensation plans, the sale of a 
residence and to conservation payments to farmers) including the 
amendments made to these sections in P.L. 96-222 shall be 
effective at the same time that these provisions became 
effective for federal income tax purposes. 
    (ii) The Internal Revenue Code of 1954, as amended through 
December 31, 1979, shall be in effect for taxable years 
beginning after December 31, 1979. 
    (iii) The Internal Revenue Code of 1954, as amended through 
December 31, 1980, and as amended by sections 302(b) and 501 to 
509 of Public Law Number 97-34, shall be in effect for taxable 
years beginning after December 31, 1980 including the provisions 
of section 404 (relating to partial exclusions of dividends and 
interest received by individuals) of the Crude Oil Windfall 
Profit Tax Act of 1980, P.L. 96-223.  The provisions of P.L. 
96-471 (relating to installment sales) sections 122, 123, 126, 
201, 202, 203, 204, 211, 213, 214, 251, 261, 264, 265, 
311(g)(3), 313, 314(a)(1), 321(a), 501 to 507, 811, and 812 of 
the Economic Recovery Tax Act of 1981, Public Law Number 97-34 
and section 113 of Public Law Number 97-119 shall be effective 
at the same time that they become effective for federal income 
tax purposes. 
    (iv) The Internal Revenue Code of 1954, as amended through 
December 31, 1981, shall be in effect for taxable years 
beginning after December 31, 1981.  The provisions of sections 
205(a), 214 to 222, 231, 232, 236, 247, 251, 252, 253, 265, 266, 
285, 288, and 335 of the Tax Equity and Fiscal Responsibility 
Act of 1982, Public Law Number 97-248, section 6(b)(2) and (3) 
of the Subchapter S Revision Act of 1982, Public Law Number 
97-354, section 517 of Public Law Number 97-424, sections 101(c) 
and (d), 102(a), (aa), (f)(4), (g), (j), (l), 103(c), 104(b)(3), 
105, 305(d), 306(a)(9) of Public Law Number 97-448, and sections 
101 and 102 of Public Law Number 97-473 shall be effective at 
the same time that they become effective for federal income tax 
purposes.  
    (v) The Internal Revenue Code of 1954, as amended through 
January 15, 1983, shall be in effect for taxable years beginning 
after December 31, 1982.  
    References to the Internal Revenue Code of 1954 in 
subdivisions 20a, 20b, 20c, and 20e, and 20f shall mean the code 
in effect for the purpose of defining gross income for the 
applicable taxable year.  
    Sec. 3.  Minnesota Statutes 1982, section 290.01, 
subdivision 20a, as amended by Laws 1982, Third Special Session 
chapter 1, article 5, section 1, is amended to read: 
    Subd. 20a.  [MODIFICATIONS INCREASING FEDERAL ADJUSTED 
GROSS INCOME.] There shall be added to federal adjusted gross 
income: 
    (1) Interest income on obligations of any state other than 
Minnesota or a political subdivision of any other state exempt 
from federal income taxes under the Internal Revenue Code of 
1954; 
    (2) A business casualty loss if the taxpayer elected to 
deduct the loss on the current year's federal income tax return 
but had deducted the loss on the previous year's Minnesota 
income tax return;  
    (3) Income taxes imposed by this state or any other taxing 
jurisdiction, to the extent deductible in determining federal 
adjusted gross income and not credited against federal income 
tax; 
    (4) Interest on indebtedness incurred or continued to 
purchase or carry securities the income from which is exempt 
from tax under this chapter, to the extent deductible in 
determining federal adjusted gross income; 
    (5) Amounts received as reimbursement for an expense of 
sickness or injury which was deducted in a prior taxable year to 
the extent that the deduction for the reimbursed expenditure 
resulted in a tax benefit; 
    (6) The amount of any federal income tax overpayment for 
any previous taxable year, received as refund or credited to 
another taxable year's income tax liability, proportionate to 
the percentage of federal income tax that was claimed as a 
deduction in determining Minnesota income tax for the previous 
taxable year.  The amount of the federal income tax overpayment 
shall be reported only to the extent that the amount resulted in 
a reduction of the tax imposed by this chapter.  
    The overpayment refund or credit, determined with respect 
to a husband and wife on a joint federal income tax return for a 
previous taxable year, shall be reported on joint, combined, or 
separate Minnesota income tax returns.  In the case of combined 
or separate Minnesota returns, the overpayment shall be reported 
by each spouse proportionately according to the relative amounts 
of federal income tax claimed as a deduction on his or her 
combined or separate Minnesota income tax return for such 
previous taxable year; 
    (7) In the case of a change of residence from Minnesota to 
another state or nation, the amount of moving expenses which 
exceed total reimbursements and which were therefore deducted in 
arriving at federal adjusted gross income; 
    (8) The amount of any increase in the taxpayer's federal 
tax liability under section 47 of the Internal Revenue Code of 
1954 to the extent of the credit under section 38 of the 
Internal Revenue Code of 1954 that was previously allowed as a 
deduction under subdivision 20b, clause (7); 
    (9) Expenses and losses arising from a farm which are not 
allowable under section 290.09, subdivision 29; 
    (10) Expenses and depreciation attributable to substandard 
buildings disallowed by section 290.101; 
    (11) The amount by which the gain determined pursuant to 
section 41.59, subdivision 2 exceeds the amount of such gain 
included in federal adjusted gross income; 
    (12) To the extent deducted in computing the taxpayer's 
federal adjusted gross income for the taxable year, losses 
recognized upon a transfer of property to the spouse or former 
spouse of the taxpayer in exchange for the release of the 
spouse's marital rights; 
    (13) Interest income from qualified scholarship funding 
bonds as defined in section 103(e) of the Internal Revenue Code 
of 1954, if the nonprofit corporation is domiciled outside of 
Minnesota; 
    (14) Exempt-interest dividends, as defined in section 
852(b)(5)(A) of the Internal Revenue Code of 1954, not included 
in federal adjusted gross income pursuant to section 
852(b)(5)(B) of the Internal Revenue Code of 1954, except for 
that portion of exempt-interest dividends derived from interest 
income on obligations of the state of Minnesota, any of its 
political or governmental subdivisions, any of its 
municipalities, or any of its governmental agencies or 
instrumentalities; 
    (15) The amount of any excluded gain recognized by a trust 
on the sale or exchange of property as defined in section 
641(c)(1) of the Internal Revenue Code of 1954; 
    (16) To the extent not included in the taxpayer's federal 
adjusted gross income, the amount of any gain, from the sale or 
other disposition of property having a lower adjusted basis for 
Minnesota income tax purposes than for federal income tax 
purposes.  This modification shall not exceed the difference in 
basis.  If the gain is considered a long term capital gain for 
federal income tax purposes, the modification shall be limited 
to 40 percent of the portion of the gain.  This modification is 
limited to property that qualified for the energy credit 
contained in section 290.06, subdivision 14, and to property 
acquired in exchange for the release of the taxpayer's marital 
rights contained in section 290.14, clause (7); 
    (17) The amount of any loss from a source outside of 
Minnesota which is not allowed under section 290.17 including 
any capital loss or net operating loss carryforwards or 
carrybacks resulting from the loss; 
    (18) The amount of a distribution from an individual 
housing account which is to be included in gross income as 
required under section 290.08, subdivision 25; 
    (19) To the extent deducted in computing the taxpayer's 
federal adjusted gross income, interest, taxes and other 
expenses which are not allowed under section 290.10, clause (9) 
or (10); 
    (20) To the extent excluded from federal adjusted gross 
income, in the case of a city manager or city administrator who 
elects to be excluded from the public employees retirement 
association and who makes contributions to a deferred 
compensation program pursuant to section 353.028, the amount of 
contributions made by the city manager or administrator which is 
equal to the amount which would have been the city manager's or 
administrator's employee contribution pursuant to section 
353.27, subdivision 2, if he were a member of the public 
employees retirement association; 
    (21) The deduction for two-earner married couples provided 
in section 221 of the Internal Revenue Code of 1954;  
    (22) Interest on all-savers certificates which is excluded 
under section 128 of the Internal Revenue Code of 1954; 
    (23) Losses from the business of mining as defined in 
section 290.05, subdivision 1, clause (a) which is not subject 
to the Minnesota income tax;  
    (24) Expenses and depreciation attributable to property 
subject to Laws 1982, chapter 523, article 7, section 3 which 
has not been registered;  
    (25) The amount of contributions to an individual 
retirement account, including a qualified voluntary employee 
contribution, simplified employee pension plan, or self-employed 
retirement plan which is allowed under sections 311 and 312 of 
Public Law Number 97-34, section 238 of Public Law Number 
97-248, and section 103(d)(1)(B) of Public Law Number 97-448 to 
the extent those contributions were not an allowable deduction 
prior to the enactment of that law; and 
    (26) To the extent deducted in computing federal adjusted 
gross income, living expenses of a member of congress in excess 
of that allowable under section 290.09, subdivision 2, clause 
(a)(3); and 
    (27) To the extent not included in the taxpayer's federal 
adjusted gross income, the amount of any contributions to a 
qualified pension plan, designated as employee contributions but 
which the employing unit picks up and which are treated as 
employer contributions pursuant to section 414(h)(2) of the 
Internal Revenue Code of 1954.  
    Sec. 4.  Minnesota Statutes 1982, section 290.01, 
subdivision 20b, as amended by Laws 1982, Third Special Session 
chapter 1, article 5, section 2, is amended to read: 
    Subd. 20b.  [MODIFICATIONS REDUCING FEDERAL ADJUSTED GROSS 
INCOME.] There shall be subtracted from federal adjusted gross 
income: 
    (1) Interest income on obligations of any authority, 
commission or instrumentality of the United States to the extent 
includible in gross income for federal income tax purposes but 
exempt from state income tax under the laws of the United States;
    (2) The portion of any gain, from the sale or other 
disposition of property having a higher adjusted basis for 
Minnesota income tax purposes than for federal income tax 
purposes, that does not exceed such difference in basis; but if 
such gain is considered a long-term capital gain for federal 
income tax purposes, the modification shall be limited to 40 per 
centum of the portion of the gain.  This modification shall not 
be applicable if the difference in basis is due to disallowance 
of depreciation pursuant to section 290.101. 
