1.1 	A bill for an act
1.2 	relating to taxation; corporate franchise, individual income, mining occupation, 
1.3 	sales and use, and cigarette excise taxation; adopting the recommendations 
1.4 	of the governor's 21st century tax commission; modifying tax bases, credits, 
1.5 	and rates; repealing the corporate franchise tax; requiring reports; amending 
1.6 	Minnesota Statutes 2008, sections 289A.18, subdivision 1; 289A.20, subdivision 
1.7 	1; 289A.30, subdivision 1; 289A.31, subdivision 1; 289A.38, subdivisions 7, 12; 
1.8 	289A.50, subdivision 1; 289A.60, subdivisions 1, 4; 290.01, subdivisions 19, 
1.9 	19a, 19b, 19f, 22, 29, 31; 290.03; 290.04, subdivision 1; 290.06, subdivision 33, 
1.10 	by adding a subdivision; 290.068, subdivisions 1, 3, 4, by adding a subdivision; 
1.11 	290.0922, subdivision 1; 290.095, subdivision 3; 290.17, subdivisions 1, 4; 
1.12 	290.191, subdivision 4; 290.32; 290.36; 297A.61, subdivision 3; 297A.62, 
1.13 	subdivision 1; 297A.67, subdivision 7; 297A.68, subdivisions 2, 5, 10, by 
1.14 	adding a subdivision; 297A.75, subdivision 1; 297F.05, subdivision 1; proposing 
1.15 	coding for new law in Minnesota Statutes, chapters 116J; 270C; 297I; repealing 
1.16 	Minnesota Statutes 2008, sections 289A.08, subdivision 3; 289A.19, subdivision 
1.17 	2; 289A.26; 290.01, subdivisions 5, 5a, 6b, 19c, 19d, 19e; 290.014, subdivision 
1.18 	5; 290.02; 290.06, subdivisions 1, 24, 27; 290.0921, subdivisions 1, 2, 3, 3a, 4, 6, 
1.19 	7, 8; 290.21, subdivisions 1, 4; 290.34, subdivisions 1, 2; 290.371, subdivisions 
1.20 	1, 2, 3, 4; 290.432; 297A.67, subdivisions 8, 9, 10, 13, 13a, 14, 16, 17, 18, 19, 
1.21 	21, 27, 29; 297A.70, subdivisions 10, 12; 298.01, subdivisions 3, 3a, 3b, 4, 
1.22 	4a, 4b, 4c, 5, 6; 298.17.
1.23 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.24 	Section 1. [116J.665] MINNESOTA BUSINESS INVESTMENT COMPANY 
1.25 	CREDIT.
1.26 		Subdivision 1.Definitions. (a) For purposes of this section, the following terms 
1.27 	have the meanings given.
1.28 	(b) "Affiliate" means:
1.29 	(1) any person who, directly or indirectly, beneficially owns, controls, or holds 
1.30 	power to vote 15 percent or more of the outstanding voting securities or other voting 
1.31 	ownership interest of a Minnesota business investment company or insurance company;
2.1 	(2) any person, 15 percent or more of whose outstanding voting securities or other 
2.2 	voting ownership interests are directly or indirectly beneficially owned, controlled, or held 
2.3 	with power to vote by a Minnesota business investment company or insurance company.
2.4 	Notwithstanding this subdivision, an investment by a participating investor in a 
2.5 	Minnesota business investment company pursuant to an allocation of premium tax credits 
2.6 	under this section does not cause that Minnesota business investment company to become 
2.7 	an affiliate of that participating investor.
2.8 	(c) "Allocation date" means the date on which credits under section 297I.23 are 
2.9 	allocated to the participating investors of a Minnesota business investment company 
2.10 	under this section.
2.11 	(d) "Designated capital" means an amount of money that:
2.12 	(1) is invested by a participating investor in a Minnesota business investment 
2.13 	company; and
2.14 	(2) fully funds the purchase price of either or both participating investor's equity 
2.15 	interest in a Minnesota business investment company or a qualified debt instrument issued 
2.16 	by a Minnesota business investment company.
2.17 	(e) "Minnesota business investment company" means a partnership, corporation, 
2.18 	trust, or limited liability company, organized on a for-profit basis, that:
2.19 	(1) has its principal office located or headquartered in Minnesota;
2.20 	(2) has as its primary business activity the investment of cash in qualified businesses; 
2.21 	and
2.22 	(3) is certified by the Department of Employment and Economic Development as 
2.23 	meeting the criteria in this section.
2.24 	(f) "Participating investor" means any insurer as defined in section 60A.02, 
2.25 	subdivision 4, that contributes designated capital pursuant to this section.
2.26 	(g) "Person" means any natural person or entity, including, but not limited to, a 
2.27 	corporation, general or limited partnership, trust, or limited liability company.
2.28 	(h)(1) "Qualified business" means a business that is independently owned and 
2.29 	operated and meets all of the following requirements:
2.30 	(i) it is headquartered in Minnesota, its principal business operations are located in 
2.31 	this state, and at least 60 percent of its employees are located in Minnesota;
2.32 	(ii) it has not more than 100 employees;
2.33 	(iii) it is not predominantly engaged in:
2.34 	(A) professional services provided by accountants, doctors, or lawyers;
2.35 	(B) banking or lending;
2.36 	(C) real estate development;
3.1 	(D) insurance;
3.2 	(E) oil and gas exploration;
3.3 	(F) direct gambling activities; or
3.4 	(G) making loans to or investments in a Minnesota business investment company 
3.5 	or an affiliate; and
3.6 	(iv) it is not a franchise of and has no financial relationship with a Minnesota business 
3.7 	investment company or any affiliate of a Minnesota business investment company prior to 
3.8 	a Minnesota business investment company's first qualified investment in the business.
3.9 	(2) A business classified as a qualified business at the time of the first qualified 
3.10 	investment in the business remains classified as a qualified business and may receive 
3.11 	continuing qualified investments from any Minnesota business investment company. 
3.12 	Continuing investments will constitute qualified investments even though the business may 
3.13 	not meet the definition of a qualified business at the time of such continuing investments.
3.14 	(i) "Qualified debt instrument" means a debt instrument issued by a Minnesota 
3.15 	business investment company which meets all of the following criteria:
3.16 	(1) it is issued at par value or a premium;
3.17 	(2) it has an original maturity date of at least four years from the date of issuance, 
3.18 	and a repayment schedule which is not faster than a level principal amortization over 
3.19 	four years; and
3.20 	(3) it satisfies the rating criteria to qualify as "NAIC1," as determined by the 
3.21 	Securities Valuation Office of the National Association of Insurance Commissioners.
3.22 	(j) "Qualified distribution" means any distribution or payment not made to a 
3.23 	participating investor or affiliate of a participating investor by a Minnesota business 
3.24 	investment company in connection with the following:
3.25 	(1) costs and expenses of forming, syndicating, and organizing the Minnesota 
3.26 	business investment company, including fees paid for professional services, and the costs 
3.27 	of financing and insuring the obligations of a Minnesota business investment company;
3.28 	(2) an annual management fee not to exceed two percent of designated capital on 
3.29 	an annual basis to offset the costs and expenses of managing and operating a Minnesota 
3.30 	business investment company;
3.31 	(3) reasonable and necessary fees in accordance with industry custom for ongoing 
3.32 	professional services, including, but not limited to, legal and accounting services related to 
3.33 	the operation of a Minnesota business investment company, not including any lobbying or 
3.34 	governmental relations;
3.35 	(4) any increase or projected increase in federal or state taxes, including penalties 
3.36 	and related interest of the equity owners of a Minnesota business investment company 
4.1 	resulting from the earnings or other tax liability of a Minnesota business investment 
4.2 	company to the extent that the increase is related to the ownership, management, or 
4.3 	operation of a Minnesota business investment company.
4.4 	(5) Payments of principal and interest to holders of qualified debt instruments issued 
4.5 	by a Minnesota business investment company may be made without any restriction 
4.6 	whatsoever.
4.7 	(k) "Qualified investment" means the investment of money by a Minnesota 
4.8 	business investment company in a qualified business for the purchase of any debt, debt 
4.9 	participation, equity, or hybrid security of any nature and description whatsoever, including 
4.10 	a debt instrument or security that has the characteristics of debt but which provides for 
4.11 	conversion into equity or equity participation instruments such as options or warrants. 
4.12 	Any repayment of a qualified investment prior to one year from the date of issuance shall 
4.13 	result in the amount of such qualified investment being reduced by 50 percent for purposes 
4.14 	of the cumulative investment requirement set forth in subdivision 8, paragraph (c).
4.15 	(l) "State premium tax liability" means any liability incurred by an insurance 
4.16 	company under the provisions of chapter 297I or in the case of a repeal or a reduction by 
4.17 	the state of the liability imposed by chapter 297I, any other tax liability imposed upon an 
4.18 	insurance company by the state.
4.19 		Subd. 2.Certification. (a) The department must provide a standardized format for 
4.20 	applying for the business investment credit under section 297I.23.
4.21 	(b) An applicant is required to:
4.22 	(1) file an application with the department;
4.23 	(2) pay a nonrefundable application fee of $7,500 at the time of filing the application;
4.24 	(3) submit as part of its application an audited balance sheet that contains an 
4.25 	unqualified opinion of an independent certified public accountant issued not more than 35 
4.26 	days before the application date that states that the applicant has an equity capitalization 
4.27 	of $500,000 or more in the form of unencumbered cash, marketable securities, or other 
4.28 	liquid assets; and
4.29 	(4) have at least two principals or persons, at least one of which is primarily located 
4.30 	in Minnesota, employed or engaged to manage the funds who each have a minimum of 
4.31 	five years of money management experience in the venture capital or business industry.
4.32 	(c) The department may certify partnerships, corporations, trusts, or limited liability 
4.33 	companies, organized on a for-profit basis, which submit an application to be designated 
4.34 	as a Minnesota business investment company if such applicant is located, headquartered, 
4.35 	and licensed or registered to conduct business in Minnesota, has as its primary business 
5.1 	activity the investment of cash in qualified businesses, and meets the other criteria set 
5.2 	forth in this section. 
5.3 	(d) The department must review the organizational documents of each applicant for 
5.4 	certification and the business history of each applicant, determine whether the applicant 
5.5 	has satisfied the requirements of this section, and determine whether the officers and the 
5.6 	board of directors, general partners, trustees, managers, or members are trustworthy and 
5.7 	are thoroughly acquainted with the requirements of this section.
5.8 	(e) Within 45 days after the receipt of an application, the department must issue the 
5.9 	certification or refuse the certification and communicate in detail to the applicant the 
5.10 	grounds for refusal, including suggestions for the removal of such grounds.
5.11 	(f) The department must begin accepting applications to become a Minnesota 
5.12 	business investment company as defined under section 297I.23 by August 1, 2009.
5.13 		Subd. 3.Requirements. (a) An insurance company or affiliate of an insurance 
5.14 	company must not, directly or indirectly:
5.15 	(1) beneficially own, whether through rights, options, convertible interest, or 
5.16 	otherwise, 15 percent or more of the voting securities or other voting ownership interest of 
5.17 	a Minnesota business investment company;
5.18 	(2) manage a Minnesota business investment company; or
5.19 	(3) control the direction of investments for a Minnesota business investment 
5.20 	company.
5.21 	(b) A Minnesota business investment company may obtain one or more guaranties, 
5.22 	indemnities, bonds, insurance policies, or other payment undertakings for the benefit 
5.23 	of its participating investors from any entity, except that in no case can more than one 
5.24 	participating investor of a Minnesota business investment company on an aggregate basis 
5.25 	with all affiliates of such participating investor be entitled to provide such guaranties, 
5.26 	indemnities, bonds, insurance policies, or other payment undertakings in favor of the 
5.27 	participating investors of a Minnesota business investment company and its affiliates in 
5.28 	this state.
5.29 	(c) This subdivision does not preclude a participating investor, insurance company, 
5.30 	or other party from exercising its legal rights and remedies, including, without limitation, 
5.31 	interim management of a Minnesota business investment company, in the event that a 
5.32 	Minnesota business investment company is in default of its statutory obligations or its 
5.33 	contractual obligations to such participating investor, insurance company, or other party, or 
5.34 	from monitoring a Minnesota business investment company to ensure its compliance with 
5.35 	this section or disallowing any investments that have not been approved by the department.
6.1 	(d) The department may contract with an independent third party to review, 
6.2 	investigate, and certify that the applications comply with the provisions of this section.
6.3 		Subd. 4.Aggregate limitations on investment tax credits; allocation. (a) 
6.4 	The aggregate amount of investment tax credits to be allocated to all participating 
6.5 	investors of Minnesota business investment companies under this section shall not exceed 
6.6 	$160,000,000. No Minnesota business investment company, on an aggregate basis with its 
6.7 	affiliates, may file credit allocation claims that exceed $160,000,000.
6.8 	(b) Credits must be allocated to participating investors in the order that the credit 
6.9 	allocation claims are filed with the department, provided that all credit allocation 
6.10 	claims filed with the department on the same day must be treated as having been filed 
6.11 	contemporaneously. Any credit allocation claims filed with the department prior to the 
6.12 	initial credit allocation claim filing date will be deemed to have been filed on such initial 
6.13 	credit allocation claim filing date. The department will set the initial credit allocation 
6.14 	claim filing date to be not less than 120 days and not greater than 150 days after the 
6.15 	department begins accepting applications for certification.
6.16 	(c) In the event that two or more Minnesota business investment companies file 
6.17 	credit allocation claims with the department on behalf of their respective participating 
6.18 	investors on the same day, and the aggregate amount of credit allocation claims exceeds 
6.19 	the aggregate limit of investment tax credits under this section or the lesser amount of 
6.20 	credits that remain unallocated on that day, then the credits shall be allocated among the 
6.21 	participating investors who filed on that day on a pro rata basis with respect to the amounts 
6.22 	claimed. The pro rata allocation for any one participating investor is the product obtained 
6.23 	by multiplying a fraction, the numerator of which is the amount of the credit allocation 
6.24 	claim filed on behalf of a participating investor and the denominator of which is the total 
6.25 	of all credit allocation claims filed on behalf of all participating investors on that day, by 
6.26 	the aggregate limit of credits under this section or the lesser amount of credits that remain 
6.27 	unallocated on that day.
6.28 	(d) Within ten business days after the department receives a credit allocation claim 
6.29 	filed by a Minnesota business investment company on behalf of one or more of its 
6.30 	participating investors, the department must notify the Minnesota business investment 
6.31 	company of the amount of credits allocated to each of the participating investors of that 
6.32 	Minnesota business investment company. In the event a Minnesota business investment 
6.33 	company does not receive an investment of designated capital from each participating 
6.34 	investor required to earn the amount of credits allocated to such participating investor 
6.35 	within ten business days of the Minnesota business investment company's receipt of notice 
6.36 	of allocation, then it shall notify the department on or before the next business day, and 
7.1 	the credits allocated to such participating investor of the Minnesota business investment 
7.2 	company forfeits. The department must then reallocate those forfeited credits among the 
7.3 	participating investors of the other Minnesota business investment companies on a pro 
7.4 	rata basis with respect to the credit allocation claims filed on behalf of the participating 
7.5 	investors. The commissioner is authorized, but not required, to levy a fine of not more than 
7.6 	$50,000 on any participating investor that does not invest the full amount of designated 
7.7 	capital required to fund the credits allocated to it by the department in accordance with the 
7.8 	credit allocation claim filed on its behalf.
7.9 	(e) No participating investor, on an aggregate basis with its affiliates, may file an 
7.10 	allocation claim for more than 25 percent of the maximum amount of investment tax 
7.11 	credits authorized under this subdivision, regardless of whether such claim is made in 
7.12 	connection with one or more Minnesota business investment companies.
7.13 		Subd. 5.Requirements for continuance of certification. (a) To maintain its 
7.14 	certification, a Minnesota business investment company must make qualified investments 
7.15 	as follows:
7.16 	(1) within two years after the allocation date, a Minnesota business investment 
7.17 	company must invest an amount equal to at least 35 percent of its designated capital in 
7.18 	qualified investments; and
7.19 	(2) within three years after the allocation date, a Minnesota business investment 
7.20 	company must invest an amount equal to at least 50 percent of its designated capital 
7.21 	in qualified investments.
7.22 	(b) Prior to making a proposed qualified investment in a specific business, a 
7.23 	Minnesota business investment company must request from the department a written 
7.24 	determination that the proposed investment qualifies as a qualified investment in a qualified 
7.25 	business. The department must notify a Minnesota business investment company within 
7.26 	ten business days from the receipt of a request of its determination and an explanation 
7.27 	of its determination. If the department fails to notify the Minnesota business investment 
7.28 	company of its determination within the ten business day period, the proposed investment 
7.29 	is deemed to be a qualified investment in a qualified business. If the department determines 
7.30 	that the proposed investment does not meet the definition of a qualified investment or 
7.31 	qualified business, or both, the department may nevertheless consider the proposed 
7.32 	investment a qualified investment and, if necessary, the business a qualified business, if the 
7.33 	department determines that the proposed investment furthers state economic development.
7.34 	(c) All designated capital not invested in qualified investments by a Minnesota 
7.35 	business investment company shall be held or invested in such manner as the Minnesota 
7.36 	business investment company, in its discretion, deems appropriate. Designated capital 
8.1 	and proceeds of designated capital returned to a Minnesota business investment company 
8.2 	after being originally invested in qualified investments may be invested again in qualified 
8.3 	investments and the investment shall count toward the requirements of paragraph (a) with 
8.4 	respect to making investments of designated capital in qualified investments.
8.5 	(d) If, within four years after its allocation date, a Minnesota business investment 
8.6 	company has not invested at least 60 percent of its designated capital in qualified 
8.7 	investments, neither the Minnesota business investment company nor its affiliates shall 
8.8 	be permitted to receive management fees.
8.9 	(e) If, within six years after its allocation date, a Minnesota business investment 
8.10 	company has not invested at least 100 percent of its designated capital in qualified 
8.11 	investments, neither the Minnesota business investment company nor its affiliates shall 
8.12 	be permitted to receive management fees.
8.13 	(f) A Minnesota business investment company may not invest more than 15 percent 
8.14 	of its designated capital in any one qualified business without the specific approval 
8.15 	of the department.
8.16 	(g) For purposes of calculating the investment percentage thresholds of paragraph 
8.17 	(a), the cumulative amount of all qualified investments made by a Minnesota business 
8.18 	investment company from the allocation date must be considered.
8.19 		Subd. 6.Minnesota business investment company reporting requirements.
 8.20 	(a) Each Minnesota business investment company must report the following to the 
8.21 	department:
8.22 	(1) as soon as practicable after the receipt of designated capital:
8.23 	(i) the name of each participating investor from which the designated capital was 
8.24 	received, including the participating investor's insurance tax identification number;
8.25 	(ii) the amount of each participating investor's investment of designated capital; and
8.26 	(iii) the date on which the designated capital was received;
8.27 	(2) on an annual basis, on or before January 31 of each year:
8.28 	(i) the amount of the Minnesota business investment company's remaining 
8.29 	uninvested designated capital at the end of the immediately preceding taxable year;
8.30 	(ii) whether or not the Minnesota business investment company has invested more 
8.31 	than 15 percent of its total designated capital in any one business;
8.32 	(iii) all qualified investments that the Minnesota business investment company has 
8.33 	made in the previous taxable year, including the number of employees of each qualified 
8.34 	business in which it has made investments at the time of the investment, and as of 
8.35 	December 1 of the preceding taxable year; and
9.1 	(iv) for any qualified business where the Minnesota business investment company 
9.2 	no longer has an investment, the Minnesota business investment company must provide 
9.3 	employment figures for that company as of the last day before the investment was 
9.4 	terminated;
9.5 	(3) other information that the department may reasonably request that helps the 
9.6 	department ascertain the impact of the Minnesota business investment company program 
9.7 	both directly and indirectly on the economy of the state of Minnesota including, but 
9.8 	not limited to, the number of jobs created by qualified businesses that have received 
9.9 	qualified investments;
9.10 	(4) within 90 days of the close of its fiscal year, annual audited financial statements 
9.11 	of the Minnesota business investment company, which must include the opinion of an 
9.12 	independent certified public accountant; and
9.13 	(5) an "agreed upon procedures report" or equivalent regarding the operations of the 
9.14 	Minnesota business investment company.
9.15 	(b) A Minnesota business investment company must pay to the department an 
9.16 	annual, nonrefundable certification fee of $5,000 on or before April 1, or $10,000 if later. 
9.17 	No annual certification fee is required if the payment date for such fee is within six months 
9.18 	of the date a Minnesota business investment company is first certified by the department.
9.19 	(c) Upon satisfying the requirements of subdivision 5, paragraph (a), clause (2), a 
9.20 	Minnesota business investment company shall provide the notice to the department and 
9.21 	the department shall, within 60 days of receipt of such notice, either confirm that the 
9.22 	Minnesota business investment company has satisfied the requirements of subdivision 
9.23 	5, paragraph (a), clause (2), as of such date or provide notice of noncompliance and 
9.24 	an explanation of any existing deficiencies. If the department does not provide such 
9.25 	notification within 60 days, the Minnesota business investment company is deemed to 
9.26 	have met the requirements of subdivision 5, paragraph (a), clause (2).
9.27 		Subd. 7.Distributions. A Minnesota business investment company may make 
9.28 	qualified distributions at any time. In order for a Minnesota business investment 
9.29 	company to make a distribution other than a qualified distribution to its equity holders, 
9.30 	the cumulative amount of all qualified investments of the Minnesota business investment 
9.31 	company must equal or exceed 100 percent of its designated capital.
9.32 		Subd. 8.Decertification. (a) The department shall conduct an annual review of 
9.33 	each Minnesota business investment company to determine if a Minnesota business 
9.34 	investment company is abiding by the requirements of certification and to ensure that no 
9.35 	investment has been made in violation of this section. The cost of the annual review 
10.1 	must be paid by each Minnesota business investment company according to a reasonable 
10.2 	fee schedule adopted by the department.
10.3 	(b) Any material violation of this section, including any material misrepresentation 
10.4 	made to the department in connection with the application process, may be grounds for 
10.5 	decertification of a Minnesota business investment company and the disallowance of 
10.6 	credits under section 297I.23, provided that in all instances the department shall provide 
10.7 	notice to the Minnesota business investment company of the grounds of such proposed 
10.8 	decertification and the opportunity to cure the violation before any such decertification 
10.9 	becomes effective.
10.10 	(c) Once a Minnesota business investment company has invested an amount 
10.11 	cumulatively equal to 100 percent of its designated capital in qualified investments, 
10.12 	provided that the Minnesota business investment company has met all other requirements 
10.13 	under this section as of such date, the Minnesota business investment company shall 
10.14 	no longer be subject to regulation by the department or the reporting requirements 
10.15 	under subdivision 6. Upon receiving certification by a Minnesota business investment 
10.16 	company that it has invested an amount equal to 100 percent of its designated capital, the 
10.17 	department must notify a Minnesota business investment company within 60 days that it 
10.18 	has or has not met the requirements, with a reason for the determination if it has not. If the 
10.19 	department does not provide notification of deregulation within 60 days, the Minnesota 
10.20 	business investment company is deemed to have met the requirements and is no longer 
10.21 	subject to regulation by the department.
10.22 	(d) The department must send written notice of any decertification proceedings to 
10.23 	the commissioner of revenue and to the address of each participating investor whose 
10.24 	tax credit may be subject to recapture or forfeiture, using the address shown on the last 
10.25 	filing submitted to the department.
10.26 		Subd. 9.Registration requirements. All investments by participating investors 
10.27 	for which tax credits are awarded under this section must be registered or specifically 
10.28 	exempt from registration.
10.29 		Subd. 10.Reports to governor and legislature. The department must make 
10.30 	an annual report to the governor and the chairs and ranking minority members of the 
10.31 	committees having jurisdiction over taxes and economic development. The report must 
10.32 	include:
10.33 	(1) the number of Minnesota business investment companies holding designated 
10.34 	capital;
10.35 	(2) the amount of designated capital invested in each Minnesota business investment 
10.36 	company;
11.1 	(3) the cumulative amount that each Minnesota business investment company has 
11.2 	invested as of January 1, 2011, and the cumulative total each year thereafter;
11.3 	(4) the cumulative amount of follow-on capital that the investments of each 
11.4 	Minnesota business investment company have created in terms of capital invested in 
11.5 	qualified businesses at the same time or subsequent to investments made by a Minnesota 
11.6 	business investment company in such businesses by sources other than Minnesota 
11.7 	business investment companies;
11.8 	(5) the total amount of investment tax credits applied under this section for each year;
11.9 	(6) the performance of each Minnesota business investment company with regard to 
11.10 	the requirements for continued certification;
11.11 	(7) the classification of the companies in which each Minnesota business investment 
11.12 	company has invested according to industrial sector and size of company;
11.13 	(8) the gross number of jobs created by investments made by each Minnesota 
11.14 	business investment company and the number of jobs retained;
11.15 	(9) the location of the companies in which each Minnesota business investment 
11.16 	company has invested;
11.17 	(10) those Minnesota business investment companies that have been decertified, 
11.18 	including the reasons for decertification; and
11.19 	(11) other related information as necessary to evaluate the effect of this section on 
11.20 	economic development.

