1.1 	A bill for an act
1.2 	relating to taxation; eliminating property tax exemptions for certain airport 
1.3 	property; eliminating the preferences for foreign source income; repealing the 
1.4 	subtraction for foreign royalties; taxing certain development subsidies; expanding 
1.5 	the definition of domestic corporations to include certain foreign corporations 
1.6 	incorporated or doing business in tax havens; modifying JOBZ and biotechnology 
1.7 	and health science industry zones; repealing international economic development 
1.8 	zones; reducing the corporate franchise tax rates; repealing the research credit; 
1.9 	repealing foreign operating corporations; repealing the special apportionment 
1.10 	formula for certain mail order businesses;amending Minnesota Statutes 2010, 
1.11 	sections 275.025, subdivisions 1, 2; 289A.08, subdivision 3; 290.01, subdivisions 
1.12 	5, 19c, 19d, 29, by adding subdivisions; 290.06, subdivision 1; 290.0921, 
1.13 	subdivision 1; 290.17, subdivision 4; 290.191, subdivisions 2, 3; repealing 
1.14 	Minnesota Statutes 2010, sections 290.01, subdivision 6b; 290.06, subdivisions 
1.15 	24, 28, 29, 30, 31, 32; 290.068, subdivisions 1, 2, 3, 4, 5, 6a, 7; 290.0921, 
1.16 	subdivision 7; 290.191, subdivision 4; 469.317; 469.318; 469.321; 469.322; 
1.17 	469.323; 469.324; 469.325; 469.326; 469.327; 469.328; 469.329; 469.337; 
1.18 	469.338; 469.339.
1.19 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.20 	Section 1. Minnesota Statutes 2010, section 275.025, subdivision 1, is amended to read:
1.21 		Subdivision 1.Levy amount. The state general levy is levied against 
1.22 	commercial-industrial property and seasonal residential recreational property, as defined 
1.23 	in this section. The state general levy base amount is $592,000,000 for taxes payable in 
1.24 	2002. For taxes payable in subsequent years, the levy base amount is increased each year 
1.25 	by multiplying the levy base amount for the prior year by the sum of one plus the rate of 
1.26 	increase, if any, in the implicit price deflator for government consumption expenditures 
1.27 	and gross investment for state and local governments prepared by the Bureau of Economic 
1.28 	Analysts of the United States Department of Commerce for the 12-month period ending 
1.29 	March 31 of the year prior to the year the taxes are payable. The tax under this section is 
2.1 	not treated as a local tax rate under section 469.177 and is not the levy of a governmental 
2.2 	unit under chapters 276A and 473F.
2.3 	In setting the rate, the commissioner shall exclude the tax capacity of property 
2.4 	described in section 473.625 from the tax base. The commissioner shall increase or 
2.5 	decrease the preliminary or final rate for a year as necessary to account for errors and tax 
2.6 	base changes that affected a preliminary or final rate for either of the two preceding years. 
2.7 	Adjustments are allowed to the extent that the necessary information is available to the 
2.8 	commissioner at the time the rates for a year must be certified, and for the following 
2.9 	reasons:
2.10 	(1) an erroneous report of taxable value by a local official;
2.11 	(2) an erroneous calculation by the commissioner; and
2.12 	(3) an increase or decrease in taxable value for commercial-industrial or seasonal 
2.13 	residential recreational property reported on the abstracts of tax lists submitted under 
2.14 	section 275.29 that was not reported on the abstracts of assessment submitted under 
2.15 	section 270C.89 for the same year.
2.16 	The commissioner may, but need not, make adjustments if the total difference in the tax 
2.17 	levied for the year would be less than $100,000.

2.18 	EFFECTIVE DATE. This section is effective for taxes payable in 2012 and 
2.19 	thereafter.

2.20 	Sec. 2. Minnesota Statutes 2010, section 275.025, subdivision 2, is amended to read:
2.21 		Subd. 2.Commercial-industrial tax capacity. For the purposes of this section, 
2.22 	"commercial-industrial tax capacity" means the tax capacity of all taxable property 
2.23 	classified as class 3 or class 5(1) under section 273.13, except for electric generation 
2.24 	attached machinery under class 3 ~~and property described in section 473.625~~. County 
2.25 	commercial-industrial tax capacity amounts are not adjusted for the captured net tax 
2.26 	capacity of a tax increment financing district under section 469.177, subdivision 2, the 
2.27 	net tax capacity of transmission lines deducted from a local government's total net tax 
2.28 	capacity under section 273.425, or fiscal disparities contribution and distribution net 
2.29 	tax capacities under chapter 276A or 473F. 