    (3) Income from the performance of personal or professional 
services which is subject to the reciprocity exclusion contained 
in section 290.081, clause (a); 
    (4) Losses, not otherwise reducing federal adjusted gross 
income assignable to Minnesota, arising from events or 
transactions which are assignable to Minnesota under the 
provisions of sections 290.17 to 290.20, including any capital 
loss or net operating loss carryforwards or carrybacks or out of 
state loss carryforwards resulting from the losses, and 
including any farm loss carryforwards or carrybacks; 
    (5) If included in federal adjusted gross income, the 
amount of any credit received, whether received as a refund or 
credit to another taxable year's income tax liability, pursuant 
to chapter 290A, and the amount of any overpayment of income tax 
to Minnesota, or any other state, for any previous taxable year, 
whether the amount is received as a refund or credited to 
another taxable year's income tax liability; 
    (6) To the extent included in federal adjusted gross 
income, or the amount reflected as the ordinary income portion 
of a lump sum distribution under section 402(e) of the Internal 
Revenue Code of 1954, notwithstanding any other law to the 
contrary, the amount received by any person (i) from the United 
States, its agencies or instrumentalities, the Federal Reserve 
Bank or from the state of Minnesota or any of its political or 
governmental subdivisions or from any other state or its 
political or governmental subdivisions, or a Minnesota volunteer 
firefighter's relief association, by way of payment as a 
pension, public employee retirement benefit, or any combination 
thereof, or (ii) as a retirement or survivor's benefit made from 
a plan qualifying under section 401, 403, 404, 405, 408, 409 or 
409A of the Internal Revenue Code of 1954.  The maximum amount 
of this subtraction shall be $11,000 less the amount by which 
the individual's federal adjusted gross income, plus the 
ordinary income portion of a lump sum distribution as defined in 
section 402(e) of the Internal Revenue Code of 1954, exceeds 
$17,000.  In the case of a volunteer firefighter who receives an 
involuntary lump sum distribution of his pension or retirement 
benefits, the maximum amount of this subtraction shall be 
$11,000; this subtraction shall not be reduced by the amount of 
the individual's federal adjusted gross income in excess of 
$17,000; 
    (7) The amount of any credit to the taxpayer's federal tax 
liability under section 38 of the Internal Revenue Code of 1954 
but only to the extent that the credit is connected with or 
allocable against the production or receipt of income included 
in the measure of the tax imposed by this chapter; 
    (8) To the extent included in the taxpayer's federal 
adjusted gross income for the taxable year, gain recognized upon 
a transfer of property to the spouse or former spouse of the 
taxpayer in exchange for the release of the spouse's marital 
rights; 
    (9) The amount of any distribution from a qualified pension 
or profit sharing plan included in federal adjusted gross income 
in the year of receipt to the extent of any contribution not 
previously allowed as a deduction by reason of a change in 
federal law which was not adopted by Minnesota law for a taxable 
year beginning in 1974 or later; 
    (10) Interest, including payment adjustment to the extent 
that it is applied to interest, earned by the seller of the 
property on a family farm security loan executed before January 
1, 1986 that is guaranteed by the commissioner of agriculture as 
provided in sections 41.51 to 41.60; 
    (11) The first $3,000 of compensation for personal services 
in the armed forces of the United States or the United Nations, 
and the next $2,000 of compensation for personal services in the 
armed forces of the United States or the United Nations wholly 
performed outside the state of Minnesota.  This modification 
does not apply to compensation defined in subdivision 20b, 
clause (6); 
    (12) The amount of any income earned for personal services 
rendered outside of Minnesota prior to the date when the 
taxpayer became a resident of Minnesota.  This modification does 
not apply to compensation defined in subdivision 20b, clause (6);
    (13) In the case of wages or salaries paid or incurred on 
or after January 1, 1977, the amount of any credit for 
employment of certain new employees under sections 44B and 51 to 
53 of the Internal Revenue Code of 1954 which is claimed as a 
credit against the taxpayer's federal tax liability, but only to 
the extent that the credit is connected with or allocable 
against the production or receipt of income included in the 
measure of the tax imposed by this chapter; 
    (14) In the case of work incentive program expenses paid or 
incurred on or after January 1, 1979, the amount of any credit 
for expenses of work incentive programs under sections 40, 50A 
and 50B of the Internal Revenue Code of 1954 which is claimed as 
a credit against the taxpayer's federal tax liability, but only 
to the extent that the credit is connected with or allocable 
against the production or receipt of income included in the 
measure of the tax imposed by this chapter; 
    (15) Unemployment compensation to the extent includible in 
gross income for federal income tax purposes under section 85 of 
the Internal Revenue Code of 1954;  
    (16) To the extent included in federal adjusted gross 
income, severance pay that may be treated as a lump sum 
distribution under the provisions of section 290.032, 
subdivision 5; 
    (17) The amount of any income or gain which is not 
assignable to Minnesota under the provisions of section 290.17; 
    (18) Minnesota exempt-interest dividends as provided by 
subdivision 27;  
    (19) A business casualty loss which the taxpayer elected to 
deduct on the current year's Minnesota income tax return but did 
not deduct on the current year's federal income tax return;  
    (20) To the extent included in federal adjusted gross 
income, in the case of a city manager or city administrator who 
elects to be excluded from the public employees retirement 
association and who makes contributions to a deferred 
compensation program pursuant to section 353.028, the amount of 
payments from the deferred compensation program equivalent to 
the amount of contributions taxed under subdivision 20a, clause 
(20); 
    (21) Contributions to and interest earned on an individual 
housing account as provided by section 290.08, subdivision 25;  
    (22) Interest earned on a contract for deed entered into 
for the sale of property for agricultural use if the rate of 
interest set in the contract is no more than nine percent per 
year for the duration of the term of the contract.  This 
exclusion shall be available only if (1) the purchaser is an 
individual who, together with his spouse and dependents, has a 
total net worth valued at less than $150,000 and (2) the 
property sold under the contract is farm land as defined in 
section 41.52, subdivision 6 of no more than 1,000 acres that 
the purchaser intends to use for agricultural purposes.  
Compliance with these requirements shall be stated in an 
affidavit to be filed with the first income tax return on which 
the taxpayer claims the exclusion provided in this clause.  Upon 
request accompanied by the information necessary to make the 
determination, the commissioner shall determine whether interest 
to be paid on a proposed transaction will qualify for this 
exclusion; the determination shall be provided within 30 days of 
receipt of the request, unless the commissioner finds it 
necessary to obtain additional information, or verification of 
the information provided, in which case the determination shall 
be provided within 30 days of receipt of the final item of 
information or verification.  The exclusion provided in this 
clause shall apply to interest earned on contracts for deed 
entered into after December 31, 1981 and before July 1, 1983; 
    (23) The penalty on the early withdrawal of an all-savers 
certificate as provided in section 128(e) of the Internal 
Revenue Code of 1954 to the extent that the interest was 
included in income under subdivision 20a, clause (22);  
    (24) Income from the business of mining as defined in 
section 290.05, subdivision 1, clause (a) which is not subject 
to the Minnesota income tax; and 
    (25) To the extent included in federal adjusted gross 
income, distributions from a qualified governmental pension plan 
which represent a return of designated employee contributions to 
the plan and which contributions were included in gross income 
pursuant to subdivision 20a, clause (27) (26).  
    Sec. 5.  Minnesota Statutes 1982, section 290.01, 
subdivision 20c, is amended to read: 
    Subd. 20c.  [MODIFICATION FOR SHAREHOLDERS OF SMALL 
BUSINESS CORPORATIONS.] A modification affecting shareholders of 
electing small business corporations under section 1372 of the 
Internal Revenue Code of 1954, as it existed prior to October 
19, 1982, shall be made where the election under section 1372 of 
the Internal Revenue Code of 1954, as it existed prior to 
October 19, 1982, antedates the election under this chapter and 
at the close of the taxable year immediately preceding the 
effective election under this chapter the corporation has a 
reserve of undistributed taxable income previously taxed to 
shareholders under the provisions of the Internal Revenue Code 
of 1954, as it existed prior to October 19, 1982, in the event 
and to the extent that the reserve is distributed to 
shareholders the distribution shall be taxed as a dividend for 
purposes of this chapter. 
    Sec. 6.  Minnesota Statutes 1982, section 290.01, 
subdivision 20f, is amended to read: 
    Subd. 20f.  [MODIFICATION FOR ACCELERATED COST RECOVERY 
SYSTEM.] A modification shall be made for the allowable 
deduction under the accelerated cost recovery system as provided 
in subdivision 28.  The allowable deduction for the accelerated 
cost recovery system as provided in section 168 of the Internal 
Revenue Code shall be the same amount as provided in that 
section for individuals, estates, and trusts with the following 
modifications:  
    (1) For property placed in service after December 31, 1980, 
and for taxable years beginning before January 1, 1982, 15 
percent of the allowance provided in section 168 of the Internal 
Revenue Code shall not be allowed.  
    (2)(a) For taxable years beginning after December 31, 1981, 
and before December 31, 1982, for 15 year real property as 
defined in section 168 of the Internal Revenue Code, 40 percent 
of the allowance provided in section 168 of the Internal Revenue 
Code shall not be allowed and for all other property, 17 percent 
of the allowance shall not be allowed.  
    (b) For taxable years beginning after December 31, 1982, 
for 15 year real property as defined in section 168 of the 
Internal Revenue Code, 40 percent of the allowance provided in 
section 168 of the Internal Revenue Code shall not be allowed 
and for all other property 20 percent of the allowance shall not 
be allowed.  
    (3) For property placed in service after December 31, 1980, 
for which the taxpayer elects to use the straight line method 
provided in section 168(b)(3) or a method provided in section 
168(e)(2) of the Internal Revenue Code, the modifications 
provided in clauses (1) and (2) do not apply.  
    (4) For property subject to the modifications contained in 
clause (1) or (2) above, the following modification shall be 
made after the entire amount of the allowable deduction for that 
property under the provision of section 168 of the Internal 
Revenue Code has been obtained.  The remaining depreciable basis 
in those assets for Minnesota purposes shall be a depreciation 
allowance computed by using the straight line method over the 
following number of years:  
    (a) 3 year property - 1 year.  
    (b) 5 year property - 2 years.  
    (c) 10 year property - 5 years.  
    (d) All 15 year property - 7 years.  
    (5) The basis of property to which section 168 of the 
Internal Revenue Code applies shall be its basis as provided in 
this chapter and including the modifications provided in this 
subdivision.  The recapture tax provisions provided in sections 
1245 and 1250 of the Internal Revenue Code shall apply but shall 
be calculated using the basis provided in the preceding 
sentence.  When an asset is exchanged for another asset 
including an involuntary conversion and under the provision of 
the Internal Revenue Code gain is not recognized in whole or in 
part on the exchange of the first asset, the basis of the second 
asset shall be the same as its federal basis provided that the 
difference in basis due to clause (1) or (2) can be written off 
as provided in clause (4).  
    (6) The modifications provided in this subdivision shall 
apply before applying any limitation to out of state losses 
contained in section 290.17 or farm losses contained in section 
290.09, subdivision 29.  
    (7) After the entire amount of the allowable deduction for 
that property under the provisions of section 168 of the 
Internal Revenue Code has been obtained, the remaining 
depreciable basis in those assets for Minnesota purposes that 
shall be allowed as provided in clause (4) shall include the 
amount of any basis reduction made for federal purposes under 
section 48(q) of the Internal Revenue Code to reflect the 
investment tax credit.  No amount shall be allowed as a 
deduction under section 196 of the Internal Revenue Code.  
    Sec. 7.  Minnesota Statutes 1982, section 290.05, 
subdivision 6, is amended to read: 
    Subd. 6.  The Internal Revenue Code referred to in any of 
the subdivisions of this section means the Internal Revenue Code 
of 1954, as amended through December 31, 1981 January 15, 1983. 