11.21 	EFFECTIVE DATE. This section is effective January 1, 2010.

11.22 	Sec. 2. [116J.8737] JOB GROWTH INVESTMENT TAX CREDIT.
11.23 		Subdivision 1.Definitions. (a) For the purposes of this section, the following terms 
11.24 	have the meanings given.
11.25 	(b) "Qualifying small business" means a business that:
11.26 	(1) is engaged in, or is committed to engage in, biotechnology, technology, 
11.27 	manufacturing, agriculture, processing or assembling products, conducting research and 
11.28 	development, or developing a new product or business process;
11.29 	(2) is not engaged in real estate development, insurance, banking, lobbying, political 
11.30 	consulting, wholesale or retail trade, leisure, hospitality, construction, or professional 
11.31 	services provided by attorneys, accountants, business consultants, physicians, or health 
11.32 	care consultants;
11.33 	(3) has its headquarters in Minnesota;
11.34 	(4) employs at least 51 percent of the business's employees in Minnesota;
11.35 	(5) has less than 100 employees;
12.1 	(6) has less than $2,000,000 in annual gross sales receipts for the previous year;
12.2 	(7) is not a subsidiary or an affiliate of a business which employs more than 100 
12.3 	employees or has total gross sales receipts for the previous year of more than $2,000,000, 
12.4 	computed by aggregating all of the employees and gross sales receipts of the business 
12.5 	entities affiliated with the business;
12.6 	(8) has not previously received more than $2,000,000 in private equity investments;
12.7 	(9) has not previously received more than $500,000 in investments that have 
12.8 	qualified for and received tax credits under this section; and
12.9 	(10) for a business with five or more employees, measured on a full-time equivalent 
12.10 	basis:
12.11 	(i) provides wages and benefits to at least 75 percent of its employees in excess of 
12.12 	the first five employees, equal to or greater than 175 percent of the federal poverty level 
12.13 	for a family of four; and
12.14 	(ii) provides wages and benefits to its employees in excess of the first five employees, 
12.15 	equal to or greater than 110 percent of the federal poverty level for a family of four.
12.16 	(c) "Qualifying green job small business" means a business that satisfies all of the 
12.17 	requirements of paragraph (b), except clause (1), and is predominantly engaged in one 
12.18 	or more of the following industry sectors:
12.19 	(1) green products: businesses related to the manufacture of products used by 
12.20 	the building, transport, consumer products, and industrial products sectors, that reduce 
12.21 	environmental impact and increase the efficiency of the use of resources such as energy, 
12.22 	water, and materials;
12.23 	(2) renewable energy: businesses related to the production of energy from natural 
12.24 	resources such as solar, wind, hydropower, geothermal, biomass (including but not limited 
12.25 	to animal waste and crop waste), and biofuels (including but not limited to ethanol and 
12.26 	biodiesel), as well as from waste heat recovery and from the use of biomass for energy 
12.27 	production including cogeneration;
12.28 	(3) green services: businesses that provide services that help other businesses or 
12.29 	consumers utilize green products and technologies, build energy infrastructure, recycle, 
12.30 	and manage waste; or
12.31 	(4) environmental conservation: businesses related to the conservation of energy, 
12.32 	air, water, and land, including air emissions control, environmental monitoring and 
12.33 	compliance, water conservation, wastewater treatment, land management (including but 
12.34 	not limited to prairie), natural pesticides, aquaculture, and organic farming.
12.35 	(d) "Regional investment fund" means a pooled investment fund that:
12.36 	(1) invests in qualifying small businesses;
13.1 	(2) invests in qualifying green job small businesses;
13.2 	(3) is organized as a limited liability company or other pass-through entity; and
13.3 	(4) has no fewer than five separate investors, each of whom is a qualified taxpayer, as 
13.4 	defined in paragraph (e), and owns no more than 20 percent of the outstanding ownership 
13.5 	interests in the fund.
13.6 	For purposes of determining the number of investors and the ownership interests of 
13.7 	an investor under this clause, the ownership interests of an investor include those of the 
13.8 	investor's spouse, children, or siblings, and any corporation, limited liability company, 
13.9 	partnership, or trust in which the investor has a controlling equity interest or in which the 
13.10 	investor exercises management control.
13.11 	(e) "Qualified taxpayer" means:
13.12 	(1) an accredited investor, within the meaning of Regulation D of the Securities and 
13.13 	Exchange Commission, Code of Federal Regulations, title 17, section 230.501(a), whether 
13.14 	part of a pass-through entity or not, who:
13.15 	(i) does not own, control, or hold power to vote 20 percent or more of the outstanding 
13.16 	securities of the qualifying small business or the qualifying green job small business in 
13.17 	which the eligible investment is proposed; or
13.18 	(ii) does not receive more than 50 percent of the gross annual income from the 
13.19 	qualifying small business or the qualifying green job small business in which the eligible 
13.20 	investment is proposed.
13.21 	(2) A member of the immediate family of a taxpayer disqualified by this subdivision 
13.22 	is not eligible for a credit under this section. For purposes of this subdivision, "immediate 
13.23 	family" means the taxpayer's spouse, parent, sibling, or child, or the spouse of any person 
13.24 	listed in this clause.
13.25 		Subd. 2.Credit allowed; holding period; limitations; and carryover. (a) A 
13.26 	qualified taxpayer is allowed a credit against the tax imposed under chapter 290 for 
13.27 	investments made in a qualified regional investment fund, a qualifying small business, 
13.28 	or a qualifying green job small business. The credit equals 30 percent of the qualified 
13.29 	taxpayer's investment in the business, but not to exceed the lesser of:
13.30 	(1) the liability for tax under chapter 290, including the applicable alternative 
13.31 	minimum tax, but excluding the minimum fee under section 290.0922, and:
13.32 	(2)(i) the amount of the certificate provided to the taxpayer under subdivision 
13.33 	4, paragraph (c); or
13.34 	(ii) the amount of the certificate provided to the qualified individual investor under 
13.35 	subdivision 6, paragraph (d).
14.1 	(b) No taxpayer may receive more than $100,000 in provisional credits under this 
14.2 	section in any one year.
14.3 	(c) A qualified taxpayer must claim the credit in the third tax year after which the 
14.4 	investment in the qualified regional investment fund, the qualifying small business, or the 
14.5 	qualifying green job small business was made. The credit is allowed only for investments 
14.6 	made in:
14.7 	(1) a qualified regional investment fund that remains invested for at least three 
14.8 	years and that are made after the fund has been certified by the commissioner under 
14.9 	subdivision 4;
14.10 	(2) a qualifying small business that remains invested for at least three years and that 
14.11 	are made after the qualified individual investor has been certified by the commissioner 
14.12 	under subdivision 6; or
14.13 	(3) a qualifying green job small business that remains invested for at least three 
14.14 	years and that are made after the qualified individual investor has been certified by the 
14.15 	commissioner under subdivision 6.
14.16 	(d) The three-year investment holding period required by paragraph (c) does not 
14.17 	apply if:
14.18 	(1) the investment by the qualified regional investment fund or the qualified 
14.19 	individual investor becomes worthless before the end of the three-year period; or
14.20 	(2) the qualifying small business or qualifying green job small business is sold 
14.21 	before the end of the three-year period.
14.22 	(e) If the amount of the credit under this subdivision for any taxable year exceeds 
14.23 	the limitations under paragraph (a), the excess is a credit carryover to each of the ten 
14.24 	succeeding taxable years. The entire amount of the excess unused credit for the taxable 
14.25 	year must be carried first to the earliest of the taxable years to which the credit may be 
14.26 	carried. The amount of the unused credit that may be added under this paragraph may not 
14.27 	exceed the taxpayer's liability for tax less the credit for the taxable year.
14.28 		Subd. 3.Qualified regional investment fund; requirements. (a) To be certified as 
14.29 	a qualified regional investment fund for the purposes of this section, a regional investment 
14.30 	fund must:
14.31 	(1) have a minimum of two-thirds of the regional investment fund's members, 
14.32 	shareholders, or partners be residents of the region that is the focus of the fund;
14.33 	(2) allocate at least 60 percent of the funds it invests to qualifying small businesses 
14.34 	or to qualifying green job small businesses within its region of focus; and
14.35 	(3) allocate at least 50 percent of the funds it invests to qualifying green job small 
14.36 	businesses.
15.1 	(b) The allocations in paragraph (a), clauses (2) and (3), need not be exclusive.
15.2 	(c) Investments from other qualified regional investment funds into the qualifying 
15.3 	small businesses or qualifying green job small businesses that are the recipients of the 
15.4 	qualified regional investment fund's investment shall count toward the allocations in 
15.5 	paragraph (a), clauses (2) and (3).
15.6 	(d) Investments in the fund may consist of equity investments or notes that pay 
15.7 	interest or other fixed amounts, or any combination of both, as the fund's governing body 
15.8 	determines appropriate.
15.9 		Subd. 4.Certification of funds. (a) Regional investment funds may apply to the 
15.10 	commissioner for certification as a qualified regional investment fund. The application 
15.11 	must be in the form and be made under the procedures specified by the commissioner, 
15.12 	accompanied by an application fee of $1,250. Fees are appropriated to the commissioner 
15.13 	for personnel and administrative expenses related to administering the program.
15.14 	(b) The commissioner may certify up to 20 regional investment funds per year. 
15.15 	Certifications shall be awarded in the order of the qualifying applications received, subject 
15.16 	to the following limitations:
15.17 	(1) the commissioner may certify no more than three regional investment funds per 
15.18 	year that seek business investment opportunities that may qualify for and receive tax 
15.19 	credits under this section in more than 15 Minnesota counties; and
15.20 	(2) the commissioner may certify no more than five regional investment funds 
15.21 	per year that seek business investment opportunities that may qualify for and receive 
15.22 	tax credits under this section in the metropolitan area, as defined in section 473.121, 
15.23 	subdivision 2.
15.24 	(c) The commissioner shall provide provisional credit certificates to investors in a 
15.25 	qualified regional fund to credits under this section, in proportion to the investment of 
15.26 	the investor in the fund and upon a showing by the fund of an investment in a qualifying 
15.27 	small business or qualifying green job small business, of no more than $500,000 per fund 
15.28 	per year. The commissioner may not issue a total of more than $15,000,000 per year in 
15.29 	provisional credit certificates to fund investors.
15.30 	(d) The commissioner shall provide a final credit certificate to investors in the fund 
15.31 	upon a showing by the fund that the holding requirements of subdivision 2, paragraph (b), 
15.32 	have been met and that the investors in the fund are otherwise eligible for the credit.
15.33 		Subd. 5.Fund requirements. The commissioner shall enter into an agreement 
15.34 	with each of the qualified regional investment funds certified under subdivision 4. Each 
15.35 	agreement must include a provision requiring the qualified regional investment fund to 
15.36 	annually report on the employment figures and wages and benefits paid by the businesses 
16.1 	in which investments are made and a provision stating the specific manner in which 
16.2 	the qualified regional investment fund will comply or is complying with the allocation 
16.3 	requirements under subdivision 3, paragraph (a), clauses (2) and (3).
16.4 		Subd. 6.Certification of individual investors. (a) Qualified taxpayers may apply 
16.5 	to the commissioner of employment and economic development for certification as a 
16.6 	qualified individual investor. The application must be in the form and be made under the 
16.7 	procedures specified by the commissioner, accompanied by an application fee of $250. 
16.8 	Fees are appropriated to the commissioner for personnel and administrative expenses 
16.9 	related to administering the program.
16.10 	(b) The commissioner may certify up to 40 qualified individual investors per year. 
16.11 	Certifications shall be awarded in the order of qualifying applications received, however 
16.12 	the commissioner may certify no more than ten qualified individual investors per year that 
16.13 	seek business investment opportunities that may qualify for and receive tax credits under 
16.14 	this section in the metropolitan area, as defined in section 473.121, subdivision 2.
16.15 	(c) The commissioner shall provide provisional credit certificates to qualified 
16.16 	individual investors, upon a showing by the qualified individual investor of investments of 
16.17 	at least $25,000 in qualifying small businesses or qualifying green job small businesses. 
16.18 	At least one-half of the investments made by the investor must be in qualifying green job 
16.19 	businesses. The commissioner may not issue more than $100,000 in provisional credit 
16.20 	certificates per qualified individual investor per year. The commissioner may not issue 
16.21 	a total of more than $1,000,000 per year in provisional credit certificates to qualified 
16.22 	individual investors in fiscal years 2010, 2011, 2012, and 2013.
16.23 	(d) The commissioner shall provide a final credit certificate to the qualified individual 
16.24 	investor upon a showing by the investor that the holding requirements of subdivision 2, 
16.25 	paragraph (c), have been met and that the investor is otherwise eligible for the credit.
16.26 		Subd. 7.Qualified individual investor requirements. The commissioner shall 
16.27 	enter into an agreement with each qualified individual investor certified under subdivision 
16.28 	6. Each agreement must include a provision requiring the qualified individual investor to 
16.29 	annually report on the employment figures and wages and benefits paid by the businesses 
16.30 	in which investments are made and a provision stating the specific manner in which the 
16.31 	qualified individual investor will comply or is complying with the allocation requirements 
16.32 	under subdivision 6, paragraph (c).
16.33 		Subd. 8.Rulemaking. The commissioner's actions in establishing procedures and 
16.34 	requirements and in making determinations and certifications to administer this section are 
16.35 	not a rule for purposes of chapter 14, are not subject to the Administrative Procedure Act 
16.36 	contained in chapter 14, and are not subject to section 14.386.