2.30 	EFFECTIVE DATE. This section is effective for taxes payable in 2012 and 
2.31 	thereafter.

2.32 	Sec. 3. Minnesota Statutes 2010, section 289A.08, subdivision 3, is amended to read:
3.1 		Subd. 3.Corporations. (a) A corporation that is subject to the state's jurisdiction to 
3.2 	tax under section 290.014, subdivision 5, must file a return~~, except that a foreign operating~~ 
3.3 	~~corporation as defined in section 290.01, subdivision 6b, is not required to file a return~~.
3.4 	(b) Members of a unitary business that are required to file a combined report on one 
3.5 	return must designate a member of the unitary business to be responsible for tax matters, 
3.6 	including the filing of returns, the payment of taxes, additions to tax, penalties, interest, 
3.7 	or any other payment, and for the receipt of refunds of taxes or interest paid in excess of 
3.8 	taxes lawfully due. The designated member must be a member of the unitary business that 
3.9 	is filing the single combined report and either:
3.10 	(1) a corporation that is subject to the taxes imposed by chapter 290; or
3.11 	(2) a corporation that is not subject to the taxes imposed by chapter 290:
3.12 	(i) Such corporation consents by filing the return as a designated member under this 
3.13 	clause to remit taxes, penalties, interest, or additions to tax due from the members of the 
3.14 	unitary business subject to tax, and receive refunds or other payments on behalf of other 
3.15 	members of the unitary business. The member designated under this clause is a "taxpayer" 
3.16 	for the purposes of this chapter and chapter 270C, and is liable for any liability imposed 
3.17 	on the unitary business under this chapter and chapter 290.
3.18 	(ii) If the state does not otherwise have the jurisdiction to tax the member designated 
3.19 	under this clause, consenting to be the designated member does not create the jurisdiction 
3.20 	to impose tax on the designated member, other than as described in item (i).
3.21 	(iii) The member designated under this clause must apply for a business tax account 
3.22 	identification number.
3.23 	(c) The commissioner shall adopt rules for the filing of one return on behalf of the 
3.24 	members of an affiliated group of corporations that are required to file a combined report. 
3.25 	All members of an affiliated group that are required to file a combined report must file one 
3.26 	return on behalf of the members of the group under rules adopted by the commissioner.
3.27 	(d) If a corporation claims on a return that it has paid tax in excess of the amount of 
3.28 	taxes lawfully due, that corporation must include on that return information necessary for 
3.29 	payment of the tax in excess of the amount lawfully due by electronic means.

3.30 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
3.31 	beginning after December 31, 2010.

3.32 	Sec. 4. Minnesota Statutes 2010, section 290.01, subdivision 5, is amended to read:
3.33 		Subd. 5.Domestic corporation. The term "domestic" when applied to a corporation 
3.34 	means a corporation:
4.1 	(1) created or organized in the United States, or under the laws of the United States 
4.2 	or of any state, the District of Columbia, or any political subdivision of any of the 
4.3 	foregoing but not including the Commonwealth of Puerto Rico, or any possession of 
4.4 	the United States;
4.5 	(2) which qualifies as a DISC, as defined in section 992(a) of the Internal Revenue 
4.6 	Code; ~~or~~
4.7 	(3) which qualifies as a FSC, as defined in section 922 of the Internal Revenue Code~~.~~;
4.8 	(4) which is incorporated in a tax haven;
4.9 	(5) which is engaged in activity in a tax haven sufficient for the tax haven to impose 
4.10 	a net income tax under United States constitutional standards and section 290.015, and 
4.11 	which reports that 20 percent or more of its income is attributable to business in the tax 
4.12 	haven; or
4.13 	(6) which has the average of its property, payroll, and sales factors, as defined under 
4.14 	section 290.191, within the 50 states of the United States and the District of Columbia, of 
4.15 	20 percent or more.

4.16 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
4.17 	beginning after December 31, 2010.

4.18 	Sec. 5. Minnesota Statutes 2010, section 290.01, is amended by adding a subdivision 
4.19 	to read:
4.20 		Subd. 5c.Tax haven. (a) "Tax haven" means the following foreign jurisdictions, 
4.21 	unless the listing of the jurisdiction does not apply under paragraph (b):
4.22 	(1) Andorra;
4.23 	(2) Anguilla;
4.24 	(3) Antigua and Barbuda;
4.25 	(4) Aruba;
4.26 	(5) Bahamas;
4.27 	(6) Bahrain;
4.28 	(7) Belize;
4.29 	(8) British Virgin Islands;
4.30 	(9) Cayman Islands;
4.31 	(10) Cook Islands;
4.32 	(11) Costa Rica;
4.33 	(12) Dominica;
4.34 	(13) Gibraltar;
4.35 	(14) Grenada;
5.1 	(15) Guernsey-Sark-Alderney;
5.2 	(16) Jersey;
5.3 	(17) Jordan;
5.4 	(18) Lebanon;
5.5 	(19) Liberia;
5.6 	(20) Liechtenstein;
5.7 	(21) Maldives;
5.8 	(22) Marshall Islands;
5.9 	(23) Monaco;
5.10 	(24) Montserrat;
5.11 	(25) Nauru;
5.12 	(26) Netherlands Antilles;
5.13 	(27) Niue;
5.14 	(28) Panama;
5.15 	(29) St. Kitts and Nevis;
5.16 	(30) St. Lucia;
5.17 	(31) St. Vincent and Grenadines;
5.18 	(32) Tonga;
5.19 	(33) Turks and Caicos; and
5.20 	(34) Vanuatu.
5.21 	(b) A foreign jurisdiction's listing under paragraph (a) does not apply to the first 
5.22 	taxable year after the United States enters into a tax treaty or other agreement with the 
5.23 	foreign jurisdiction that provides for prompt, obligatory, and automatic exchange of 
5.24 	information with the United States government relevant to enforcing the provisions of 
5.25 	federal tax laws and the treaty or other agreement was in effect for the taxable year.

