Minnesota Session Laws - 1989, Regular Session

  

                         Laws of Minnesota 1989 

                         CHAPTER 27-H.F.No. 68 
           An act relating to taxation; making technical 
          corrections to the property taxation of unmined iron 
          ore; making technical corrections and clarifications 
          to the corporate franchise tax; retroactively 
          providing a corporate franchise tax modification for 
          mining income or gains; clarifying the computation of 
          mining occupation taxes; exempting S corporations from 
          business activity report filing requirements; 
          repealing an obsolete reference; amending Minnesota 
          Statutes 1988, sections 273.1104, subdivision 2; 
          290.01, subdivision 19d; 290.015, subdivisions 2, 3, 
          and 4; 290.092, subdivisions 2 and 4a; 290.191, 
          subdivisions 6 and 11; 290.371; 298.01, subdivisions 
          3, 4, and by adding subdivisions; and Laws 1988, 
          chapter 719, article 2, section 57; repealing 
          Minnesota Statutes 1988, section 52.22. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                ARTICLE 1
    Section 1.  Minnesota Statutes 1988, section 273.1104, 
subdivision 2, is amended to read: 
    Subd. 2.  On or before October 1 September 15 in each year, 
the commissioner shall send to each person subject to the tax on 
unmined iron ores and to each taxing district affected, a notice 
of the gross tax capacity market value of the unmined ores as 
determined by the commissioner prior to adjustment under 
subdivision 1.  Said notice shall be sent by mail directed to 
such person at the address given in the report filed and the 
assessor of such taxing district, but the validity of the tax 
shall not be affected by the failure of the commissioner of 
revenue to mail such notice or the failure of the person subject 
to the tax to receive it. 
    On the first secular day following the tenth first day of 
October, the commissioner of revenue shall hold a hearing which 
may be adjourned from day to day.  All relevant and material 
evidence having probative value with respect to the issues shall 
be submitted at the hearing and such hearing shall not be a 
"contested case" within the meaning of section 14.02, 
subdivision 3.  Every person subject to such tax may at such 
hearing present evidence and argument on any matter bearing upon 
the validity or correctness of the tax determined to be due, and 
the commissioner of revenue shall review the determination of 
such tax. 
    Sec. 2.  Minnesota Statutes 1988, section 290.01, 
subdivision 19d, is amended to read: 
    Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
TAXABLE INCOME.] For corporations, there shall be subtracted 
from federal taxable income after the increases provided in 
subdivision 19c:  
     (1) the amount of foreign dividend gross-up added to gross 
income for federal income tax purposes under section 78 of the 
Internal Revenue Code; 
     (2) the decrease in salary expense for federal income tax 
purposes due to claiming the federal jobs credit under section 
51 of the Internal Revenue Code; 
     (3) any dividend (not including any distribution in 
liquidation) paid within the taxable year by a national or state 
bank to the United States, or to any instrumentality of the 
United States exempt from federal income taxes, on the preferred 
stock of the bank owned by the United States or the 
instrumentality; 
     (4) amounts disallowed for intangible drilling costs due to 
differences between this chapter and the Internal Revenue Code 
in taxable years beginning before January 1, 1987, as follows: 
     (i) to the extent the disallowed costs are represented by 
physical property, an amount equal to the allowance for 
depreciation under Minnesota Statutes 1986, section 290.09, 
subdivision 7, subject to the modifications contained in 
subdivision 19e; and 
     (ii) to the extent the disallowed costs are not represented 
by physical property, an amount equal to the allowance for cost 
depletion under Minnesota Statutes 1986, section 290.09, 
subdivision 8; 
     (5) the deduction for capital losses pursuant to sections 
1211 and 1212 of the Internal Revenue Code of 1986, as amended 
through December 31, 1987, except that: 
     (i) for capital losses incurred in taxable years beginning 
after December 31, 1986, capital loss carrybacks shall not be 
allowed; 
     (ii) for capital losses incurred in taxable years beginning 
after December 31, 1986, a capital loss carryover to each of the 
15 taxable years succeeding the loss year shall be allowed; 
     (iii) for capital losses incurred in taxable years 
beginning before January 1, 1987, a capital loss carryback to 
each of the three taxable years preceding the loss year, subject 
to the provisions of Minnesota Statutes 1986, section 290.16, 
shall be allowed; and 
     (iv) for capital losses incurred in taxable years beginning 
before January 1, 1987, a capital loss carryover to each of the 
five taxable years succeeding the loss year to the extent such 
loss was not used in a prior taxable year and subject to the 