17.1 	EFFECTIVE DATE. This section is effective January 1, 2010, for taxable years 
17.2 	beginning after December 31, 2009, and only applies to investments made after the 
17.3 	qualified regional investment fund or qualified individual investor has been certified by 
17.4 	the commissioner of economic development.

17.5 	Sec. 3. [270C.132] BIENNIAL BENEFITS RECEIVED BY BUSINESS REPORT.
17.6 	The commissioner shall report to the legislature by February 1 of each 
17.7 	even-numbered year an estimate of the amount of taxes paid by businesses to and the 
17.8 	amount of benefits received by businesses from Minnesota state and local governments. 
17.9 	For purposes of this report, "business taxes" has the meaning used by the commissioner in 
17.10 	preparing the tax incidence study required under section 270C.13. The report may include 
17.11 	detail that shows the variation in the ratio by industry sector and analysis of benefits using 
17.12 	a varying set of assumptions regarding the extent to which businesses benefit from or 
17.13 	consume government services in their operations.

17.14 	Sec. 4. Minnesota Statutes 2008, section 289A.18, subdivision 1, is amended to read:
17.15 		Subdivision 1. Individual income, fiduciary income, corporate franchise, and 
17.16 	entertainment taxes; partnership and S corporation returns; information returns; 
17.17 	mining company returns. The returns required to be made under sections 289A.08 and 
17.18 	289A.12 must be filed at the following times: 
17.19 	(1) returns made on the basis of the calendar year must be filed on April 15 following 
17.20 	the close of the calendar year, except that returns of corporations must be filed on March 
17.21 	15 following the close of the calendar year; 
17.22 	(2) returns made on the basis of the fiscal year must be filed on the 15th day of the 
17.23 	fourth month following the close of the fiscal year, except that returns of corporations 
17.24 	must be filed on the 15th day of the third month following the close of the fiscal year; 
17.25 	(3) returns for a fractional part of a year must be filed on the 15th day of the fourth 
17.26 	month following the end of the month in which falls the last day of the period for which 
17.27 	the return is made, except that the returns of corporations must be filed on the 15th day of 
17.28 	the third month following the end of the tax year; or, in the case of a corporation which is 
17.29 	a member of a unitary group, the return of the corporation must be filed on the 15th day of 
17.30 	the third month following the end of the tax year of the unitary group in which falls the 
17.31 	last day of the period for which the return is made;
17.32 	(4) in the case of a final return of a decedent for a fractional part of a year, the return 
17.33 	must be filed on the 15th day of the fourth month following the close of the 12-month 
17.34 	period that began with the first day of that fractional part of a year; 
18.1 	(5) in the case of the return of a cooperative association, returns must be filed on or 
18.2 	before the 15th day of the ninth month following the close of the taxable year; 
18.3 	(6) if a corporation has been divested from a unitary group and files a return for 
18.4 	a fractional part of a year in which it was a member of a unitary business that files a 
18.5 	combined report under section 290.17, subdivision 4, the divested corporation's return 
18.6 	must be filed on the 15th day of the third month following the close of the common 
18.7 	accounting period that includes the fractional year;
18.8 	(7) returns of entertainment entities must be filed on April 15 following the close of 
18.9 	the calendar year; 
18.10 	(8) (7) returns required to be filed under section 289A.08, subdivision 4, must be 
18.11 	filed on the 15th day of the fifth month following the close of the taxable year; 
18.12 	(9) returns of mining companies must be filed on May 1 following the close of the 
18.13 	calendar year; and 
18.14 	(10) (8) returns required to be filed with the commissioner under section 289A.12, 
18.15 	subdivision 2 or 4 to 10, must be filed within 30 days after being demanded by the 
18.16 	commissioner. 

18.17 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
18.18 	December 31, 2009.

18.19 	Sec. 5. Minnesota Statutes 2008, section 289A.20, subdivision 1, is amended to read:
18.20 		Subdivision 1.Individual income, fiduciary income, mining company, corporate 
18.21 	franchise, and entertainment taxes. (a) Individual income, and fiduciary, mining 
18.22 	company, and corporate franchise taxes must be paid to the commissioner on or before the 
18.23 	date the return must be filed under section 289A.18, subdivision 1, or the extended due 
18.24 	date as provided in section 289A.19, unless an earlier date for payment is provided. 
18.25 	Notwithstanding any other law, a taxpayer whose unpaid liability for income or 
18.26 	corporate franchise taxes, as reflected upon the return, is $1 or less need not pay the tax.
18.27 	(b) Entertainment taxes must be paid on or before the date the return must be filed 
18.28 	under section 289A.18, subdivision 1. 
18.29 	(c) If a fiduciary administers 100 or more trusts, fiduciary income taxes for all trusts 
18.30 	administered by the fiduciary must be paid by electronic means.

18.31 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
18.32 	December 31, 2009.

18.33 	Sec. 6. Minnesota Statutes 2008, section 289A.30, subdivision 1, is amended to read:
19.1 		Subdivision 1.Fiduciary income, corporate franchise tax. Where good cause 
19.2 	exists, the commissioner may extend the time for payment of the amount determined as a 
19.3 	fiduciary income tax or corporate franchise tax by the taxpayer, or an amount determined 
19.4 	as a deficiency, for a period of not more than six months from the date prescribed for 
19.5 	the payment of the tax.

19.6 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
19.7 	December 31, 2009.

19.8 	Sec. 7. Minnesota Statutes 2008, section 289A.31, subdivision 1, is amended to read:
19.9 		Subdivision 1.Individual income, fiduciary income, mining company, corporate 
19.10 	franchise, and entertainment taxes. (a) Individual income, and fiduciary income, mining 
19.11 	company, and corporate franchise taxes, and interest and penalties, must be paid by the 
19.12 	taxpayer upon whom the tax is imposed, except in the following cases:
19.13 	(1) The tax due from a decedent for that part of the taxable year in which the 
19.14 	decedent died during which the decedent was alive and the taxes, interest, and penalty 
19.15 	due for the prior years must be paid by the decedent's personal representative, if any. 
19.16 	If there is no personal representative, the taxes, interest, and penalty must be paid by 
19.17 	the transferees, as defined in section 270C.58, subdivision 3, to the extent they receive 
19.18 	property from the decedent;
19.19 	(2) The tax due from an infant or other incompetent person must be paid by the 
19.20 	person's guardian or other person authorized or permitted by law to act for the person;
19.21 	(3) The tax due from the estate of a decedent must be paid by the estate's personal 
19.22 	representative;
19.23 	(4) The tax due from a trust, including those within the definition of a corporation, as 
19.24 	defined in section 290.01, subdivision 4, must be paid by a trustee; and
19.25 	(5) The tax due from a taxpayer whose business or property is in charge of a 
19.26 	receiver, trustee in bankruptcy, assignee, or other conservator, must be paid by the 
19.27 	person in charge of the business or property so far as the tax is due to the income from 
19.28 	the business or property.
19.29 	(b) Entertainment taxes are the joint and several liability of the entertainer and the 
19.30 	entertainment entity. The payor is liable to the state for the payment of the tax required to 
19.31 	be deducted and withheld under section 290.9201, subdivision 7, and is not liable to the 
19.32 	entertainer for the amount of the payment.
19.33 	(c) The tax imposed under section 290.0922 on partnerships is the joint and several 
19.34 	liability of the partnership and the general partners.

20.1 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
20.2 	December 31, 2009.

20.3 	Sec. 8. Minnesota Statutes 2008, section 289A.38, subdivision 7, is amended to read:
20.4 		Subd. 7. Federal tax changes. If the amount of income, items of tax preference, 
20.5 	deductions, or credits for any year of a taxpayer as reported to the Internal Revenue 
20.6 	Service is changed or corrected by the commissioner of Internal Revenue or other officer 
20.7 	of the United States or other competent authority, or where a renegotiation of a contract or 
20.8 	subcontract with the United States results in a change in income, items of tax preference, 
20.9 	deductions, credits, or withholding tax, or, in the case of estate tax, where there are 
20.10 	adjustments to the taxable estate, the taxpayer shall report the change or correction or 
20.11 	renegotiation results in writing to the commissioner. The report must be submitted within 
20.12 	180 days after the final determination and must be in the form of either an amended 
20.13 	Minnesota estate, withholding tax, corporate franchise tax, or income tax return conceding 
20.14 	the accuracy of the federal determination or a letter detailing how the federal determination 
20.15 	is incorrect or does not change the Minnesota tax. An amended Minnesota income tax 
20.16 	return must be accompanied by an amended property tax refund return, if necessary. A 
20.17 	taxpayer filing an amended federal tax return must also file a copy of the amended return 
20.18 	with the commissioner of revenue within 180 days after filing the amended return. 

20.19 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
20.20 	December 31, 2009.

20.21 	Sec. 9. Minnesota Statutes 2008, section 289A.38, subdivision 12, is amended to read:
20.22 		Subd. 12.Request for early audit for individual income, and fiduciary income, 
20.23 	mining company, and corporate franchise taxes. (a) Tax must be assessed within 
20.24 	18 months after written request for an assessment has been made in the case of income 
20.25 	received (1) during the lifetime of a decedent, (2) by the decedent's estate during the 
20.26 	period of administration, or (3) by a trustee of a terminating trust or other fiduciary 
20.27 	who, because of custody of assets, would be liable for the payment of tax under section 
20.28 	270C.58, subdivision 2, or (4) by a mining company or a corporation. A proceeding in 
20.29 	court for the collection of the tax must begin within two years after written request for the 
20.30 	assessment (filed after the return is made and in the form the commissioner prescribes) by 
20.31 	the personal representative or other fiduciary representing the estate of the decedent, or 
20.32 	by the trustee of a terminating trust or other fiduciary who, because of custody of assets, 
20.33 	would be liable for the payment of tax under section 270C.58, subdivision 2, or by the 
20.34 	corporation. Except as provided in section 289A.42, subdivision 1, an assessment must 
21.1 	not be made after the expiration of 3-1/2 years after the return was filed, and an action 
21.2 	must not be brought after the expiration of four years after the return was filed.
21.3 	(b) Paragraph (a) only applies in the case of a mining company or a corporation if:
21.4 	(1) the written request notifies the commissioner that the corporation contemplates 
21.5 	dissolution at or before the expiration of the 18-month period;
21.6 	(2) the dissolution is begun in good faith before the expiration of the 18-month 
21.7 	period; and
21.8 	(3) the dissolution is completed within the 18-month period.

21.9 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
21.10 	December 31, 2009.

21.11 	Sec. 10. Minnesota Statutes 2008, section 289A.50, subdivision 1, is amended to read:
21.12 		Subdivision 1.General right to refund. (a) Subject to the requirements of this 
21.13 	section and section 289A.40, a taxpayer who has paid a tax in excess of the taxes lawfully 
21.14 	due and who files a written claim for refund will be refunded or credited the overpayment 
21.15 	of the tax determined by the commissioner to be erroneously paid.
21.16 	(b) The claim must specify the name of the taxpayer, the date when and the period 
21.17 	for which the tax was paid, the kind of tax paid, the amount of the tax that the taxpayer 
21.18 	claims was erroneously paid, the grounds on which a refund is claimed, and other 
21.19 	information relative to the payment and in the form required by the commissioner. An 
21.20 	income tax, or estate tax, or corporate franchise tax return, or amended return claiming an 
21.21 	overpayment constitutes a claim for refund.
21.22 	(c) When, in the course of an examination, and within the time for requesting a 
21.23 	refund, the commissioner determines that there has been an overpayment of tax, the 
21.24 	commissioner shall refund or credit the overpayment to the taxpayer and no demand 
21.25 	is necessary. If the overpayment exceeds $1, the amount of the overpayment must 
21.26 	be refunded to the taxpayer. If the amount of the overpayment is less than $1, the 
21.27 	commissioner is not required to refund. In these situations, the commissioner does not 
21.28 	have to make written findings or serve notice by mail to the taxpayer.
21.29 	(d) If the amount allowable as a credit for withholding, estimated taxes, or dependent 
21.30 	care exceeds the tax against which the credit is allowable, the amount of the excess is 
21.31 	considered an overpayment. The refund allowed by section 290.06, subdivision 23, is also 
21.32 	considered an overpayment. The requirements of section 270C.33 do not apply to the 
21.33 	refunding of such an overpayment shown on the original return filed by a taxpayer.
21.34 	(e) If the entertainment tax withheld at the source exceeds by $1 or more the taxes, 
21.35 	penalties, and interest reported in the return of the entertainment entity or imposed by 
22.1 	section 290.9201, the excess must be refunded to the entertainment entity. If the excess is 
22.2 	less than $1, the commissioner need not refund that amount.
22.3 	(f) If the surety deposit required for a construction contract exceeds the liability of 
22.4 	the out-of-state contractor, the commissioner shall refund the difference to the contractor.
22.5 	(g) An action of the commissioner in refunding the amount of the overpayment does 
22.6 	not constitute a determination of the correctness of the return of the taxpayer.
22.7 	(h) There is appropriated from the general fund to the commissioner of revenue the 
22.8 	amount necessary to pay refunds allowed under this section.

22.9 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
22.10 	December 31, 2009.

