1.1 	A bill for an act
1.2 	relating to taxation; providing tax relief; making changes to various income 
1.3 	and franchise, estate and gift, sales and use, and miscellaneous tax provisions; 
1.4 	appropriating money;amending Minnesota Statutes 2012, sections 116J.8737, 
1.5 	subdivisions 5, 12; 272.03, subdivision 1; 289A.02, subdivision 7; 289A.18, 
1.6 	subdivision 3; 290.01, subdivision 19a, by adding a subdivision; 290.067, 
1.7 	subdivision 2a, by adding a subdivision; 290.0671, subdivision 1; 290.0674, 
1.8 	subdivision 2; 291.03, by adding a subdivision; 297A.67, by adding a subdivision; 
1.9 	297A.68, by adding a subdivision; Minnesota Statutes 2013 Supplement, sections 
1.10 	289A.10, subdivision 1; 290.01, subdivisions 19, 19b, 31; 290A.03, subdivision 
1.11 	15; 291.005, subdivision 1; 291.03, subdivision 1; 297A.61, subdivision 3; 
1.12 	297A.68, subdivision 5; 297A.70, subdivisions 2, 13, 14; proposing coding 
1.13 	for new law in Minnesota Statutes, chapters 291; 477A; repealing Minnesota 
1.14 	Statutes 2012, sections 290.067, subdivisions 2, 2a, 2b; 291.03, subdivision 1b; 
1.15 	Minnesota Statutes 2013 Supplement, sections 291.03, subdivision 1c; 292.16; 
1.16 	292.17; 292.18; 292.19; 292.20; 292.21; 297A.61, subdivision 57.
1.17 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.18 	ARTICLE 1
1.19 	INCOME TAX RELIEF

1.20 	Section 1. Minnesota Statutes 2012, section 289A.02, subdivision 7, is amended to read:
1.21 		Subd. 7.Internal Revenue Code. Unless specifically defined otherwise, "Internal 
1.22 	Revenue Code" means the Internal Revenue Code of 1986, as amended through April 14, 
1.23 	2011 December 31, 2013.

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

1.25 	Sec. 2. Minnesota Statutes 2013 Supplement, section 290.01, subdivision 19, is 
1.26 	amended to read:
2.1 		Subd. 19.Net income. The term "net income" means the federal taxable income, 
2.2 	as defined in section 63 of the Internal Revenue Code of 1986, as amended through the 
2.3 	date named in this subdivision, incorporating the federal effective dates of changes to the 
2.4 	Internal Revenue Code and any elections made by the taxpayer in accordance with the 
2.5 	Internal Revenue Code in determining federal taxable income for federal income tax 
2.6 	purposes, and with the modifications provided in subdivisions 19a to 19f.
2.7 	In the case of a regulated investment company or a fund thereof, as defined in section 
2.8 	851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment 
2.9 	company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, 
2.10 	except that:
2.11 	(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal 
2.12 	Revenue Code does not apply;
2.13 	(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal 
2.14 	Revenue Code must be applied by allowing a deduction for capital gain dividends and 
2.15 	exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal 
2.16 	Revenue Code; and
2.17 	(3) the deduction for dividends paid must also be applied in the amount of any 
2.18 	undistributed capital gains which the regulated investment company elects to have treated 
2.19 	as provided in section 852(b)(3)(D) of the Internal Revenue Code.
2.20 	The net income of a real estate investment trust as defined and limited by section 
2.21 	856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust 
2.22 	taxable income as defined in section 857(b)(2) of the Internal Revenue Code.
2.23 	The net income of a designated settlement fund as defined in section 468B(d) of 
2.24 	the Internal Revenue Code means the gross income as defined in section 468B(b) of the 
2.25 	Internal Revenue Code.
2.26 	The Internal Revenue Code of 1986, as amended through April 14, 2011 December 
2.27 	31, 2013, shall be in effect for taxable years beginning after December 31, 1996, and 
2.28 	before January 1, 2012, and for taxable years beginning after December 31, 2012. The 
2.29 	Internal Revenue Code of 1986, as amended through January 3, 2013, is in effect for 
2.30 	taxable years beginning after December 31, 2011, and before January 1, 2013.
2.31 	The provisions of sections 315 and 331 of the American Taxpayer Relief Act of 
2.32 	2012, Public Law 112-240, extension of increased expensing limitations and treatment 
2.33 	of certain real property as section 179 property and extension and modification of bonus 
2.34 	depreciation, are effective at the same time they become effective for federal purposes.
3.1 	Except as otherwise provided, references to the Internal Revenue Code in 
3.2 	subdivisions 19 to 19f mean the code in effect for purposes of determining net income for 
3.3 	the applicable year.

3.4 	EFFECTIVE DATE. This section is effective the day following final enactment 
3.5 	except that the changes incorporated by federal changes are effective retroactively from 
3.6 	the same time the changes became effective for federal purposes.