5.26 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
5.27 	beginning after December 31, 2010.

5.28 	Sec. 6. Minnesota Statutes 2010, section 290.01, subdivision 19c, is amended to read:
5.29 		Subd. 19c.Corporations; additions to federal taxable income. For corporations, 
5.30 	there shall be added to federal taxable income:
5.31 	(1) the amount of any deduction taken for federal income tax purposes for income, 
5.32 	excise, or franchise taxes based on net income or related minimum taxes, including but not 
5.33 	limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota, 
5.34 	another state, a political subdivision of another state, the District of Columbia, or any 
5.35 	foreign country or possession of the United States;
6.1 	(2) interest not subject to federal tax upon obligations of: the United States, its 
6.2 	possessions, its agencies, or its instrumentalities; the state of Minnesota or any other 
6.3 	state, any of its political or governmental subdivisions, any of its municipalities, or any 
6.4 	of its governmental agencies or instrumentalities; the District of Columbia; or Indian 
6.5 	tribal governments;
6.6 	(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal 
6.7 	Revenue Code;
6.8 	(4) the amount of any net operating loss deduction taken for federal income tax 
6.9 	purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss 
6.10 	deduction under section 810 of the Internal Revenue Code;
6.11 	(5) the amount of any special deductions taken for federal income tax purposes 
6.12 	under sections 241 to 247 and 965 of the Internal Revenue Code;
6.13 	(6) losses from the business of mining, as defined in section 290.05, subdivision 1, 
6.14 	clause (a), that are not subject to Minnesota income tax;
6.15 	(7) the amount of any capital losses deducted for federal income tax purposes under 
6.16 	sections 1211 and 1212 of the Internal Revenue Code;
6.17 	(8) the exempt foreign trade income of a foreign sales corporation under sections 
6.18 	921(a) and 291 of the Internal Revenue Code;
6.19 	(9) the amount of percentage depletion deducted under sections 611 through 614 and 
6.20 	291 of the Internal Revenue Code;
6.21 	(10) for certified pollution control facilities placed in service in a taxable year 
6.22 	beginning before December 31, 1986, and for which amortization deductions were elected 
6.23 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
6.24 	31, 1985, the amount of the amortization deduction allowed in computing federal taxable 
6.25 	income for those facilities;
6.26 	(11) for taxable years beginning before January 1, 2011, the amount of any deemed 
6.27 	dividend from a foreign operating corporation determined pursuant to section 290.17, 
6.28 	subdivision 4, paragraph (g). The deemed dividend shall be reduced by the amount of the 
6.29 	addition to income required by clauses (20), (21), (22), and (23);
6.30 	(12) the amount of a partner's pro rata share of net income which does not flow 
6.31 	through to the partner because the partnership elected to pay the tax on the income under 
6.32 	section 6242(a)(2) of the Internal Revenue Code;
6.33 	(13) the amount of net income excluded under section 114 of the Internal Revenue 
6.34 	Code;
7.1 	(14) any increase in subpart F income, as defined in section 952(a) of the Internal 
7.2 	Revenue Code, for the taxable year when subpart F income is calculated without regard to 
7.3 	the provisions of Division C, title III, section 303(b) of Public Law 110-343;
7.4 	(15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A) 
7.5 	and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer 
7.6 	has an activity that in the taxable year generates a deduction for depreciation under 
7.7 	section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year 
7.8 	that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed 
7.9 	under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the 
7.10 	depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the 
7.11 	amount of the loss from the activity that is not allowed in the taxable year. In succeeding 
7.12 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
7.13 	under section 168(k)(1)(A) and (k)(4)(A) is allowed;
7.14 	(16) 80 percent of the amount by which the deduction allowed by section 179 of the 
7.15 	Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 
7.16 	Revenue Code of 1986, as amended through December 31, 2003;