22.11 	Sec. 11. Minnesota Statutes 2008, section 289A.60, subdivision 1, is amended to read:
22.12 		Subdivision 1.Penalty for failure to pay tax. (a) If a corporate franchise, fiduciary 
22.13 	income, mining company, estate, partnership, S corporation, or nonresident entertainer 
22.14 	tax is not paid within the time specified for payment, a penalty of six percent is added to 
22.15 	the unpaid tax, except that if a corporation or mining company meets the requirements of 
22.16 	section 289A.19, subdivision 2, the penalty is not imposed. 
22.17 	(b) For the taxes listed in paragraph (a), in addition to the penalty in that paragraph, 
22.18 	whether imposed or not, if a return or amended return is filed after the due date, without 
22.19 	regard to extensions, and any tax reported as remaining due is not remitted with the return 
22.20 	or amended return, a penalty of five percent of the tax not paid is added to the tax. If the 
22.21 	commissioner issues an order assessing additional tax for a tax listed in paragraph (a), 
22.22 	and the tax is not paid within 60 days after the mailing of the order or, if appealed, within 
22.23 	60 days after final resolution of the appeal, a penalty of five percent of the unpaid tax 
22.24 	is added to the tax.
22.25 	(c) If an individual income tax is not paid within the time specified for payment, a 
22.26 	penalty of four percent is added to the unpaid tax. There is a presumption of reasonable 
22.27 	cause for the late payment if the individual: (i) pays by the due date of the return at 
22.28 	least 90 percent of the amount of tax, after credits other than withholding and estimated 
22.29 	payments, shown owing on the return; (ii) files the return within six months after the due 
22.30 	date; and (iii) pays the remaining balance of the reported tax when the return is filed.
22.31 	(d) If the commissioner issues an order assessing additional individual income tax, 
22.32 	and the tax is not paid within 60 days after the mailing of the order or, if appealed, within 
22.33 	60 days after final resolution of the appeal, a penalty of four percent of the unpaid tax 
22.34 	is added to the tax.
23.1 	(e) If a withholding or sales or use tax is not paid within the time specified for 
23.2 	payment, a penalty must be added to the amount required to be shown as tax. The penalty 
23.3 	is five percent of the tax not paid on or before the date specified for payment of the tax 
23.4 	if the failure is for not more than 30 days, with an additional penalty of five percent of 
23.5 	the amount of tax remaining unpaid during each additional 30 days or fraction of 30 days 
23.6 	during which the failure continues, not exceeding 15 percent in the aggregate.

23.7 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
23.8 	December 31, 2009.

23.9 	Sec. 12. Minnesota Statutes 2008, section 289A.60, subdivision 4, is amended to read:
23.10 		Subd. 4.Substantial understatement of liability; penalty. (a) The commissioner 
23.11 	of revenue shall impose a penalty for substantial understatement of any tax payable to the 
23.12 	commissioner, except a tax imposed under chapter 297A.
23.13 	(b) There must be added to the tax an amount equal to 20 percent of the amount of any 
23.14 	underpayment attributable to the understatement. There is a substantial understatement of 
23.15 	tax for the period if the amount of the understatement for the period exceeds the greater of:
23.16 	(1) ten percent of the tax required to be shown on the return for the period; or
23.17 	(2)(i) $10,000 in the case of a mining company or a corporation, other than an S 
23.18 	corporation as defined in section 290.9725, when the tax is imposed by chapter 290 or 
23.19 	section 298.01 or 298.015, or
23.20 	(ii) $5,000 in the case of any other taxpayer, and in the case of a mining company or 
23.21 	a corporation any tax not imposed by chapter 290 or section 298.01 or 298.015.
23.22 	(c) For a corporation, other than an S corporation, there is also a substantial 
23.23 	understatement of tax for any taxable year if the amount of the understatement for the 
23.24 	taxable year exceeds the lesser of:
23.25 	(1) ten percent of the tax required to be shown on the return for the taxable year 
23.26 	(or, if greater, $10,000); or
23.27 	(2) $10,000,000.
23.28 	(d) The term "understatement" means the excess of the amount of the tax required 
23.29 	to be shown on the return for the period, over the amount of the tax imposed that is 
23.30 	shown on the return. The excess must be determined without regard to items to which 
23.31 	subdivision 27 applies. The amount of the understatement shall be reduced by that part of 
23.32 	the understatement that is attributable to the tax treatment of any item by the taxpayer if 
23.33 	(1) there is or was substantial authority for the treatment, or (2)(i) any item with respect to 
23.34 	which the relevant facts affecting the item's tax treatment are adequately disclosed in the 
23.35 	return or in a statement attached to the return and (ii) there is a reasonable basis for the tax 
24.1 	treatment of the item. The exception for substantial authority under clause (1) does not 
24.2 	apply to positions listed by the Secretary of the Treasury under section 6662(d)(3) of the 
24.3 	Internal Revenue Code. A corporation does not have a reasonable basis for its tax treatment 
24.4 	of an item attributable to a multiple-party financing transaction if the treatment does not 
24.5 	clearly reflect the income of the corporation within the meaning of section 6662(d)(2)(B) 
24.6 	of the Internal Revenue Code. The special rules in cases involving tax shelters provided in 
24.7 	section 6662(d)(2)(C) of the Internal Revenue Code shall apply and shall apply to a tax 
24.8 	shelter the principal purpose of which is the avoidance or evasion of state taxes.
24.9 	(e) (d) The commissioner may abate all or any part of the addition to the tax 
24.10 	provided by this section on a showing by the taxpayer that there was reasonable cause for 
24.11 	the understatement, or part of it, and that the taxpayer acted in good faith. The additional 
24.12 	tax and penalty shall bear interest at the rate specified in section 270C.40 from the time 
24.13 	the tax should have been paid until paid.

24.14 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
24.15 	December 31, 2009.

24.16 	Sec. 13. Minnesota Statutes 2008, section 290.01, subdivision 19, is amended to read:
24.17 		Subd. 19. Net income. The term "net income" means the federal taxable income, 
24.18 	as defined in section 63 of the Internal Revenue Code of 1986, as amended through the 
24.19 	date named in this subdivision, incorporating the federal effective dates of changes to the 
24.20 	Internal Revenue Code and any elections made by the taxpayer in accordance with the 
24.21 	Internal Revenue Code in determining federal taxable income for federal income tax 
24.22 	purposes, and with the modifications provided in subdivisions 19a to 19f.
24.23 	In the case of a regulated investment company or a fund thereof, as defined in section 
24.24 	851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment 
24.25 	company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, 
24.26 	except that:
24.27 	(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal 
24.28 	Revenue Code does not apply;
24.29 	(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal 
24.30 	Revenue Code must be applied by allowing a deduction for capital gain dividends and 
24.31 	exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal 
24.32 	Revenue Code; and
24.33 	(3) the deduction for dividends paid must also be applied in the amount of any 
24.34 	undistributed capital gains which the regulated investment company elects to have treated 
24.35 	as provided in section 852(b)(3)(D) of the Internal Revenue Code.
25.1 	The net income of a real estate investment trust as defined and limited by section 
25.2 	856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust 
25.3 	taxable income as defined in section 857(b)(2) of the Internal Revenue Code.
25.4 	The net income of a designated settlement fund as defined in section 468B(d) of 
25.5 	the Internal Revenue Code means the gross income as defined in section 468B(b) of the 
25.6 	Internal Revenue Code.
25.7 	The Internal Revenue Code of 1986, as amended through February 13, 2008, shall 
25.8 	be in effect for taxable years beginning after December 31, 1996, except section 179 of the 
25.9 	Internal Revenue Code, as amended through February 17, 2009, applies.
25.10 	Except as otherwise provided, references to the Internal Revenue Code in 
25.11 	subdivisions 19 to 19f mean the code in effect for purposes of determining net income for 
25.12 	the applicable year.

25.13 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
25.14 	December 31, 2009.

25.15 	Sec. 14. Minnesota Statutes 2008, section 290.01, subdivision 19a, is amended to read:
25.16 		Subd. 19a. Additions to federal taxable income. For individuals, estates, and 
25.17 	trusts, there shall be added to federal taxable income: 
25.18 	(1)(i) interest income on obligations of any state other than Minnesota or a political 
25.19 	or governmental subdivision, municipality, or governmental agency or instrumentality 
25.20 	of any state other than Minnesota exempt from federal income taxes under the Internal 
25.21 	Revenue Code or any other federal statute; and 
25.22 	(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue 
25.23 	Code, except the portion of the exempt-interest dividends derived from interest income 
25.24 	on obligations of the state of Minnesota or its political or governmental subdivisions, 
25.25 	municipalities, governmental agencies or instrumentalities, but only if the portion of the 
25.26 	exempt-interest dividends from such Minnesota sources paid to all shareholders represents 
25.27 	95 percent or more of the exempt-interest dividends that are paid by the regulated 
25.28 	investment company as defined in section 851(a) of the Internal Revenue Code, or the 
25.29 	fund of the regulated investment company as defined in section 851(g) of the Internal 
25.30 	Revenue Code, making the payment; and 
25.31 	(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal 
25.32 	government described in section 7871(c) of the Internal Revenue Code shall be treated as 
25.33 	interest income on obligations of the state in which the tribe is located; 
25.34 	(2) the amount of income or sales and use taxes paid or accrued within the taxable 
25.35 	year under this chapter and the amount of taxes based on net income paid or sales and use 
26.1 	taxes paid to any other state or to any province or territory of Canada, to the extent allowed 
26.2 	as a deduction under section 63(d) of the Internal Revenue Code, but the addition may not 
26.3 	be more than the amount by which the itemized deductions as allowed under section 63(d) 
26.4 	of the Internal Revenue Code exceeds the amount of the standard deduction as defined 
26.5 	in section 63(c) of the Internal Revenue Code. For the purpose of this paragraph, the 
26.6 	disallowance of itemized deductions under section 68 of the Internal Revenue Code of 
26.7 	1986, income or sales and use tax is the last itemized deduction disallowed; 
26.8 	(3) the capital gain amount of a lump-sum distribution to which the special tax under 
26.9 	section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies; 
26.10 	(4) the amount of income taxes paid or accrued within the taxable year under this 
26.11 	chapter and taxes based on net income paid to any other state or any province or territory 
26.12 	of Canada, to the extent allowed as a deduction in determining federal adjusted gross 
26.13 	income. For the purpose of this paragraph, income taxes do not include the taxes imposed 
26.14 	by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 
26.15 	(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10 
26.16 	other than expenses or interest used in computing net interest income for the subtraction 
26.17 	allowed under subdivision 19b, clause (1); 
26.18 	(6) the amount of a partner's pro rata share of net income which does not flow 
26.19 	through to the partner because the partnership elected to pay the tax on the income under 
26.20 	section 6242(a)(2) of the Internal Revenue Code; 
26.21 	(7) 80 percent of the depreciation deduction allowed under section 168(k) of the 
26.22 	Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that 
26.23 	in the taxable year generates a deduction for depreciation under section 168(k) and the 
26.24 	activity generates a loss for the taxable year that the taxpayer is not allowed to claim for 
26.25 	the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is 
26.26 	limited to excess of the depreciation claimed by the activity under section 168(k) over the 
26.27 	amount of the loss from the activity that is not allowed in the taxable year. In succeeding 
26.28 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
26.29 	under section 168(k) is allowed; 
26.30 	(8) for taxable years beginning before January 1, 2010, 80 percent of the amount by 
26.31 	which the deduction allowed by section 179 of the Internal Revenue Code exceeds the 
26.32 	deduction allowable by section 179 of the Internal Revenue Code of 1986, as amended 
26.33 	through December 31, 2003; 
26.34 	(9) to the extent deducted in computing federal taxable income, the amount of the 
26.35 	deduction allowable under section 199 of the Internal Revenue Code; 
27.1 	(10) the exclusion allowed under section 139A of the Internal Revenue Code for 
27.2 	federal subsidies for prescription drug plans; 
27.3 	(11) the amount of expenses disallowed under section 290.10, subdivision 2;
27.4 	(12) for taxable years beginning after December 31, 2006, and before January 1, 
27.5 	2008, the amount deducted for qualified tuition and related expenses under section 222 of 
27.6 	the Internal Revenue Code, to the extent deducted from gross income; and 
27.7 	(13) for taxable years beginning after December 31, 2006, and before January 1, 
27.8 	2008, the amount deducted for certain expenses of elementary and secondary school 
27.9 	teachers under section 62(a)(2)(D) of the Internal Revenue Code, to the extent deducted 
27.10 	from gross income. 

27.11 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
27.12 	December 31, 2009.

27.13 	Sec. 15. Minnesota Statutes 2008, section 290.01, subdivision 19b, is amended to read:
27.14 		Subd. 19b. Subtractions from federal taxable income. For individuals, estates, 
27.15 	and trusts, there shall be subtracted from federal taxable income: 
27.16 	(1) net interest income on obligations of any authority, commission, or 
27.17 	instrumentality of the United States to the extent includable in taxable income for federal 
27.18 	income tax purposes but exempt from state income tax under the laws of the United States; 
27.19 	(2) if included in federal taxable income, the amount of any overpayment of income 
27.20 	tax to Minnesota or to any other state, for any previous taxable year, whether the amount 
27.21 	is received as a refund or as a credit to another taxable year's income tax liability; 
27.22 	(3) the amount paid to others, less the amount used to claim the credit allowed under 
27.23 	section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten 
27.24 	to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and 
27.25 	transportation of each qualifying child in attending an elementary or secondary school 
27.26 	situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a 
27.27 	resident of this state may legally fulfill the state's compulsory attendance laws, which 
27.28 	is not operated for profit, and which adheres to the provisions of the Civil Rights Act 
27.29 	of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or 
27.30 	tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause, 
27.31 	"textbooks" includes books and other instructional materials and equipment purchased 
27.32 	or leased for use in elementary and secondary schools in teaching only those subjects 
27.33 	legally and commonly taught in public elementary and secondary schools in this state. 
27.34 	Equipment expenses qualifying for deduction includes expenses as defined and limited in 
27.35 	section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional 
28.1 	books and materials used in the teaching of religious tenets, doctrines, or worship, the 
28.2 	purpose of which is to instill such tenets, doctrines, or worship, nor does it include books 
28.3 	or materials for, or transportation to, extracurricular activities including sporting events, 
28.4 	musical or dramatic events, speech activities, driver's education, or similar programs. For 
28.5 	purposes of the subtraction provided by this clause, "qualifying child" has the meaning 
28.6 	given in section 32(c)(3) of the Internal Revenue Code; 
28.7 	(4) income as provided under section 290.0802; 
28.8 	(5) to the extent included in federal adjusted gross income, income realized on 
28.9 	disposition of property exempt from tax under section 290.491; 
28.10 	(6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E) 
28.11 	of the Internal Revenue Code in determining federal taxable income by an individual 
28.12 	who does not itemize deductions for federal income tax purposes for the taxable year, an 
28.13 	amount equal to 50 percent of the excess of charitable contributions over $500 allowable 
28.14 	as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and 
28.15 	under the provisions of Public Law 109-1; 
28.16 	(7) for taxable years beginning before January 1, 2008, the amount of the federal 
28.17 	small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code 
28.18 	which is included in gross income under section 87 of the Internal Revenue Code; 
28.19 	(8) for individuals who are allowed a federal foreign tax credit for taxes that do not 
28.20 	qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover 
28.21 	of subnational foreign taxes for the taxable year, but not to exceed the total subnational 
28.22 	foreign taxes reported in claiming the foreign tax credit. For purposes of this clause, 
28.23 	"federal foreign tax credit" means the credit allowed under section 27 of the Internal 
28.24 	Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed 
28.25 	under section 904(c) of the Internal Revenue Code minus national level foreign taxes to 
28.26 	the extent they exceed the federal foreign tax credit; 
28.27 	(9) in each of the five tax years immediately following the tax year in which an 
28.28 	addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case 
28.29 	of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth 
28.30 	of the delayed depreciation. For purposes of this clause, "delayed depreciation" means 
28.31 	the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or 
28.32 	subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the 
28.33 	positive value of any net operating loss under section 172 of the Internal Revenue Code 
28.34 	generated for the tax year of the addition. The resulting delayed depreciation cannot be 
28.35 	less than zero; 
28.36 	(10) job opportunity building zone income as provided under section 469.316; 
29.1 	(11) to the extent included in federal taxable income, the amount of compensation 
29.2 	paid to members of the Minnesota National Guard or other reserve components of the 
29.3 	United States military for active service performed in Minnesota, excluding compensation 
29.4 	for services performed under the Active Guard Reserve (AGR) program. For purposes of 
29.5 	this clause, "active service" means (i) state active service as defined in section 190.05, 
29.6 	subdivision 5a, clause (1); (ii) federally funded state active service as defined in section 
29.7 	190.05, subdivision 5b; or (iii) federal active service as defined in section 190.05, 
29.8 	subdivision 5c, but "active service" excludes service performed in accordance with section 
29.9 	190.08, subdivision 3; 
29.10 	(12) to the extent included in federal taxable income, the amount of compensation 
29.11 	paid to Minnesota residents who are members of the armed forces of the United States or 
29.12 	United Nations for active duty performed outside Minnesota under United States Code, 
29.13 	title 10, section 101(d); United States Code, title 32, section 101(12); or the authority of 
29.14 	the United Nations; 
29.15 	(13) an amount, not to exceed $10,000, equal to qualified expenses related to a 
29.16 	qualified donor's donation, while living, of one or more of the qualified donor's organs 
29.17 	to another person for human organ transplantation. For purposes of this clause, "organ" 
29.18 	means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow; 
29.19 	"human organ transplantation" means the medical procedure by which transfer of a human 
29.20 	organ is made from the body of one person to the body of another person; "qualified 
29.21 	expenses" means unreimbursed expenses for both the individual and the qualified donor 
29.22 	for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses 
29.23 	may be subtracted under this clause only once; and "qualified donor" means the individual 
29.24 	or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An 
29.25 	individual may claim the subtraction in this clause for each instance of organ donation for 
29.26 	transplantation during the taxable year in which the qualified expenses occur; 
29.27 	(14) in each of the five tax years immediately following the tax year in which an 
29.28 	addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a 
29.29 	shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the 
29.30 	addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the 
29.31 	case of a shareholder of a corporation that is an S corporation, minus the positive value of 
29.32 	any net operating loss under section 172 of the Internal Revenue Code generated for the 
29.33 	tax year of the addition. If the net operating loss exceeds the addition for the tax year, a 
29.34 	subtraction is not allowed under this clause; 
30.1 	(15) to the extent included in federal taxable income, compensation paid to a service 
30.2 	member as defined in United States Code, title 10, section 101(a)(5), for military service 
30.3 	as defined in the Servicemembers Civil Relief Act, Public Law 108-189, section 101(2); 
30.4 	(16) international economic development zone income as provided under section 
30.5 	469.325; and
30.6 	(17) to the extent included in federal taxable income, the amount of national service 
30.7 	educational awards received from the National Service Trust under United States Code, 
30.8 	title 42, sections 12601 to 12604, for service in an approved Americorps National Service 
30.9 	program; and
30.10 	(18) an amount not to exceed 20 percent of the excess of (i) income derived from a 
30.11 	trade or business in which the taxpayer materially participates, as defined in section 469(h) 
30.12 	of the Internal Revenue Code, distributed by a partnership or S corporation to the taxpayer 
30.13 	less (ii) any losses, other than passive losses as defined in section 469 of the Internal 
30.14 	Revenue Code, claimed by the partner or shareholder, provided that the subtraction under 
30.15 	this clause may be claimed only if the entity distributing the income has employees and 
30.16 	tangible property located in this state. 