provisions of Minnesota Statutes 1986, section 290.16, shall be 
allowed; 
     (6) an amount for interest and expenses relating to income 
not taxable for federal income tax purposes, if (i) the income 
is taxable under this chapter and (ii) the interest and expenses 
were disallowed as deductions under the provisions of section 
171(a)(2), 265 or 291 of the Internal Revenue Code of 1986, as 
amended through December 31, 1987, in computing federal taxable 
income; 
     (7) in the case of mines, oil and gas wells, other natural 
deposits, and timber for which percentage depletion was 
disallowed pursuant to subdivision 19c, clause (11), a 
reasonable allowance for depletion based on actual cost.  In the 
case of leases the deduction must be apportioned between the 
lessor and lessee in accordance with rules prescribed by the 
commissioner.  In the case of property held in trust, the 
allowable deduction must be apportioned between the income 
beneficiaries and the trustee in accordance with the pertinent 
provisions of the trust, or if there is no provision in the 
instrument, on the basis of the trust's income allocable to 
each; 
     (8) for certified pollution control facilities placed in 
service in a taxable year beginning before December 31, 1986, 
and for which amortization deductions were elected under section 
169 of the Internal Revenue Code of 1954, as amended through 
December 31, 1985, an amount equal to the allowance for 
depreciation under Minnesota Statutes 1986, section 290.09, 
subdivision 7; 
     (9) the amount included in federal taxable income 
attributable to the credits provided in Minnesota Statutes 1986, 
section 273.1314, subdivision 9, or Minnesota Statutes, section 
469.171, subdivision 6; 
    (10) amounts included in federal taxable income that are 
due to refunds of income, excise, or franchise taxes based on 
net income or related minimum taxes paid by the corporation to 
Minnesota, another state, a political subdivision of another 
state, the District of Columbia, or a foreign country or 
possession of the United States to the extent that the taxes 
were added to federal taxable income under section 290.01, 
subdivision 19c, clause (1), in a prior taxable year; and 
    (11) the following percentage of royalties, fees, or other 
like income accrued or received from a foreign operating 
corporation or a foreign corporation which is part of the same 
unitary business as the receiving corporation: 
      Taxable Year 
      Beginning After .......... Percentage 
      December 31, 1988 ........ 50 percent 
      December 31, 1990 ........ 80 percent.; and
     (12) income or gains from the business of mining as defined 
in section 290.05, subdivision 1, clause (a), that are not 
subject to Minnesota franchise tax. 
    Sec. 3.  Minnesota Statutes 1988, section 298.01, 
subdivision 3, is amended to read: 
    Subd. 3.  [OCCUPATION TAX; OTHER ORES.] Every person 
engaged in the business of mining or producing ores in this 
state, except iron ore or taconite concentrates, shall pay an 
occupation tax to the state of Minnesota as provided in this 
subdivision.  The tax is measured by the person's taxable income 
for the year for which the tax is imposed, and computed in the 
manner and at the rates provided in chapter 290 determined in 
the same manner as the tax imposed by section 290.02, except 
that sections 290.01, subdivisions 19c, clause (11), 19d, clause 
(7), and 290.05, subdivision 1, clause (a), and 290.17, 
subdivision 4, do not apply.  Corporations and individuals shall 
be subject to the alternative minimum taxes imposed under 
chapter 290.  The tax is in addition to all other taxes and is 
due and payable on or before June 15 of the year succeeding the 
calendar year covered by the report required by section 298.05. 
    Sec. 4.  Minnesota Statutes 1988, section 298.01, is 
amended by adding a subdivision to read: 
    Subd. 3a.  [GROSS INCOME.] (a) For purposes of determining 
a person's taxable income under subdivision 3, gross income is 
determined by the amount of gross proceeds from mining in this 
state under section 298.016 and includes any gain or loss 
recognized from the sale or disposition of assets used in the 
business in this state. 
    (b) In applying section 290.191, subdivision 5, transfers 
of ores are deemed to be sales outside this state if the ores 
are transported out of this state after the ores have been 
converted to a marketable quality. 
    Sec. 5.  Minnesota Statutes 1988, section 298.01, is 
amended by adding a subdivision to read: 
    Subd. 3b.  [DEDUCTIONS.] (a) For purposes of determining 
taxable income under subdivision 3, the deductions from gross 
income include only those expenses necessary to convert raw ores 
to marketable quality.  Such expenses include costs associated 
with refinement but do not include expenses such as 
transportation, stockpiling, marketing, or marine insurance that 
are incurred after marketable ores are produced, unless the 
expenses are included in gross income. 
    (b) The provisions of section 290.01, subdivisions 19c, 
clauses (7) and (11), and 19d, clauses (7) and (12), are not 
used to determine taxable income. 