    Sec. 8.  Minnesota Statutes 1982, section 290.068, 
subdivision 3, is amended to read: 
    Subd. 3.  [LIMITATION; CARRYBACK AND CARRYOVER.] (a)(1) The 
credit for the taxable year shall not exceed the liability for 
tax.  "Liability for tax" for purposes of this section means the 
tax imposed under this chapter for the taxable year reduced by 
the sum of the credits allowed under section 290.06, except the 
credit allowed under section 290.06, subdivision 13.  
    (2) In the case of an individual who 
    (A) owns an interest in an unincorporated business, 
    (B) is a partner in a partnership, 
    (C) is a beneficiary of an estate or trust, or 
    (D) is a shareholder in a small business corporation, 
having a valid election in effect under section 1372 of the 
Internal Revenue Code an S corporation, 
    the credit allowed for the taxable year shall not exceed 
the lesser of the amount determined under clause (1) for the 
taxable year or an amount (separately computed with respect to 
such person's interest in the trade or business or entity) equal 
to the amount of tax attributable to that portion of a person's 
taxable income which is allocable or apportionable to the 
person's interest in the trade or business or entity.  
     (b) If the amount of the credit determined under this 
section for any taxable year exceeds the limitation under clause 
(a), the excess shall be a research credit carryback to each of 
the three preceding taxable years and a research credit 
carryover to each of the 15 succeeding taxable years.  The 
entire amount of the excess unused credit for the taxable year 
shall be carried first to the earliest of the taxable years to 
which the credit may be carried and then to each successive year 
to which the credit may be carried.  The amount of the unused 
credit which may be added under this clause shall not exceed the 
taxpayer's liability for tax less the research credit for the 
taxable year.  
     For the purposes of sections 290.46 and 290.50, if the 
claim for refund relates to an overpayment attributable to a 
research and experimental expenditure credit carryback under 
this subdivision, in lieu of the period of limitation prescribed 
in sections 290.46 and 290.50, the period of limitation shall be 
that period which ends with the expiration of the 15th day of 
the 46th month, or the 45th month, in the case of a corporation, 
following the end of the taxable year in which the research and 
experimental expenditure credit arises which results in the 
carryback.  In any case in which a taxpayer is entitled to a 
refund in a carryback year due to the carryback of a research 
and experimental expenditure credit, interest shall be computed 
only from the end of the taxable year in which the credit arises.
    Sec. 9.  Minnesota Statutes 1982, section 290.068, 
subdivision 4, is amended to read: 
    Subd. 4.  [SMALL BUSINESS CORPORATIONS ESTATES AND TRUSTS;  
PARTNERSHIPS.] In the case of small business corporations, 
having a valid election in effect, under section 1372 of the 
Internal Revenue Code of 1954, estates and trusts, and 
partnerships, the credit shall be allocated in the same manner 
provided by section 44F(f)(2) of the Internal Revenue Code.  
    Sec. 10.  Minnesota Statutes 1982, section 290.09, 
subdivision 2, is amended to read: 
    Subd. 2.  [TRADE OR BUSINESS EXPENSES; EXPENSES FOR 
PRODUCTION OF INCOME.] (a) In General.  There shall be allowed 
as a deduction all the ordinary and necessary expenses paid or 
incurred during the taxable year in carrying on any trade or 
business, including 
    (1) A reasonable allowance for salaries or other 
compensation for personal services actually rendered; 
    (2) Traveling expenses (including amounts expended for 
meals and lodging other than amounts which are lavish or 
extravagant under the circumstances) while away from home in the 
pursuit of a trade or business; and 
    (3) Rentals or other payments required to be made as a 
condition to the continued use or possession, for purposes of 
the trade or business, of property to which the taxpayer has not 
taken or is not taking title or in which he has no equity.  For 
purposes of the preceding sentence, the place of residence of a 
member of congress within the state shall be considered his 
home, but amounts expended by such members within each taxable 
year for living expenses shall not be deductible for income tax 
purposes in excess of $3,000. 
     (b) Expenses for Production of Income.  In the case of an 
individual, there shall be allowed as a deduction all the 
ordinary and necessary expenses paid or incurred during the 
taxable year. 
     (1) For the production or collection of income; 
     (2) For the management, conservation, or maintenance of 
property held for the production of income; or 
     (3) In connection with the determination, collection, or 
refund of any tax. 
     (c) Actual campaign expenditures in an amount not to exceed 
one-third of the salary of the office sought, for the year the 
election is held, by the candidate, but no less than $100, not 
reimbursed, which have been personally paid by a candidate for 
public office; 
     (d) No deduction shall be allowed under this subdivision 
for any contribution or gift which would be allowable as a 
deduction under section 290.21 were it not for the percentage 
limitations set forth in such section; 
     (e) All expense money paid by the legislature to 
legislators; 
    (f) The provisions of section 280A (disallowing certain 
expenses in connection with the business use of the home and 
rental of vacation homes) of the Internal Revenue Code of 1954, 
as amended through December 31, 1981 1982, shall be applicable 
in determining the availability of any deduction under this 
subdivision. 
    (g) Entertainment, amusement, or recreation expenses shall 
be allowed under this subdivision only to the extent that they 
qualify as a deduction under section 274 of the Internal Revenue 
Code of 1954, as amended through December 31, 1981 1982. 
     (h) No deduction shall be allowed under this subdivision 
for illegal bribes, kickbacks, and other payments, fines, and 
penalties, or treble damage payments under the antitrust laws 
except as provided in section 162 of the Internal Revenue Code 
of 1954, as amended through December 31, 1982.  
    Sec. 11.  Minnesota Statutes 1982, section 290.09, 
subdivision 7, as amended by Laws 1982, Third Special Session 
chapter 1, article 7, section 2, is amended to read: 
    Subd. 7.  [DEPRECIATION.] (A) [CUMULATIVE DEPRECIATION.] 
(a) There shall be allowed as a depreciation deduction a 
reasonable allowance for the exhaustion, wear and tear 
(including a reasonable allowance for obsolescence): 
    (1) of property used in the trade or business, or 
    (2) of property held for the production of income. 
    In the case of recovery property as provided in clause (c), 
the deduction allowable under clause (c) shall be deemed to 
constitute the reasonable allowance provided by this 
subdivision, except for the provisions of Part (B) relating to 
first year depreciation and except with respect to that portion 
of the basis of the property to which section 167(k) of the 
Internal Revenue Code of 1954, as amended through January 15, 
1983, applies.  
     (b) The term "reasonable allowance" as used in clause (a) 
shall include (but shall not be limited to) an allowance 
computed in accordance with regulations prescribed by the 
commissioner, under any of the following methods: 
    (1) the straight line method. 
    (2) the declining balance method, using a rate not 
exceeding twice the rate which would have been used had the 
annual allowance been computed under the method described in 
paragraph (1). 
    (3) the sum of the years-digits method, and 
    (4) any other consistent method productive of an annual 
allowance, which, when added to all allowances for the period 
commencing with the taxpayer's use of the property and including 
the taxable year, does not, during the first two-thirds of the 
useful life of the property, exceed the total of such allowances 
which would have been used had such allowances been computed 
under the method described in (2). Nothing in this clause (b) 
shall be construed to limit or reduce an allowance otherwise 
allowable under clause (a). 
    (c) For purposes of this subdivision "reasonable allowance" 
shall include be the accelerated cost recovery system provisions 
of section 168 of the Internal Revenue Code of 1954, as amended 
through December 1, 1982 January 15, 1983, except as provided in 
this subdivision.  In the case of recovery property within the 
meaning of section 168 of the Internal Revenue Code of 1954, as 
amended through December 1, 1982 January 15, 1983, the term 
"reasonable allowance" as used in clause (a) shall mean 85 
percent of the deduction allowed pursuant to section 168 of the 
Internal Revenue Code of 1954 for property placed in service 
after December 31, 1980 and for taxable years beginning before 
January 1, 1982.  
    For taxable years beginning after December 31, 1981 the 
term reasonable allowance as used in clause (a) shall mean the 
following percent of the deduction allowed pursuant to section 
168 of the Internal Revenue Code of 1954, as amended through 
December 1, 1982 January 15, 1983:  
    (1) For 3, 5 and 10 year property and for 15 year public 
utility property the allowable percentage is 83 percent and 80 
percent for taxable years beginning after December 31, 1982.  
    (2) For 15 year real property the allowable percentage is 
60 percent.  
    For property placed in service after December 31, 1980 the 
term "reasonable allowance" as used in clause (a) shall mean 100 
percent of the deduction allowed pursuant to section 168 of the 
Internal Revenue Code of 1954 where the taxpayer uses for 
federal income tax purposes the straight line method provided in 
section 168(b)(3) or a method provided in section 168(e)(2) of 
the Internal Revenue Code of 1954, as amended through December 
1, 1982 January 15, 1983.  For property placed in service after 
December 31, 1980 and for which the full amount of the deduction 
allowed under section 168 of the Internal Revenue Code of 1954, 
as amended through December 1, 1982 January 15, 1983 has been 
allowed, the remaining depreciable basis in those assets for 
Minnesota purposes shall be a depreciation allowance computed by 
using the straight line method over the following number of 
years:  
    (1) 3 year property - 1 year.  
    (2) 5 year property - 2 years.  
    (3) 10 year property - 5 years.  
    (4) All 15 year property - 7 years.  
    When an asset is exchanged for another asset including an 
involuntary conversion and under the provision of the Internal 
Revenue Code gain is not recognized in whole or in part on the 
exchange of the first asset, the basis of the second asset shall 
be the same as its federal basis provided that the difference in 
basis due to the limitations provided in this clause can be 
written off as provided in the preceding sentence.  
     After the full amount of the allowable deduction for that 
property under the provision of section 168 of the Internal 
Revenue Code of 1954, as amended through January 15, 1983, has 
been obtained, the remaining depreciable basis in those assets 
for Minnesota purposes that shall be allowed as a depreciation 
allowance as provided above shall include the amount of any 
basis reduction made for federal purposes under section 48(q) of 
the Internal Revenue Code, as amended through January 15, 1983, 
to reflect the investment tax credit.  No amount shall be 
allowed as a deduction under section 196 of the Internal Revenue 
Code of 1954, as amended through January 15, 1983.  
    The provisions of section 168(i)(4) of the Internal Revenue 
Code of 1954, as amended through December 1, 1982 January 15, 
1983 shall apply to restrict research credit carrybacks and net 
operating loss carrybacks which are allocable to elected 
qualified leased property, nothwithstanding section 290.068, 
subdivision 3, or 290.095, subdivision 3.  
    The modification provided in this clause shall apply before 
applying a limitation on farm losses as contained in subdivision 
29.  
    (d) Paragraphs (2), (3), and (4) of clause (b) shall apply 
only in the case of property (other than intangible property) 
described in clause (a) with a useful life of three years or 
more. 
    (1) the construction, reconstruction, or erection of which 
is completed after December 31, 1958, and then only to that 
portion of the basis which is properly attributable to such 
construction, reconstruction, or erection after December 31, 
1958, or 
    (2) acquired after December 31, 1958, if the original use 
of such property commenced with the taxpayer and commences after 
such date. 