30.17 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
30.18 	December 31, 2009.

30.19 	Sec. 16. Minnesota Statutes 2008, section 290.01, subdivision 19f, is amended to read:
30.20 		Subd. 19f.Basis modifications affecting gain or loss on disposition of property.
 30.21 	(a) For individuals, estates, and trusts, the basis of property is its adjusted basis for 
30.22 	federal income tax purposes except as set forth in paragraphs (f), (g), and (m). For 
30.23 	corporations, the basis of property is its adjusted basis for federal income tax purposes, 
30.24 	without regard to the time when the property became subject to tax under this chapter or to 
30.25 	whether out-of-state losses or items of tax preference with respect to the property were not 
30.26 	deductible under this chapter, except that the modifications to the basis for federal income 
30.27 	tax purposes set forth in paragraphs (b) to (j) are allowed to corporations, and the resulting 
30.28 	modifications to federal taxable income must be made in the year in which gain or loss 
30.29 	on the sale or other disposition of property is recognized.
30.30 	(b) The basis of property shall not be reduced to reflect federal investment tax credit.
30.31 	(c) The basis of property subject to the accelerated cost recovery system under 
30.32 	section 168 of the Internal Revenue Code shall be modified to reflect the modifications in 
30.33 	depreciation with respect to the property provided for in subdivision 19e. For certified 
30.34 	pollution control facilities for which amortization deductions were elected under section 
31.1 	169 of the Internal Revenue Code of 1954, the basis of the property must be increased by 
31.2 	the amount of the amortization deduction not previously allowed under this chapter.
31.3 	(d) For property acquired before January 1, 1933, the basis for computing a gain is 
31.4 	the fair market value of the property as of that date. The basis for determining a loss is 
31.5 	the cost of the property to the taxpayer less any depreciation, amortization, or depletion, 
31.6 	actually sustained before that date. If the adjusted cost exceeds the fair market value of the 
31.7 	property, then the basis is the adjusted cost regardless of whether there is a gain or loss.
31.8 	(e) The basis is reduced by the allowance for amortization of bond premium if an 
31.9 	election to amortize was made pursuant to Minnesota Statutes 1986, section 290.09, 
31.10 	subdivision 13, and the allowance could have been deducted by the taxpayer under this 
31.11 	chapter during the period of the taxpayer's ownership of the property. 
31.12 	(f) For assets placed in service before January 1, 1987, corporations, partnerships, 
31.13 	or individuals engaged in the business of mining ores other than iron ore or taconite 
31.14 	concentrates subject to the occupation tax under chapter 298 must use the occupation 
31.15 	tax basis of property used in that business.
31.16 	(g) For assets placed in service before January 1, 1990, corporations, partnerships, or 
31.17 	individuals engaged in the business of mining iron ore or taconite concentrates subject 
31.18 	to the occupation tax under chapter 298 must use the occupation tax basis of property 
31.19 	used in that business.
31.20 	(h) In applying the provisions of sections 301(c)(3)(B), 312(f) and (g), and 316(a)(1) 
31.21 	of the Internal Revenue Code, the dates December 31, 1932, and January 1, 1933, shall be 
31.22 	substituted for February 28, 1913, and March 1, 1913, respectively.
31.23 	(i) In applying the provisions of section 362(a) and (c) of the Internal Revenue Code, 
31.24 	the date December 31, 1956, shall be substituted for June 22, 1954.
31.25 	(j)(g) The basis of property shall be increased by the amount of intangible drilling 
31.26 	costs not previously allowed due to differences between this chapter and the Internal 
31.27 	Revenue Code.
31.28 	(k) The adjusted basis of any corporate partner's interest in a partnership is the same 
31.29 	as the adjusted basis for federal income tax purposes modified as required to reflect the 
31.30 	basis modifications set forth in paragraphs (b) to (j). The adjusted basis of a partnership 
31.31 	in which the partner is an individual, estate, or trust is the same as the adjusted basis for 
31.32 	federal income tax purposes modified as required to reflect the basis modifications set 
31.33 	forth in paragraphs (f) and (g).
31.34 	(l) (h) The modifications contained in paragraphs (b) to (j) (g) also apply to the basis 
31.35 	of property that is determined by reference to the basis of the same property in the hands 
31.36 	of a different taxpayer or by reference to the basis of different property.

32.1 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
32.2 	December 31, 2009.

32.3 	Sec. 17. Minnesota Statutes 2008, section 290.01, subdivision 22, is amended to read:
32.4 		Subd. 22.Taxable net income. For tax years beginning after December 31, 1986, 
32.5 	the term "taxable net income" means:
32.6 	(1) for resident individuals the same as net income;
32.7 	(2) for individuals who were not residents of Minnesota for the entire year, the same 
32.8 	as net income except that the tax is imposed only on the Minnesota apportioned share of 
32.9 	that income as determined pursuant to section 290.06, subdivision 2c, paragraph (e); 
32.10 	(3) for all other taxpayers, the part of net income that is allocable to Minnesota by 
32.11 	assignment or apportionment under one or more of sections 290.17, 290.191, 290.20, 
32.12 	and 290.36. 
32.13 	For tax years beginning before January 1, 1987, the term "taxable net income" 
32.14 	means the net income assignable to this state pursuant to sections 290.17 to 290.20. For 
32.15 	corporations, taxable net income is then reduced by the deductions contained in section 
32.16 	290.21.

32.17 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
32.18 	December 31, 2009.

32.19 	Sec. 18. Minnesota Statutes 2008, section 290.01, subdivision 29, is amended to read:
32.20 		Subd. 29.Taxable income. The term "taxable income" means:
32.21 	(1) for individuals, estates, and trusts, the same as taxable net income;.
32.22 	(2) for corporations, the taxable net income less
32.23 	(i) the net operating loss deduction under section 290.095;
32.24 	(ii) the dividends received deduction under section 290.21, subdivision 4;
32.25 	(iii) the exemption for operating in a job opportunity building zone under section 
32.26 	469.317;
32.27 	(iv) the exemption for operating in a biotechnology and health sciences industry 
32.28 	zone under section 469.337; and
32.29 	(v) the exemption for operating in an international economic development zone 
32.30 	under section 469.326.

32.31 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
32.32 	December 31, 2009.

33.1 	Sec. 19. Minnesota Statutes 2008, section 290.01, subdivision 31, is amended to read:
33.2 		Subd. 31. Internal Revenue Code. Unless specifically defined otherwise, "Internal 
33.3 	Revenue Code" means the Internal Revenue Code of 1986, as amended through February 
33.4 	13, 2008, except section 179 of the Internal Revenue Code, as amended through February 
33.5 	17, 2009, applies.

33.6 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
33.7 	December 31, 2010.

33.8 	Sec. 20. Minnesota Statutes 2008, section 290.03, is amended to read:
33.9 	290.03 INCOME TAX; IMPOSITION, CLASSES OF TAXPAYERS.
33.10 	An annual tax for each taxable year, computed in the manner and at the rates 
33.11 	hereinafter provided, is hereby imposed upon the taxable income for such year of the 
33.12 	following classes of taxpayers:
33.13 	(1) Resident and nonresident individuals;
33.14 	(2) Estates of decedents, dying domiciled within or without this state;
33.15 	(3) Trusts (except those taxable as corporations) however created by residents or 
33.16 	nonresidents or by domestic or foreign corporations.

33.17 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
33.18 	December 31, 2009.

33.19 	Sec. 21. Minnesota Statutes 2008, section 290.04, subdivision 1, is amended to read:
33.20 		Subdivision 1.Accrual. The liability for the tax imposed by section 290.02 shall 
33.21 	arise upon the first day of the taxable year upon which a domestic corporation exercises 
33.22 	any of the privileges specified in section 290.02 or exists as a corporation, or on which 
33.23 	a foreign corporation is possessed of the privilege for the grant to it of the privilege of 
33.24 	transacting or for the actual transaction by it of any local business within this state during 
33.25 	any part of its taxable year, in corporate or organized form. The liability for the tax 
33.26 	imposed by section 290.03 shall arise concurrently with the receipt or accrual of income 
33.27 	during the taxable year. The provisions shall in no way affect the determination of the 
33.28 	amount of such taxes, the time for making returns, and the time for paying such taxes.  

33.29 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
33.30 	December 31, 2009.

33.31 	Sec. 22. Minnesota Statutes 2008, section 290.06, subdivision 33, is amended to read:
34.1 		Subd. 33. Bovine testing credit. (a) An owner of cattle in Minnesota may take a 
34.2 	credit against the tax due under this chapter for an amount equal to: (1) for corporate 
34.3 	filers, including shareholders of an S corporation under section 290.9725, 25 percent of 
34.4 	the expenses incurred during the taxable year to conduct tuberculosis testing on those 
34.5 	cattle; and (2) for all other filers, one-half the expenses incurred during the taxable year to 
34.6 	conduct tuberculosis testing on those cattle. 
34.7 	(b) If the amount of credit which the taxpayer is eligible to receive under this 
34.8 	subdivision exceeds the taxpayer's tax liability under this chapter, the commissioner of 
34.9 	revenue shall refund the excess to the taxpayer. 
34.10 	(c) The amount necessary to pay claims for the refund provided in this subdivision is 
34.11 	appropriated from the general fund to the commissioner of revenue. 
34.12 	(d) Expenses incurred in a calendar year in which tuberculosis testing of cattle in 
34.13 	Minnesota is not federally required are not allowed in claiming the credit under paragraph 
34.14 	(a). 

34.15 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
34.16 	December 31, 2009.

34.17 	Sec. 23. Minnesota Statutes 2008, section 290.06, is amended by adding a subdivision 
34.18 	to read:
34.19 		Subd. 36.Job growth investment tax credit. A taxpayer is allowed a credit 
34.20 	as determined under section 116J.8737 against the tax imposed by this chapter. 
34.21 	Notwithstanding the certification eligibility issued by the commissioner of the Department 
34.22 	of Employment and Economic Development under section 116J.8737, the commissioner 
34.23 	may utilize any audit and examination powers under chapter 270C or 289A to the extent 
34.24 	necessary to verify that the taxpayer is eligible for the credit and to assess for the amount 
34.25 	of any improperly claimed credit.

34.26 	EFFECTIVE DATE. This section is effective July 1, 2009, for taxable years 
34.27 	beginning after December 31, 2008, and only applies to investments made after the 
34.28 	qualified regional investment fund or qualified individual investor has been certified by 
34.29 	the commissioner of employment and economic development.

34.30 	Sec. 24. Minnesota Statutes 2008, section 290.068, subdivision 1, is amended to read:
34.31 		Subdivision 1.Credit allowed. A corporation, other than a corporation treated as an 
34.32 	"S" corporation under section 290.9725, taxpayer, other than a corporation not treated as an 
35.1 	"S" corporation,  is allowed a credit against the portion of the franchise tax computed under 
35.2 	section 290.06, subdivision 1, sections 290.06 and 290.091 for the taxable year equal to:  
35.3 	(a) 5 (1) ten percent of the first $2,000,000 of the excess (if any) of
35.4 	(1) the qualified research expenses for the taxable year, over
35.5 	(2) the base amount; and
35.6 	(b) 2.5 percent on all of such excess expenses over $2,000,000.

35.7 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
35.8 	December 31, 2009.

35.9 	Sec. 25. Minnesota Statutes 2008, section 290.068, subdivision 3, is amended to read:
35.10 		Subd. 3.Limitation; carryover Credit refundable. (a)(1) The credit for the 
35.11 	taxable year shall not exceed the liability for tax. "Liability for tax" for purposes of this 
35.12 	section means the tax imposed under section 290.06, subdivision 1, for the taxable year 
35.13 	reduced by the sum of the nonrefundable credits allowed under this chapter.
35.14 	(2) In the case of a corporation which is a partner in a partnership, the credit allowed 
35.15 	for the taxable year shall not exceed the lesser of the amount determined under clause (1) 
35.16 	for the taxable year or an amount (separately computed with respect to the corporation's 
35.17 	interest in the trade or business or entity) equal to the amount of tax attributable to that 
35.18 	portion of taxable income which is allocable or apportionable to the corporation's interest 
35.19 	in the trade or business or entity.
35.20 	(b) If the amount of the credit determined under this section for any taxable year 
35.21 	exceeds the limitation under clause (a), theliability for tax, the commissioner shall refund 
35.22 	the excess shall be a research credit carryover to each of the 15 succeeding taxable years. 
35.23 	The entire amount of the excess unused credit for the taxable year shall be carried first 
35.24 	to the earliest of the taxable years to which the credit may be carried and then to each 
35.25 	successive year to which the credit may be carried. The amount of the unused credit which 
35.26 	may be added under this clause shall not exceed the taxpayer's liability for tax less the 
35.27 	research credit for the taxable year to the taxpayer.

35.28 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
35.29 	December 31, 2009.

35.30 	Sec. 26. Minnesota Statutes 2008, section 290.068, subdivision 4, is amended to read:
35.31 		Subd. 4.Partnerships. In the case of partnerships the credit shall be allocated in 
35.32 	the same manner provided by section sections 41(f)(2) and 41(g) of the Internal Revenue 
35.33 	Code.

36.1 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
36.2 	December 31, 2009.

36.3 	Sec. 27. Minnesota Statutes 2008, section 290.068, is amended by adding a subdivision 
36.4 	to read:
36.5 		Subd. 7.Appropriation. An amount sufficient to pay the refunds required by this 
36.6 	section is appropriated to the commissioner from the general fund.

36.7 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
36.8 	December 31, 2009.

36.9 	Sec. 28. Minnesota Statutes 2008, section 290.0922, subdivision 1, is amended to read:
36.10 		Subdivision 1.Imposition. (a) In addition to the tax imposed by this chapter without 
36.11 	regard to this section, the franchise tax imposed on a corporation required to file under 
36.12 	section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation 
36.13 	under section 290.9725 for the taxable year includes a tax equal to the following amounts:

36.14
36.15
36.16	If the sum of the corporation's 
Minnesota property, payrolls, and sales 
or receipts is: 
		the tax equals: 
	
36.17			less than
	$
	500,000
		$
	0
		
36.18		$
	500,000 to
	$
	999,999
		$
	100
		
36.19		$
	1,000,000 to
	$
	4,999,999
		$
	300
		
36.20		$
	5,000,000 to
	$
	9,999,999
		$
	1,000
		
36.21
36.22		$
	10,000,000 
to
	$
	19,999,999
		$
	2,000
		
36.23		$
	20,000,000 or more 
		$
	5,000
		
36.24 	(b) A tax is imposed for each taxable year on a corporation required to file a return 
36.25 	under section 289A.12, subdivision 3, that is treated as an "S" corporation under section 
36.26 	290.9725 and on a partnership required to file a return under section 289A.12, subdivision 
36.27 	3, other than a partnership that derives over 80 percent of its income from farming. The 
36.28 	tax imposed under this paragraph is due on or before the due date of the return for the 
36.29 	taxpayer due under section 289A.18, subdivision 1. The commissioner shall prescribe 
36.30 	the return to be used for payment of this tax. The tax under this paragraph is equal to 
36.31 	the following amounts:

36.32
36.33
36.34	If the sum of the S corporation's or 
partnership's Minnesota property, 
payrolls, and sales or receipts is:
			the tax equals:
	
36.35			less than
	$
	500,000
		$
	0
		
36.36		$
	500,000 to
	$
	999,999
		$
	100
		
36.37		$
	1,000,000 to
	$
	4,999,999
		$
	300
		
37.1		$
	5,000,000 to
	$
	9,999,999
		$
	1,000
		
37.2
37.3		$
	10,000,000 
to
	$
	19,999,999
		$
	2,000
		
37.4		$
	20,000,000 or more
		$
	5,000

37.5 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
37.6 	December 31, 2009.