    Sec. 6.  Minnesota Statutes 1988, section 298.01, 
subdivision 4, is amended to read: 
    Subd. 4.  [OCCUPATION TAX; IRON ORE; TACONITE 
CONCENTRATES.] A person engaged in the business of mining or 
producing of iron ore or taconite concentrates in this state 
shall pay an occupation tax to the state of Minnesota.  The tax 
is measured by the person's taxable income for the year for 
which the tax is imposed, and computed in the manner and at the 
rates provided for in chapter 290, determined in the same manner 
as the tax imposed by section 290.02, except that sections 
290.01, subdivisions 19c, clause (11), 19d, clause (7), and 
290.05, subdivision 1, clause (a), and 290.17, subdivision 4, do 
not apply.  Corporations and individuals shall be subject to the 
alternative minimum taxes imposed under chapter 290.  The tax is 
in addition to all other taxes and is due and payable on or 
before June 15 of the year succeeding the calendar year covered 
by the report required by section 298.05. 
    Sec. 7.  Minnesota Statutes 1988, section 298.01, is 
amended by adding a subdivision to read: 
    Subd. 4a.  [GROSS INCOME.] (a) For purposes of determining 
a person's taxable income under subdivision 4, gross income is 
determined by the mine value of the ore mined in Minnesota and 
includes any gain or loss recognized from the sale or 
disposition of assets used in the business in this state. 
    (b) Mine value is the value, or selling price, of iron ore 
or taconite concentrates, f.o.b. mine.  The mine value is 
calculated by multiplying the iron unit price for the period, as 
determined by the commissioner, by the tons produced and the 
weighted average analysis. 
    (c) In applying section 290.191, subdivision 5, transfers 
of iron ore and taconite concentrates are deemed to be sales 
outside this state if the iron ore or taconite concentrates are 
transported out of this state after the raw iron ore and 
taconite concentrates have been converted to a marketable 
quality. 
    Sec. 8.  Minnesota Statutes 1988, section 298.01, is 
amended by adding a subdivision to read: 
    Subd. 4b.  [DEDUCTIONS.] For purposes of determining 
taxable income under subdivision 4, the deductions from gross 
income include only those expenses necessary to convert raw iron 
ore or taconite concentrates to marketable quality.  Such 
expenses include costs associated with beneficiation and 
refinement but do not include expenses such as transportation, 
stockpiling, marketing, or marine insurance that are incurred 
after marketable iron ore or taconite pellets are produced. 
    Sec. 9.  Minnesota Statutes 1988, section 298.01, is 
amended by adding a subdivision to read: 
    Subd. 4c.  [SPECIAL DEDUCTIONS.] (a) For purposes of 
determining taxable income under subdivision 4, the following 
modifications are allowed: 
    (1) the provisions of section 290.01, subdivisions 19c, 
clauses (7) and (11), and 19d, clauses (7) and (12), are not 
used to determine taxable income; and 
    (2) for assets placed in service before January 1, 1990, 
the deduction for depreciation will be the same amount allowed 
under chapter 290, except that after an asset has been fully 
depreciated for federal income tax purposes any remaining 
depreciable basis is allowed as a deduction using the 
straight-line method over the following number of years: 
    (i) three-year property, one year; 
    (ii) five- and seven-year property, two years; 
    (iii) ten-year property, five years; and 
    (iv) all other property, seven years. 
    No deduction is allowed if an asset is fully depreciated 
for occupation tax purposes before January 1990. 
    (b) For purposes of determining the deduction allowed under 
paragraph (a), clause (2), the remaining depreciable basis of 
property placed in service before January 1, 1990, is calculated 
as follows: 
    (1) the adjusted basis of the property on December 31, 
1989, which was used to calculate the hypothetical corporate 
franchise tax under Minnesota Statutes 1988, section 298.40, 
including salvage value; less 
    (2) deductions for depreciation allowed under section 
290.01, subdivision 19e. 
    (c) The basis for determining gain or loss on sale or 
disposition of assets placed in service before January 1, 1990, 
is the basis determined under paragraph (b), less the deductions 
allowed under paragraph (a), clause (2). 
    (d) The amount of net operating loss incurred in a taxable 
year beginning before January 1, 1990, that may be carried over 
to a taxable year beginning after December 31, 1989, is the 
amount of net operating loss carryover determined in the 
calculation of the hypothetical corporate franchise tax under 
Minnesota Statutes 1988, sections 298.40 and 298.402. 
    Sec. 10.  [EFFECTIVE DATES.] 
    Section 1 is effective for taxes levied in 1989, payable in 
1990, and thereafter.  Section 2 is effective for taxable years 
beginning after December 31, 1986.  Sections 3 to 5 are 
effective for ores mined after December 31, 1986.  Sections 6 to 
9 are effective for ores mined after December 31, 1989. 