3.7 	Sec. 3. Minnesota Statutes 2012, section 290.01, subdivision 19a, is amended to read:
3.8 		Subd. 19a.Additions to federal taxable income. For individuals, estates, and 
3.9 	trusts, there shall be added to federal taxable income:
3.10 	(1)(i) interest income on obligations of any state other than Minnesota or a political 
3.11 	or governmental subdivision, municipality, or governmental agency or instrumentality 
3.12 	of any state other than Minnesota exempt from federal income taxes under the Internal 
3.13 	Revenue Code or any other federal statute; and
3.14 	(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue 
3.15 	Code, except:
3.16 	(A) the portion of the exempt-interest dividends exempt from state taxation under 
3.17 	the laws of the United States; and
3.18 	(B) the portion of the exempt-interest dividends derived from interest income 
3.19 	on obligations of the state of Minnesota or its political or governmental subdivisions, 
3.20 	municipalities, governmental agencies or instrumentalities, but only if the portion of the 
3.21 	exempt-interest dividends from such Minnesota sources paid to all shareholders represents 
3.22 	95 percent or more of the exempt-interest dividends, including any dividends exempt 
3.23 	under subitem (A), that are paid by the regulated investment company as defined in section 
3.24 	851(a) of the Internal Revenue Code, or the fund of the regulated investment company as 
3.25 	defined in section 851(g) of the Internal Revenue Code, making the payment; and
3.26 	(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal 
3.27 	government described in section 7871(c) of the Internal Revenue Code shall be treated as 
3.28 	interest income on obligations of the state in which the tribe is located;
3.29 	(2) the amount of income, or sales and use, motor vehicle sales, or excise taxes paid 
3.30 	or accrued within the taxable year under this chapter and or chapter 297A, the amount 
3.31 	of taxes based on net income paid, or sales and use, motor vehicle sales, or excise taxes 
3.32 	paid to any other state or to any province or territory of Canada, to the extent allowed as 
3.33 	a deduction under section 63(d) of the Internal Revenue Code, but the addition may not 
3.34 	be more than the amount by which the itemized deductions as allowed under section 
3.35 	63(d) of the Internal Revenue Code state itemized deduction exceeds the amount of the 
4.1 	standard deduction as defined in section 63(c) of the Internal Revenue Code, disregarding 
4.2 	the amounts allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue 
4.3 	Code, minus any addition that would have been required under clause (21) if the taxpayer 
4.4 	had claimed the standard deduction. For the purpose of this paragraph, the disallowance of 
4.5 	itemized deductions under section 68 of the Internal Revenue Code of 1986, income, sales 
4.6 	and use, motor vehicle sales, or excise taxes are the last itemized deductions disallowed
4.7 	 income and sales and use taxes are the last itemized deductions disallowed under clause 
4.8 	(19) or subdivision 29a, paragraph (b);
4.9 	(3) the capital gain amount of a lump-sum distribution to which the special tax under 
4.10 	section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
4.11 	(4) the amount of income taxes paid or accrued within the taxable year under this 
4.12 	chapter and taxes based on net income paid to any other state or any province or territory 
4.13 	of Canada, to the extent allowed as a deduction in determining federal adjusted gross 
4.14 	income. For the purpose of this paragraph, income taxes do not include the taxes imposed 
4.15 	by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
4.16 	(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10 
4.17 	other than expenses or interest used in computing net interest income for the subtraction 
4.18 	allowed under subdivision 19b, clause (1);
4.19 	(6) the amount of a partner's pro rata share of net income which does not flow 
4.20 	through to the partner because the partnership elected to pay the tax on the income under 
4.21 	section 6242(a)(2) of the Internal Revenue Code;
4.22 	(7) 80 percent of the depreciation deduction allowed under section 168(k) of the 
4.23 	Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that 
4.24 	in the taxable year generates a deduction for depreciation under section 168(k) and the 
4.25 	activity generates a loss for the taxable year that the taxpayer is not allowed to claim for 
4.26 	the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is 
4.27 	limited to excess of the depreciation claimed by the activity under section 168(k) over the 
4.28 	amount of the loss from the activity that is not allowed in the taxable year. In succeeding 
4.29 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
4.30 	under section 168(k) is allowed;
4.31 	(8) 80 percent of the amount by which the deduction allowed by section 179 of the 
4.32 	Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 
4.33 	Revenue Code of 1986, as amended through December 31, 2003;
4.34 	(9) to the extent deducted in computing federal taxable income, the amount of the 
4.35 	deduction allowable under section 199 of the Internal Revenue Code;
5.1 	(10) for taxable years beginning before January 1, 2013, the exclusion allowed under 
5.2 	section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;
5.3 	(11) the amount of expenses disallowed under section 290.10, subdivision 2;
5.4 	(12) for taxable years beginning before January 1, 2010, the amount deducted for 
5.5 	qualified tuition and related expenses under section 222 of the Internal Revenue Code, to 
5.6 	the extent deducted from gross income;
5.7 	(13) for taxable years beginning before January 1, 2010, the amount deducted for 
5.8 	certain expenses of elementary and secondary school teachers under section 62(a)(2)(D) 
5.9 	of the Internal Revenue Code, to the extent deducted from gross income;
5.10 	(14) the additional standard deduction for property taxes payable that is allowable 
5.11 	under section 63(c)(1)(C) of the Internal Revenue Code;
5.12 	(15) the additional standard deduction for qualified motor vehicle sales taxes 
5.13 	allowable under section 63(c)(1)(E) of the Internal Revenue Code;
5.14 	(16) discharge of indebtedness income resulting from reacquisition of business 
5.15 	indebtedness and deferred under section 108(i) of the Internal Revenue Code;
5.16 	(17) the amount of unemployment compensation exempt from tax under section 
5.17 	85(c) of the Internal Revenue Code;
5.18 	(18) changes to federal taxable income attributable to a net operating loss that the 
5.19 	taxpayer elected to carry back for more than two years for federal purposes but for which 
5.20 	the losses can be carried back for only two years under section 290.095, subdivision 
5.21 	11, paragraph (c);
5.22 	(19) to the extent included in the computation of federal taxable income in taxable 
5.23 	years beginning after December 31, 2010, and before January 1, 2014, the amount of 
5.24 	disallowed itemized deductions, but the amount of disallowed itemized deductions plus 
5.25 	the addition required under clause (2) may not be more than the amount by which the 
5.26 	itemized deductions as allowed under section 63(d) of the Internal Revenue Code exceeds 
5.27 	the amount of the standard deduction as defined in section 63(c) of the Internal Revenue 
5.28 	Code, disregarding the amounts allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the 
5.29 	Internal Revenue Code, and reduced by any addition that would have been required under 
5.30 	clause (21) if the taxpayer had claimed the standard deduction:
5.31 	(i) the amount of disallowed itemized deductions is equal to the lesser of:
5.32 	(A) three percent of the excess of the taxpayer's federal adjusted gross income 
5.33 	over the applicable amount; or
5.34 	(B) 80 percent of the amount of the itemized deductions otherwise allowable to the 
5.35 	taxpayer under the Internal Revenue Code for the taxable year;
6.1 	(ii) the term "applicable amount" means $100,000, or $50,000 in the case of a 
6.2 	married individual filing a separate return. Each dollar amount shall be increased by 
6.3 	an amount equal to:
6.4 	(A) such dollar amount, multiplied by
6.5 	(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal 
6.6 	Revenue Code for the calendar year in which the taxable year begins, by substituting 
6.7 	"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof;
6.8 	(iii) the term "itemized deductions" does not include:
6.9 	(A) the deduction for medical expenses under section 213 of the Internal Revenue 
6.10 	Code;
6.11 	(B) any deduction for investment interest as defined in section 163(d) of the Internal 
6.12 	Revenue Code; and
6.13 	(C) the deduction under section 165(a) of the Internal Revenue Code for casualty or 
6.14 	theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue 
6.15 	Code or for losses described in section 165(d) of the Internal Revenue Code;
6.16 	(20) to the extent included in federal taxable income in taxable years beginning after 
6.17 	December 31, 2010, and before January 1, 2014, the amount of disallowed personal 
6.18 	exemptions for taxpayers with federal adjusted gross income over the threshold amount:
6.19 	(i) the disallowed personal exemption amount is equal to the dollar amount of the 
6.20 	personal exemptions claimed by the taxpayer in the computation of federal taxable income 
6.21 	multiplied by the applicable percentage;
6.22 	(ii) "applicable percentage" means two percentage points for each $2,500 (or 
6.23 	fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable 
6.24 	year exceeds the threshold amount. In the case of a married individual filing a separate 
6.25 	return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In 
6.26 	no event shall the applicable percentage exceed 100 percent;
6.27 	(iii) the term "threshold amount" means:
6.28 	(A) $150,000 in the case of a joint return or a surviving spouse;
6.29 	(B) $125,000 in the case of a head of a household;
6.30 	(C) $100,000 in the case of an individual who is not married and who is not a 
6.31 	surviving spouse or head of a household; and
6.32 	(D) $75,000 in the case of a married individual filing a separate return; and
6.33 	(iv) the thresholds shall be increased by an amount equal to:
6.34 	(A) such dollar amount, multiplied by
7.1 	(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal 
7.2 	Revenue Code for the calendar year in which the taxable year begins, by substituting 
7.3 	"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; and
7.4 	(21) to the extent deducted in the computation of federal taxable income, for taxable 
7.5 	years beginning after December 31, 2010, and before January 1, 2013 2014, the difference 
7.6 	between the standard deduction allowed under section 63(c) of the Internal Revenue Code 
7.7 	and the standard deduction allowed for 2011 and, 2012, and 2013 under the Internal 
7.8 	Revenue Code as amended through December 1, 2010.