    (e) Where, under regulations rules prescribed by the 
commissioner, the taxpayer and the commissioner have, after June 
30, 1959, entered into an agreement in writing specifically 
dealing with the useful life and rate of depreciation of any 
property, the rate so agreed upon shall be binding on both the 
taxpayer and the commissioner in the absence of facts or 
circumstances not taken into consideration in the adoption of 
such agreement.  The responsibility of establishing the 
existence of such facts and circumstances shall rest with the 
party initiating the modification. Any change in the agreed rate 
and useful life specified in the agreement shall not be 
effective for taxable years before the taxable year in which 
notice in writing by certified mail is served by the party to 
the agreement initiating such change.  This clause shall not 
apply with respect to recovery property as defined in clause (c).
    (f) In the absence of an agreement under clause (e) 
containing a provision to the contrary, a taxpayer may at any 
time elect in accordance with regulations rules prescribed by 
the commissioner to change from the method of depreciation 
prescribed in clause (b)(2) to the method described in clause 
(b)(1). 
    (g) The basis on which exhaustion, wear and tear, and 
obsolescence are to be allowed in respect of any property shall 
be the adjusted basis provided in this chapter for the purpose 
of determining the gain on the sale or other disposition of such 
property. 
    (B) [FIRST YEAR DEPRECIATION.] The term "reasonable 
allowance" as used in this subdivision may, at the election of 
the taxpayer, include an amount as provided under section 179 of 
the Internal Revenue Code of 1954, as amended through December 
1, 1982 January 15, 1983.  
    Sec. 12.  Minnesota Statutes 1982, section 290.09, 
subdivision 29, is amended to read: 
    Subd. 29.  [DEDUCTIONS ATTRIBUTABLE TO FARMING.] (a) 
[DEFINITIONS.] For purposes of this subdivision, income and 
gains and expenses and losses shall be considered as "arising 
from a farm" if such items are received or incurred in 
connection with cultivating the soil, or in connection with 
raising or harvesting any agricultural or horticultural 
commodity, including the raising, shearing, feeding, caring for, 
training, and management of livestock, bees, poultry, and 
fur-bearing animals and wildlife, and all operations incident 
thereto, including but not limited to the common use of 
"hedging." 
     (b) [DEDUCTIONS LIMITED.] Except as provided in this 
subdivision, expenses and losses, except for interest and taxes, 
arising from a farm shall not be allowed as deductions in excess 
of income and gains arising from a farm. 
     (c) [DEDUCTIONS ALLOWED; CARRYOVER DEDUCTIONS.] Expenses 
and losses arising from a farm or farms shall be allowed as 
deductions up to the amount of the income and gains arising from 
a farm or farms in any taxable year, plus the first $15,000 of 
nonfarm gross income, or nonfarm taxable net income in the case 
of a corporation, provided however that in any case where 
nonfarm income exceeds $15,000, the maximum allowable amount of 
$15,000 shall be reduced by twice the amount by which the 
nonfarm income exceeds the amount of $15,000.  For this purpose 
and for the purpose of applying the limitation in the following 
paragraph regarding the application of any carryback or 
carryforward, the term gross income shall include the ordinary 
income portion of a lump sum distribution as defined in section 
402(e) of the Internal Revenue Code of 1954, as amended through 
December 31, 1981, and no deduction shall be allowed for 
two-earner married couples as provided in section 221 of the 
Internal Revenue Code of 1954, as amended through December 31, 
1981.  Any remaining balance of the deductions shall be carried 
back three years and carried forward five years, in 
chronological order, provided, however, that in any case in 
which any individual, estate or trust which elects a net 
operating loss carryforward under section 172(b)(3)(C) of the 
Internal Revenue Code of 1954, as amended through December 31, 
1981, such losses shall not be carried back but shall only be 
carried forward. 
     Current expenses and losses shall be utilized as deductions 
in any taxable year, to the extent herein allowable, prior to 
the application of any carryback or carryover deductions.  In 
any event, the combined amounts of such current expenses and 
losses and carryback or carryover deductions shall be allowed as 
deductions up to the amount of the income and gains arising from 
a farm or farms in any taxable year, plus the first $15,000 of 
nonfarm gross income, or nonfarm taxable net income in the case 
of a corporation, provided however that in any case where 
nonfarm income exceeds $15,000, the maximum allowable amount of 
$15,000 shall be reduced by twice the amount by which the 
nonfarm income exceeds the amount of $15,000. 
     (d) [SHAREHOLDERS SEPARATE ENTITIES.] For purposes of this 
subdivision, individual shareholders of an electing small 
business corporation S corporation shall be considered separate 
entities. 
    (e) [SPECIAL PERIOD OF LIMITATION WITH RESPECT TO FARM LOSS 
LIMITATION CARRYBACKS.] For the purposes of sections 290.46 and 
290.50, if the claim for refund relates to an overpayment 
attributable to a farm loss limitation carryback under this 
subdivision, in lieu of the period of limitation prescribed in 
sections 290.46 and 290.50, the period of limitation shall be 
that period which ends with the expiration of the 15th day of 
the 46th month (or the 45th month, in the case of a corporation) 
following the end of the taxable year of the farm loss which 
results in the carryback.  
    (f) [INTEREST ON CLAIMS.] In any case in which a taxpayer 
is entitled to a refund in a carryback year due to the carryback 
of a farm loss, interest shall be computed only from the end of 
the taxable year in which the loss occurs. 
    (g) [ORDER OF APPLICATION.] The application of this 
subdivision shall be made after applying any limitation to out 
of state losses contained in section 290.17.  
    Sec. 13.  Minnesota Statutes 1982, section 290.091, is 
amended to read: 
    290.091 [MINIMUM TAX ON PREFERENCE ITEMS.] 
    In addition to all other taxes imposed by this chapter 
there is hereby imposed, a tax which, in the case of a resident 
individual, shall be equal to 40 percent of the amount of the 
taxpayer's minimum tax liability for tax preference items 
pursuant to the provisions of sections 55 to 58 and 443(d) of 
the Internal Revenue Code of 1954 as amended through December 
31, 1981 January 15, 1983.  For purposes of the tax imposed by 
this section, the following modifications shall be made:  
    (1) Capital gain as defined in section 57(a) of the 
Internal Revenue Code shall not include that portion of any gain 
occasioned by sale, transfer or the granting of a perpetual 
easement pursuant to any eminent domain proceeding or threat 
thereof as described in section 290.13, subdivision 5.  This 
modification shall apply to the years in which the gain or 
reduction in loss is actually included in federal adjusted gross 
income even though amounts received pursuant to the eminent 
domain proceedings were received in prior years.  
    (2) In the case of a corporate taxpayer, percentage 
depletion shall not be a preference item.  
    (3) In the case of a corporate taxpayer, the capital gain 
preference item shall not include the timber preference income 
defined in section 57(e)(1) of the Internal Revenue Code.  
    (4) The preference item of reserves for losses on bad debts 
shall not include reserves allowable under section 593 of the 
Internal Revenue Code, but which are not allowable under section 
290.09, subdivision 6, clause (c).  
    (5) In the case of an individual, the preference item of 
adjusted itemized deductions does not include any deduction for 
charitable contributions in excess of the limitations contained 
in section 290.21, subdivision 3, including any carryover amount 
allowed for federal purposes alternative tax itemized deductions 
shall include the amount allowable as a deduction for the 
taxable year under section 164 of the Internal Revenue Code for 
Minnesota income tax paid or accrued.  
    (6) The capital gain preference item shall be reduced where 
the gain would be modified because some or all of the assets 
have a higher basis for Minnesota purposes than for federal 
purposes.  
    (7) In the case of a nonresident individual, or an estate 
or trust, with a net operating loss that is a larger amount for 
Minnesota than for federal, the capital gain preference item 
shall be reduced to the extent it was reduced in the allowance 
of the net operating loss.  
    (8) Federal preference items from the business of mining or 
producing iron ore and other ores which are subject to the 
occupation tax and exempt from taxation under section 290.05, 
subdivision 1, shall not be a preference item for Minnesota.  
    (9) In the case of a corporate taxpayer, amortization of 
certified pollution control facilities, shall not be a 
preference item.  
    In the case of a resident individual, having preference 
items which could not be taken to reduce income from sources 
outside the state pursuant to section 290.17, subdivision 1, or 
any other taxpayer the tax shall equal 40 percent of that 
federal liability, multiplied by a fraction the numerator of 
which is the amount of the taxpayer's preference item income 
allocated to this state pursuant to the provisions of sections 
290.17 to 290.20, and the denominator of which is the taxpayer's 
total preference item income for federal purposes.  
    The tax benefit rule contained in section 58(h) of the 
Internal Revenue Code is applied to the Minnesota minimum tax 
only to the extent that it determines if there is a federal 
minimum tax.  No separate tax benefit rule is allowable for the 
Minnesota minimum tax.  
    For property placed in service after December 31, 1980, the 
preference items contained in section 57 (a)(12) of the Internal 
Revenue Code of 1954, as amended through December 31, 1981 
January 15, 1983, shall not apply.  
    Sec. 14.  Minnesota Statutes 1982, section 290.10, is 
amended to read: 
    290.10 [NONDEDUCTIBLE ITEMS.] 
    In computing the net income no deduction shall in any case 
be allowed for: 
    (1) Personal, living or family expenses; 
    (2) Amounts paid out for new buildings or for permanent 
improvements or betterments made to increase the value of any 
property or estate, except as otherwise provided in this chapter;
    (3) Amounts expended in restoring property or in making 
good the exhaustion thereof for which an allowance is or has 
been made; 
    (4) Premiums paid on any life insurance policy covering the 
life of the taxpayer or of any other person; 
    (5) The shrinkage in value, due to the lapse of time, of a 
life or terminable interest of any kind in property acquired by 
gift, devise, bequest or inheritance; 
    (6) Losses from sales or exchanges of property, directly or 
indirectly, between related taxpayers as defined and as provided 
in section 267 of the Internal Revenue Code of 1954, as amended 
through December 31, 1981 1982; 
    (7) In computing net income, no deduction shall be allowed 
under section 290.09, subdivision 2, relating to expenses 
incurred or under section 290.09, subdivision 3, relating to 
interest accrued as provided in section 267(a)(2) and (e) of the 
Internal Revenue Code of 1954, as amended through December 31, 
1981 1982; 
    (8) (a) Contributions by employees under the federal 
railroad retirement act and the federal social security act.  
(b) Payments to Minnesota or federal public employee retirement 
funds.  (c) Three-fourths (75 percent) of the amount of taxes 
imposed on self-employment income under section 1401 of the 
Internal Revenue Code of 1954, as amended through December 31, 
1981 1982. 
    (9) Expenses, interest and taxes connected with or 
allocable against the production or receipt of all income not 
included in the measure of the tax imposed by this chapter.  
    (10) In situations where this chapter provides for a 
subtraction from gross income of a specific dollar amount of an 
item of income assignable to this state, and within the measure 
of the tax imposed by this chapter, that portion of the federal 
income tax liability assessed upon such income subtracted, and 
any expenses attributable to earning such income, shall not be 
deductible in computing net income. 
    (11) Amounts paid or accrued for such taxes and carrying 
charges as, under regulations rules prescribed by the 
commissioner, are chargeable to capital account with respect to 
property, if the taxpayer elects, in accordance with such 
regulations rules, to treat such taxes or charges as so 
chargeable. 
