1.1                          A bill for an act 
  1.2             relating to taxation; conforming certain tax 
  1.3             provisions to federal law; amending Minnesota Statutes 
  1.4             2003 Supplement, sections 289A.02, subdivision 7; 
  1.5             290.01, subdivisions 19, 19b, 31; 290A.03, subdivision 
  1.6             15; 291.005, subdivision 1. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 2003 Supplement, section 
  1.9   289A.02, subdivision 7, is amended to read: 
  1.10     Subd. 7.  [INTERNAL REVENUE CODE.] Unless specifically 
  1.11  defined otherwise, "Internal Revenue Code" means the Internal 
  1.12  Revenue Code of 1986, as amended through ~~June 15, 2003~~ December 
  1.13  31, 2003. 
  1.14     <b>[EFFECTIVE DATE.]</b> This section is effective for actions 
  1.15  required on or after November 11, 2003. 
  1.16     Sec. 2.  Minnesota Statutes 2003 Supplement, section 
  1.17  290.01, subdivision 19, is amended to read: 
  1.18     Subd. 19.  [NET INCOME.] The term "net income" means the 
  1.19  federal taxable income, as defined in section 63 of the Internal 
  1.20  Revenue Code of 1986, as amended through the date named in this 
  1.21  subdivision, incorporating any elections made by the taxpayer in 
  1.22  accordance with the Internal Revenue Code in determining federal 
  1.23  taxable income for federal income tax purposes, and with the 
  1.24  modifications provided in subdivisions 19a to 19f. 
  1.25     In the case of a regulated investment company or a fund 
  1.26  thereof, as defined in section 851(a) or 851(g) of the Internal 
  2.1   Revenue Code, federal taxable income means investment company 
  2.2   taxable income as defined in section 852(b)(2) of the Internal 
  2.3   Revenue Code, except that:  
  2.4      (1) the exclusion of net capital gain provided in section 
  2.5   852(b)(2)(A) of the Internal Revenue Code does not apply; 
  2.6      (2) the deduction for dividends paid under section 
  2.7   852(b)(2)(D) of the Internal Revenue Code must be applied by 
  2.8   allowing a deduction for capital gain dividends and 
  2.9   exempt-interest dividends as defined in sections 852(b)(3)(C) 
  2.10  and 852(b)(5) of the Internal Revenue Code; and 
  2.11     (3) the deduction for dividends paid must also be applied 
  2.12  in the amount of any undistributed capital gains which the 
  2.13  regulated investment company elects to have treated as provided 
  2.14  in section 852(b)(3)(D) of the Internal Revenue Code.  
  2.15     The net income of a real estate investment trust as defined 
  2.16  and limited by section 856(a), (b), and (c) of the Internal 
  2.17  Revenue Code means the real estate investment trust taxable 
  2.18  income as defined in section 857(b)(2) of the Internal Revenue 
  2.19  Code.  
  2.20     The net income of a designated settlement fund as defined 
  2.21  in section 468B(d) of the Internal Revenue Code means the gross 
  2.22  income as defined in section 468B(b) of the Internal Revenue 
  2.23  Code. 
  2.24     The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 
  2.25  1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 
  2.26  1616, 1617, 1704(l), and 1704(m) of the Small Business Job 
  2.27  Protection Act, Public Law 104-188, the provisions of Public Law 
  2.28  104-117, the provisions of sections 313(a) and (b)(1), 602(a), 
  2.29  913(b), 941, 961, 971, 1001(a) and (b), 1002, 1003, 1012, 1013, 
  2.30  1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 1131(b) 
  2.31  and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and 
  2.32  1604(d)(1) of the Taxpayer Relief Act of 1997, Public Law 
  2.33  105-34, the provisions of section 6010 of the Internal Revenue 
  2.34  Service Restructuring and Reform Act of 1998, Public Law 
  2.35  105-206, the provisions of section 4003 of the Omnibus 
  2.36  Consolidated and Emergency Supplemental Appropriations Act, 
  3.1   1999, Public Law 105-277, and the provisions of section 318 of 
  3.2   the Consolidated Appropriation Act of 2001, Public Law 106-554, 
  3.3   shall become effective at the time they become effective for 
  3.4   federal purposes. 