7.17 	(17) to the extent deducted in computing federal taxable income, the amount of the 
7.18 	deduction allowable under section 199 of the Internal Revenue Code;
7.19 	(18) the exclusion allowed under section 139A of the Internal Revenue Code for 
7.20 	federal subsidies for prescription drug plans;
7.21 	(19) the amount of expenses disallowed under section 290.10, subdivision 2;
7.22 	(20) for taxable years beginning before January 1, 2011, an amount equal to the 
7.23 	interest and intangible expenses, losses, and costs paid, accrued, or incurred by any 
7.24 	member of the taxpayer's unitary group to or for the benefit of a corporation that is a 
7.25 	member of the taxpayer's unitary business group that qualifies as a foreign operating 
7.26 	corporation. For purposes of this clause, intangible expenses and costs include:
7.27 	(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition, 
7.28 	use, maintenance or management, ownership, sale, exchange, or any other disposition of 
7.29 	intangible property;
7.30 	(ii) losses incurred, directly or indirectly, from factoring transactions or discounting 
7.31 	transactions;
7.32 	(iii) royalty, patent, technical, and copyright fees;
7.33 	(iv) licensing fees; and
7.34 	(v) other similar expenses and costs.
8.1 	For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent 
8.2 	applications, trade names, trademarks, service marks, copyrights, mask works, trade 
8.3 	secrets, and similar types of intangible assets.
8.4 	This clause does not apply to any item of interest or intangible expenses or costs paid, 
8.5 	accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect 
8.6 	to such item of income to the extent that the income to the foreign operating corporation 
8.7 	is income from sources without the United States as defined in subtitle A, chapter 1, 
8.8 	subchapter N, part 1, of the Internal Revenue Code;
8.9 	(21) for taxable years beginning before January 1, 2011, except as already included 
8.10 	in the taxpayer's taxable income pursuant to clause (20), any interest income and income 
8.11 	generated from intangible property received or accrued by a foreign operating corporation 
8.12 	that is a member of the taxpayer's unitary group. For purposes of this clause, income 
8.13 	generated from intangible property includes:
8.14 	(i) income related to the direct or indirect acquisition, use, maintenance or 
8.15 	management, ownership, sale, exchange, or any other disposition of intangible property;
8.16 	(ii) income from factoring transactions or discounting transactions;
8.17 	(iii) royalty, patent, technical, and copyright fees;
8.18 	(iv) licensing fees; and
8.19 	(v) other similar income.
8.20 	For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent 
8.21 	applications, trade names, trademarks, service marks, copyrights, mask works, trade 
8.22 	secrets, and similar types of intangible assets.
8.23 	This clause does not apply to any item of interest or intangible income received or accrued 
8.24 	by a foreign operating corporation with respect to such item of income to the extent that 
8.25 	the income is income from sources without the United States as defined in subtitle A, 
8.26 	chapter 1, subchapter N, part 1, of the Internal Revenue Code;
8.27 	(22) for taxable years beginning before January 1, 2011, the dividends attributable to 
8.28 	the income of a foreign operating corporation that is a member of the taxpayer's unitary 
8.29 	group in an amount that is equal to the dividends paid deduction of a real estate investment 
8.30 	trust under section 561(a) of the Internal Revenue Code for amounts paid or accrued by 
8.31 	the real estate investment trust to the foreign operating corporation;
8.32 	(23) for taxable years beginning before January 1, 2011, the income of a foreign 
8.33 	operating corporation that is a member of the taxpayer's unitary group in an amount that 
8.34 	is equal to gains derived from the sale of real or personal property located in the United 
8.35 	States;
9.1 	(24) the additional amount allowed as a deduction for donation of computer 
9.2 	technology and equipment under section 170(e)(6) of the Internal Revenue Code, to the 
9.3 	extent deducted from taxable income; and
9.4 	(25) discharge of indebtedness income resulting from reacquisition of business 
9.5 	indebtedness and deferred under section 108(i) of the Internal Revenue Code.