7.9 	EFFECTIVE DATE. This section is effective retroactively for taxable years 
7.10 	beginning after December 31, 2012.

7.11 	Sec. 4. Minnesota Statutes 2013 Supplement, section 290.01, subdivision 19b, is 
7.12 	amended to read:
7.13 		Subd. 19b.Subtractions from federal taxable income. For individuals, estates, 
7.14 	and trusts, there shall be subtracted from federal taxable income:
7.15 	(1) net interest income on obligations of any authority, commission, or 
7.16 	instrumentality of the United States to the extent includable in taxable income for federal 
7.17 	income tax purposes but exempt from state income tax under the laws of the United States;
7.18 	(2) if included in federal taxable income, the amount of any overpayment of income 
7.19 	tax to Minnesota or to any other state, for any previous taxable year, whether the amount 
7.20 	is received as a refund or as a credit to another taxable year's income tax liability;
7.21 	(3) the amount paid to others, less the amount used to claim the credit allowed under 
7.22 	section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten 
7.23 	to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and 
7.24 	transportation of each qualifying child in attending an elementary or secondary school 
7.25 	situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a 
7.26 	resident of this state may legally fulfill the state's compulsory attendance laws, which 
7.27 	is not operated for profit, and which adheres to the provisions of the Civil Rights Act 
7.28 	of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or 
7.29 	tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause, 
7.30 	"textbooks" includes books and other instructional materials and equipment purchased 
7.31 	or leased for use in elementary and secondary schools in teaching only those subjects 
7.32 	legally and commonly taught in public elementary and secondary schools in this state. 
7.33 	Equipment expenses qualifying for deduction includes expenses as defined and limited in 
7.34 	section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional 
7.35 	books and materials used in the teaching of religious tenets, doctrines, or worship, the 
8.1 	purpose of which is to instill such tenets, doctrines, or worship, nor does it include books 
8.2 	or materials for, or transportation to, extracurricular activities including sporting events, 
8.3 	musical or dramatic events, speech activities, driver's education, or similar programs. No 
8.4 	deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or 
8.5 	the qualifying child's vehicle to provide such transportation for a qualifying child. For 
8.6 	purposes of the subtraction provided by this clause, "qualifying child" has the meaning 
8.7 	given in section 32(c)(3) of the Internal Revenue Code;
8.8 	(4) income as provided under section 290.0802;
8.9 	(5) to the extent included in federal adjusted gross income, income realized on 
8.10 	disposition of property exempt from tax under section 290.491;
8.11 	(6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E) 
8.12 	of the Internal Revenue Code in determining federal taxable income by an individual 
8.13 	who does not itemize deductions for federal income tax purposes for the taxable year, an 
8.14 	amount equal to 50 percent of the excess of charitable contributions over $500 allowable 
8.15 	as a deduction for the taxable year under section 170(a) of the Internal Revenue Code, 
8.16 	under the provisions of Public Law 109-1 and Public Law 111-126;
8.17 	(7) for individuals who are allowed a federal foreign tax credit for taxes that do not 
8.18 	qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover 
8.19 	of subnational foreign taxes for the taxable year, but not to exceed the total subnational 
8.20 	foreign taxes reported in claiming the foreign tax credit. For purposes of this clause, 
8.21 	"federal foreign tax credit" means the credit allowed under section 27 of the Internal 
8.22 	Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed 
8.23 	under section 904(c) of the Internal Revenue Code minus national level foreign taxes to 
8.24 	the extent they exceed the federal foreign tax credit;
8.25 	(8) in each of the five tax years immediately following the tax year in which an 
8.26 	addition is required under subdivision 19a, clause (7), or 19c, clause (12), in the case of a 
8.27 	shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the 
8.28 	delayed depreciation. For purposes of this clause, "delayed depreciation" means the amount 
8.29 	of the addition made by the taxpayer under subdivision 19a, clause (7), or subdivision 19c, 
8.30 	clause (12), in the case of a shareholder of an S corporation, minus the positive value of 
8.31 	any net operating loss under section 172 of the Internal Revenue Code generated for the 
8.32 	tax year of the addition. The resulting delayed depreciation cannot be less than zero;
8.33 	(9) job opportunity building zone income as provided under section 469.316;
8.34 	(10) to the extent included in federal taxable income, the amount of compensation 
8.35 	paid to members of the Minnesota National Guard or other reserve components of the 
8.36 	United States military for active service, excluding compensation for services performed 
9.1 	under the Active Guard Reserve (AGR) program. For purposes of this clause, "active 
9.2 	service" means (i) state active service as defined in section 190.05, subdivision 5a, clause 
9.3 	(1); or (ii) federally funded state active service as defined in section 190.05, subdivision 
9.4 	5b, but "active service" excludes service performed in accordance with section 190.08, 
9.5 	subdivision 3;
9.6 	(11) to the extent included in federal taxable income, the amount of compensation 
9.7 	paid to Minnesota residents who are members of the armed forces of the United States 
9.8 	or United Nations for active duty performed under United States Code, title 10; or the 
9.9 	authority of the United Nations;
9.10 	(12) an amount, not to exceed $10,000, equal to qualified expenses related to a 
9.11 	qualified donor's donation, while living, of one or more of the qualified donor's organs 
9.12 	to another person for human organ transplantation. For purposes of this clause, "organ" 
9.13 	means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow; 
9.14 	"human organ transplantation" means the medical procedure by which transfer of a human 
9.15 	organ is made from the body of one person to the body of another person; "qualified 
9.16 	expenses" means unreimbursed expenses for both the individual and the qualified donor 
9.17 	for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses 
9.18 	may be subtracted under this clause only once; and "qualified donor" means the individual 
9.19 	or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An 
9.20 	individual may claim the subtraction in this clause for each instance of organ donation for 
9.21 	transplantation during the taxable year in which the qualified expenses occur;
9.22 	(13) in each of the five tax years immediately following the tax year in which an 
9.23 	addition is required under subdivision 19a, clause (8), or 19c, clause (13), in the case of a 
9.24 	shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the 
9.25 	addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (13), in the 
9.26 	case of a shareholder of a corporation that is an S corporation, minus the positive value of 
9.27 	any net operating loss under section 172 of the Internal Revenue Code generated for the 
9.28 	tax year of the addition. If the net operating loss exceeds the addition for the tax year, a 
9.29 	subtraction is not allowed under this clause;
9.30 	(14) to the extent included in the federal taxable income of a nonresident of 
9.31 	Minnesota, compensation paid to a service member as defined in United States Code, title 
9.32 	10, section 101(a)(5), for military service as defined in the Servicemembers Civil Relief 
9.33 	Act, Public Law 108-189, section 101(2);
9.34 	(15) to the extent included in federal taxable income, the amount of national service 
9.35 	educational awards received from the National Service Trust under United States Code, 
10.1 	title 42, sections 12601 to 12604, for service in an approved Americorps National Service 
10.2 	program;
10.3 	(16) to the extent included in federal taxable income, discharge of indebtedness 
10.4 	income resulting from reacquisition of business indebtedness included in federal taxable 
10.5 	income under section 108(i) of the Internal Revenue Code. This subtraction applies only 
10.6 	to the extent that the income was included in net income in a prior year as a result of the 
10.7 	addition under section 290.01, subdivision 19a, clause (16);
10.8 	(17) the amount of the net operating loss allowed under section 290.095, subdivision 
10.9 	11, paragraph (c); and
10.10 	(18) the amount of expenses not allowed for federal income tax purposes due 
10.11 	to claiming the railroad track maintenance credit under section 45G(a) of the Internal 
10.12 	Revenue Code.;
10.13 	(19) for taxable years beginning after December 31, 2012, and before January 1, 
10.14 	2014, the amount of the limitation on itemized deductions under section 68 of the Internal 
10.15 	Revenue Code; and
10.16 	(20) for taxable years beginning after December 31, 2012, and before January 1, 
10.17 	2014, the amount of the phaseout of personal exemptions under section 151(d) of the 
10.18 	Internal Revenue Code.