  3.5      The Internal Revenue Code of 1986, as amended through 
  3.6   December 31, 1996, shall be in effect for taxable years 
  3.7   beginning after December 31, 1996. 
  3.8      The provisions of sections 202(a) and (b), 221(a), 225, 
  3.9   312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 
  3.10  (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 
  3.11  1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 
  3.12  1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 
  3.13  of the Taxpayer Relief Act of 1997, Public Law 105-34, the 
  3.14  provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002, 
  3.15  and 7003 of the Internal Revenue Service Restructuring and 
  3.16  Reform Act of 1998, Public Law 105-206, the provisions of 
  3.17  section 3001 of the Omnibus Consolidated and Emergency 
  3.18  Supplemental Appropriations Act, 1999, Public Law 105-277, the 
  3.19  provisions of section 3001 of the Miscellaneous Trade and 
  3.20  Technical Corrections Act of 1999, Public Law 106-36, ~~and~~ the 
  3.21  provisions of section 316 of the Consolidated Appropriation Act 
  3.22  of 2001, Public Law 106-554, and the provision of section 101 of 
  3.23  the Military Family Tax Relief Act of 2003, Public Law 108-121, 
  3.24  shall become effective at the time they become effective for 
  3.25  federal purposes. 
  3.26     The Internal Revenue Code of 1986, as amended through 
  3.27  December 31, 1997, shall be in effect for taxable years 
  3.28  beginning after December 31, 1997. 
  3.29     The provisions of sections 5002, 6009, 6011, and 7001 of 
  3.30  the Internal Revenue Service Restructuring and Reform Act of 
  3.31  1998, Public Law 105-206, the provisions of section 9010 of the 
  3.32  Transportation Equity Act for the 21st Century, Public Law 
  3.33  105-178, the provisions of sections 1004, 4002, and 5301 of the 
  3.34  Omnibus Consolidation and Emergency Supplemental Appropriations 
  3.35  Act, 1999, Public Law 105-277, the provision of section 303 of 
  3.36  the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law 
  4.1   105-369, the provisions of sections 532, 534, 536, 537, and 538 
  4.2   of the Ticket to Work and Work Incentives Improvement Act of 
  4.3   1999, Public Law 106-170, the provisions of the Installment Tax 
  4.4   Correction Act of 2000, Public Law 106-573, and the provisions 
  4.5   of section 309 of the Consolidated Appropriation Act of 2001, 
  4.6   Public Law 106-554, shall become effective at the time they 
  4.7   become effective for federal purposes. 
  4.8      The Internal Revenue Code of 1986, as amended through 
  4.9   December 31, 1998, shall be in effect for taxable years 
  4.10  beginning after December 31, 1998.  
  4.11     The provisions of the FSC Repeal and Extraterritorial 
  4.12  Income Exclusion Act of 2000, Public Law 106-519, and the 
  4.13  provision of section 412 of the Job Creation and Worker 
  4.14  Assistance Act of 2002, Public Law 107-147, shall become 
  4.15  effective at the time it became effective for federal purposes. 
  4.16     The Internal Revenue Code of 1986, as amended through 
  4.17  December 31, 1999, shall be in effect for taxable years 
  4.18  beginning after December 31, 1999.  The provisions of sections 
  4.19  306 and 401 of the Consolidated Appropriation Act of 2001, 
  4.20  Public Law 106-554, and the provision of section 632(b)(2)(A) of 
  4.21  the Economic Growth and Tax Relief Reconciliation Act of 2001, 
  4.22  Public Law 107-16, and provisions of sections 101 and 402 of the 
  4.23  Job Creation and Worker Assistance Act of 2002, Public Law 
  4.24  107-147, shall become effective at the same time it became 
  4.25  effective for federal purposes. 