9.6 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
9.7 	beginning after December 31, 2010.

9.8 	Sec. 7. Minnesota Statutes 2010, section 290.01, subdivision 19d, is amended to read:
9.9 		Subd. 19d.Corporations; modifications decreasing federal taxable income. For 
9.10 	corporations, there shall be subtracted from federal taxable income after the increases 
9.11 	provided in subdivision 19c:
9.12 	(1) the amount of foreign dividend gross-up added to gross income for federal 
9.13 	income tax purposes under section 78 of the Internal Revenue Code;
9.14 	(2) the amount of salary expense not allowed for federal income tax purposes due to 
9.15 	claiming the work opportunity credit under section 51 of the Internal Revenue Code;
9.16 	(3) any dividend (not including any distribution in liquidation) paid within the 
9.17 	taxable year by a national or state bank to the United States, or to any instrumentality of 
9.18 	the United States exempt from federal income taxes, on the preferred stock of the bank 
9.19 	owned by the United States or the instrumentality;
9.20 	(4) amounts disallowed for intangible drilling costs due to differences between 
9.21 	this chapter and the Internal Revenue Code in taxable years beginning before January 
9.22 	1, 1987, as follows:
9.23 	(i) to the extent the disallowed costs are represented by physical property, an amount 
9.24 	equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09, 
9.25 	subdivision 7, subject to the modifications contained in subdivision 19e; and
9.26 	(ii) to the extent the disallowed costs are not represented by physical property, an 
9.27 	amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section 
9.28 	290.09, subdivision 8;
9.29 	(5) the deduction for capital losses pursuant to sections 1211 and 1212 of the 
9.30 	Internal Revenue Code, except that:
9.31 	(i) for capital losses incurred in taxable years beginning after December 31, 1986, 
9.32 	capital loss carrybacks shall not be allowed;
9.33 	(ii) for capital losses incurred in taxable years beginning after December 31, 1986, 
9.34 	a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be 
9.35 	allowed;
10.1 	(iii) for capital losses incurred in taxable years beginning before January 1, 1987, a 
10.2 	capital loss carryback to each of the three taxable years preceding the loss year, subject to 
10.3 	the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
10.4 	(iv) for capital losses incurred in taxable years beginning before January 1, 1987, 
10.5 	a capital loss carryover to each of the five taxable years succeeding the loss year to the 
10.6 	extent such loss was not used in a prior taxable year and subject to the provisions of 
10.7 	Minnesota Statutes 1986, section 290.16, shall be allowed;
10.8 	(6) an amount for interest and expenses relating to income not taxable for federal 
10.9 	income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and 
10.10 	expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or 
10.11 	291 of the Internal Revenue Code in computing federal taxable income;
10.12 	(7) in the case of mines, oil and gas wells, other natural deposits, and timber for 
10.13 	which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a 
10.14 	reasonable allowance for depletion based on actual cost. In the case of leases the deduction 
10.15 	must be apportioned between the lessor and lessee in accordance with rules prescribed 
10.16 	by the commissioner. In the case of property held in trust, the allowable deduction must 
10.17 	be apportioned between the income beneficiaries and the trustee in accordance with the 
10.18 	pertinent provisions of the trust, or if there is no provision in the instrument, on the basis 
10.19 	of the trust's income allocable to each;
10.20 	(8) for certified pollution control facilities placed in service in a taxable year 
10.21 	beginning before December 31, 1986, and for which amortization deductions were elected 
10.22 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
10.23 	31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes 
10.24 	1986, section 290.09, subdivision 7;
10.25 	(9) amounts included in federal taxable income that are due to refunds of income, 
10.26 	excise, or franchise taxes based on net income or related minimum taxes paid by the 
10.27 	corporation to Minnesota, another state, a political subdivision of another state, the 
10.28 	District of Columbia, or a foreign country or possession of the United States to the extent 
10.29 	that the taxes were added to federal taxable income under section 290.01, subdivision 19c, 
10.30 	clause (1), in a prior taxable year;
10.31 	(10) for taxable years beginning before January 1, 2011, 80 percent of royalties, 
10.32 	fees, or other like income accrued or received from a foreign operating corporation 
10.33 	or a foreign corporation which is part of the same unitary business as the receiving 
10.34 	corporation, unless the income resulting from such payments or accruals is income from 
10.35 	sources within the United States as defined in subtitle A, chapter 1, subchapter N, part 
10.36 	1, of the Internal Revenue Code;
11.1 	(11) income or gains from the business of mining as defined in section 290.05, 
11.2 	subdivision 1, clause (a), that are not subject to Minnesota franchise tax;
11.3 	(12) the amount of disability access expenditures in the taxable year which are not 
11.4 	allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
11.5 	(13) the amount of qualified research expenses not allowed for federal income tax 
11.6 	purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that 
11.7 	the amount exceeds the amount of the credit allowed under section 290.068;
11.8 	(14) the amount of salary expenses not allowed for federal income tax purposes due 
11.9 	to claiming the Indian employment credit under section 45A(a) of the Internal Revenue 
11.10 	Code;
11.11 	(15) for a corporation whose foreign sales corporation, as defined in section 922 
11.12 	of the Internal Revenue Code, constituted a foreign operating corporation during any 
11.13 	taxable year ending before January 1, 1995, and a return was filed by August 15, 1996, 
11.14 	claiming the deduction under section 290.21, subdivision 4, for income received from 
11.15 	the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of 
11.16 	income excluded under section 114 of the Internal Revenue Code, provided the income is 
11.17 	not income of a foreign operating company;
11.18 	(16) any decrease in subpart F income, as defined in section 952(a) of the Internal 
11.19 	Revenue Code, for the taxable year when subpart F income is calculated without regard to 
11.20 	the provisions of Division C, title III, section 303(b) of Public Law 110-343;
11.21 	(17) in each of the five tax years immediately following the tax year in which an 
11.22 	addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of 
11.23 	the delayed depreciation. For purposes of this clause, "delayed depreciation" means the 
11.24 	amount of the addition made by the taxpayer under subdivision 19c, clause (15). The 
11.25 	resulting delayed depreciation cannot be less than zero;
11.26 	(18) in each of the five tax years immediately following the tax year in which an 
11.27 	addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of 
11.28 	the amount of the addition; and
11.29 	(19) to the extent included in federal taxable income, discharge of indebtedness 
11.30 	income resulting from reacquisition of business indebtedness included in federal taxable 
11.31 	income under section 108(i) of the Internal Revenue Code. This subtraction applies only 
11.32 	to the extent that the income was included in net income in a prior year as a result of the 
11.33 	addition under section 290.01, subdivision 19c, clause (25).

11.34 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
11.35 	beginning after December 31, 2010.