10.19 	EFFECTIVE DATE. This section is effective retroactively for taxable years 
10.20 	beginning after December 31, 2012.

10.21 	Sec. 5. Minnesota Statutes 2012, section 290.01, is amended by adding a subdivision 
10.22 	to read:
10.23 		Subd. 29a.State itemized deduction. (a) "State itemized deduction" for 
10.24 	taxable years beginning after December 31, 2012, and before January 1, 2014, means 
10.25 	federal itemized deductions, as defined in section 63(d) of the Internal Revenue Code, 
10.26 	disregarding any limitation under section 68 of the Internal Revenue Code, and reduced 
10.27 	by the amount of the addition required under subdivision 19a, clause (19).
10.28 	(b) "State itemized deduction" for taxable years beginning after December 31, 2013, 
10.29 	means federal itemized deductions, as defined in section 63(d) of the Internal Revenue 
10.30 	Code, after any limitation under section 68 of the Internal Revenue Code.

10.31 	EFFECTIVE DATE. This section is effective retroactively for taxable years 
10.32 	beginning after December 31, 2012.

11.1 	Sec. 6. Minnesota Statutes 2013 Supplement, section 290.01, subdivision 31, is 
11.2 	amended to read:
11.3 		Subd. 31.Internal Revenue Code. Unless specifically defined otherwise, for 
11.4 	taxable years beginning before January 1, 2012, and after December 31, 2012, "Internal 
11.5 	Revenue Code" means the Internal Revenue Code of 1986, as amended through April 14, 
11.6 	2011; and for taxable years beginning after December 31, 2011, and before January 1, 
11.7 	2013, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended 
11.8 	through January 3, 2013 December 31, 2013. Internal Revenue Code also includes any 
11.9 	uncodified provision in federal law that relates to provisions of the Internal Revenue 
11.10 	Code that are incorporated into Minnesota law. When used in this chapter, the reference 
11.11 	to "subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code" is to the 
11.12 	Internal Revenue Code as amended through March 18, 2010.

11.13 	EFFECTIVE DATE. This section is effective the day following final enactment 
11.14 	except the changes incorporated by federal changes are effective retroactively at the same 
11.15 	time the changes became effective for federal purposes.