                               ARTICLE 2
    Section 1.  Minnesota Statutes 1988, section 290.015, 
subdivision 2, is amended to read: 
    Subd. 2.  [PRESUMPTION.] (a) A person is presumed, subject 
to rebuttal, to be obtaining or regularly soliciting business 
from within this state if: 
    (1) it is a financial institution and it conducts 
activities described in subdivision 1, paragraph (b), without 
regard to transactions described in subdivision 3, with 20 or 
more persons within this state during any tax period; or 
    (2) it is a financial institution as defined in section 
290.01, subdivision 4a, and the sum of its assets and the 
absolute value of its deposits attributable to sources within 
this state equals or exceeds $5,000,000, with assets and 
deposits attributed to sources within this state by applying the 
principles established under section 290.191, except as provided 
in subdivision 3. 
    (b) A financial institution that (i) is not engaged in 
activities within this state under subdivision 1, paragraph (a), 
and (ii) does not satisfy the requirements of paragraph (a) is 
not subject to taxes imposed by this chapter.  
    Sec. 2.  Minnesota Statutes 1988, section 290.015, 
subdivision 3, is amended to read: 
    Subd. 3.  [EXCEPTIONS.] (a) A person is not subject to tax 
under this chapter if the person is engaged in the business of 
selling tangible personal property and taxation of that person 
under this chapter is precluded by Public Law Number 86-272, 
United States Code, title 15, sections 381 to 384 or would be so 
precluded except for the fact that the person stored tangible 
personal property in a state licensed facility under chapter 231.
    (b) Ownership of an interest in the following types of 
property (including those contacts with this state reasonably 
required to evaluate and complete the acquisition or disposition 
of the property, the servicing of the property or the income 
from it, the collection of income from the property, or the 
acquisition or liquidation of collateral relating to the 
property) shall not be a factor in determining whether the owner 
is subject to tax under this chapter: 
    (1) an interest in a real estate mortgage investment 
conduit, a real estate investment trust, or a regulated 
investment company or a fund of a regulated investment company, 
as those terms are defined in the Internal Revenue Code of 1986, 
as amended through December 31, 1987; 
    (2) an interest in money market instruments or securities 
as defined in section 290.191, subdivision 6, paragraphs (c) and 
(d); 
    (3) an interest in a loan-backed, mortgage-backed, or 
receivable-backed security representing either:  (i) ownership 
in a pool of promissory notes, mortgages, or receivables or 
certificates of interest or participation in such notes, 
mortgages, or receivables, or (ii) debt obligations or equity 
interests which provide for payments in relation to payments or 
reasonable projections of payments on the notes, mortgages, or 
receivables, and which are issued by a financial institution or 
by an entity substantially all of whose assets consist of 
promissory notes, mortgages, receivables, or interests in them; 
    (3) (4) an interest in any assets described in section 
290.191, subdivision 11, paragraphs (e) to (l), and in which the 
payment obligations embodied in such assets were solicited and 
entered into by persons independent and not acting on behalf of 
the owner; 
    (4) (5) an interest in the right to service, or collect 
income from any assets described in section 290.191, subdivision 
11, paragraphs (e) to (l), and in which the payment obligations 
embodied in such assets were solicited and entered into by 
persons independent and not acting on behalf of the owner; 
    (5) (6) an interest of a person other than an individual, 
estate, or trust, in any intangible, tangible, real, or personal 
property acquired in satisfaction, whether in whole or in part, 
of any asset embodying a payment obligation which is in default, 
whether secured or unsecured, the ownership of an interest in 
which would be exempt under the preceding provisions of this 
subdivision, provided the property is disposed of within a 
reasonable period of time; or 
    (6) (7) amounts held in escrow or trust accounts, pursuant 
to and in accordance with the terms of property described in 
this subdivision. 
    If the person is a member of the unitary group, paragraph 
(b) does, clauses (2) to (7), do not apply to an interest 
acquired from another member of the unitary group.  
    Sec. 3.  Minnesota Statutes 1988, section 290.015, 
subdivision 4, is amended to read: 
    Subd. 4.  [LIMITATIONS.] (a) This section does not subject 
a trade or business to any regulation, including any tax, of any 
local unit of government or subdivision of this state if the 
trade or business does not own or lease tangible or real 
property located within this state and has no employees or 
independent contractors present in this state to assist in the 
carrying on of the business. 
    (b) The purchase of tangible personal property or 
intangible property or services by a person that conducts a 
trade or business with the principal place of business outside 
of Minnesota (the "non-Minnesota person") from a person within 
Minnesota shall not be taken into account in determining whether 
the non-Minnesota person is subject to the taxes imposed by this 
chapter, except for services involving either the direct 
solicitation of Minnesota customers or relationships with 
Minnesota customers after sales are made.  This paragraph is 
subject to the limitations contained in subdivision 3, paragraph 
(b), clauses (4) and (5). 
    (c) No contact with any Minnesota financial institution by 
any financial institution with its principal place of business 
outside Minnesota with respect to transactions described in 
subdivision 3, or with respect to deposits received from or by a 
Minnesota financial institution, shall be taken into account in 
determining whether such a financial institution is subject to 
the taxes imposed by this chapter.  The fact of participation by 
a Minnesota financial institution in a transaction which also 
involves a borrower and a financial institution that conducts a 
trade or business with its principal place of business outside 
of Minnesota shall not be a factor in determining whether such 
financial institution is subject to the taxes imposed by this 
chapter.  This paragraph does not apply to transactions between 
or among members of the same unitary group. 