     (12) No deduction or credit shall be allowed for any amount 
paid or incurred during the taxable year in carrying on any 
trade or business if the trade or business (or the activities 
which comprise the trade or business) consists of trafficking in 
controlled substances (within the meaning of schedule I and II 
of the federal Controlled Substances Act) which is prohibited by 
federal law or the law of Minnesota.  
    Sec. 15.  Minnesota Statutes 1982, section 290.135, 
subdivision 1, as amended by Laws 1982, Third Special Session 
chapter 1, article 7, section 7, is amended to read: 
     Subdivision 1.  [GENERAL RULE.] Gain or loss shall be 
recognized to a corporation on the distribution of property in 
partial or complete liquidation as provided in sections 336 to 
346 of the Internal Revenue Code of 1954, as amended through 
December 1, 1982 January 15, 1983.  
    Sec. 16.  Minnesota Statutes 1982, section 290.16, 
subdivision 7, is amended to read: 
    Subd. 7.  [BONDS, OTHER EVIDENCES OF INDEBTEDNESS.] For the 
purpose of this section, the treatment of amounts received by 
the holder upon the retirement of bonds, debentures, notes or 
certificates or other evidences of indebtedness, which are 
capital assets in the hands of the taxpayer, shall be governed 
by the provisions of section 1232 of the Internal Revenue Code 
of 1954, as amended through December 31, 1981 January 15, 1983. 
The provisions of section 1232A of the Internal Revenue Code of 
1954, as amended through December 31, 1982, shall apply to 
determine the amount of the original issue discount which shall 
be included in gross income.  The tax treatment of stripped 
bonds shall be governed by the provisions of section 1232B of 
the Internal Revenue Code of 1954, as amended through December 
31, 1982. 
    Sec. 17.  Minnesota Statutes 1982, section 290.16, 
subdivision 16, is amended to read: 
    Subd. 16.  [GAIN FROM DISPOSITION OF CERTAIN DEPRECIABLE 
REALTY.] For purposes of this subdivision "depreciable realty" 
shall mean "Section 1250 realty" as that phrase is defined in 
Section 1250(c) of the Internal Revenue Code of 1954, as amended 
through December 31, 1981 January 15, 1983. 
    In determining net income of any corporate taxpayer, the 
gain realized from the disposition of "depreciable realty" shall 
be treated in the same manner as is provided by Section sections 
1250 and 291 of the Internal Revenue Code of 1954, as amended 
through December 31, 1981 January 15, 1983, and regulations 
rules adopted pursuant thereto except that the determination 
shall be made using the basis computed under this chapter. 
    Sec. 18.  Minnesota Statutes 1982, section 290.17, 
subdivision 1, is amended to read: 
    Subdivision 1.  [INCOME OF RESIDENT INDIVIDUALS.] The gross 
income of individuals during the period of time when they are 
residents of Minnesota shall be their gross income as defined in 
section 290.01, subdivision 20, except that the amount of 
otherwise deductible losses incurred in connection with income 
derived from sources outside the state shall be reduced by the 
sum of the taxpayer's items of tax preference as defined in 
section 57, as limited by section 58(i)(7) of the Internal 
Revenue Code of 1954, as amended through December 31, 1981 1982, 
which are attributable to losses incurred in connection with 
sources of income outside the state. 
    Sec. 19.  Minnesota Statutes 1982, section 290.26, 
subdivision 2, is amended to read: 
    Subd. 2.  [EMPLOYER CONTRIBUTIONS.] Contributions of an 
employer to an employee's trust or annuity plan and compensation 
under a deferred-payment plan or to a simplified employee 
pension shall be allowed as a deduction in accordance with the 
provisions of section 404 or 408(k) of the Internal Revenue Code 
of 1954, as amended through December 31, 1981 1982, as adapted 
to the provisions of this chapter under rules issued by the 
commissioner of revenue. 
    Sec. 20.  Minnesota Statutes 1982, section 290.37, is 
amended by adding a subdivision to read: 
    Subd. 4.  [FURNISHING OF SOCIAL SECURITY NUMBER; PENALTY.] 
(a) Any individual with respect to whom a return, statement, or 
other document is required under this chapter to be made by 
another person shall furnish to that other person the 
individual's social security account number.  Any person 
required under this chapter to make a return, statement, or 
other document with respect to another person who is an 
individual shall request from that individual and shall include 
in the return, statement, or other document, the individual's 
social security account number.  A return of an estate or trust 
with respect to its liability for tax, and any statement or 
other document in support thereof, shall be considered as a 
return, statement, or other document with respect to each 
individual beneficiary of the estate or trust, otherwise a 
return of any individual with respect to his liability for tax, 
or any statement or other document in support thereof, shall not 
be considered as a return, statement, or other document with 
respect to another person.  
    (b) If any person who is required under clause (a) to (l) 
furnish his social security account number to another person, or 
(2) include in any return, statement, or other document made 
with respect to another person who is an individual the social 
security account number of that individual; fails to comply with 
the requirement at the time prescribed, that person shall, 
unless it is shown that the failure is due to reasonable cause 
and not to willful neglect, pay a penalty of $50 for each 
failure except that the total amount imposed on a person for all 
failures during any calendar year shall not exceed $25,000.  
    Sec. 21.  Minnesota Statutes 1982, section 290.41, 
subdivision 3, is amended to read: 
    Subd. 3.  [BY BROKERS.] The commissioner of revenue may 
require brokers every person doing business as a broker to 
furnish him with the names of customers name and address of each 
customer for whom they have transacted business, and with such 
details regarding gross proceeds and other information as to 
transactions of any customer as will enable him to determine 
whether all income tax due on profits or gains of such customers 
has been paid.  The provisions of section 6045 of the Internal 
Revenue Code of 1954, as amended through December 31, 1982, 
which define terms and provide the requirements that a statement 
be furnished to the customer shall apply.  
    Sec. 22.  Minnesota Statutes 1982, section 290.41, 
subdivision 8, is amended to read: 
    Subd. 8.  [FAILURE TO FILE RETURN.] In the case of each 
failure to file, with the commissioner, a return required by 
this section on the date prescribed therefor (determined with 
regard to any extension of time for filing), unless it is shown 
that such failure is due to reasonable cause and not to willful 
neglect, the payer person failing to file such return shall pay 
to the commissioner a penalty of $10 $50 for each such failure, 
but the total amount imposed on the delinquent payer person for 
all such failures during any calendar year shall not exceed 
$1,000 $25,000.  If one or more failures to file a return are 
due to intentional disregard of the filing requirement, then 
with respect to the failures the penalty imposed under the 
preceding sentence shall not be less than an amount equal to 
    (a) in the case of a return not described in clause (b) or 
(c), ten percent of the aggregate amount of the items required 
to be reported, 
    (b) in the case of a return required to be filed under 
subdivision 3, five percent of the gross proceeds required to be 
reported, 
    (c) in the case of a return required to be filed under 
subdivision 9 relating to direct sales, $100 for each failure; 
however, the total amount imposed on the delinquent person for 
all intentional failures during any calendar year shall not 
exceed $50,000.  The penalty shall be collected in the same 
manner as any delinquent income tax. 
    Sec. 23.  Minnesota Statutes 1982, section 290.41, is 
amended by adding a subdivision to read: 
    Subd. 9.  [PAYMENTS OF REMUNERATION FOR SERVICES AND DIRECT 
SALES.] Every person who is required to make a return under 
section 6041A (relating to information returns regarding 
payments of remuneration for services and direct sales) of the 
Internal Revenue Code of 1954, as amended through December 31, 
1982, shall file with the commissioner a copy of the return 
containing the information required under that section, and the 
provisions of that section shall govern the requirements of a 
statement that must be furnished to persons with respect to whom 
information is required to be furnished, notwithstanding section 
290.42, clause (7).  
    Sec. 24.  Minnesota Statutes 1982, section 290.45, 
subdivision 1, is amended to read: 
    Subdivision 1.  [DATE DUE, INSTALLMENTS.] The tax imposed 
by this chapter shall be paid to the commissioner of revenue at 
the time fixed for filing the return on which the tax is based, 
except that at the election of the following taxpayers estates 
and trusts the balance of tax due after applying any tax credit 
and payment of estimated tax may be paid in two equal 
installments, as follows:.  
    (a) as to estates and trusts, The first shall be paid at 
the time fixed for filing the return, and the second on or 
before six months thereafter. 
    (b) as to corporations, the first shall be paid at the time 
fixed for filing the return and the second on or before three 
months thereafter.  If any installment is not paid on or before 
the date fixed for its payment the whole amount of the tax 
unpaid shall become due and payable.  They shall be paid to the 
commissioner or to the local officers designated by the 
commissioner with whom the return is filed as hereinbefore 
provided.  
    Sec. 25.  Minnesota Statutes 1982, section 290.48, is 
amended by adding a subdivision to read:  
     Subd. 10.  [PRESUMPTIONS WHERE OWNER OF LARGE AMOUNT OF 
CASH IS NOT IDENTIFIED.] (a) If the individual who is in 
physical possession of cash in excess of $10,000 does not claim 
such cash as his, or as belonging to another person whose 
identity the commissioner can readily ascertain and who 
acknowledges ownership of such cash, then, for purposes of 
subdivisions 3 and 4, it shall be presumed that the cash 
represents gross income of a single individual for the taxable 
year in which the possession occurs, and that the collection of 
tax will be jeopardized by delay.  
    (b) In the case of any assessment resulting from the 
application of clause (a), the entire amount of the cash shall 
be treated as taxable income for the taxable year in which the 
possession occurs, such income shall be treated as taxable at an 
eight percent rate, and except as provided in clause (c), the 
possessor of the cash shall be treated (solely with respect to 
the cash) as the taxpayer for purposes of this chapter and the 
assessment and collection of the tax.  
     (c) If, after an assessment resulting from the application 
of clause (a), the assessment is abated and replaced by an 
assessment against the owner of the cash, the later assessment 
shall be treated for purposes of all laws relating to lien, 
levy, and collection as relating back to the date of the 
original assessment.  
    (d) For purposes of this subdivision, the definitions 
contained in section 6867 of the Internal Revenue Code of 1954, 
as amended through December 31, 1982, shall apply.  
    Sec. 26.  [290.522] [ACTION TO ENJOIN PROMOTERS OF ABUSIVE 
TAX SHELTERS.] 
    A civil action in the name of the state of Minnesota to 
enjoin any person from further engaging in conduct subject to 
penalty under section 28 (relating to penalty for promoting 
abusive tax shelter), may be commenced at the request of the 
commissioner.  Any action under this section shall be brought by 
the attorney general in the tax court or the district court for 
the judicial district in which such person resides, has his 
principal place of business, or has engaged in conduct subject 
to penalty under section 28, or in the district court for Ramsey 
county.  The court may exercise its jurisdiction over the action 
separate and apart from any other action brought by the state of 
Minnesota against the person.  
    If the court finds that the person has engaged in any 
conduct subject to penalty under section 28 (relating to penalty 
for promoting abusive tax shelters), and that injunctive relief 
is appropriate to prevent recurrence of the conduct, the court 
may enjoin the person from engaging in the conduct or in any 
other activity subject to penalty under section 28.  