11.16 	Sec. 7. Minnesota Statutes 2012, section 290.067, subdivision 2a, is amended to read:
11.17 		Subd. 2a.Income. (a) For purposes of this section, "income" means the sum of 
11.18 	the following:
11.19 	(1) federal adjusted gross income as defined in section 62 of the Internal Revenue 
11.20 	Code; and
11.21 	(2) the sum of the following amounts to the extent not included in clause (1):
11.22 	(i) all nontaxable income;
11.23 	(ii) the amount of a passive activity loss that is not disallowed as a result of section 
11.24 	469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity 
11.25 	loss carryover allowed under section 469(b) of the Internal Revenue Code;
11.26 	(iii) an amount equal to the total of any discharge of qualified farm indebtedness 
11.27 	of a solvent individual excluded from gross income under section 108(g) of the Internal 
11.28 	Revenue Code;
11.29 	(iv) cash public assistance and relief;
11.30 	(v) any pension or annuity (including railroad retirement benefits, all payments 
11.31 	received under the federal Social Security Act, supplemental security income, and veterans 
11.32 	benefits), which was not exclusively funded by the claimant or spouse, or which was 
11.33 	funded exclusively by the claimant or spouse and which funding payments were excluded 
11.34 	from federal adjusted gross income in the years when the payments were made;
12.1 	(vi) interest received from the federal or a state government or any instrumentality 
12.2 	or political subdivision thereof;
12.3 	(vii) workers' compensation;
12.4 	(viii) nontaxable strike benefits;
12.5 	(ix) the gross amounts of payments received in the nature of disability income or 
12.6 	sick pay as a result of accident, sickness, or other disability, whether funded through 
12.7 	insurance or otherwise;
12.8 	(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 
12.9 	1986, as amended through December 31, 1995;
12.10 	(xi) contributions made by the claimant to an individual retirement account, 
12.11 	including a qualified voluntary employee contribution; simplified employee pension plan; 
12.12 	self-employed retirement plan; cash or deferred arrangement plan under section 401(k) 
12.13 	of the Internal Revenue Code; or deferred compensation plan under section 457 of the 
12.14 	Internal Revenue Code;
12.15 	(xii) nontaxable scholarship or fellowship grants;
12.16 	(xiii) the amount of deduction allowed under section 199 of the Internal Revenue 
12.17 	Code;
12.18 	(xiv) the amount of deduction allowed under section 220 or 223 of the Internal 
12.19 	Revenue Code;
12.20 	(xv) the amount of deducted for tuition expenses required to be added to income 
12.21 	under section 290.01, subdivision 19a, clause (12) 222 of the Internal Revenue Code;
12.22 	(xvi) the amount deducted for certain expenses of elementary and secondary school 
12.23 	teachers under section 62(a)(2)(D) of the Internal Revenue Code; and
12.24 	(xvii) unemployment compensation.
12.25 	In the case of an individual who files an income tax return on a fiscal year basis, the 
12.26 	term "federal adjusted gross income" means federal adjusted gross income reflected in the 
12.27 	fiscal year ending in the next calendar year. Federal adjusted gross income may not be 
12.28 	reduced by the amount of a net operating loss carryback or carryforward or a capital loss 
12.29 	carryback or carryforward allowed for the year.
12.30 	(b) "Income" does not include:
12.31 	(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;
12.32 	(2) amounts of any pension or annuity that were exclusively funded by the claimant 
12.33 	or spouse if the funding payments were not excluded from federal adjusted gross income 
12.34 	in the years when the payments were made;
12.35 	(3) surplus food or other relief in kind supplied by a governmental agency;
12.36 	(4) relief granted under chapter 290A;
13.1 	(5) child support payments received under a temporary or final decree of dissolution 
13.2 	or legal separation; and
13.3 	(6) restitution payments received by eligible individuals and excludable interest as 
13.4 	defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 
13.5 	2001, Public Law 107-16.

13.6 	EFFECTIVE DATE. This section is effective retroactively for taxable years 
13.7 	beginning after December 31, 2012.

13.8 	Sec. 8. Minnesota Statutes 2012, section 290.067, is amended by adding a subdivision 
13.9 	to read:
13.10 		Subd. 2c.Dependent care credit; temporary definition. For taxable years 
13.11 	beginning after December 31, 2012, and before January 1, 2014, for purposes of this 
13.12 	section, "section 21 of the Internal Revenue Code" means section 21 of the Internal 
13.13 	Revenue Code as amended through June 1, 2001.

13.14 	EFFECTIVE DATE. This section is effective retroactively for taxable years 
13.15 	beginning after December 31, 2012.

13.16 	Sec. 9. Minnesota Statutes 2012, section 290.0671, subdivision 1, is amended to read:
13.17 		Subdivision 1.Credit allowed. (a) An individual is allowed a credit against the tax 
13.18 	imposed by this chapter equal to a percentage of earned income. To receive a credit, a 
13.19 	taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code.
13.20 	(b) For individuals with no qualifying children, the credit equals 1.9125 percent of 
13.21 	the first $4,620 of earned income. The credit is reduced by 1.9125 percent of earned 
13.22 	income or adjusted gross income, whichever is greater, in excess of $5,770, but in no 
13.23 	case is the credit less than zero.
13.24 	(c) For individuals with one qualifying child, the credit equals 8.5 percent of the first 
13.25 	$6,920 of earned income and 8.5 percent of earned income over $12,080 but less than 
13.26 	$13,450. The credit is reduced by 5.73 percent of earned income or adjusted gross income, 
13.27 	whichever is greater, in excess of $15,080, but in no case is the credit less than zero.
13.28 	(d) For individuals with two or more qualifying children, the credit equals ten percent 
13.29 	of the first $9,720 of earned income and 20 percent of earned income over $14,860 but less 
13.30 	than $16,800. The credit is reduced by 10.3 percent of earned income or adjusted gross 
13.31 	income, whichever is greater, in excess of $17,890, but in no case is the credit less than zero.
13.32 	(e) For a nonresident or part-year resident, the credit must be allocated based on the 
13.33 	percentage calculated under section 290.06, subdivision 2c, paragraph (e).
14.1 	(f) For a person who was a resident for the entire tax year and has earned income 
14.2 	not subject to tax under this chapter, including income excluded under section 290.01, 
14.3 	subdivision 19b, clause (9) (14), the credit must be allocated based on the ratio of federal 
14.4 	adjusted gross income reduced by the earned income not subject to tax under this chapter 
14.5 	over federal adjusted gross income. For purposes of this paragraph, the subtractions 
14.6 	for military pay under section 290.01, subdivision 19b, clauses (10) and (11), are not 
14.7 	considered "earned income not subject to tax under this chapter."
14.8 	For the purposes of this paragraph, the exclusion of combat pay under section 112 
14.9 	of the Internal Revenue Code is not considered "earned income not subject to tax under 
14.10 	this chapter."
14.11 	(g) For tax years beginning after December 31, 2007, and before December 31, 
14.12 	2010, and for taxable years beginning after December 31, 2017, the $5,770 in paragraph 
14.13 	(b), the $15,080 in paragraph (c), and the $17,890 in paragraph (d), after being adjusted for 
14.14 	inflation under subdivision 7, are each increased by $3,000 for married taxpayers filing joint 
14.15 	returns. For tax years beginning after December 31, 2008, the commissioner shall annually 
14.16 	adjust the $3,000 by the percentage determined pursuant to the provisions of section 1(f) 
14.17 	of the Internal Revenue Code, except that in section 1(f)(3)(B), the word "2007" shall be 
14.18 	substituted for the word "1992." For 2009, the commissioner shall then determine the 
14.19 	percent change from the 12 months ending on August 31, 2007, to the 12 months ending on 
14.20 	August 31, 2008, and in each subsequent year, from the 12 months ending on August 31, 
14.21 	2007, to the 12 months ending on August 31 of the year preceding the taxable year. The 
14.22 	earned income thresholds as adjusted for inflation must be rounded to the nearest $10. If the 
14.23 	amount ends in $5, the amount is rounded up to the nearest $10. The determination of the 
14.24 	commissioner under this subdivision is not a rule under the Administrative Procedure Act.
14.25 	(h) For tax years beginning after December 31, 2010, and before January 1, 2012,
14.26 	 and for taxable years beginning after December 31, 2012, and before January 1, 2018, the 
14.27 	$5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
14.28 	after being adjusted for inflation under subdivision 7, are each increased by $5,000 for 
14.29 	married taxpayers filing joint returns. For tax years beginning after December 31, 2010, 
14.30 	and before January 1, 2012, and for taxable years beginning after December 31, 2012, 
14.31 	and before January 1, 2018, the commissioner shall annually adjust the $5,000 by the 
14.32 	percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue 
14.33 	Code, except that in section 1(f)(3)(B), the word "2008" shall be substituted for the word 
14.34 	"1992." For 2011, the commissioner shall then determine the percent change from the 12 
14.35 	months ending on August 31, 2008, to the 12 months ending on August 31, 2010, and in 
14.36 	each subsequent year from the 12 months ending on August 31, 2008, to the 12 months 
15.1 	ending on August 31 of the year preceding the taxable year. The earned income thresholds 
15.2 	as adjusted for inflation must be rounded to the nearest $10. If the amount ends in $5, the 
15.3 	amount is rounded up to the nearest $10. The determination of the commissioner under 
15.4 	this subdivision is not a rule under the Administrative Procedure Act.
15.5 	(i) The commissioner shall construct tables showing the amount of the credit at 
15.6 	various income levels and make them available to taxpayers. The tables shall follow 
15.7 	the schedule contained in this subdivision, except that the commissioner may graduate 
15.8 	the transition between income brackets.