37.7 	Sec. 29. Minnesota Statutes 2008, section 290.095, subdivision 3, is amended to read:
37.8 		Subd. 3.Carryover. (a) A net operating loss incurred in a taxable year: (i) 
37.9 	beginning after December 31, 1986, shall be a net operating loss carryover to each of the 
37.10 	15 taxable years following the taxable year of such loss; (ii) beginning before January 1, 
37.11 	1987, shall be a net operating loss carryover to each of the five taxable years following the 
37.12 	taxable year of such loss subject to the provisions of Minnesota Statutes 1986, section 
37.13 	290.095; and (iii) beginning before January 1, 1987, shall be a net operating loss carryback 
37.14 	to each of the three taxable years preceding the loss year subject to the provisions of 
37.15 	Minnesota Statutes 1986, section 290.095.  
37.16 	(b) The entire amount of the net operating loss for any taxable year shall be carried to 
37.17 	the earliest of the taxable years to which such loss may be carried. The portion of such loss 
37.18 	which shall be carried to each of the other taxable years shall be the excess, if any, of the 
37.19 	amount of such loss over the sum of the taxable net income, adjusted by the modifications 
37.20 	specified in subdivision 4, for each of the taxable years to which such loss may be carried.
37.21 	(c) Where a corporation apportions its income under the provisions of section 
37.22 	290.191, the net operating loss deduction incurred in any taxable year shall be allowed 
37.23 	to the extent of the apportionment ratio of the loss year.  
37.24 	(d) The provisions of sections 381, 382, and 384 of the Internal Revenue Code apply 
37.25 	to carryovers in certain corporate acquisitions and special limitations on net operating loss 
37.26 	carryovers. The limitation amount determined under section 382 shall be applied to net 
37.27 	income, before apportionment, in each post change year to which a loss is carried.

37.28 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
37.29 	December 31, 2009.

37.30 	Sec. 30. Minnesota Statutes 2008, section 290.17, subdivision 1, is amended to read:
37.31 		Subdivision 1.Scope of allocation rules. (a) The income of resident individuals 
37.32 	is not subject to allocation outside this state. The allocation rules apply to nonresident 
37.33 	individuals, estates, trusts, nonresident partners of partnerships, and nonresident 
37.34 	shareholders of corporations treated as "S" corporations under section 290.9725, and all 
38.1 	corporations not having such an election in effect. If a partnership or corporation would 
38.2 	not otherwise be subject to the allocation rules, but conducts a trade or business that is part 
38.3 	of a unitary business involving another legal entity that is subject to the allocation rules, 
38.4 	the partnership or corporation is subject to the allocation rules. 
38.5 	(b) Expenses, losses, and other deductions (referred to collectively in this paragraph 
38.6 	as "deductions") must be allocated along with the item or class of gross income to which 
38.7 	they are definitely related for purposes of assignment under this section or apportionment 
38.8 	under section 290.191, 290.20, or 290.36. Deductions definitely related to any item of 
38.9 	gross income assigned under subdivision 2, paragraph (e), are assigned to the taxpayer's 
38.10 	domicile. 
38.11 	(c) In the case of an individual who is a resident for only part of a taxable year, 
38.12 	the individual's income, gains, losses, and deductions from the distributive share of a 
38.13 	partnership, S corporation, trust, or estate are not subject to allocation outside this state 
38.14 	to the extent of the distributive share multiplied by a ratio, the numerator of which is 
38.15 	the number of days the individual was a resident of this state during the tax year of the 
38.16 	partnership, S corporation, trust, or estate, and the denominator of which is the number of 
38.17 	days in the taxable year of the partnership, S corporation, trust, or estate.

38.18 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
38.19 	December 31, 2009.

38.20 	Sec. 31. Minnesota Statutes 2008, section 290.17, subdivision 4, is amended to read:
38.21 		Subd. 4.Unitary business principle. (a) If a trade or business conducted wholly 
38.22 	within this state or partly within and partly without this state is part of a unitary business, 
38.23 	the entire income of the unitary business is subject to apportionment pursuant to section 
38.24 	290.191. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary 
38.25 	business is considered to be derived from any particular source and none may be allocated 
38.26 	to a particular place except as provided by the applicable apportionment formula. The 
38.27 	provisions of this subdivision do not apply to business income subject to subdivision 5, 
38.28 	income of an insurance company, or income of an investment company determined under 
38.29 	section 290.36. 
38.30 	(b) The term "unitary business" means business activities or operations which 
38.31 	result in a flow of value between them. The term may be applied within a single legal 
38.32 	entity or between multiple entities and without regard to whether each entity is a sole 
38.33 	proprietorship, a corporation, a partnership, or a trust.
38.34 	(c) Unity is presumed whenever there is unity of ownership, operation, and use, 
38.35 	evidenced by centralized management or executive force, centralized purchasing, 
39.1 	advertising, accounting, or other controlled interaction, but the absence of these 
39.2 	centralized activities will not necessarily evidence a nonunitary business. Unity is also 
39.3 	presumed when business activities or operations are of mutual benefit, dependent upon or 
39.4 	contributory to one another, either individually or as a group.
39.5 	(d) Where a business operation conducted in Minnesota is owned by a business 
39.6 	entity that carries on business activity outside the state different in kind from that 
39.7 	conducted within this state, and the other business is conducted entirely outside the state, it 
39.8 	is presumed that the two business operations are unitary in nature, interrelated, connected, 
39.9 	and interdependent unless it can be shown to the contrary.
39.10 	(e) Unity of ownership is not deemed to exist when a corporation is involved unless 
39.11 	that corporation is a member of a group of two or more business entities and more than 50 
39.12 	percent of the voting stock of each member of the group is directly or indirectly owned 
39.13 	by a common owner or by common owners, either corporate or noncorporate, or by one 
39.14 	or more of the member corporations of the group. For this purpose, the term "voting 
39.15 	stock" shall include membership interests of mutual insurance holding companies formed 
39.16 	under section 66A.40. 
39.17 	(f) The net income and apportionment factors under section 290.191 or 290.20 of 
39.18 	foreign corporations and other foreign entities which are part of a unitary business shall 
39.19 	not be included in the net income or the apportionment factors of the unitary business. 
39.20 	A foreign corporation or other foreign entity which is required to file a return under this 
39.21 	chapter shall file on a separate return basis. The net income and apportionment factors 
39.22 	under section 290.191 or 290.20 of foreign operating corporations shall not be included in 
39.23 	the net income or the apportionment factors of the unitary business except as provided in 
39.24 	paragraph (g).
39.25 	(g) The adjusted net income of a foreign operating corporation shall be deemed to 
39.26 	be paid as a dividend on the last day of its taxable year to each shareholder thereof, in 
39.27 	proportion to each shareholder's ownership, with which such corporation is engaged in 
39.28 	a unitary business. Such deemed dividend shall be treated as a dividend under section 
39.29 	290.21, subdivision 4. 
39.30 	Dividends actually paid by a foreign operating corporation to a corporate shareholder 
39.31 	which is a member of the same unitary business as the foreign operating corporation shall 
39.32 	be eliminated from the net income of the unitary business in preparing a combined report 
39.33 	for the unitary business. The adjusted net income of a foreign operating corporation 
39.34 	shall be its net income adjusted as follows:
40.1 	(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto 
40.2 	Rico, or a United States possession or political subdivision of any of the foregoing shall 
40.3 	be a deduction; and
40.4 	(2) the subtraction from federal taxable income for payments received from foreign 
40.5 	corporations or foreign operating corporations under section 290.01, subdivision 19d, 
40.6 	clause (10), shall not be allowed. 
40.7 	If a foreign operating corporation incurs a net loss, neither income nor deduction 
40.8 	from that corporation shall be included in determining the net income of the unitary 
40.9 	business.
40.10 	(h) (f) For purposes of determining the net income of a unitary business and the 
40.11 	factors to be used in the apportionment of net income pursuant to section 290.191 or 
40.12 	290.20, there must be included only the income and apportionment factors of domestic 
40.13 	corporations or other domestic entities other than foreign operating corporations that are 
40.14 	determined to be part of the unitary business pursuant to this subdivision, notwithstanding 
40.15 	that foreign corporations or other foreign entities might be included in the unitary business. 
40.16 	(i) Deductions for expenses, interest, or taxes otherwise allowable under this chapter 
40.17 	that are connected with or allocable against dividends, deemed dividends described 
40.18 	in paragraph (g), or royalties, fees, or other like income described in section 290.01, 
40.19 	subdivision 19d, clause (10), shall not be disallowed. 
40.20 	(j) (g) Each corporation or other entity, except a sole proprietorship, that is part of 
40.21 	a unitary business must file combined reports as the commissioner determines. On the 
40.22 	reports, all intercompany transactions between entities included pursuant to paragraph 
40.23 	(h) (f) must be eliminated and the entire net income of the unitary business determined in 
40.24 	accordance with this subdivision is apportioned among the entities by using each entity's 
40.25 	Minnesota factors for apportionment purposes in the numerators of the apportionment 
40.26 	formula and the total factors for apportionment purposes of all entities included pursuant 
40.27 	to paragraph (h) (f) in the denominators of the apportionment formula.
40.28 	(k) If a corporation has been divested from a unitary business and is included in a 
40.29 	combined report for a fractional part of the common accounting period of the combined 
40.30 	report:
40.31 	(1) its income includable in the combined report is its income incurred for that part 
40.32 	of the year determined by proration or separate accounting; and
40.33 	(2) its sales, property, and payroll included in the apportionment formula must 
40.34 	be prorated or accounted for separately.

40.35 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
40.36 	December 31, 2009.

41.1 	Sec. 32. Minnesota Statutes 2008, section 290.191, subdivision 4, is amended to read:
41.2 		Subd. 4.Apportionment formula for certain mail order businesses. If the 
41.3 	business of a corporation, partnership, or proprietorship consists exclusively of the 
41.4 	selling of tangible personal property and services at retail, as defined in section 297A.61, 
41.5 	subdivision 4, paragraph (a), in response to orders received by United States mail, 
41.6 	telephone, facsimile, or other electronic media, and 99 percent of the taxpayer's property 
41.7 	and payroll is within Minnesota, then the taxpayer may apportion net income to Minnesota 
41.8 	based solely upon the percentage that the sales made within this state in connection 
41.9 	with its trade or business during the tax period are of the total sales wherever made in 
41.10 	connection with the trade or business during the tax period. Property and payroll factors 
41.11 	are disregarded. In determining eligibility for this subdivision: 
41.12 	(1) the sale not in the ordinary course of business of tangible or intangible assets 
41.13 	used in conducting business activities must be disregarded; and
41.14 	(2) property and payroll at a distribution center outside of Minnesota are disregarded 
41.15 	if the sole activity at the distribution center is the filling of orders, and no solicitation 
41.16 	of orders occurs at the distribution center.

41.17 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
41.18 	December 31, 2009.

41.19 	Sec. 33. Minnesota Statutes 2008, section 290.32, is amended to read:
41.20 	290.32 TAXES FOR PART OF YEAR, COMPUTATION.
41.21 	When under this chapter a taxpayer is permitted or required to make a return for a 
41.22 	fractional part of a year, the tax shall be computed in the same manner as if such fractional 
41.23 	part of a year were an entire year, except:
41.24 	(1) A taxpayer who is permitted to change the basis for reporting income from a 
41.25 	fiscal to a calendar year shall make a separate return for the period between the close of 
41.26 	the taxpayer's last fiscal year and the following December 31st; if the change is from a 
41.27 	calendar to a fiscal year, a separate return shall be made for the period between the close 
41.28 	of the taxpayer's last calendar year and the date designated as the close of the fiscal year; 
41.29 	and if the change is from one fiscal year to another fiscal year, a separate return shall be 
41.30 	made for the period between the close of the former fiscal year and the date designated as 
41.31 	the close of the new fiscal year. The taxable net income, or for corporations the taxable 
41.32 	net income as reduced by the deductions contained in section 290.21, for any such period 
41.33 	shall be put on an annual basis by multiplying the amount thereof by 12 and dividing by 
41.34 	the number of months included in the period for which such separate return is made; and 
42.1 	the tax shall be that part of a tax, computed on the taxable net income put on such annual 
42.2 	basis which the number of months in such period bears to 12 months.
42.3 	(2) Where any of the enumerated changes in accounting period referred to in clause 
42.4 	(1) involve a 52-53 week fiscal year and any such change results in a short period of less 
42.5 	than seven days, such short period shall be added to and deemed a part of the following 
42.6 	taxable year. If the change results in a short period of seven or more days, but less than 
42.7 	359 days, the taxable net income, or for corporations the taxable net income as reduced 
42.8 	by the deductions contained in section 290.21, for any such period shall be placed on an 
42.9 	annual basis by multiplying such income by 365 and dividing the result by the same 
42.10 	number of days in the short period; and the tax shall be that part of a tax, computed on the 
42.11 	taxable net income placed on such annual basis which the number of days in such short 
42.12 	period bears to 365 days. Where the short period is 359 days or more, the tax shall be 
42.13 	computed in the same manner as if such short period were an entire year.  

42.14 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
42.15 	December 31, 2009.

42.16 	Sec. 34. Minnesota Statutes 2008, section 290.36, is amended to read:
42.17 	290.36 INVESTMENT COMPANIES; REPORT OF NET INCOME; 
42.18 	COMPUTATION OF AMOUNT OF INCOME ALLOCABLE TO STATE.
42.19 	The taxable net income of investment companies shall be computed as follows:
42.20 	Each investment company transacting business as such in this state shall report to 
42.21 	the commissioner the net income returned by the company for the taxable year to the 
42.22 	United States under the provisions of the Internal Revenue Code, less the credits provided 
42.23 	therein and subject to the adjustments required by this chapter. The commissioner shall 
42.24 	compute therefrom the taxable net income of the investment company by assigning to this 
42.25 	state that proportion of such net income, less such credits which the aggregate of the gross 
42.26 	payments collected by the company during the taxable year from old and new business 
42.27 	upon investment contracts issued by the company and held by residents of this state, bears 
42.28 	to the total amount of the gross payments collected during such year by the company from 
42.29 	such business upon investment contracts issued by the company and held by persons 
42.30 	residing within the state and elsewhere.
42.31 	As used in this section, the term "investment company" means any person, 
42.32 	copartnership, or association, or corporation, whether local or foreign, coming within 
42.33 	the purview of section 54.26, and who or which is registered under the Investment 
42.34 	Company Act of 1940 (United States Code, title 15, section 80a-1 and following), as 
43.1 	amended through December 31, 1986, and who or which solicits or receives payments 
43.2 	to be made to itself and which issues therefor, or has issued therefor and has or shall 
43.3 	have outstanding so-called bonds, shares, coupons, certificates of membership, or other 
43.4 	evidences of obligation or agreement or pretended agreement to return to the holders or 
43.5 	owners thereof money or anything of value at some future date; and as to whom the 
43.6 	gross payments received during the taxable year in question upon outstanding investment 
43.7 	contracts, plus interest and dividends earned on investment contracts determined by 
43.8 	prorating the total dividends and interest for the taxable year in question in the same 
43.9 	proportion that certificate reserves as defined by the Investment Company Act of 1940, as 
43.10 	amended through December 31, 1986, is to total assets, shall be at least 50 percent of the 
43.11 	company's gross payments upon investment contracts plus gross income from all other 
43.12 	sources except dividends from subsidiaries for the taxable year in question. The term 
43.13 	"investment contract" shall mean any such so-called bonds, shares, coupons, certificates 
43.14 	of membership, or other evidences of obligation or agreement or pretended agreement 
43.15 	issued by an investment company.  

43.16 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
43.17 	December 31, 2009.