    Sec. 4.  Minnesota Statutes 1988, section 290.092, 
subdivision 2, is amended to read: 
    Subd. 2.  [EXEMPTIONS.] Corporations subject to tax under 
sections 290.05, subdivision 3; or 60A.15, subdivision 1 and 
290.35; real estate investment trusts; regulated investment 
companies as defined in section 851(a) of the Internal Revenue 
Code of 1986 or funds of regulated investment companies as 
defined in section 851(h) of the Internal Revenue Code of 1986, 
as amended through December 31, 1988; cooperatives taxable under 
subchapter T of the Internal Revenue Code of 1986 or organized 
under chapter 308 or a similar law of another state; and 
entities having a valid election in effect under section 1362 or 
860D(b) of the Internal Revenue Code of 1986, as amended through 
December 31, 1987 1988, are not subject to the tax imposed in 
subdivision 1 or subdivision 5. 
    Sec. 5.  Minnesota Statutes 1988, section 290.092, 
subdivision 4a, is amended to read: 
    Subd. 4a.  [NEW BUSINESS EXCLUSION.] For the first five 
taxable years during which a corporation is subject to taxation 
under this chapter, the amount of its Minnesota property and 
payrolls must be excluded from the alternative minimum tax base 
unless it is disqualified in this subdivision.  A corporation is 
considered subject to taxation under this chapter if it would be 
subject to Minnesota's jurisdiction to tax as provided in 
section 290.015, before claiming this exclusion.  The following 
does not qualify for this exclusion:  
    (1) a corporation that is a member of a unitary group that 
includes at least one business that does not qualify for this 
exclusion; 
    (2) any corporation organized under the laws of this state 
or certified to do business within this state at least five 
taxable years before the taxable year in which this exclusion is 
claimed; 
    (3) corporations created by:  reorganizations, as defined 
in section 368 of the Internal Revenue Code of 1986, as amended 
through December 31, 1987; or split-ups, split-offs, or 
spin-offs, as described in section 355 of the Internal Revenue 
Code of 1986, as amended through December 31, 1987; or the 
transfer or acquisition, whether directly or indirectly, of 
assets which constitute a trade or business, including stock 
purchases under section 338 of the Internal Revenue Code of 
1986, as amended through December 31, 1987, where the surviving, 
newly formed, or acquiring corporation conducts substantially 
the same activities as the predecessor corporation, regardless 
of whether or not the survivor corporation also conducts 
additional activities, and the predecessor corporation would not 
otherwise qualify for this exclusion if it had continued to 
conduct those activities; 
    (4) any change in identity or form of business where the 
original business entity would have been subject to Minnesota's 
taxing jurisdiction, as provided in section 290.015, at least 
five taxable years before the taxable year in which this 
exclusion is claimed; 
    (5) a corporation, the primary business activity of which 
is the providing of professional services as defined in section 
319A.02; operation as a financial institution, as defined in 
section 290.01, subdivision 4a; sales or management of real 
estate; or operation as an insurance agency, as defined in 
section 60A.03 60A.02; or 
    (6) a corporation the affairs of which the commissioner 
finds were arranged as they were primarily to reduce taxes by 
qualifying as a new business under this subdivision. 
    Sec. 6.  Minnesota Statutes 1988, section 290.191, 
subdivision 6, is amended to read: 
    Subd. 6.  [DETERMINATION OF RECEIPTS FACTOR FOR FINANCIAL 
INSTITUTIONS.] (a) For purposes of this section, the rules in 
this subdivision and subdivisions 7 and 8 apply in determining 
the receipts factor for financial institutions.  
    (b) "Receipts" for this purpose means gross income, 
including net taxable gain on disposition of assets, including 
securities and money market instruments, when derived from 
transactions and activities in the regular course of the 
taxpayer's trade or business.  
    (c) "Money market instruments" means federal funds sold and 
securities purchased under agreements to resell, commercial 
paper, banker's acceptances, and purchased certificates of 
deposit and similar instruments to the extent that the 
instruments are reflected as assets under generally accepted 
accounting principles.  
    (d) "Securities" means United States Treasury securities, 
obligations of United States government agencies and 
corporations, obligations of state and political subdivisions, 
corporate stock and other securities, participations in 
securities backed by mortgages held by United States or state 
government agencies, loan-backed securities and similar 
investments to the extent the investments are reflected as 
assets under generally accepted accounting principles.  