15.9 	EFFECTIVE DATE. This section is effective retroactively for taxable years 
15.10 	beginning after December 31, 2012.

15.11 	Sec. 10. Minnesota Statutes 2012, section 290.0674, subdivision 2, is amended to read:
15.12 		Subd. 2.Limitations. (a) For claimants with income not greater than $33,500, the 
15.13 	maximum credit allowed for a family is $1,000 multiplied by the number of qualifying 
15.14 	children in kindergarten through grade 12 in the family. The maximum credit for families 
15.15 	with one qualifying child in kindergarten through grade 12 is reduced by $1 for each $4 of 
15.16 	household income over $33,500, and the maximum credit for families with two or more 
15.17 	qualifying children in kindergarten through grade 12 is reduced by $2 for each $4 of 
15.18 	household income over $33,500, but in no case is the credit less than zero.
15.19 	For purposes of this section "income" has the meaning given in section 290.067, 
15.20 	subdivision 2a 290A.03, subdivision 3, paragraphs (1) and (2). In the case of a married 
15.21 	claimant, a credit is not allowed unless a joint income tax return is filed.
15.22 	(b) For a nonresident or part-year resident, the credit determined under subdivision 1 
15.23 	and the maximum credit amount in paragraph (a) must be allocated using the percentage 
15.24 	calculated in section 290.06, subdivision 2c, paragraph (e).

15.25 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
15.26 	December 31, 2013.

15.27 	Sec. 11. Minnesota Statutes 2013 Supplement, section 290A.03, subdivision 15, 
15.28 	is amended to read:
15.29 		Subd. 15.Internal Revenue Code. For taxable years beginning before January 1, 
15.30 	2012, and after December 31, 2012, "Internal Revenue Code" means the Internal Revenue 
15.31 	Code of 1986, as amended through April 14, 2011; and for taxable years beginning after 
15.32 	December 31, 2011, and before January 1, 2013, "Internal Revenue Code" means the 
15.33 	Internal Revenue Code of 1986, as amended through January 3, 2013 December 31, 2013.

16.1 	EFFECTIVE DATE. This section is effective retroactively for refunds based on 
16.2 	property taxes payable after December 31, 2013, and for rent paid after December 31, 2012.

16.3 	Sec. 12. INDIVIDUAL INCOME TAX COLLECTION ACTION PROHIBITED.
 16.4 	Notwithstanding any law to the contrary, the commissioner of revenue must not 
16.5 	increase the amount due or decrease the refund for an individual tax return for a taxable 
16.6 	year beginning after December 31, 2012, and before January 1, 2014, to the extent the 
16.7 	amount due was understated or the refund was overstated because the taxpayer calculated 
16.8 	their tax or refund based on the Internal Revenue Code as amended through April 14, 
16.9 	2011, rather than based on the Internal Revenue Code as amended through December 31, 
16.10 	2013, as provided in this article.

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

16.12 	Sec. 13. APPROPRIATION.
 16.13 	$1,101,000 is appropriated from the general fund to the commissioner of revenue 
16.14 	in fiscal year 2014 for the costs of administering this act. This appropriation does not 
16.15 	cancel, but is available until June 30, 2015. This is a onetime appropriation and does not 
16.16 	renew or become part of the base budget.

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

16.18 	Sec. 14.  REPEALER.
 16.19 	Minnesota Statutes 2012, section 290.067, subdivisions 2, 2a, and 2b, are repealed.

16.20 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
16.21 	December 31, 2013.