43.18 	Sec. 35. Minnesota Statutes 2008, section 297A.61, subdivision 3, is amended to read:
43.19 		Subd. 3. Sale and purchase. (a) "Sale" and "purchase" include, but are not limited 
43.20 	to, each of the transactions listed in this subdivision. 
43.21 	(b) Sale and purchase include: 
43.22 	(1) any transfer of title or possession, or both, of tangible personal property, whether 
43.23 	absolutely or conditionally, for a consideration in money or by exchange or barter; and 
43.24 	(2) the leasing of or the granting of a license to use or consume, for a consideration 
43.25 	in money or by exchange or barter, tangible personal property, other than a manufactured 
43.26 	home used for residential purposes for a continuous period of 30 days or more. 
43.27 	(c) Sale and purchase include the production, fabrication, printing, or processing of 
43.28 	tangible personal property for a consideration for consumers who furnish either directly or 
43.29 	indirectly the materials used in the production, fabrication, printing, or processing. 
43.30 	(d) Sale and purchase include the preparing for a consideration of food. 
43.31 	Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited 
43.32 	to, the following: 
43.33 	(1) prepared food sold by the retailer; 
43.34 	(2) soft drinks; 
43.35 	(3) candy; 
44.1 	(4) dietary supplements; and 
44.2 	(5) all food sold through vending machines. 
44.3 	(e) A sale and a purchase includes the furnishing for a consideration of residential 
44.4 	sewer services, electricity, gas, water, or steam for use or consumption within this state. 
44.5 	(f) A sale and a purchase includes the transfer for a consideration of prewritten 
44.6 	computer software whether delivered electronically, by load and leave, or otherwise. 
44.7 	(g) A sale and a purchase includes the furnishing for a consideration of the following 
44.8 	services: 
44.9 	(1) the privilege of admission to places of amusement, recreational areas, or athletic 
44.10 	events, and the making available of amusement devices, tanning facilities, reducing 
44.11 	salons, steam baths, Turkish baths, health clubs, and spas or athletic facilities; 
44.12 	(2) lodging and related services by a hotel, rooming house, resort, campground, 
44.13 	motel, or trailer camp, including furnishing the guest of the facility with access to 
44.14 	telecommunication services, and the granting of any similar license to use real property 
44.15 	in a specific facility, other than the renting or leasing of it for a continuous period of 
44.16 	30 days or more under an enforceable written agreement that may not be terminated 
44.17 	without prior notice; 
44.18 	(3) nonresidential parking services, whether on a contractual, hourly, or other 
44.19 	periodic basis, except for parking at a meter; 
44.20 	(4) the granting of membership in a club, association, or other organization if: 
44.21 	(i) the club, association, or other organization makes available for the use of its 
44.22 	members sports and athletic facilities, without regard to whether a separate charge is 
44.23 	assessed for use of the facilities; and 
44.24 	(ii) use of the sports and athletic facility is not made available to the general public 
44.25 	on the same basis as it is made available to members. 
44.26 	Granting of membership means both onetime initiation fees and periodic membership 
44.27 	dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and 
44.28 	squash courts; basketball and volleyball facilities; running tracks; exercise equipment; 
44.29 	swimming pools; and other similar athletic or sports facilities; 
44.30 	(5) delivery of aggregate materials by a third party, excluding delivery of aggregate 
44.31 	material used in road construction, and delivery of concrete block by a third party if 
44.32 	the delivery would be subject to the sales tax if provided by the seller of the concrete 
44.33 	block; and 
44.34 	(6) services as provided in this clause: 
44.35 	(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering, 
44.36 	and storing clothes, linen services and supply, cleaning and blocking hats, and carpet, 
45.1 	drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not 
45.2 	include services provided by coin operated facilities operated by the customer; 
45.3 	(ii) motor vehicle washing, waxing, and cleaning services, including services 
45.4 	provided by coin operated facilities operated by the customer, and rustproofing, 
45.5 	undercoating, and towing of motor vehicles; 
45.6 	(iii) building and residential cleaning, maintenance, and disinfecting services and 
45.7 	pest control and exterminating services; 
45.8 	(iv) detective, security, burglar, fire alarm, and armored car services; but not 
45.9 	including services performed within the jurisdiction they serve by off-duty licensed peace 
45.10 	officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit 
45.11 	organization for monitoring and electronic surveillance of persons placed on in-home 
45.12 	detention pursuant to court order or under the direction of the Minnesota Department 
45.13 	of Corrections; 
45.14 	(v) pet grooming services; 
45.15 	(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting 
45.16 	and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor 
45.17 	plant care; tree, bush, shrub, and stump removal, except when performed as part of a land 
45.18 	clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for 
45.19 	public utility lines. Services performed under a construction contract for the installation of 
45.20 	shrubbery, plants, sod, trees, bushes, and similar items are not taxable; 
45.21 	(vii) massages, except when provided by a licensed health care facility or 
45.22 	professional or upon written referral from a licensed health care facility or professional for 
45.23 	treatment of illness, injury, or disease; and
45.24 	(viii) the furnishing of lodging, board, and care services for animals in kennels and 
45.25 	other similar arrangements, but excluding veterinary and horse boarding services;
45.26 	(ix) car repair services;
45.27 	(x) general repair services;
45.28 	(xi) legal services;
45.29 	(xii) accounting, financial planning, and brokerage services;
45.30 	(xiii) tattoos and body piercing;
45.31 	(xiv) personal grooming and salon services, including, but not limited to, haircuts, 
45.32 	hair styling, and hair dyeing; hair extensions; shaving and waxing; manicures; pedicures; 
45.33 	facials; body wraps; and tanning services; and
45.34 	(xv) funeral services. 
45.35 	In applying the provisions of this chapter, the terms "tangible personal property" 
45.36 	and "retail sale" include taxable services listed in clause (6), items (i) to (vi) and (viii), 
46.1 	and the provision of these taxable services, unless specifically provided otherwise. 
46.2 	Services performed by an employee for an employer are not taxable. Services performed 
46.3 	by a partnership or association for another partnership or association are not taxable if 
46.4 	one of the entities owns or controls more than 80 percent of the voting power of the 
46.5 	equity interest in the other entity. Services performed between members of an affiliated 
46.6 	group of corporations are not taxable. For purposes of the preceding sentence, "affiliated 
46.7 	group of corporations" means those entities that would be classified as members of an 
46.8 	affiliated group as defined under United States Code, title 26, section 1504, disregarding 
46.9 	the exclusions in section 1504(b). 
46.10 	For purposes of clause (5), "road construction" means construction of (1) public 
46.11 	roads, (2) cartways, and (3) private roads in townships located outside of the seven-county 
46.12 	metropolitan area up to the point of the emergency response location sign. 
46.13 	(h) A sale and a purchase includes the furnishing for a consideration of tangible 
46.14 	personal property or taxable services by the United States or any of its agencies or 
46.15 	instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political 
46.16 	subdivisions. 
46.17 	(i) A sale and a purchase includes the furnishing for a consideration of 
46.18 	telecommunications services, ancillary services associated with telecommunication 
46.19 	services, cable television services,  and direct satellite services, and ring tones. 
46.20 	Telecommunication services include, but are not limited to, the following services, 
46.21 	as defined in section 297A.669: air-to-ground radiotelephone service, mobile 
46.22 	telecommunication service, postpaid calling service, prepaid calling service, prepaid 
46.23 	wireless calling service, and private communication services. The services in this 
46.24 	paragraph are taxed to the extent allowed under federal law. 
46.25 	(j) A sale and a purchase includes the furnishing for a consideration of installation if 
46.26 	the installation charges would be subject to the sales tax if the installation were provided 
46.27 	by the seller of the item being installed. 
46.28 	(k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer 
46.29 	to a customer when (1) the vehicle is rented by the customer for a consideration, or (2) 
46.30 	the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section 
46.31 	65B.29, subdivision 1, clause (1). 

46.32 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
46.33 	December 31, 2009.

46.34 	Sec. 36. Minnesota Statutes 2008, section 297A.62, subdivision 1, is amended to read:
47.1 		Subdivision 1.Generally. (a) Except as otherwise provided in paragraph (b), 
47.2 	subdivision 3, or in this chapter, a sales tax of 6.5 percent is imposed on the gross receipts 
47.3 	from retail sales as defined in section 297A.61, subdivision 4, made in this state or to a 
47.4 	destination in this state by a person who is required to have or voluntarily obtains a permit 
47.5 	under section 297A.83, subdivision 1. 
47.6 	(b) On or before October 1, 2009, the commissioner shall estimate the rates of tax 
47.7 	that, after applying the provisions of this act, results in no change in the total amount of 
47.8 	general fund revenues and dedicated revenues under the Minnesota Constitution, article 
47.9 	XI, section 15, that the state would receive during fiscal year 2011 and shall publish the 
47.10 	rate in the State Register. The commissioner shall estimate the rate under the Minnesota 
47.11 	Constitution, article XI, section 15, to proportionately adjust for the expansion of the tax 
47.12 	base under this act in compliance with the constitutional provision. Those respective rates 
47.13 	apply instead of the rate under paragraph (a) and the Minnesota Constitution, article XI, 
47.14 	section 15, effective for sales and purchases made after December 31, 2009.

47.15 	EFFECTIVE DATE. This section is effective the day following final enactment.

47.16 	Sec. 37. Minnesota Statutes 2008, section 297A.67, subdivision 7, is amended to read:
47.17 		Subd. 7. Drugs; medical devices. (a) Sales of the following drugs and medical 
47.18 	devices for human use are exempt: 
47.19 	(1) drugs, including excluding over-the-counter drugs; 
47.20 	(2) single-use finger-pricking devices for the extraction of blood and other single-use 
47.21 	devices and single-use diagnostic agents used in diagnosing, monitoring, or treating 
47.22 	diabetes; 
47.23 	(3) insulin and medical oxygen for human use, regardless of whether prescribed 
47.24 	or sold over the counter;
47.25 	(4) (3) prosthetic devices; 
47.26 	(5) (4) durable medical equipment for home use only; 
47.27 	(6) (5) mobility enhancing equipment; and
47.28 	(7) prescription corrective eyeglasses; and
47.29 	(8) (6) kidney dialysis equipment, including repair and replacement parts. 
47.30 	(b) For purposes of this subdivision: 
47.31 	(1) "Drug" means a compound, substance, or preparation, and any component of 
47.32 	a compound, substance, or preparation, other than food and food ingredients, dietary 
47.33 	supplements, or alcoholic beverages that is: 
48.1 	(i) recognized in the official United States Pharmacopoeia, official Homeopathic 
48.2 	Pharmacopoeia of the United States, or official National Formulary, and supplement 
48.3 	to any of them; 
48.4 	(ii) intended for use in the diagnosis, cure, mitigation, treatment, or prevention 
48.5 	of disease; or 
48.6 	(iii) intended to affect the structure or any function of the body. 
48.7 	(2) "Durable medical equipment" means equipment, including repair and 
48.8 	replacement parts, but not including mobility enhancing equipment, that: 
48.9 	(i) can withstand repeated use; 
48.10 	(ii) is primarily and customarily used to serve a medical purpose; 
48.11 	(iii) generally is not useful to a person in the absence of illness or injury; and 
48.12 	(iv) is not worn in or on the body. 
48.13 	For purposes of this clause, "repair and replacement parts" includes all components 
48.14 	or attachments used in conjunction with the durable medical equipment, but does not 
48.15 	include repair and replacement parts which are for single patient use only.
48.16 	(3) "Mobility enhancing equipment" means equipment, including repair and 
48.17 	replacement parts, but not including durable medical equipment, that: 
48.18 	(i) is primarily and customarily used to provide or increase the ability to move from 
48.19 	one place to another and that is appropriate for use either in a home or a motor vehicle; 
48.20 	(ii) is not generally used by persons with normal mobility; and 
48.21 	(iii) does not include any motor vehicle or equipment on a motor vehicle normally 
48.22 	provided by a motor vehicle manufacturer. 
48.23 	(4) "Over-the-counter drug" means a drug that contains a label that identifies the 
48.24 	product as a drug as required by Code of Federal Regulations, title 21, section 201.66. The 
48.25 	label must include a "drug facts" panel or a statement of the active ingredients with a list of 
48.26 	those ingredients contained in the compound, substance, or preparation. Over-the-counter 
48.27 	drugs do not include grooming and hygiene products, regardless of whether they otherwise 
48.28 	meet the definition. "Grooming and hygiene products" are soaps, cleaning solutions, 
48.29 	shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and sunscreens. 
48.30 	(5) "Prescribed" and "prescription" means a direction in the form of an order, 
48.31 	formula, or recipe issued in any form of oral, written, electronic, or other means of 
48.32 	transmission by a duly licensed health care professional. 
48.33 	(6) "Prosthetic device" means a replacement, corrective, or supportive device, 
48.34 	including repair and replacement parts, worn on or in the body to: 
48.35 	(i) artificially replace a missing portion of the body; 
48.36 	(ii) prevent or correct physical deformity or malfunction; or 
49.1 	(iii) support a weak or deformed portion of the body. 
49.2 	Prosthetic device does not include corrective eyeglasses. 
49.3 	(7) "Kidney dialysis equipment" means equipment that: 
49.4 	(i) is used to remove waste products that build up in the blood when the kidneys are 
49.5 	not able to do so on their own; and 
49.6 	(ii) can withstand repeated use, including multiple use by a single patient, 
49.7 	notwithstanding the provisions of clause (2). 

49.8 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
49.9 	December 31, 2009.

49.10 	Sec. 38. Minnesota Statutes 2008, section 297A.68, subdivision 2, is amended to read:
49.11 		Subd. 2.Materials consumed in industrial production. (a) Materials stored, used, 
49.12 	or consumed in industrial production of personal property intended to be sold ultimately at 
49.13 	retail are exempt, whether or not the item so used becomes an ingredient or constituent 
49.14 	part of the property produced. Materials that qualify for this exemption include, but 
49.15 	are not limited to, the following:
49.16 	(1) chemicals, including chemicals used for cleaning food processing machinery 
49.17 	and equipment;
49.18 	(2) materials, including chemicals, fuels, and electricity purchased by persons 
49.19 	engaged in industrial production to treat waste generated as a result of the production 
49.20 	process;
49.21 	(3) fuels, electricity, gas, and steam used or consumed in the production process, 
49.22 	except that electricity, gas, or steam used for space heating, cooling, or lighting is exempt 
49.23 	if (i) it is in excess of the average climate control or lighting for the production area, and 
49.24 	(ii) it is necessary to produce that particular product;
49.25 	(4) petroleum products and lubricants;
49.26 	(5) packaging materials, including returnable containers used in packaging food 
49.27 	and beverage products;
49.28 	(6) accessory tools, equipment, and other items that are separate detachable units 
49.29 	with an ordinary useful life of less than 12 months used in producing a direct effect upon 
49.30 	the product; and
49.31 	(7) the following materials, tools, and equipment used in metal-casting: crucibles, 
49.32 	thermocouple protection sheaths and tubes, stalk tubes, refractory materials, molten metal 
49.33 	filters and filter boxes, degassing lances, and base blocks.
49.34 	(b) This exemption does not include:
50.1 	(1) machinery, equipment, implements, tools, accessories, appliances, contrivances 
50.2 	and furniture and fixtures, except those listed in paragraph (a), clause (6); and
50.3 	(2) petroleum and special fuels used in producing or generating power for propelling 
50.4 	ready-mixed concrete trucks on the public highways of this state.
50.5 	(c) Industrial production includes, but is not limited to, research, development, 
50.6 	design or production of any tangible personal property, manufacturing, processing (other 
50.7 	than by restaurants and consumers) of agricultural products (whether vegetable or animal), 
50.8 	commercial fishing, refining, smelting, reducing, brewing, distilling, printing, mining, 
50.9 	quarrying, lumbering, generating electricity, the production of road building materials, 
50.10 	and the research, development, design, or production of computer software. Industrial 
50.11 	production does not include painting, cleaning, repairing or similar processing of property 
50.12 	except as part of the original manufacturing process.
50.13 	(d) Industrial production does not include:
50.14 	(1) the furnishing of services listed in section 297A.61, subdivision 3, paragraph (g), 
50.15 	clause (6), items (i) to (vi) and (viii) to (xv); or
50.16 	(2) the transportation, transmission, or distribution of petroleum, liquefied gas, 
50.17 	natural gas, water, or steam, in, by, or through pipes, lines, tanks, mains, or other means of 
50.18 	transporting those products. For purposes of this paragraph, "transportation, transmission, 
50.19 	or distribution" does not include blending of petroleum or biodiesel fuel as defined 
50.20 	in section 239.77.

50.21 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
50.22 	December 31, 2009.