     (e) Receipts from the lease or rental of real or tangible 
personal property, including both finance leases and true 
leases, must be attributed to this state if the property is 
located in this state.  Tangible personal property that is 
characteristically moving property, such as motor vehicles, 
rolling stock, aircraft, vessels, mobile equipment, and the 
like, is considered to be located in a state if:  
    (1) the operation of the property is entirely within the 
state; or 
    (2) the operation of the property is in two or more states, 
but the principal base of operations from which the property is 
sent out is in the state.  
    (f) Interest income and other receipts from assets in the 
nature of loans that are secured primarily by real estate or 
tangible personal property must be attributed to this state if 
the security property is located in this state under the 
principles stated in paragraph (e).  
    (g) Interest income and other receipts from consumer loans 
not secured by real or tangible personal property that are made 
to residents of this state, whether at a place of business, by 
traveling loan officer, by mail, by telephone or other 
electronic means, must be attributed to this state.  
    (h) Interest income and other receipts from commercial 
loans and installment obligations not secured that are unsecured 
by real or tangible personal property or secured by intangible 
property must be attributed to this state if the proceeds of the 
loan are to be applied in this state.  If it cannot be 
determined where the funds are to be applied, the income and 
receipts are attributed to the state in which the office of the 
borrower from which the application would be made in the regular 
course of business is located.  If this cannot be determined, 
the transaction is disregarded in the apportionment formula.  
    (i) Interest income and other receipts from a participating 
financial institution's portion of participation and syndication 
loans must be attributed under paragraphs (e) to (h).  A 
participation loan is a loan in which more than one lender is a 
creditor to a common borrower an arrangement in which a lender 
makes a loan to a borrower and then sells all or a part of the 
loan to a purchasing financial institution.  A syndication loan 
is a multibank loan transaction in which all the lenders are 
named as parties to the loan documentation, are known to the 
borrower, and have privity of contract with the borrower.  
    (j) Interest income and other receipts including service 
charges from financial institution credit card and travel and 
entertainment credit card receivables and credit card holders' 
fees must be attributed to the state to which the card charges 
and fees are regularly billed.  
    (k) Merchant discount income derived from financial 
institution credit card holder transactions with a merchant must 
be attributed to the state in which the merchant is located.  In 
the case of merchants located within and outside the state, only 
receipts from merchant discounts attributable to sales made from 
locations within the state are attributed to this state.  It is 
presumed, subject to rebuttal, that the location of a merchant 
is the address shown on the invoice submitted by the merchant to 
the taxpayer.  
     (l) Receipts from the performance of fiduciary and other 
services must be attributed to the state in which the benefits 
of the services are consumed.  If the benefits are consumed in 
more than one state, the receipts from those benefits must be 
apportioned to this state pro rata according to the portion of 
the benefits consumed in this state.  If the extent to which the 
benefits of services are consumed in this state is not readily 
determinable, the benefits of the services shall be deemed to be 
consumed at the location of the office of the customer from 
which the services were ordered in the regular course of the 
customer's trade or business.  If the ordering office cannot be 
determined, the benefits of the services shall be deemed to be 
consumed at the office of the customer to which the services are 
billed.  
     (m) Receipts from the issuance of travelers checks and 
money orders must be attributed to the state in which the checks 
and money orders are purchased.  
    (n) Receipts from investments of a financial institution in 
securities of this state, its political subdivisions, agencies, 
and instrumentalities must be attributed to this state.  
    (o) Receipts from a financial institution's interest in any 
property described in section 290.015, subdivision 3, paragraph 
(b), is not included in the numerator or the denominator of the 
receipts factor provided the financial institution's activities 
within this state with respect to any interest in the property 
are limited in the manner provided in section 290.015, 
subdivision 3, paragraph (b).  If a financial institution is 
subject to tax under this chapter, its interest in property 
described in section 290.015, subdivision 3, paragraph (b), is 
included in the receipts factor in the same manner as assets in 
the nature of securities or money market instruments are 
included under paragraph (n) and subdivision 7. 
    Sec. 7.  Minnesota Statutes 1988, section 290.191, 
subdivision 11, is amended to read: 
    Subd. 11.  [FINANCIAL INSTITUTIONS; PROPERTY FACTOR.] (a) 
For financial institutions, the property factor includes, as 
well as tangible property, intangible property as set forth in 
this subdivision.  
    (b) Intangible personal property must be included at its 
tax basis for federal income tax purposes.  
    (c) Goodwill must not be included in the property factor.  
    (d) Coin and currency located in this state must be 
attributed to this state.  
    (e) Lease financing receivables must be attributed to this 
state if and to the extent that the property is located within 
this state.  
    (f) Assets in the nature of loans that are secured by real 
or tangible personal property must be attributed to this state 
if and to the extent that the security property is located 
within this state.  
    (g) Assets in the nature of consumer loans and installment 
obligations that are unsecured or secured by intangible property 
must be attributed to this state if the loan was made to a 
resident of this state.  