    Sec. 27.  Minnesota Statutes 1982, section 290.53, 
subdivision 2, is amended to read: 
    Subd. 2.  [FAILURE TO MAKE AND FILE RETURN.] In case of any 
failure to make and file a return as required by this chapter 
within the time prescribed by law or prescribed by the 
commissioner in pursuance of law, there shall be added to the 
tax in lieu of the penalty provided in subdivision 1:  ten 
percent if the failure is for not more than 30 days with an 
additional five percent for each additional 30 days or fraction 
thereof during which such failure continues, not exceeding 25 
percent in the aggregate.  
     In the case of a failure to file a return of tax imposed by 
this chapter within 60 days of the date prescribed for filing of 
the return (determined with regard to any extensions of time for 
filing), the amount added to the tax under this subdivision 
shall not be less than the lesser of $50 or 100 percent of the 
amount required to be shown as tax on the return.  
     The amount so added to any tax shall be collected at the 
same time and in the same manner and as a part of the tax, and 
the amount of said tax together with the amount so added shall 
bear interest at the rate specified in section 270.75 from the 
time such tax should have been paid until paid unless the tax 
has been paid before the discovery of the neglect, in which case 
the amount so added shall be collected in the same manner as the 
tax. 
    For the purposes of this subdivision the amount of any 
taxes required to be shown on the return shall be reduced by the 
amount of any part of the tax which is paid on or before the 
date prescribed for payment of the tax and by the amount of any 
credit against the tax which may be claimed upon the return. 
    Sec. 28.  Minnesota Statutes 1982, section 290.53, is 
amended by adding a subdivision to read:  
    Subd. 9.  [PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.] Any 
person who (a)(1) organizes (or assists in the organization of) 
a partnership or other entity, any investment plan or 
arrangement, or any other plan or arrangement, or 
    (2) participates in the sale of any interest in an entity 
or plan or arrangement referred to in clause (1), and 
    (b) makes or furnishes (in connection with the organization 
or sale) a statement with respect to the allowability of any 
deduction or credit, the excludability of any income, or the 
securing of any other tax benefit by reason of holding an 
interest in the entity or participating in the plan or 
arrangement which the person knows or has reason to know is 
false or fraudulent as to any material matter, 
    shall pay a penalty equal to the greater of $1,000 or ten 
percent of the gross income derived or to be derived by the 
person from the activity.  
     The penalty imposed by this subdivision is in addition to 
any other penalty provided by this section.  The penalty shall 
be collected in the same manner as any delinquent income tax. In 
any proceeding involving the issue of whether or not any person 
is liable for this penalty, the burden of proof shall be upon 
the commissioner.  
    Sec. 29.  Minnesota Statutes 1982, section 290.53, is 
amended by adding a subdivision to read:  
    Subd. 10.  [FRIVOLOUS INCOME TAX RETURN; PENALTY.] If any 
individual files what purports to be an income tax return 
required by this chapter, but which does not contain information 
on which the substantial correctness of the self-assessment may 
be judged, or contains information that on its face indicates 
that the self-assessment is substantially incorrect; and the 
conduct is due to a position which is frivolous, or a desire 
(which appears on the purported return) to delay or impede the 
administration of Minnesota income tax laws, then the individual 
shall pay a penalty of $500.  The penalty imposed by this 
subdivision shall be in addition to any other penalty provided 
by this section.  The penalty shall be collected in the same 
manner as any delinquent income tax.  In any proceeding 
involving the issue of whether or not any person is liable for 
this penalty, the burden of proof shall be upon the commissioner.
    Sec. 30.  Minnesota Statutes 1982, section 290.92, 
subdivision 7, is amended to read: 
    Subd. 7.  [WITHHOLDING STATEMENT TO EMPLOYEE OR PAYEE AND 
TO COMMISSIONER.] (1) Every person required to deduct and 
withhold from an employee a tax under subdivision 2a or 
subdivision 3, or who would have been required to deduct and 
withhold a tax under subdivision 2a or subdivision 3, determined 
without regard to subdivision 19, if the employee had claimed no 
more than one withholding exemption, or who paid wages not 
subject to withholding under subdivision 2a or 3 to an employee 
in excess of $600, or who has entered into a voluntary 
withholding agreement with a payee pursuant to subdivision 20, 
shall furnish to each such employee in respect to the 
remuneration paid by such person to such employee during the 
calendar year, on or before January 31 of the succeeding year, 
or, if his employment is terminated before the close of such 
calendar year, at the employee's request within 30 days after 
the last payment of remuneration is made within 30 days after 
the date of receipt of a written request from the employee if 
the 30-day period ends before January 31, a written statement 
showing the following: 
    (a) Name of such person, 
    (b) The name of the employee or payee and his social 
security account number, 
    (c) The total amount of wages as that term is defined in 
subdivision 1(1), and/or the total amount of remuneration 
subject to withholding pursuant to subdivision 20, and the 
amount of sick pay as required under section 6051(f) of the 
Internal Revenue Code of 1954, as amended through December 31, 
1980, 
    (d) The total amount deducted and withheld as tax under 
subdivision 2a or subdivision 3. 
    (2) The statement required to be furnished by this 
subdivision in respect of any remuneration shall be furnished at 
such other times, shall contain such other information, and 
shall be in such form as the commissioner may prescribe. 
    (3) The commissioner may prescribe regulations rules 
providing for reasonable extensions of time, not in excess of 30 
days, to employers or payers required to furnish such statements 
to their employees or payees under this subdivision. 
    (4) A duplicate of any statement made pursuant to this 
subdivision and in accordance with rules prescribed by the 
commissioner, along with a reconciliation in such form as the 
commissioner may prescribe of all such statements for the 
calendar year (including a reconciliation of the quarterly 
returns required to be filed pursuant to subdivision 6), shall 
be filed with the commissioner on or before February 28 of the 
year after the payments were made.  
    Sec. 31.  Minnesota Statutes 1982, section 290.92, 
subdivision 13, is amended to read: 
    Subd. 13.  [REFUNDS.] (1) Where the amount of the tax 
withheld at the source under subdivision 2a or subdivision 3 
exceeds by $1 or more the taxes (and any added penalties and 
interest) reported in the return of the employee taxpayer or 
imposed upon him by this chapter, the amount of such excess 
shall be refunded to the employee taxpayer.  If the amount of 
such excess is less than $1 the commissioner shall not be 
required to refund that amount.  Where any amount of such excess 
to be refunded exceeds $10, such amount on the original return 
shall bear interest at the rate of six percent per annum, 
computed from 90 days after (a) the due date of the return of 
the employee taxpayer or (b) the date on which his return is 
filed, whichever is later, to the date the refund is paid to the 
taxpayer.  A return shall not be treated as filed until it is in 
processible form.  A return is in processible form when it is 
filed on a permitted form containing the taxpayer's name, 
address, social security account number, the required signature, 
and sufficient required information (whether on the return or on 
required attachments) to permit the mathematical verification of 
tax liability shown on the return.  Notwithstanding the 
provisions of section 290.50, written findings by the 
commissioner, notice by mail to the taxpayer, and certificate 
for refundment by the commissioner, shall not be necessary.  The 
provisions of section 270.10, shall not be applicable. 
    (2) Any action of the commissioner in refunding the amount 
of such excess shall not constitute a determination of the 
correctness of the return of the employee taxpayer within the 
purview of section 290.46. 
    (3) The commissioner of finance shall cause any such refund 
of tax and interest, to be paid out of the general fund in 
accordance with the provisions of section 290.62, and so much of 
said fund as may be necessary is hereby appropriated for that 
purpose.  
    Sec. 32.  Minnesota Statutes 1982, section 290.92, 
subdivision 15, is amended to read: 
    Subd. 15.  [PENALTIES.] (1) If any tax required to be 
deducted and withheld under subdivision 2a or subdivision 3, or 
any portion thereof, is not paid to or deposited with the 
commissioner within the time specified in subdivision 6 for the 
payment thereof, there shall be added thereto a penalty equal to 
ten percent of the amount so remaining unpaid.  Such penalty 
shall be collected as part of said tax, and the amount of said 
tax not timely paid, together with said penalty, shall bear 
interest at the rate specified in section 270.75 from the time 
such tax should have been paid or deposited until paid.  Where 
an extension of time for payment has been granted under the 
provisions of subdivision 6, interest shall be paid at the rate 
specified in section 270.75 from the date when such payment or 
deposit should have been made if no extension had been granted, 
until such tax is paid.  If payment is not made at the 
expiration of the extended period the penalties provided in this 
subdivision shall apply.  
    (2) In the case of any failure to withhold a tax on wages, 
make and file quarterly returns or make payments to or deposits 
with the commissioner of amounts withheld, as required by this 
section, within the time prescribed by law, there shall be added 
to the tax in lieu of the penalty provided in paragraph (1) a 
penalty equal to ten percent of the amount of tax that should 
have been properly withheld and paid over to or deposited with 
the commissioner if the failure is for not more than 30 days 
with an additional five percent for each additional 30 days or 
fraction thereof during which such failure continues, not 
exceeding 25 percent in the aggregate.  The amount of the tax 
together with this amount shall bear interest at the rate 
specified in section 270.75 from the time the tax should have 
been paid until paid.  The amount so added to the tax shall be 
collected at the same time and in the same manner and as a part 
of the tax unless the tax has been paid before the discovery of 
the negligence, in which case the amount so added shall be 
collected in the same manner as the tax. 
    (3) (2) If any employer required to withhold a tax on 
wages, make deposits, make and file quarterly returns and make 
payments to the commissioner of amounts withheld, as required by 
sections 290.92 to 290.97, willfully fails to withhold such a 
tax or make such deposits, files a false or fraudulent return, 
willfully fails to make such a payment or deposit, or willfully 
attempts in any manner to evade or defeat any such tax or the 
payment or deposit thereof, there shall also be imposed on such 
employer as a penalty an amount equal to 50 percent of the 
amount of tax (less any amount paid or deposited by such 
employer on the basis of such false or fraudulent return or 
deposit) that should have been properly withheld and paid over 
or deposited with the commissioner.  The amount of the tax 
together with this amount shall bear interest at the rate 
specified in section 270.75 from the time the tax should have 
been paid until paid.  The penalty imposed by this paragraph 
shall be collected as a part of the tax, and shall be in 
addition to any other penalties civil and criminal, prescribed 
by this subdivision. 
    (4) (3) If any person required under the provisions of 
subdivision 7 to furnish a statement to an employee or payee and 
a duplicate statement to the commissioner, or to furnish a 
reconciliation of such statements (and quarterly returns) to the 
commissioner, willfully furnishes a false or fraudulent 
statement to an employee or payee or a false or fraudulent 
duplicate statement or reconciliation of statements (and 
quarterly returns) to the commissioner, or willfully fails to 
furnish a statement or such reconciliation in the manner, at the 
time, and showing the information required by the provisions of 
subdivision 7, or regulations rules prescribed by the 
commissioner thereunder, there shall be imposed on such a person 
a penalty of $10 $50 for each such act or failure to act, but 
the total amount imposed on the delinquent person for all such 
failures during any calendar year shall not exceed $25,000.  The 
penalty imposed by this paragraph shall become due and payable 
within ten days after the mailing of a written demand therefor, 
and may be collected in the manner prescribed in subdivision 
6(8). 