12.1 	Sec. 8. Minnesota Statutes 2010, section 290.01, subdivision 29, is amended to read:
12.2 		Subd. 29.Taxable income. The term "taxable income" means:
12.3 	(1) for individuals, estates, and trusts, the same as taxable net income;
12.4 	(2) for corporations, the taxable net income less
12.5 	(i) the net operating loss deduction under section 290.095; and
12.6 	(ii) the dividends received deduction under section 290.21, subdivision 4; plus
12.7 	(iii) ~~the exemption for operating in a job opportunity building zone under section~~ 
12.8 	~~469.317;~~ Minnesota development subsidies.
12.9 	~~(iv) the exemption for operating in a biotechnology and health sciences industry~~ 
12.10 	~~zone under section 469.337; and~~
12.11 	~~(v) the exemption for operating in an international economic development zone~~ 
12.12 	~~under section 469.326.~~

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

12.15 	Sec. 9. Minnesota Statutes 2010, section 290.01, is amended by adding a subdivision 
12.16 	to read:
12.17 		Subd. 33.Minnesota development subsidies. (a) "Minnesota development 
12.18 	subsidies" means the greater of the following amounts:
12.19 	(1) one-half of the amount deducted by the taxpayer in computing federal taxable 
12.20 	income for the taxable year, as property taxes, business expenses, or otherwise, that is 
12.21 	attributable to property taxes paid by the taxpayer, either directly or indirectly through a 
12.22 	lease or otherwise, on property located in a tax increment financing district, as defined in 
12.23 	section 469.174, or that receives an abatement under sections 469.1813 to 469.1815, if the 
12.24 	owner of the property or a related party has entered a development or similar agreement 
12.25 	with respect to the increment district or derives a benefit from the abatement by its 
12.26 	property having access to or use of public improvements financed with the abatement or 
12.27 	otherwise; or
12.28 	(2) the amount of payments received by the taxpayer under a development or similar 
12.29 	agreement that provides for payments or reimbursements from the proceeds of increments 
12.30 	from a tax increment financing district or from an abatement under sections 469.1813 to 
12.31 	469.1815, but excluding reimbursements under a development action response plan, as 
12.32 	defined in section 469.174, subdivision 17, to pay for its costs incurred to fund removal 
12.33 	or remedial actions.

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

13.3 	Sec. 10. Minnesota Statutes 2010, section 290.06, subdivision 1, is amended to read:
13.4 		Subdivision 1.Computation, corporations. The franchise tax imposed upon 
13.5 	corporations shall be computed by applying to their taxable income the rate of ~~9.8~~ 7.5
13.6 	percent.

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

13.9 	Sec. 11. Minnesota Statutes 2010, section 290.0921, subdivision 1, is amended to read:
13.10 		Subdivision 1.Tax imposed. In addition to the taxes computed under this chapter 
13.11 	without regard to this section, the franchise tax imposed on corporations includes a tax 
13.12 	equal to the excess, if any, for the taxable year of:
13.13 	(1) ~~5.8~~ 4.5 percent of Minnesota alternative minimum taxable income; over
13.14 	(2) the tax imposed under section 290.06, subdivision 1, without regard to this 
13.15 	section.