    (h) Assets in the nature of commercial loan and installment 
obligations that are unsecured by real or tangible personal 
property or secured by intangible property must be attributed to 
this state if the loan proceeds of the loan are to be applied in 
this state.  If it cannot be determined where the funds are to 
be applied, the assets must be attributed to the state in which 
there is located the office of the borrower from which the 
application would be made in the regular course of business.  If 
this cannot be determined, the transaction is disregarded in the 
apportionment formula.  
    (i) A participating financial institution's portion of a 
participation loan and syndication loans must be attributed 
under paragraphs (e) to (h).  
    (j) Financial institution credit card and travel and 
entertainment credit card receivables must be attributed to the 
state to which the credit card charges and fees are regularly 
billed.  
    (k) Receivables arising from merchant discount income 
derived from financial institution credit card holder 
transactions with a merchant are attributed to the state in 
which the merchant is located.  In the case of merchants located 
within and without the state, only receipts receivables from 
merchant discounts attributable to sales made from locations 
within the state are attributed to this state.  It is presumed, 
subject to rebuttal, that the location of a merchant is the 
address shown on the invoice submitted by the merchant to the 
taxpayer. 
    (l) Assets in the nature of securities and money market 
instruments are apportioned to this state based upon the ratio 
that total deposits from this state, its residents, its 
political subdivisions, agencies and instrumentalities bear to 
the total deposits from all states, their residents, their 
political subdivisions, agencies and instrumentalities.  In the 
case of an unregulated financial institution, the assets are 
apportioned to this state based upon the ratio that its gross 
business income earned from sources within this state bears to 
gross business income earned from sources within all states.  
For purposes of this subsection, deposits made by this state, 
its residents, its political subdivisions, agencies, and 
instrumentalities are attributed to this state, whether or not 
the deposits are accepted or maintained by the taxpayer at 
locations within this state. 
    (m) A financial institution's interest in any property 
described in section 290.015, subdivision 3, paragraph (b), is 
not included in the numerator or the denominator of the property 
factor provided the financial institution's activities within 
this state with respect to any interest in such property are 
limited in the manner provided in section 290.015, subdivision 
3, paragraph (b).  If a financial institution is subject to tax 
under this chapter, its interest in property described in 
section 290.015, subdivision 3, paragraph (b), is included in 
the property factor in the same manner as assets in the nature 
of securities or money market instruments are included under 
paragraph (1).  
    Sec. 8.  Minnesota Statutes 1988, section 290.371, is 
amended to read: 
    Subdivision 1.  [REPORT REQUIRED.] Every corporation that, 
during any calendar year or fiscal accounting year beginning 
after December 31, 1986, obtained any business from within this 
state as described in section 290.015, subdivision 1, with the 
exception of:  
    (1) activity levels lower than those set forth in section 
290.015, subdivision 2, paragraph (a), if the corporation is a 
financial institution; or 
    (2) activities described in section 290.015, subdivision 3, 
paragraph (b); or 
    (3) except corporations specifically exempted under 
subdivision 3 2, must file a notice of business activities 
report, as provided in this section.  Filing of the report is 
not a factor in determining whether a corporation is subject to 
taxation under this chapter. 
    Subd. 3. 2.  [EXEMPTIONS.] A corporation is not required to 
file a notice of business activities report if:  
    (1) by the end of an accounting period for which it was 
otherwise required to file a notice of business activities 
report under this section, it had received a certificate of 
authority to do business in this state; 
    (2) a timely return or report has been filed under section 
290.05, subdivision 4; or 290.37; 
    (3) the corporation is exempt from taxation under this 
chapter pursuant to section 290.05, subdivision 1; or 
    (4) the corporation's activities in Minnesota, or the 
interests in property which it owns, consist solely of 
activities or property exempted from jurisdiction to tax under 
section 290.015, subdivision 3, paragraph (b).; or 
    (5) the corporation has a valid election in effect under 
section 1362 of the Internal Revenue Code of 1986, as amended 
through December 31, 1988. 
    Subd. 4. 3.  [ANNUAL FILING.] Every corporation not exempt 
under subdivision 3 must file annually a notice of business 
activities report, including such forms as the commissioner may 
require, with respect to each of its calendar or fiscal 
accounting years beginning after December 31, 1986, on or before 
the 15th day of the fourth month after the close of the calendar 
or fiscal accounting year.  
    Subd. 5. 4.  [FAILURE TO FILE TIMELY REPORT.] (a) Any 
corporation required to file a notice of business activities 
report does not have any cause of action upon which it may bring 
suit under Minnesota law, except for issues related to its 
Minnesota tax liability, unless the corporation has filed a 
notice of business activities report.  
    (b) The failure of a corporation to file a timely report 
prevents the use of the courts in this state, except regarding 
activities and property described in section 290.015, 
subdivision 3, paragraph (b), for all contracts executed and all 
causes of action that arose at any time before the end of the 
last accounting period for which the corporation failed to file 
a required report.  