  4.26     The Internal Revenue Code of 1986, as amended through 
  4.27  December 31, 2000, shall be in effect for taxable years 
  4.28  beginning after December 31, 2000.  The provisions of sections 
  4.29  659a and 671 of the Economic Growth and Tax Relief 
  4.30  Reconciliation Act of 2001, Public Law 107-16, the provisions of 
  4.31  sections 104, 105, and 111 of the Victims of Terrorism Tax 
  4.32  Relief Act of 2001, Public Law 107-134, ~~and~~ the provisions of 
  4.33  sections 201, 403, 413, and 606 of the Job Creation and Worker 
  4.34  Assistance Act of 2002, Public Law 107-147, and the provision of 
  4.35  section 102 of the Military Family Tax Relief Act of 2003, 
  4.36  Public Law 108-121, shall become effective at the same time it 
  5.1   became effective for federal purposes. 
  5.2      The Internal Revenue Code of 1986, as amended through March 
  5.3   15, 2002, shall be in effect for taxable years beginning after 
  5.4   December 31, 2001. 
  5.5      The provisions of sections 101 and 102 of the Victims of 
  5.6   Terrorism Tax Relief Act of 2001, Public Law 107-134, shall 
  5.7   become effective at the same time it becomes effective for 
  5.8   federal purposes. 
  5.9      The Internal Revenue Code of 1986, as amended through June 
  5.10  15, 2003, shall be in effect for taxable years beginning after 
  5.11  December 31, 2002.  The provisions of section 201 of the Jobs 
  5.12  and Growth Tax Relief and Reconciliation Act of 2003, ~~H.R. 2, if~~ 
  5.13  ~~it is enacted into law~~ Public Law 108-27, and the provisions of 
  5.14  sections 103, 106, 108, 109, and 110 of the Military Family Tax 
  5.15  Relief Act of 2003, Public Law 108-121, are effective at the 
  5.16  same time it became effective for federal purposes. 
  5.17     The Internal Revenue Code of 1986, as amended through 
  5.18  December 31, 2003, shall be in effect for taxable years 
  5.19  beginning after December 31, 2003. 
  5.20     Except as otherwise provided, references to the Internal 
  5.21  Revenue Code in subdivisions 19a to 19g mean the code in effect 
  5.22  for purposes of determining net income for the applicable year. 
  5.23     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  5.24  following final enactment. 
  5.25     Sec. 3.  Minnesota Statutes 2003 Supplement, section 
  5.26  290.01, subdivision 19b, is amended to read: 
  5.27     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  5.28  individuals, estates, and trusts, there shall be subtracted from 
  5.29  federal taxable income: 
  5.30     (1) interest income on obligations of any authority, 
  5.31  commission, or instrumentality of the United States to the 
  5.32  extent includable in taxable income for federal income tax 
  5.33  purposes but exempt from state income tax under the laws of the 
  5.34  United States; 
  5.35     (2) if included in federal taxable income, the amount of 
  5.36  any overpayment of income tax to Minnesota or to any other 
  6.1   state, for any previous taxable year, whether the amount is 
  6.2   received as a refund or as a credit to another taxable year's 
  6.3   income tax liability; 
  6.4      (3) the amount paid to others, less the amount used to 
  6.5   claim the credit allowed under section 290.0674, not to exceed 
  6.6   $1,625 for each qualifying child in grades kindergarten to 6 and 
  6.7   $2,500 for each qualifying child in grades 7 to 12, for tuition, 
  6.8   textbooks, and transportation of each qualifying child in 
  6.9   attending an elementary or secondary school situated in 
  6.10  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
  6.11  wherein a resident of this state may legally fulfill the state's 
  6.12  compulsory attendance laws, which is not operated for profit, 
  6.13  and which adheres to the provisions of the Civil Rights Act of 
  6.14  1964 and chapter 363A.  For the purposes of this clause, 
  6.15  "tuition" includes fees or tuition as defined in section 
  6.16  290.0674, subdivision 1, clause (1).  As used in this clause, 
  6.17  "textbooks" includes books and other instructional materials and 