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

13.18 	Sec. 12. Minnesota Statutes 2010, section 290.17, subdivision 4, is amended to read:
13.19 		Subd. 4.Unitary business principle. (a) If a trade or business conducted wholly 
13.20 	within this state or partly within and partly without this state is part of a unitary business, 
13.21 	the entire income of the unitary business is subject to apportionment pursuant to section 
13.22 	290.191. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary 
13.23 	business is considered to be derived from any particular source and none may be allocated 
13.24 	to a particular place except as provided by the applicable apportionment formula. The 
13.25 	provisions of this subdivision do not apply to business income subject to subdivision 5, 
13.26 	income of an insurance company, or income of an investment company determined under 
13.27 	section 290.36.
13.28 	(b) The term "unitary business" means business activities or operations which 
13.29 	result in a flow of value between them. The term may be applied within a single legal 
13.30 	entity or between multiple entities and without regard to whether each entity is a sole 
13.31 	proprietorship, a corporation, a partnership or a trust.
14.1 	(c) Unity is presumed whenever there is unity of ownership, operation, and use, 
14.2 	evidenced by centralized management or executive force, centralized purchasing, 
14.3 	advertising, accounting, or other controlled interaction, but the absence of these 
14.4 	centralized activities will not necessarily evidence a nonunitary business. Unity is also 
14.5 	presumed when business activities or operations are of mutual benefit, dependent upon or 
14.6 	contributory to one another, either individually or as a group.
14.7 	(d) Where a business operation conducted in Minnesota is owned by a business 
14.8 	entity that carries on business activity outside the state different in kind from that 
14.9 	conducted within this state, and the other business is conducted entirely outside the state, it 
14.10 	is presumed that the two business operations are unitary in nature, interrelated, connected, 
14.11 	and interdependent unless it can be shown to the contrary.
14.12 	(e) Unity of ownership is not deemed to exist when a corporation is involved unless 
14.13 	that corporation is a member of a group of two or more business entities and more than 50 
14.14 	percent of the voting stock of each member of the group is directly or indirectly owned 
14.15 	by a common owner or by common owners, either corporate or noncorporate, or by one 
14.16 	or more of the member corporations of the group. For this purpose, the term "voting 
14.17 	stock" shall include membership interests of mutual insurance holding companies formed 
14.18 	under section 66A.40.
14.19 	(f) The net income and apportionment factors under section 290.191 or 290.20 of 
14.20 	foreign corporations and other foreign entities which are part of a unitary business shall 
14.21 	not be included in the net income or the apportionment factors of the unitary business. 
14.22 	A foreign corporation or other foreign entity which is required to file a return under this 
14.23 	chapter shall file on a separate return basis. ~~The net income and apportionment factors~~ 
14.24 	~~under section 290.191 or 290.20 of foreign operating corporations shall not be included in~~ 
14.25 	~~the net income or the apportionment factors of the unitary business except as provided~~ 
14.26 	~~in paragraph (g).~~ The legislature intends that the provisions of this paragraph are not 
14.27 	severable from the provisions of section 290.01, subdivision 5, clauses (4) to (6), and if 
14.28 	any of those provisions are found to be unconstitutional, the provisions of this paragraph 
14.29 	are void for the respective taxable years.
14.30 	~~(g) The adjusted net income of a foreign operating corporation shall be deemed to~~ 
14.31 	~~be paid as a dividend on the last day of its taxable year to each shareholder thereof, in~~ 
14.32 	~~proportion to each shareholder's ownership, with which such corporation is engaged in~~ 
14.33 	~~a unitary business. Such deemed dividend shall be treated as a dividend under section~~ 
14.34 	~~290.21, subdivision 4.~~
14.35 	~~Dividends actually paid by a foreign operating corporation to a corporate shareholder~~ 
14.36 	~~which is a member of the same unitary business as the foreign operating corporation shall~~ 
15.1 	~~be eliminated from the net income of the unitary business in preparing a combined report~~ 
15.2 	~~for the unitary business. The adjusted net income of a foreign operating corporation~~ 
15.3 	~~shall be its net income adjusted as follows:~~
15.4 	~~(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto~~ 
15.5 	~~Rico, or a United States possession or political subdivision of any of the foregoing shall~~ 
15.6 	~~be a deduction; and~~
15.7 	~~(2) the subtraction from federal taxable income for payments received from foreign~~ 
15.8 	~~corporations or foreign operating corporations under section 290.01, subdivision 19d,~~ 
15.9 	~~clause (10), shall not be allowed.~~
15.10 	~~If a foreign operating corporation incurs a net loss, neither income nor deduction~~ 
15.11 	~~from that corporation shall be included in determining the net income of the unitary~~ 
15.12 	~~business.~~
15.13 	~~(h)~~ (g) For purposes of determining the net income of a unitary business and the 
15.14 	factors to be used in the apportionment of net income pursuant to section 290.191 or 
15.15 	290.20, there must be included only the income and apportionment factors of domestic 
15.16 	corporations or other domestic entities ~~other than foreign operating corporations~~ that are 
15.17 	determined to be part of the unitary business pursuant to this subdivision, notwithstanding 
15.18 	that foreign corporations or other foreign entities might be included in the unitary business.
15.19 	~~(i)~~ (h) Deductions for expenses, interest, or taxes otherwise allowable under 
15.20 	this chapter that are connected with or allocable against dividends~~, deemed dividends~~ 
15.21 	~~described in paragraph (g), or royalties, fees, or other like income described in section~~ 
15.22 	~~290.01, subdivision 19d, clause (10),~~ shall not be disallowed.
15.23 	~~(j)~~ (i) Each corporation or other entity, except a sole proprietorship, that is part of 
15.24 	a unitary business must file combined reports as the commissioner determines. On the 
15.25 	reports, all intercompany transactions between entities included pursuant to paragraph ~~(h)~~
15.26 	(g) must be eliminated and the entire net income of the unitary business determined in 
15.27 	accordance with this subdivision is apportioned among the entities by using each entity's 
15.28 	Minnesota factors for apportionment purposes in the numerators of the apportionment 
15.29 	formula and the total factors for apportionment purposes of all entities included pursuant 
15.30 	to paragraph ~~(h)~~(g) in the denominators of the apportionment formula.
15.31 	~~(k)~~ (j) If a corporation has been divested from a unitary business and is included in a 
15.32 	combined report for a fractional part of the common accounting period of the combined 
15.33 	report:
15.34 	(1) its income includable in the combined report is its income incurred for that part 
15.35 	of the year determined by proration or separate accounting; and
16.1 	(2) its sales, property, and payroll included in the apportionment formula must 
16.2 	be prorated or accounted for separately.

16.3 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
16.4 	beginning after December 31, 2010.