    (5) (4) In addition to the penalties hereinbefore 
prescribed, any person required to withhold a tax on wages, make 
and file quarterly returns and make payments or deposits to the 
commissioner of amounts withheld, as required by this section, 
who willfully fails to withhold such a tax or truthfully make 
and file such a quarterly return or make such a payment or 
deposit, shall be guilty of a gross misdemeanor. 
    (6) (5) In lieu of any other penalty provided by law, 
except the penalty provided by paragraph (4) (3), any person 
required under the provisions of subdivision 7 to furnish a 
statement of wages to an employee and a duplicate statement to 
the commissioner, who willfully furnishes a false or fraudulent 
statement of wages to an employee or a false or fraudulent 
duplicate statement of wages to the commissioner, or who 
willfully fails to furnish such a statement in the manner, at 
the time, and showing the information required by the provisions 
of subdivision 7, or regulations rules prescribed by the 
commissioner thereunder, shall be guilty of a gross misdemeanor. 
    (7) (6) Any employee required to supply information to his 
employer under the provisions of subdivision 5, who willfully 
fails to supply information thereunder which would require an 
increase in the tax to be deducted and withheld under 
subdivision 2a or subdivision 3, shall be guilty of a 
misdemeanor. 
    (8) (7) The term "person," as used in this section, 
includes an officer or employee of a corporation, or a member or 
employee of a partnership, who as such officer, employee, or 
member is under a duty to perform the act in respect of which 
the violation occurs. 
    (9) (8) All payments received may, in the discretion of the 
commissioner of revenue, be credited first to the oldest 
liability not secured by a judgment or lien, but in all cases 
shall be credited first to penalties, next to interest, and then 
to the tax due. 
    (10) (9) In addition to any other penalty provided by law, 
any employee who furnishes a withholding exemption certificate 
to his employer which the employee has reason to know contains a 
materially incorrect statement shall be liable to the 
commissioner of revenue for a penalty of $500 for each 
instance.  The penalty shall be immediately due and payable and 
may be collected in the same manner as any delinquent income tax.
    (11) (10) In addition to any other penalty provided by law, 
any employer who fails to submit a copy of a withholding 
exemption certificate required by section 26 subdivision 5a, 
clause (1)(a), (1)(b), or (2) shall be liable to the 
commissioner of revenue for a penalty of $50 for each instance.  
The penalty shall be immediately due and payable and may be 
collected in the manner provided in subdivision 6(8).  
    Sec. 33.  Minnesota Statutes 1982, section 290.92, is 
amended by adding a subdivision to read:  
    Subd. 26.  [EXTENSION OF WITHHOLDING TO CERTAIN PAYMENTS 
WHERE IDENTIFYING NUMBER NOT FURNISHED OR INACCURATE.] (a) If, 
in the case of any backup withholding payment, (1) the payee 
fails to furnish his social security account number to the 
payor, or (2) the commissioner notifies the payor that the 
number furnished by the payee is incorrect, then the payor shall 
deduct and withhold from the payment a tax equal to five percent 
of the payment.  
    (b) (1) In the case of any failure described in clause (a) 
(1), clause (a) shall apply to any backup withholding payment 
made during the period during which the social security account 
number has not been furnished.  
    (2) In any case where there is a notification described in 
clause (a)(2), clause (a) shall apply to any backup withholding 
payment made (i) after the close of the 15th day after the day 
on which the payor was so notified, and (ii) before the payee 
furnishes another social security account number.  
    (3) Unless the payor otherwise elects, clause (a) shall 
also apply to any backup withholding payment made after the 
close of the period described in paragraph (1) or (2) (as the 
case may be).  
    If the payor so elects, clause (a) shall also apply to any 
backup withholding payment made during the 15-day period 
described in paragraph (2).  
    (c) The provisions of section 3402(s) of the Internal 
Revenue Code of 1954, as amended through December 31, 1982, 
shall apply and shall govern when withholding shall be required 
and the definition of terms.  The term "backup withholding 
payment" shall include only those payments for personal 
services.  No tax shall be deducted or withheld under this 
subdivision with respect to any amount for which withholding is 
otherwise required under this section.  For purposes of this 
section, payments which are subject to withholding under this 
subdivision shall be treated as if they were wages paid by an 
employer to an employee.  
    (d) Whenever the commissioner notifies a payor under this 
subdivision that the social security account number furnished by 
any payee is incorrect, notwithstanding section 290.61, the 
commissioner shall at the same time furnish a copy of the notice 
to the payor, and the payor shall promptly furnish the copy to 
the payee.  If the commissioner notifies a payor under this 
subdivision that the social security account number furnished by 
any payee is incorrect and the payee subsequently furnishes 
another social security account number to the payor, the payor 
shall promptly notify the commissioner of the other social 
security account number furnished.  
    Sec. 34.  Minnesota Statutes 1982, section 290.93, 
subdivision 9, is amended to read: 
    Subd. 9.  [OVERPAYMENT OF ESTIMATED TAX.] (1) Where the 
amount of an installment payment of estimated tax exceeds the 
amount determined to be the correct amount of such installment 
payment, the overpayment shall be credited against the unpaid 
installments, if any.  Where the total amount of the estimated 
tax payments plus (a) the total amount of tax withheld at the 
source under section 290.92, subdivision 2a or subdivision 3 (if 
any) and (b) and other payments (if any) exceeds by $1 or more 
the taxes (and any added penalties and interest) reported in the 
return of the taxpayer or imposed upon him by this chapter, the 
amount of such excess shall be refunded to the taxpayer.  If the 
amount of such excess is less than $1 the commissioner shall not 
be required to refund that amount.  Where any amount of such 
excess to be refunded exceeds $10, such amount on the original 
return shall bear interest at the rate of six percent per annum, 
computed from 90 days after (a) the due date of the return of 
the taxpayer or (b) the date on which his return is filed, 
whichever is later, until the date the refund is paid to the 
taxpayer.  A return shall not be treated as filed until it is in 
processible form.  A return is in processible form when the 
return is filed on a permitted form, and the return contains the 
taxpayer's name, address, social security account number, the 
required signature, and sufficient required information (whether 
on the return or on required attachments) to permit the 
mathematical verification of tax liability shown on the return.  
Notwithstanding the provisions of section 290.50, written 
findings by the commissioner, notice by mail to the taxpayer, 
and certificate for refundment by the commissioner, shall not be 
necessary.  The provisions of section 270.10, shall not be 
applicable. 
     (2) Any action of the commissioner in refunding the amount 
of such excess shall not constitute a determination of the 
correctness of the return of the taxpayer within the purview of 
section 290.46. 
     (3) The commissioner of finance shall cause any such refund 
of tax and interest to be paid out of the general fund in 
accordance with the provisions of section 290.62, and so much of 
said fund as may be necessary is hereby appropriated for that 
purpose.  
    Sec. 35.  Minnesota Statutes 1982, section 290.93, 
subdivision 10, is amended to read: 
    Subd. 10.  [UNDERPAYMENT OF ESTIMATED TAX.] (1) In the case 
of any underpayment of estimated tax by an individual, except as 
provided in paragraph (4) or (5), there may be added to and 
become a part of the taxes imposed by this chapter, for the 
taxable year an amount determined at the rate specified in 
section 270.75 upon the amount of the underpayment for the 
period of the underpayment. 
     (2) For purposes of the preceding paragraph, the amount of 
underpayment shall be the excess of 
     (a) The amount of the installment which would be required 
to be paid if the estimated tax were equal to 80 percent (66 2/3 
percent in the case of farmers referred to in subdivision 5(2) 
of this section) of the taxes shown on the return for the 
taxable year or the taxes for such year if no return was filed, 
over 
     (b) The amount, if any, of the installment paid on or 
before the last day prescribed for such payment. 
     (3) The period of the underpayment shall run from the date 
the installment was required to be paid to whichever of the 
following dates is the earlier 
     (a) The 15th day of the fourth month following the close of 
the taxable year. 
     (b) With respect to any portion of the underpayment, the 
date on which such portion is paid.  For purposes of this 
subparagraph, a payment of estimated tax on any installment date 
shall be considered a payment of any previous underpayment only 
to the extent such payment exceeds the amount of the installment 
determined under paragraph (2) (a) for such installment date. 
     (4) The addition to the tax with respect to any 
underpayment of any installment shall not be imposed if the 
total amount of all payments of estimated tax made on or before 
the last date prescribed for the payment of such installment 
equals or exceeds the amount which would have been required to 
be paid on or before such date if the estimated tax were 
whichever of the following is the lesser 
     (a) The total tax liability shown on the return of the 
individual for the preceding taxable year (if a return showing a 
liability for such taxes was filed by the individual for the 
preceding taxable year of 12 months), or 
     (b) An amount equal to the tax computed, at the rates 
applicable to the taxable year, on the basis of the taxpayer's 
status with respect to the personal credits for the taxable 
year, but otherwise on the basis of the facts shown on his 
return for, and the law applicable to the preceding taxable 
year, or 
     (c) An amount equal to 80 percent (66 2/3 percent in the 
case of farmers referred to in subdivision 5(2) of this section) 
of the tax for the taxable year (after deducting personal 
credits) computed by placing on an annualized basis the taxable 
income for the months in the taxable year ending before the 
month in which the installment is required to be paid.  For 
purposes of this subparagraph, the taxable income shall be 
placed on an annualized basis by 
     (i) Multiplying by 12 (or in the case of a taxable year of 
less than 12 months, the number of months in the taxable year) 
the taxable income computed for the months in the taxable year 
ending before the month in which the installment is required to 
be paid. 
     (ii) Dividing the resulting amount by the number of months 
in the taxable year ending before the month in which such 
installment date falls, or 
    (d) An amount equal to 90 percent of the tax computed, at 
the rates applicable to the taxable year, on the basis of the 
actual taxable income for the months in the taxable year ending 
before the month in which the installment is required to be paid.
    (5) No addition to the tax shall be imposed under this 
subdivision for any taxable year if:  
    (a) the individual did not have any liability for tax for 
the preceding taxable year, 
    (b) the preceding taxable year was a taxable year of 12 
months, and 
    (c) the individual was a resident of Minnesota throughout 
the preceding taxable year.  
    (5) (6) For the purposes of applying this subdivision, the 
estimated tax shall be computed without any reduction for the 
amount which the individual estimates as his credit under 
section 290.92, subdivision 12 (relating to tax withheld at 
source on wages), and the refundable credits contained in 
sections 290.06, subdivision 13, 290.067, and 290.501, and 
chapter 290A which are allowed against income tax liability, and 
the amount of such credits for the taxable year shall be deemed 
a payment of estimated tax, and an equal part of such amounts 
shall be deemed paid on each installment date (determined under 
subdivisions 6 and 7 of this section) for such taxable year, 
unless the taxpayer establishes the dates on which all amounts 
were actually withheld, in which case the amounts so withheld 
shall be deemed payments of estimated tax on the dates on which 
such amounts were actually withheld. 