  6.18  equipment purchased or leased for use in elementary and 
  6.19  secondary schools in teaching only those subjects legally and 
  6.20  commonly taught in public elementary and secondary schools in 
  6.21  this state.  Equipment expenses qualifying for deduction 
  6.22  includes expenses as defined and limited in section 290.0674, 
  6.23  subdivision 1, clause (3).  "Textbooks" does not include 
  6.24  instructional books and materials used in the teaching of 
  6.25  religious tenets, doctrines, or worship, the purpose of which is 
  6.26  to instill such tenets, doctrines, or worship, nor does it 
  6.27  include books or materials for, or transportation to, 
  6.28  extracurricular activities including sporting events, musical or 
  6.29  dramatic events, speech activities, driver's education, or 
  6.30  similar programs.  For purposes of the subtraction provided by 
  6.31  this clause, "qualifying child" has the meaning given in section 
  6.32  32(c)(3) of the Internal Revenue Code; 
  6.33     (4) income as provided under section 290.0802; 
  6.34     (5) to the extent included in federal adjusted gross 
  6.35  income, income realized on disposition of property exempt from 
  6.36  tax under section 290.491; 
  7.1      (6) to the extent included in federal taxable income, 
  7.2   postservice benefits for youth community service under section 
  7.3   124D.42 for volunteer service under United States Code, title 
  7.4   42, sections 12601 to 12604; 
  7.5      (7) to the extent not deducted in determining federal 
  7.6   taxable income by an individual who does not itemize deductions 
  7.7   for federal income tax purposes for the taxable year, an amount 
  7.8   equal to 50 percent of the excess of charitable contributions 
  7.9   allowable as a deduction for the taxable year under section 
  7.10  170(a) of the Internal Revenue Code over $500; 
  7.11     (8) for taxable years beginning before January 1, 2008, the 
  7.12  amount of the federal small ethanol producer credit allowed 
  7.13  under section 40(a)(3) of the Internal Revenue Code which is 
  7.14  included in gross income under section 87 of the Internal 
  7.15  Revenue Code; 
  7.16     (9) for individuals who are allowed a federal foreign tax 
  7.17  credit for taxes that do not qualify for a credit under section 
  7.18  290.06, subdivision 22, an amount equal to the carryover of 
  7.19  subnational foreign taxes for the taxable year, but not to 
  7.20  exceed the total subnational foreign taxes reported in claiming 
  7.21  the foreign tax credit.  For purposes of this clause, "federal 
  7.22  foreign tax credit" means the credit allowed under section 27 of 
  7.23  the Internal Revenue Code, and "carryover of subnational foreign 
  7.24  taxes" equals the carryover allowed under section 904(c) of the 
  7.25  Internal Revenue Code minus national level foreign taxes to the 
  7.26  extent they exceed the federal foreign tax credit; 
  7.27     (10) in each of the five tax years immediately following 
  7.28  the tax year in which an addition is required under subdivision 
  7.29  19a, clause (7), an amount equal to one-fifth of the delayed 
  7.30  depreciation.  For purposes of this clause, "delayed 
  7.31  depreciation" means the amount of the addition made by the 
  7.32  taxpayer under subdivision 19a, clause (7), minus the positive 
  7.33  value of any net operating loss under section 172 of the 
  7.34  Internal Revenue Code generated for the tax year of the 
  7.35  addition.  The resulting delayed depreciation cannot be less 
  7.36  than zero; ~~and~~ 
  8.1      (11) job opportunity building zone income as provided under 
  8.2   section 469.316; and 
  8.3      (12) to the extent included in federal taxable income, 
  8.4   compensation paid to a service member as defined in United 
  8.5   States Code, title 10, section 101(a)(5), for military service 
  8.6   as defined in the Service Members Civil Relief Act, Public Law 
  8.7   108-189, section 101(2), performed by a nonresident.  This 
  8.8   subtraction does not apply to "retirement income" as defined in 
  8.9   section 290.17, subdivision 2, paragraph (a), clause (3). 