50.23 	Sec. 39. Minnesota Statutes 2008, section 297A.68, subdivision 5, is amended to read:
50.24 		Subd. 5.Capital equipment. (a) Capital equipment is exempt. For purchases 
50.25 	made prior to January 1, 2010, the tax must be imposed and collected as if the rate under 
50.26 	section 297A.62, subdivision 1, applied, and then refunded in the manner provided 
50.27 	in section 297A.75.
50.28 	"Capital equipment" means machinery and equipment purchased or leased, and used 
50.29 	in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining, 
50.30 	or refining tangible personal property to be sold ultimately at retail if the machinery 
50.31 	and equipment are essential to the integrated production process of manufacturing, 
50.32 	fabricating, mining, or refining. Capital equipment also includes machinery and 
50.33 	equipment used primarily to electronically transmit results retrieved by a customer of an 
50.34 	online computerized data retrieval system. Capital equipment also includes machinery 
51.1 	and equipment used primarily to produce taxable services, as defined in section 297A.61, 
51.2 	subdivision 3, paragraph (g), clause (6).
51.3 	(b) Capital equipment includes, but is not limited to:
51.4 	(1) machinery and equipment used to operate, control, or regulate the production 
51.5 	equipment;
51.6 	(2) machinery and equipment used for research and development, design, quality 
51.7 	control, and testing activities;
51.8 	(3) environmental control devices that are used to maintain conditions such as 
51.9 	temperature, humidity, light, or air pressure when those conditions are essential to and are 
51.10 	part of the production process;
51.11 	(4) materials and supplies used to construct and install machinery or equipment;
51.12 	(5) repair and replacement parts, including accessories, whether purchased as spare 
51.13 	parts, repair parts, or as upgrades or modifications to machinery or equipment;
51.14 	(6) materials used for foundations that support machinery or equipment;
51.15 	(7) materials used to construct and install special purpose buildings used in the 
51.16 	production process;
51.17 	(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed 
51.18 	as part of the delivery process regardless if mounted on a chassis, repair parts for 
51.19 	ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and
51.20 	(9) machinery or equipment used for research, development, design, or production 
51.21 	of computer software.
51.22 	(c) Capital equipment does not include the following:
51.23 	(1) motor vehicles taxed under chapter 297B;
51.24 	(2) machinery or equipment used to receive or store raw materials;
51.25 	(3) building materials, except for materials included in paragraph (b), clauses (6) 
51.26 	and (7);
51.27 	(4) machinery or equipment used for nonproduction purposes, including, but not 
51.28 	limited to, the following: plant security, fire prevention, first aid, and hospital stations; 
51.29 	support operations or administration; pollution control; and plant cleaning, disposal of 
51.30 	scrap and waste, plant communications, space heating, cooling, lighting, or safety;
51.31 	(5) farm machinery and aquaculture production equipment as defined by section 
51.32 	297A.61, subdivisions 12 and 13;
51.33 	(6) machinery or equipment purchased and installed by a contractor as part of an 
51.34 	improvement to real property;
51.35 	(7) machinery and equipment used by restaurants in the furnishing, preparing, or 
51.36 	serving of prepared foods as defined in section 297A.61, subdivision 31;
52.1 	(8) machinery and equipment used to furnish the services listed in section 297A.61, 
52.2 	subdivision 3, paragraph (g), clause (6), items (i) to (vi) and (viii);
52.3 	(9) machinery or equipment used in the transportation, transmission, or distribution 
52.4 	of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines, 
52.5 	tanks, mains, or other means of transporting those products. This clause does not apply to 
52.6 	machinery or equipment used to blend petroleum or biodiesel fuel as defined in section 
52.7 	239.77; or
52.8 	(10) any other item that is not essential to the integrated process of manufacturing, 
52.9 	fabricating, mining, or refining.
52.10 	(d) For purposes of this subdivision:
52.11 	(1) "Equipment" means independent devices or tools separate from machinery but 
52.12 	essential to an integrated production process, including computers and computer software, 
52.13 	used in operating, controlling, or regulating machinery and equipment; and any subunit or 
52.14 	assembly comprising a component of any machinery or accessory or attachment parts of 
52.15 	machinery, such as tools, dies, jigs, patterns, and molds.
52.16 	(2) "Fabricating" means to make, build, create, produce, or assemble components or 
52.17 	property to work in a new or different manner.
52.18 	(3) "Integrated production process" means a process or series of operations through 
52.19 	which tangible personal property is manufactured, fabricated, mined, or refined. For 
52.20 	purposes of this clause, (i) manufacturing begins with the removal of raw materials 
52.21 	from inventory and ends when the last process prior to loading for shipment has been 
52.22 	completed; (ii) fabricating begins with the removal from storage or inventory of the 
52.23 	property to be assembled, processed, altered, or modified and ends with the creation 
52.24 	or production of the new or changed product; (iii) mining begins with the removal of 
52.25 	overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and 
52.26 	ends when the last process before stockpiling is completed; and (iv) refining begins with 
52.27 	the removal from inventory or storage of a natural resource and ends with the conversion 
52.28 	of the item to its completed form.
52.29 	(4) "Machinery" means mechanical, electronic, or electrical devices, including 
52.30 	computers and computer software, that are purchased or constructed to be used for the 
52.31 	activities set forth in paragraph (a), beginning with the removal of raw materials from 
52.32 	inventory through completion of the product, including packaging of the product.
52.33 	(5) "Machinery and equipment used for pollution control" means machinery and 
52.34 	equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity 
52.35 	described in paragraph (a).
53.1 	(6) "Manufacturing" means an operation or series of operations where raw materials 
53.2 	are changed in form, composition, or condition by machinery and equipment and which 
53.3 	results in the production of a new article of tangible personal property. For purposes of 
53.4 	this subdivision, "manufacturing" includes the generation of electricity or steam to be 
53.5 	sold at retail.
53.6 	(7) "Mining" means the extraction of minerals, ores, stone, or peat.
53.7 	(8) "Online data retrieval system" means a system whose cumulation of information 
53.8 	is equally available and accessible to all its customers.
53.9 	(9) "Primarily" means machinery and equipment used 50 percent or more of the time 
53.10 	in an activity described in paragraph (a).
53.11 	(10) "Refining" means the process of converting a natural resource to an intermediate 
53.12 	or finished product, including the treatment of water to be sold at retail.
53.13 	(11) This subdivision does not apply to telecommunications equipment as 
53.14 	provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit 
53.15 	for telecommunications services.

53.16 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
53.17 	December 31, 2009.

53.18 	Sec. 40. Minnesota Statutes 2008, section 297A.68, subdivision 10, is amended to read:
53.19 		Subd. 10.Publications; publication materials. Tangible personal property that 
53.20 	is used or consumed in producing any publication regularly issued at average intervals 
53.21 	not exceeding three months is exempt, and any such publication is exempt. "Publication" 
53.22 	includes, but is not limited to, a qualified newspaper as defined by section 331A.02, 
53.23 	together with any supplements or enclosures. "Publication" does not include magazines 
53.24 	and periodicals sold over the counter. Tangible personal property that is used or consumed 
53.25 	in producing a publication does not include machinery, equipment, implements, tools, 
53.26 	accessories, appliances, contrivances, furniture, and fixtures used in the publication, or 
53.27 	fuel, electricity, gas, or steam used for space heating or lighting. 
53.28 	Advertising contained in a publication is a nontaxable service and is exempt. 
53.29 	Persons who publish or sell newspapers are engaging in a nontaxable service with 
53.30 	respect to gross receipts realized from such news-gathering or news-publishing activities, 
53.31 	including the sale of advertising.

53.32 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
53.33 	December 31, 2009.

54.1 	Sec. 41. Minnesota Statutes 2008, section 297A.68, is amended by adding a 
54.2 	subdivision to read:
54.3 		Subd. 42.Taxable services used in a trade or business. Purchases of taxable 
54.4 	services, as defined in section 297A.61, subdivision 3, paragraph (g), clause (6), items 
54.5 	(ix) to (xii), by a business are exempt if the purchase qualifies as an ordinary and 
54.6 	necessary business expense that is deductible under the Internal Revenue Code or must be 
54.7 	capitalized and that may be deducted under depreciation or amortization rules under the 
54.8 	Internal Revenue Code.

54.9 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
54.10 	December 31, 2009.

54.11 	Sec. 42. Minnesota Statutes 2008, section 297A.75, subdivision 1, is amended to read:
54.12 		Subdivision 1.Tax collected. The tax on the gross receipts from the sale of the 
54.13 	following exempt items must be imposed and collected as if the sale were taxable and the 
54.14 	rate under section 297A.62, subdivision 1, applied. The exempt items include:
54.15 	(1) capital equipment exempt under section 297A.68, subdivision 5, and purchased 
54.16 	prior to January 1, 2010;
54.17 	(2) building materials for an agricultural processing facility exempt under section 
54.18 	297A.71, subdivision 13;
54.19 	(3) building materials for mineral production facilities exempt under section 
54.20 	297A.71, subdivision 14;
54.21 	(4) building materials for correctional facilities under section 297A.71, subdivision 
54.22 	3;
54.23 	(5) building materials used in a residence for disabled veterans exempt under section 
54.24 	297A.71, subdivision 11;
54.25 	(6) elevators and building materials exempt under section 297A.71, subdivision 12;
54.26 	(7) building materials for the Long Lake Conservation Center exempt under section 
54.27 	297A.71, subdivision 17;
54.28 	(8) materials, supplies, fixtures, furnishings, and equipment for a county law 
54.29 	enforcement and family service center under section 297A.71, subdivision 26;
54.30 	(9) materials and supplies for qualified low-income housing under section 297A.71, 
54.31 	subdivision 23;
54.32 	(10) materials, supplies, and equipment for municipal electric utility facilities under 
54.33 	section 297A.71, subdivision 35;
55.1 	(11) equipment and materials used for the generation, transmission, and distribution 
55.2 	of electrical energy and an aerial camera package exempt under section 297A.68, 
55.3 	subdivision 37;
55.4 	(12) tangible personal property and taxable services and construction materials, 
55.5 	supplies, and equipment exempt under section 297A.68, subdivision 41;
55.6 	(13) commuter rail vehicle and repair parts under section 297A.70, subdivision 
55.7 	3, clause (11); and
55.8 	(14) materials, supplies, and equipment for construction or improvement of projects 
55.9 	and facilities under section 297A.71, subdivision 40.

55.10 	EFFECTIVE DATE. This section is effective the day following final enactment.

55.11 	Sec. 43. Minnesota Statutes 2008, section 297F.05, subdivision 1, is amended to read:
55.12 		Subdivision 1.Rates; cigarettes. A tax is imposed upon the sale of cigarettes in 
55.13 	this state, upon having cigarettes in possession in this state with intent to sell, upon any 
55.14 	person engaged in business as a distributor, and upon the use or storage by consumers, at 
55.15 	the following rates:
55.16 	(1) on cigarettes weighing not more than three pounds per thousand, 24 74 mills on 
55.17 	each such cigarette; and
55.18 	(2) on cigarettes weighing more than three pounds per thousand, 48 148 mills on 
55.19 	each such cigarette.

55.20 	EFFECTIVE DATE. This section is effective January 1, 2010.

55.21 	Sec. 44. [297I.23] MINNESOTA BUSINESS INVESTMENT COMPANY 
55.22 	CREDIT.
55.23 	(a) A participating investor as defined under section 116J.665, subdivision 1, 
55.24 	is allowed a credit against the tax imposed in this chapter equal to 80 percent of the 
55.25 	participating investor's investment of designated capital in a Minnesota business 
55.26 	investment company. Beginning January 1, 2010, a participating investor may claim 
55.27 	the credit as follows:
55.28 	(1) in tax year 2010, an amount equal to 20 percent of the participating investor's 
55.29 	investment of designated capital;
55.30 	(2) in tax year 2011, an amount equal to 20 percent of the participating investor's 
55.31 	investment of designated capital;
55.32 	(3) in tax year 2012, an amount equal to 20 percent of the participating investor's 
55.33 	investment of designated capital; and
56.1 	(4) in tax year 2013, an amount equal to 20 percent of the participating investor's 
56.2 	investment of designated capital.
56.3 	(b) The credit for any taxable year must not exceed the liability for tax under this 
56.4 	chapter for the taxable year. If the amount of the credit determined under this section 
56.5 	for any taxable year exceeds the liability for tax under this chapter, the excess is an 
56.6 	investment tax credit carryover to future taxable years without limitation. Credits may be 
56.7 	used in connection with both final payments and prepayments of a participating investor's 
56.8 	state premium tax liability.
56.9 	(c) A participating investor claiming a credit under this section is not required to pay 
56.10 	any additional retaliatory tax levied as a result of claiming the credit.
56.11 	(d) A participating investor is not required to reduce the amount of tax pursuant to 
56.12 	the state premium tax liability included by the participating investor in connection with 
56.13 	ratemaking for any insurance contract written in this state because of a reduction in the 
56.14 	participating investor's tax liability based on the tax credit allowed under this section.
56.15 	(e) If the taxes paid by a participating investor with respect to its state premium 
56.16 	tax liability constitute a credit against any other tax that is imposed by this state, the 
56.17 	participating investor's credit against the other tax shall not be reduced by virtue of the 
56.18 	reduction in the participating investor's tax liability based on the tax credit allowed 
56.19 	under this section.
56.20 	(f) Final decertification of a Minnesota business investment company under section 
56.21 	116J.665 may result in the disallowance and the recapture of the credit allowed under this 
56.22 	section. The amount to be disallowed and recaptured must be assessed as follows:
56.23 	(1) decertification of a Minnesota business investment company within two years of 
56.24 	its allocation date and prior to meeting the requirements of section 116J.665, subdivision 
56.25 	5, paragraph (a), clause (1), shall result in the disallowance of all of the credits allowed 
56.26 	under this section;
56.27 	(2) decertification of a Minnesota business investment company that has already met 
56.28 	the requirements of section 116J.665, subdivision 5, paragraph (a), clause (1), shall not 
56.29 	cause the disallowance of any credits allowed under this section nor the recapture of any 
56.30 	portion of the credits that was previously taken.
56.31 	(g) A participating investor must not transfer, agree to transfer, sell, or agree to 
56.32 	sell the credit under this section until 180 days from the date on which the participating 
56.33 	investor invested designated capital. After 180 days from the date of investment, a 
56.34 	participating investor, or subsequent transferee, may transfer credits based upon rules 
56.35 	adopted by the department to facilitate such transfers. Any transfer or sale of the credits 
56.36 	does not affect the time schedule for claiming the credit. Any tax credits recaptured 
57.1 	under this section remain the liability of the participating investor that actually applied 
57.2 	the credit towards its tax liability.

57.3 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
57.4 	December 31, 2009.

57.5 	Sec. 45. FLOOR STOCKS TAX.
 57.6 		Subdivision 1.Cigarettes. (a) A floor stocks cigarette sales tax is imposed on every 
57.7 	person engaged in the business in this state as a distributor, retailer, subjobber, vendor, 
57.8 	manufacturer, or manufacturer's representative of cigarettes, on the stamped cigarettes and 
57.9 	unaffixed stamps in the person's possession or under the person's control at 12:01 a.m. on 
57.10 	January 1, 2010. The tax is imposed at the rate of $1 per pack of 20 cigarettes. For packs 
57.11 	of cigarettes with other than 20 cigarettes, the tax shall be adjusted proportionally.
57.12 	(b) Each distributor, by February 15, 2010, shall file a return with the commissioner, 
57.13 	in the form the commissioner prescribes, showing the stamped cigarettes and unaffixed 
57.14 	stamps on hand at 12:01 a.m. on January 1, 2010, and the amount of tax due on the 
57.15 	cigarettes and unaffixed stamps. The tax imposed by this section is due and payable by 
57.16 	February 1, 2010, and after that date bears interest at the rate of one percent per month.
57.17 	(c) Each retailer, subjobber, vendor, manufacturer, or manufacturer's representative, 
57.18 	by February 15, 2010, shall file a return with the commissioner, in the form the 
57.19 	commissioner prescribes, showing the cigarettes on hand at 12:01 a.m. on January 1, 
57.20 	2010, and the amount of tax due on the cigarettes. The tax imposed by this section 
57.21 	is due and payable by February 1, 2010, and after that date bears interest at the rate of 
57.22 	one percent per month.
57.23 		Subd. 2.Audit and enforcement. The tax imposed by this section is subject to 
57.24 	the audit, assessment, penalty, and collection provisions applicable to the taxes imposed 
57.25 	under Minnesota Statutes, chapter 297F. The commissioner may require a distributor to 
57.26 	receive and maintain copies of floor stocks tax returns filed by all persons requesting 
57.27 	a credit for returned cigarettes.
57.28 		Subd. 3.Deposit of revenues. The revenue from the tax imposed under this 
57.29 	section shall be deposited by the commissioner in the state treasury and credited to the 
57.30 	general fund.

57.31 	EFFECTIVE DATE. This section is effective the day following final enactment.

57.32 	Sec. 46. ADJUSTMENT OF CIGARETTE SALES TAX.
 58.1 	Notwithstanding the provisions of Minnesota Statutes, section 297F.25, the 
58.2 	commissioner of revenue shall adjust the cigarette sales tax rate under Minnesota Statutes, 
58.3 	section 297F.25, effective January 1, 2010, to reflect the estimated effect on the average 
58.4 	weighted retail price of cigarettes of the imposition of the increased cigarette taxes under 
58.5 	section 43.

58.6 	EFFECTIVE DATE. This section is effective the day following final enactment.

58.7 	Sec. 47.  REPEALER.
 58.8 	Minnesota Statutes 2008, sections 289A.08, subdivision 3; 289A.19, subdivision 
58.9 	2; 289A.26; 290.01, subdivisions 5, 5a, 6b, 19c, 19d, and 19e; 290.014, subdivision 5; 
58.10 	290.02; 290.06, subdivisions 1, 24, and 27; 290.0921, subdivisions 1, 2, 3, 3a, 4, 6, 7, and 
58.11 	8; 290.21, subdivisions 1 and 4; 290.34, subdivisions 1 and 2; 290.371, subdivisions 1, 
58.12 	2, 3, and 4; 290.432; 297A.67, subdivisions 8, 9, 10, 13, 13a, 14, 16, 17, 18, 19, 21, 27, 
58.13 	and 29; 297A.70, subdivisions 10 and 12; 298.01, subdivisions 3, 3a, 3b, 4, 4a, 4b, 4c, 5, 
58.14 	and 6; and 298.17, are repealed.

58.15 	EFFECTIVE DATE. The provisions of this section relating to income, corporate 
58.16 	franchise, and mining taxation are effective for taxable years beginning after December 
58.17 	31, 2009. The provisions of this section relating to sales and use taxation are effective 
58.18 	for sales and purchases made after December 31, 2009.