16.5 	Sec. 13. Minnesota Statutes 2010, section 290.191, subdivision 2, is amended to read:
16.6 		Subd. 2.Apportionment formula of general application. ~~(a)~~ Except for those 
16.7 	trades or businesses required to use a different formula under subdivision 3 or section 
16.8 	290.36, and for those trades or businesses that receive permission to use some other 
16.9 	method under section 290.20 or under subdivision 4, a trade or business required to 
16.10 	apportion its net income must apportion its income to this state on the basis of the 
16.11 	~~percentage obtained by taking the sum of:~~
16.12 	~~(1) the percent for the sales factor under paragraph (b) of the~~ percentage which 
16.13 	the sales made within this state in connection with the trade or business during the tax 
16.14 	period are of the total sales wherever made in connection with the trade or business during 
16.15 	the tax period~~;~~.
16.16 	~~(2) the percent for the property factor under paragraph (b) of the percentage which~~ 
16.17 	~~the total tangible property used by the taxpayer in this state in connection with the trade or~~ 
16.18 	~~business during the tax period is of the total tangible property, wherever located, used by~~ 
16.19 	~~the taxpayer in connection with the trade or business during the tax period; and~~
16.20 	~~(3) the percent for the payroll factor under paragraph (b) of the percentage which~~ 
16.21 	~~the taxpayer's total payrolls paid or incurred in this state or paid in respect to labor~~ 
16.22 	~~performed in this state in connection with the trade or business during the tax period are~~ 
16.23 	~~of the taxpayer's total payrolls paid or incurred in connection with the trade or business~~ 
16.24 	~~during the tax period.~~
16.25 	~~(b) For purposes of paragraph (a) and subdivision 3, the following percentages apply~~ 
16.26 	~~for the taxable years specified:~~

16.27

16.28

~~Taxable years beginning~~ 
~~during calendar year~~

~~Sales factor~~ 
~~percent~~

~~Property factor~~ 
~~percent~~

~~Payroll factor~~
~~percent~~

16.29 | ~~2007~~ | | | ~~78~~ | | | ~~11~~ | | ~~11~~
16.30 | ~~2008~~ | | | ~~81~~ | | | ~~9.5~~ | | ~~9.5~~
16.31 | ~~2009~~ | | | ~~84~~ | | | ~~8~~ | | ~~8~~
16.32 | ~~2010~~ | | | ~~87~~ | | | ~~6.5~~ | | ~~6.5~~
16.33 | ~~2011~~ | | | ~~90~~ | | | ~~5~~ | | ~~5~~
16.34 | ~~2012~~ | | | ~~93~~ | | | ~~3.5~~ | | ~~3.5~~
16.35 | ~~2013~~ | | | ~~96~~ | | | ~~2~~ | | ~~2~~
16.36 | ~~2014 and later calendar years~~ | ~~100~~ | | | ~~0~~ | | ~~0~~

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

17.3 	Sec. 14. Minnesota Statutes 2010, section 290.191, subdivision 3, is amended to read:
17.4 		Subd. 3.Apportionment formula for financial institutions. Except for an 
17.5 	investment company required to apportion its income under section 290.36, a financial 
17.6 	institution that is required to apportion its net income must apportion its net income to this 
17.7 	state on the basis of the percentage ~~obtained by taking the sum of:~~
17.8 	~~(1) the percent for the sales factor under subdivision 2, paragraph (b), of the~~ 
17.9 	~~percentage~~ which the receipts from within this state in connection with the trade or 
17.10 	business during the tax period are of the total receipts in connection with the trade or 
17.11 	business during the tax period, from wherever derived~~;~~.
17.12 	~~(2) the percent for the property factor under subdivision 2, paragraph (b), of the~~ 
17.13 	~~percentage which the sum of the total tangible property used by the taxpayer in this~~ 
17.14 	~~state and the intangible property owned by the taxpayer and attributed to this state in~~ 
17.15 	~~connection with the trade or business during the tax period is of the sum of the total~~ 
17.16 	~~tangible property, wherever located, used by the taxpayer and the intangible property~~ 
17.17 	~~owned by the taxpayer and attributed to all states in connection with the trade or business~~ 
17.18 	~~during the tax period; and~~
17.19 	~~(3) the percent for the payroll factor under subdivision 2, paragraph (b), of the~~ 
17.20 	~~percentage which the taxpayer's total payrolls paid or incurred in this state or paid in~~ 
17.21 	~~respect to labor performed in this state in connection with the trade or business during~~ 
17.22 	~~the tax period are of the taxpayer's total payrolls paid or incurred in connection with~~ 
17.23 	~~the trade or business during the tax period.~~

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

17.26 	Sec. 15.  REPEALER.
 17.27 	Minnesota Statutes 2010, sections 290.01, subdivision 6b; 290.06, subdivisions 
17.28 	24, 28, 29, 30, 31, and 32; 290.068, subdivisions 1, 2, 3, 4, 5, 6a, and 7; 290.0921, 
17.29 	subdivision 7; 290.191, subdivision 4; 469.317; 469.318; 469.321; 469.322; 469.323; 
17.30 	469.324; 469.325; 469.326; 469.327; 469.328; 469.329; 469.337; 469.338; and 469.339,
17.31 	are repealed.

17.32 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
17.33 	beginning after December 31, 2010.