  8.10     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
  8.11  beginning after December 31, 2002.  
  8.12     Sec. 4.  Minnesota Statutes 2003 Supplement, section 
  8.13  290.01, subdivision 31, is amended to read: 
  8.14     Subd. 31.  [INTERNAL REVENUE CODE.] Unless specifically 
  8.15  defined otherwise, "Internal Revenue Code" means the Internal 
  8.16  Revenue Code of 1986, as amended through ~~June 15, 2003~~ December 
  8.17  31, 2003. 
  8.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  8.19  following final enactment except the changes incorporated by 
  8.20  federal changes are effective at the same times as the changes 
  8.21  were effective for federal purposes. 
  8.22     Sec. 5.  Minnesota Statutes 2003 Supplement, section 
  8.23  290A.03, subdivision 15, is amended to read: 
  8.24     Subd. 15.  [INTERNAL REVENUE CODE.] "Internal Revenue Code" 
  8.25  means the Internal Revenue Code of 1986, as amended through ~~June~~ 
  8.26  ~~15, 2003~~ December 31, 2003. 
  8.27     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  8.28  following final enactment except the changes to household income 
  8.29  generated by federal changes to federal adjusted gross income 
  8.30  are effective at the same time federal changes are effective. 
  8.31     Sec. 6.  Minnesota Statutes 2003 Supplement, section 
  8.32  291.005, subdivision 1, is amended to read: 
  8.33     Subdivision 1.  Unless the context otherwise clearly 
  8.34  requires, the following terms used in this chapter shall have 
  8.35  the following meanings: 
  8.36     (1) "Federal gross estate" means the gross estate of a 
  9.1   decedent as valued and otherwise determined for federal estate 
  9.2   tax purposes by federal taxing authorities pursuant to the 
  9.3   provisions of the Internal Revenue Code. 
  9.4      (2) "Minnesota gross estate" means the federal gross estate 
  9.5   of a decedent after (a) excluding therefrom any property 
  9.6   included therein which has its situs outside Minnesota, and (b) 
  9.7   including therein any property omitted from the federal gross 
  9.8   estate which is includable therein, has its situs in Minnesota, 
  9.9   and was not disclosed to federal taxing authorities.  
  9.10     (3) "Personal representative" means the executor, 
  9.11  administrator or other person appointed by the court to 
  9.12  administer and dispose of the property of the decedent.  If 
  9.13  there is no executor, administrator or other person appointed, 
  9.14  qualified, and acting within this state, then any person in 
  9.15  actual or constructive possession of any property having a situs 
  9.16  in this state which is included in the federal gross estate of 
  9.17  the decedent shall be deemed to be a personal representative to 
  9.18  the extent of the property and the Minnesota estate tax due with 
  9.19  respect to the property. 
  9.20     (4) "Resident decedent" means an individual whose domicile 
  9.21  at the time of death was in Minnesota. 
  9.22     (5) "Nonresident decedent" means an individual whose 
  9.23  domicile at the time of death was not in Minnesota. 
  9.24     (6) "Situs of property" means, with respect to real 
  9.25  property, the state or country in which it is located; with 
  9.26  respect to tangible personal property, the state or country in 
  9.27  which it was normally kept or located at the time of the 
  9.28  decedent's death; and with respect to intangible personal 
  9.29  property, the state or country in which the decedent was 
  9.30  domiciled at death. 
  9.31     (7) "Commissioner" means the commissioner of revenue or any 
  9.32  person to whom the commissioner has delegated functions under 
  9.33  this chapter. 
  9.34     (8) "Internal Revenue Code" means the United States 
  9.35  Internal Revenue Code of 1986, as amended through December 31, 
  9.36  ~~2002~~ 2003. 
 10.1      <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
 10.2   decedents dying after January 31, 2003.