16.22 	ARTICLE 2
16.23 	SALES AND USE TAX RELIEF

16.24 	Section 1. Minnesota Statutes 2013 Supplement, section 297A.61, subdivision 3, 
16.25 	is amended to read:
16.26 		Subd. 3.Sale and purchase. (a) "Sale" and "purchase" include, but are not limited 
16.27 	to, each of the transactions listed in this subdivision. In applying the provisions of this 
16.28 	chapter, the terms "tangible personal property" and "retail sale" include the taxable 
16.29 	services listed in paragraph (g), clause (6), items (i) to (vi) and (viii), and the provision 
16.30 	of these taxable services, unless specifically provided otherwise. Services performed by 
17.1 	an employee for an employer are not taxable. Services performed by a partnership or 
17.2 	association for another partnership or association are not taxable if one of the entities owns 
17.3 	or controls more than 80 percent of the voting power of the equity interest in the other 
17.4 	entity. Services performed between members of an affiliated group of corporations are not 
17.5 	taxable. For purposes of the preceding sentence, "affiliated group of corporations" means 
17.6 	those entities that would be classified as members of an affiliated group as defined under 
17.7 	United States Code, title 26, section 1504, disregarding the exclusions in section 1504(b).
17.8 	(b) Sale and purchase include:
17.9 	(1) any transfer of title or possession, or both, of tangible personal property, whether 
17.10 	absolutely or conditionally, for a consideration in money or by exchange or barter; and
17.11 	(2) the leasing of or the granting of a license to use or consume, for a consideration 
17.12 	in money or by exchange or barter, tangible personal property, other than a manufactured 
17.13 	home used for residential purposes for a continuous period of 30 days or more.
17.14 	(c) Sale and purchase include the production, fabrication, printing, or processing of 
17.15 	tangible personal property for a consideration for consumers who furnish either directly or 
17.16 	indirectly the materials used in the production, fabrication, printing, or processing.
17.17 	(d) Sale and purchase include the preparing for a consideration of food. 
17.18 	Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited 
17.19 	to, the following:
17.20 	(1) prepared food sold by the retailer;
17.21 	(2) soft drinks;
17.22 	(3) candy;
17.23 	(4) dietary supplements; and
17.24 	(5) all food sold through vending machines.
17.25 	(e) A sale and a purchase includes the furnishing for a consideration of electricity, 
17.26 	gas, water, or steam for use or consumption within this state.
17.27 	(f) A sale and a purchase includes the transfer for a consideration of prewritten 
17.28 	computer software whether delivered electronically, by load and leave, or otherwise.
17.29 	(g) A sale and a purchase includes the furnishing for a consideration of the following 
17.30 	services:
17.31 	(1) the privilege of admission to places of amusement, recreational areas, or athletic 
17.32 	events, and the making available of amusement devices, tanning facilities, reducing 
17.33 	salons, steam baths, Turkish baths, health clubs, and spas or athletic facilities;
17.34 	(2) lodging and related services by a hotel, rooming house, resort, campground, 
17.35 	motel, or trailer camp, including furnishing the guest of the facility with access to 
17.36 	telecommunication services, and the granting of any similar license to use real property in 
18.1 	a specific facility, other than the renting or leasing of it for a continuous period of 30 days 
18.2 	or more under an enforceable written agreement that may not be terminated without prior 
18.3 	notice and including accommodations intermediary services provided in connection with 
18.4 	other services provided under this clause;
18.5 	(3) nonresidential parking services, whether on a contractual, hourly, or other 
18.6 	periodic basis, except for parking at a meter;
18.7 	(4) the granting of membership in a club, association, or other organization if:
18.8 	(i) the club, association, or other organization makes available for the use of its 
18.9 	members sports and athletic facilities, without regard to whether a separate charge is 
18.10 	assessed for use of the facilities; and
18.11 	(ii) use of the sports and athletic facility is not made available to the general public 
18.12 	on the same basis as it is made available to members.
18.13 	Granting of membership means both onetime initiation fees and periodic membership 
18.14 	dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and 
18.15 	squash courts; basketball and volleyball facilities; running tracks; exercise equipment; 
18.16 	swimming pools; and other similar athletic or sports facilities;
18.17 	(5) delivery of aggregate materials by a third party, excluding delivery of aggregate 
18.18 	material used in road construction; and delivery of concrete block by a third party if the 
18.19 	delivery would be subject to the sales tax if provided by the seller of the concrete block. 
18.20 	For purposes of this clause, "road construction" means construction of:
18.21 	(i) public roads;
18.22 	(ii) cartways; and
18.23 	(iii) private roads in townships located outside of the seven-county metropolitan area 
18.24 	up to the point of the emergency response location sign; and
18.25 	(6) services as provided in this clause:
18.26 	(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering, 
18.27 	and storing clothes, linen services and supply, cleaning and blocking hats, and carpet, 
18.28 	drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not 
18.29 	include services provided by coin operated facilities operated by the customer;
18.30 	(ii) motor vehicle washing, waxing, and cleaning services, including services 
18.31 	provided by coin operated facilities operated by the customer, and rustproofing, 
18.32 	undercoating, and towing of motor vehicles;
18.33 	(iii) building and residential cleaning, maintenance, and disinfecting services and 
18.34 	pest control and exterminating services;
18.35 	(iv) detective, security, burglar, fire alarm, and armored car services; but not 
18.36 	including services performed within the jurisdiction they serve by off-duty licensed peace 
19.1 	officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit 
19.2 	organization or any organization at the direction of a county for monitoring and electronic 
19.3 	surveillance of persons placed on in-home detention pursuant to court order or under the 
19.4 	direction of the Minnesota Department of Corrections;
19.5 	(v) pet grooming services;
19.6 	(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting 
19.7 	and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor 
19.8 	plant care; tree, bush, shrub, and stump removal, except when performed as part of a land 
19.9 	clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for 
19.10 	public utility lines. Services performed under a construction contract for the installation of 
19.11 	shrubbery, plants, sod, trees, bushes, and similar items are not taxable;
19.12 	(vii) massages, except when provided by a licensed health care facility or 
19.13 	professional or upon written referral from a licensed health care facility or professional for 
19.14 	treatment of illness, injury, or disease; and
19.15 	(viii) the furnishing of lodging, board, and care services for animals in kennels and 
19.16 	other similar arrangements, but excluding veterinary and horse boarding services.
19.17 	(h) A sale and a purchase includes the furnishing for a consideration of tangible 
19.18 	personal property or taxable services by the United States or any of its agencies or 
19.19 	instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political 
19.20 	subdivisions.
19.21 	(i) A sale and a purchase includes the furnishing for a consideration of 
19.22 	telecommunications services, ancillary services associated with telecommunication 
19.23 	services, and pay television services. Telecommunication services include, but are 
19.24 	not limited to, the following services, as defined in section 297A.669: air-to-ground 
19.25 	radiotelephone service, mobile telecommunication service, postpaid calling service, 
19.26 	prepaid calling service, prepaid wireless calling service, and private communication 
19.27 	services. The services in this paragraph are taxed to the extent allowed under federal law.
19.28 	(j) A sale and a purchase includes the furnishing for a consideration of installation if 
19.29 	the installation charges would be subject to the sales tax if the installation were provided 
19.30 	by the seller of the item being installed.
19.31 	(k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer 
19.32 	to a customer when (1) the vehicle is rented by the customer for a consideration, or (2) 
19.33 	the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section 
19.34 	59B.02, subdivision 11.
19.35 	(l) A sale and a purchase includes furnishing for a consideration of specified digital 
19.36 	products or other digital products or granting the right for a consideration to use specified 
20.1 	digital products or other digital products on a temporary or permanent basis and regardless 
20.2 	of whether the purchaser is required to make continued payments for such right. Wherever 
20.3 	the term "tangible personal property" is used in this chapter, other than in subdivisions 10 
20.4 	and 38, the provisions also apply to specified digital products, or other digital products, 
20.5 	unless specifically provided otherwise or the context indicates otherwise.
20.6 	(m) A sale and purchase includes the furnishing for consideration of the following 
20.7 	services:
20.8 	(1) repairing and maintaining electronic and precision equipment, which service can 
20.9 	be deducted as a business expense under the Internal Revenue Code. This includes, but 
20.10 	is not limited to, repair or maintenance of electronic devices, computers and computer 
20.11 	peripherals, monitors, computer terminals, storage devices, and CD-ROM drives; other 
20.12 	office equipment such as photocopying machines, printers, and facsimile machines; 
20.13 	televisions, stereos, sound systems, video or digital recorders and players; two-way radios 
20.14 	and other communications equipment; radar and sonar equipment, scientific instruments, 
20.15 	microscopes, and medical equipment;
20.16 	(2) repairing and maintaining commercial and industrial machinery and equipment. 
20.17 	For purposes of this subdivision, the following items are not commercial or industrial 
20.18 	machinery and equipment: (i) motor vehicles; (ii) furniture and fixtures; (iii) ships; (iv) 
20.19 	railroad stock; and (v) aircraft; and
20.20 	(3) warehousing or storage services for tangible personal property, excluding:
20.21 	(i) agricultural products;
20.22 	(ii) refrigerated storage;
20.23 	(iii) electronic data; and
20.24 	(iv) self-storage services and storage of motor vehicles, recreational vehicles, and 
20.25 	boats, not eligible to be deducted as a business expense under the Internal Revenue Code.