    Sec. 36.  Minnesota Statutes 1982, section 290.93, 
subdivision 11, is amended to read: 
    Subd. 11.  [FAILURE TO PAY.] Any individual required under 
this section to pay any estimated tax, who willfully fails to 
pay such estimated tax at the time or times required by law or 
regulations rules, shall, in addition to other penalties 
provided by law, be guilty of a gross misdemeanor.  This 
subdivision shall not apply to an individual with respect to the 
failure to pay estimated tax if there is no addition to the tax 
under this section with respect to the failure to pay estimated 
tax.  
    Sec. 37.  Minnesota Statutes 1982, section 290.934, 
subdivision 4, is amended to read: 
    Subd. 4.  [EXCEPTION.] (a) Notwithstanding the provisions 
of the preceding subdivisions, the addition to the tax with 
respect to any underpayment of any installment shall not be 
imposed if the total amount of all payments of estimated tax 
made on or before the last date prescribed for the payment of 
such installment equals or exceeds the amount which would have 
been required to be paid on or before such date if the estimated 
tax were whichever of the following is the lesser 
     (1) The tax shown on the return of the corporation for the 
preceding taxable year, if a return showing a liability for tax 
was filed by the corporation for the preceding taxable year and 
such preceding year was a taxable year of 12 months. 
     (2) An amount equal to the tax computed at the rates 
applicable to the taxable year but otherwise on the basis of the 
facts shown on the return of the corporation for, and the law 
applicable to, the preceding taxable year.  
     (3) (A) An amount equal to the tax for the taxable year 
computed by placing on an annualized basis the taxable income:  
     (i) for the first two months of the taxable year, in the 
case of the installment required to be paid in the third month, 
    (ii) for the first two months or for the first five months 
of the taxable year, in the case of the installment required to 
be paid in the sixth month, 
    (iii) for the first six months or for the first eight 
months of the taxable year in the case of the installment 
required to be paid in the ninth month, and 
    (iv) for the first nine months or for the first 11 months 
of the taxable year, in the case of the installment required to 
be paid in the 12th month of the taxable year.  
    (B) For purposes of this paragraph, the taxable income 
shall be placed on an annualized basis by 
    (i) multiplying by 12 the taxable income referred to in 
subparagraph (A), and 
    (ii) dividing the resulting amount by the number of months 
in the taxable year (2, 5, 6, 8, 9, or 11, as the case may be) 
referred to in clause (A).  
    (4) (A) If this paragraph is applicable, the amount 
determined for any installment shall be determined in the 
following manner:  
    (i) take the taxable income for all months during the 
taxable year preceding the filing month, 
    (ii) divide that amount by the base period percentage for 
all months during the taxable year preceding the filing month, 
    (iii) determine the tax on the amount determined under item 
(ii), and 
    (iv) multiply the tax computed under item (iii) by the base 
period percentage for the filing month and all months during the 
taxable year preceding the filing month.  
    (B) For purposes of this paragraph:  
    (i) The "base period percentage" for any period of months 
shall be the average percent which the taxable income for the 
corresponding months in each of the three preceding taxable 
years bears to the taxable income for the three preceding 
taxable years.  
    (ii) The term "filing month" means the month in which the 
installment is required to be paid.  
    (iii) This paragraph shall only apply if the base period 
percentage for any six consecutive months of the taxable year 
equals or exceeds 70 percent.  
     (iv) The commissioner may by rules provide for the 
determination of the base period percentage in the case of 
reorganizations, new corporations, and other similar 
circumstances.  
    (b) Notwithstanding clause (a) (1) and (2), in the case of 
a large corporation, the addition to the tax with respect to any 
underpayment of any installment shall be imposed if the total 
amount of all payments of estimated tax made on or before the 
last date prescribed for the payment of the installment is less 
than the amount required to be paid on or before the date.  The 
amount required to be paid as estimated tax for the taxable year 
shall in no event be less than the applicable percentage of (A) 
the tax shown on the return for the taxable year, or (B) if no 
return was filed, the tax for the year.  The term "large 
corporation" means any corporation (or any predecessor 
corporation) which had taxable net income of $1,000,000 or more 
for any taxable year during the testing period.  The term 
"testing period" means the three taxable years immediately 
preceding the taxable year involved.  The term "applicable 
percentage" means 65 percent for taxable years beginning after 
April 30, 1982, 75 percent for taxable years beginning after 
December 31, 1982, and 80 90 percent for taxable years beginning 
after December 31, 1983.  
    Sec. 38.  Minnesota Statutes 1982, section 290.9725, is 
amended to read: 
    290.9725 [ELECTION BY SMALL BUSINESS CORPORATION.] 
    Any corporation having a valid election in effect under 
section 1372 1362 of the Internal Revenue Code of 1954, as 
amended through December 31, 1981 1982, shall not be subject to 
the taxes imposed by this chapter, except the tax imposed under 
section 290.92. 
    Sec. 39.  Minnesota Statutes 1982, section 290.9726, 
subdivision 5, is amended to read: 
    Subd. 5.  [CREDIT ALLOWANCES.] The credits provided in 
sections 290.06 and 290.501 to which the corporation is entitled 
shall be allocated to the shareholders in the same percentage as 
the undistributed income was apportioned under section 1373(b) 
as provided in sections 1366 and 1377 of the Internal Revenue 
Code of 1954, as amended through December 31, 1981 1982.  The 
limitations set forth in the computation of the credit shall be 
applied to the shareholders.  
    Sec. 40.  Minnesota Statutes 1982, section 290.9726, 
subdivision 6, is amended to read: 
    Subd. 6.  [BASIS.] The adjustments to basis described in 
section 1376 of the Internal Revenue Code of 1954, as amended 
through December 31, 1981 as it existed prior to October 19, 
1982, shall not be made for any year beginning before January 1, 
1981 for which the corporation did not have a valid election to 
be taxed as a small business corporation.  
    Sec. 41.  Minnesota Statutes 1982, section 290.974, is 
amended to read: 
    290.974 [RETURN OF ELECTING SMALL BUSINESS S CORPORATION.] 
    Every electing small business S corporation under section 
290.9725 shall make a small business corporation return for each 
taxable year during which said election is in effect stating 
specifically the names and addresses of all persons owning stock 
in the corporation at any time during the taxable year, the 
number of shares of stock owned by each shareholder at all times 
during the taxable year, each shareholder's pro rata share of 
each item of the corporation for the taxable year, and such 
other information for the purposes of carrying out the 
provisions of sections 290.01, subdivisions 20 to 20f and 
290.9725 as the commissioner may by forms and regulations rules 
prescribe.  
    Sec. 42.  Minnesota Statutes 1982, section 290A.03, 
subdivision 3, is amended to read: 
    Subd. 3.  [INCOME.] (1) "Income" means the sum of the 
following: 
    (a) federal adjusted gross income as defined in the 
Internal Revenue Code of 1954 as amended through December 31, 
1981 January 15, 1983; and 
    (b) the sum of the following amounts to the extent not 
included in clause (a): 
    (i) additions to federal adjusted gross income as provided 
in Minnesota Statutes, section 290.01, subdivision 20a, clauses 
(1), (3), (9), (14), (15), and (21); 
    (ii) all nontaxable income; 
    (iii) recognized net long term capital gains; 
    (iv) dividends and interest excluded from federal adjusted 
gross income under sections 116 or 128 of the Internal Revenue 
Code of 1954; 
    (v) cash public assistance and relief; 
    (vi) 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; 
     (vii) nontaxable interest received from the state or 
federal government or any instrumentality or political 
subdivision thereof; 
     (viii) workers' compensation; 
     (ix) unemployment benefits; 
     (x) nontaxable strike benefits; and 
     (xi) 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.  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. 
     (2) "Income" does not include 
     (a) amounts excluded pursuant to the Internal Revenue Code, 
sections 101(a), 102, 117, and 121; 
     (b) 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; 
     (c) surplus food or other relief in kind supplied by a 
governmental agency; 
     (d) relief granted under sections 290A.01 to 290A.20; 
     (e) child support payments received under a temporary or 
final decree of dissolution or legal separation;  
     (f) federal adjusted gross income shall be reduced by wage 
or salary expense, or expense of work incentive programs which 
are not allowed as a deduction under provisions of section 280C 
of the Internal Revenue Code of 1954; or 
     (g) federal adjusted gross income shall be reduced by the 
amount of the penalty on the early withdrawal of an all-savers 
certificate as provided in section 128(e) of the Internal 
Revenue Code of 1954.  
    Sec. 43.  [INSTRUCTIONS TO THE REVISOR.] 
    In the next edition of Minnesota Statutes, the revisor of 
statutes shall substitute the phrase "Internal Revenue Code of 
1954, as amended through December 31, 1982" for the words 
"Internal Revenue Code of 1954, as amended through December 31, 
1981" or for the words "Internal Revenue Code of 1954, as 
amended through December 1, 1982" wherever the phrase occurs in 
chapter 290, except section 290.01, subdivision 20.  
    Sec. 44.  [REPEALER.] 
    Minnesota Statutes 1982, section 290.01, subdivision 28, is 
repealed.  
    Sec. 45.  [EFFECTIVE DATE.] 
    Sections 2 and 6 are effective for taxable years beginning 
after December 31, 1982, except as otherwise provided.  Sections 
4, 5, 8, 9, 12, 18, 24, 27, 37, 39, 41, 43, and 44 are effective 
for taxable years beginning after December 31, 1982.  Section 3 
is effective for taxable years beginning after December 31, 1982 
except that the provision concerning qualified voluntary 
employee contributions is effective for taxable years beginning 
after December 31, 1981.  Sections 7 and 19 are effective for 
taxable years beginning after December 31, 1981.  Sections 1, 
10, 14, 21, 25, 26, 28, 30, 36, and 40 are effective the day 
after final enactment.  Section 11 is effective for taxable 
years beginning after December 31, 1982, except that the 
reference to the straight line method and other methods and the 
adoption of changes made in Public Law Number 97-448 and the 
changes made in clauses (a) and (e) are effective for property 
placed in service after December 31, 1980, in taxable years 
ending after that date.  Section 13 is effective for taxable 
years beginning after December 31, 1982, provided that the 
adoption of section 204(b) of Public Law Number 97-248 is 
effective at the same time it is effective for federal 
purposes.  Sections 15, 16, and 17 are effective at the same 
time the changes made in Public Law Number 97-248 and Public Law 
Number 97-448 are effective for federal income tax purposes. 
Sections 20, 22, and 32 are effective for returns or statements 
for which the due date is after December 31, 1983.  Section 23 
is effective for payments and sales made after December 31, 
1982.  Sections 29, 31, and 34 are effective for documents filed 
after June 30, 1983.  Section 33 is effective for payments made 
after December 31, 1983.  Section 35 is effective for taxable 
years beginning after December 31, 1982, except that the 
amendment in clause (6) is effective for taxable years beginning 
after December 31, 1981.  Section 38 is effective for taxable 
years beginning after December 31, 1982, however as provided in 
section 6(b)(3) of Public Law Number 97-354, the new passive 
income rules of that law shall apply to a taxable year beginning 
in 1982.  Section 42 is effective for claims based on rent paid 
in 1982 and subsequent years and property taxes payable in 1983 
and subsequent years. 
    Approved May 20, 1983