    (c) The court in which the issues arise has the power to 
must excuse the corporation for its failure to file a report 
when due, and restore the corporation's cause of action under 
the laws of this state, if the corporation has paid all taxes, 
interest, and civil penalties due the state for all periods, or 
provided for payment of them by adequate security or bond 
approved by the commissioner.  
    (d) Notwithstanding the provisions of section 290.61, the 
commissioner may acknowledge whether or not a particular 
corporation has filed with the commissioner reports or returns 
required by this chapter if the acknowledgment: 
    (1) is to a party in a civil action; 
    (2) relates to the filing status of another party in the 
same civil action; and 
    (3) is in response to a written request accompanied by a 
copy of the summons and complaint in the civil action.  
    Sec. 9.  Laws 1988, chapter 719, article 2, section 57, is 
amended to read: 
    Sec. 57.  [EFFECTIVE DATE.] 
    Sections 1, 4, and 5 are effective January 1, 1988.  
Sections 7, 8, 9, 11, clause (13), 31, and 40 are effective for 
taxable years beginning after December 31, 1990, except that 
sections 7, 8, 9, 11, clause (13), and 40 are effective for 
taxable years beginning after December 31, 1989, insofar as they 
apply to 936 corporations and sections 7 and 8 are effective for 
taxable years beginning after December 31, 1988, insofar as they 
apply to royalties, fees, or other like income as described in 
section 12, clause (11).  In this section, "936 corporations" 
are corporations referred to in section 9, clause (2)(ii).  
Sections 12, clause (11), 14, 26, 33, and 56, paragraph (c), are 
effective for taxable years beginning after December 31, 1988.  
Sections 2, 3, 32, 36, 37, and 38 are effective for taxable 
years beginning after December 31, 1987.  Section 30, paragraphs 
(f), (g), (h), and (j) are effective for taxable years beginning 
after December 31, 1990, except that insofar as they apply to 
936 corporations, they are effective for taxable years beginning 
after December 31, 1989.  Sections 29, in its reference to 
section 290.17, subdivision 4, paragraph (i), and 30, paragraph 
(i), are effective for taxable years beginning after December 
31, 1987, in its application to dividends, for taxable years 
beginning after December 31, 1988, in its application to income 
described in section 290.01, subdivision 19d, clause (11), for 
taxable years beginning after December 31, 1989, in its 
application to other income of 936 corporations a deemed 
dividend from a 936 corporation, and for taxable years beginning 
after December 31, 1990, in its application to other income of 
foreign operating corporations deemed dividends.  Section 30, 
paragraph (k) is effective for taxable years beginning after 
December 31, 1987.  As used in this section, a "deemed dividend" 
has the meaning described in section 30, paragraph (g).  
    Sections 10, 11, clauses (2) and (3), 12, except for clause 
(11), 13, 15 to 18, 20, 21, 23, 25, 29 insofar as it refers to 
companies subject to the occupation tax, 34, 35, 39, 41 to 49, 
and 56, paragraph (d), are effective for taxable years beginning 
after December 31, 1986.  Section 22 is effective for taxable 
years beginning after December 31, 1986, except that the part 
relating to the apportionment of the exemption amount among 
members of a unitary group is effective for taxable years 
beginning after December 31, 1987.  Section 27 is effective for 
taxable years beginning after December 31, 1986, except that the 
part relating to the allowance of a net operating loss incurred 
in any taxable year to the extent of the apportionment ratio of 
the loss year is effective for taxable years beginning after 
December 31, 1987.  Section 28 is effective for losses incurred 
in taxable years beginning after December 31, 1986 1987, and is 
repealed effective for taxable years beginning after December 
31, 1993.  Sections 6, 50, and 55 are effective the day 
following final enactment.  Sections 51 and 52 are effective for 
ores mined after December 31, 1989.  Section 53 is effective for 
ores mined after December 31, 1986, and before January 1, 1990.  
Section 54 is effective for ore mined after December 31, 1986.  
Section 56, paragraph (a), is effective for ores mined after 
December 31, 1989.  Section 56, paragraph (b), is effective for 
ores mined after December 31, 1986, and supersedes the repealer 
in Laws 1987, chapter 268, article 9, section 43. 
    Sec. 10.  [REPEALER.] 
    Minnesota Statutes 1988, section 52.22, is repealed. 
    Sec. 11.  [EFFECTIVE DATE.] 
    Sections 1 to 8 are effective for taxable years beginning 
after December 31, 1986, except that the elimination of clause 
(1) in section 290.371, subdivision 1, is effective for taxable 
years beginning after December 31, 1988. 
    Presented to the governor April 7, 1989 
    Signed by the governor April 7, 1989, 4:54 p.m.