20.26 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
20.27 	March 31, 2014.

20.28 	Sec. 2. Minnesota Statutes 2012, section 297A.67, is amended by adding a subdivision 
20.29 	to read:
20.30 		Subd. 33.Presentations accessed as digital audio and audiovisual works.
 20.31 	The charge for a live or prerecorded presentation, such as a lecture, seminar, 
20.32 	workshop, or course, where participants access the presentation as a digital audio 
20.33 	work or digital audiovisual work, and are connected to the presentation via the 
20.34 	Internet, telecommunications equipment or other device that transfers the presentation 
20.35 	electronically, is exempt if:
21.1 	(1) participants and the presenter, during the time that participants access the 
21.2 	presentation, are able to give, receive, and discuss the presentation with each other, 
21.3 	although the amount of interaction and when in the presentation the interaction occurs 
21.4 	may be limited by the presenter; and
21.5 	(2) for those presentations where participants are given the option to attend the 
21.6 	same presentation in person:
21.7 	(i) any limitations on the amount of interaction and when it occurs during the 
21.8 	presentation are the same for those participants accessing the presentation electronically 
21.9 	as those attending in person; and
21.10 	(ii) the admission to the in person presentation is not subject to tax under this chapter.

21.11 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
21.12 	June 30, 2014.

21.13 	Sec. 3. Minnesota Statutes 2013 Supplement, section 297A.68, subdivision 5, is 
21.14 	amended to read:
21.15 		Subd. 5.Capital equipment. (a) Capital equipment is exempt.
21.16 	"Capital equipment" means machinery and equipment purchased or leased, and used 
21.17 	in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining, 
21.18 	or refining tangible personal property to be sold ultimately at retail if the machinery and 
21.19 	equipment are essential to the integrated production process of manufacturing, fabricating, 
21.20 	mining, or refining. Capital equipment also includes machinery and equipment 
21.21 	used primarily to electronically transmit results retrieved by a customer of an online 
21.22 	computerized data retrieval system.
21.23 	(b) Capital equipment includes, but is not limited to:
21.24 	(1) machinery and equipment used to operate, control, or regulate the production 
21.25 	equipment;
21.26 	(2) machinery and equipment used for research and development, design, quality 
21.27 	control, and testing activities;
21.28 	(3) environmental control devices that are used to maintain conditions such as 
21.29 	temperature, humidity, light, or air pressure when those conditions are essential to and are 
21.30 	part of the production process;
21.31 	(4) materials and supplies used to construct and install machinery or equipment;
21.32 	(5) repair and replacement parts, including accessories, whether purchased as spare 
21.33 	parts, repair parts, or as upgrades or modifications to machinery or equipment;
21.34 	(6) materials used for foundations that support machinery or equipment;
22.1 	(7) materials used to construct and install special purpose buildings used in the 
22.2 	production process;
22.3 	(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed 
22.4 	as part of the delivery process regardless if mounted on a chassis, repair parts for 
22.5 	ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and
22.6 	(9) machinery or equipment used for research, development, design, or production 
22.7 	of computer software.
22.8 	(c) Capital equipment does not include the following:
22.9 	(1) motor vehicles taxed under chapter 297B;
22.10 	(2) machinery or equipment used to receive or store raw materials;
22.11 	(3) building materials, except for materials included in paragraph (b), clauses (6) 
22.12 	and (7);
22.13 	(4) machinery or equipment used for nonproduction purposes, including, but not 
22.14 	limited to, the following: plant security, fire prevention, first aid, and hospital stations; 
22.15 	support operations or administration; pollution control; and plant cleaning, disposal of 
22.16 	scrap and waste, plant communications, space heating, cooling, lighting, or safety;
22.17 	(5) farm machinery and aquaculture production equipment as defined by section 
22.18 	297A.61, subdivisions 12 and 13;
22.19 	(6) machinery or equipment purchased and installed by a contractor as part of an 
22.20 	improvement to real property;
22.21 	(7) machinery and equipment used by restaurants in the furnishing, preparing, or 
22.22 	serving of prepared foods as defined in section 297A.61, subdivision 31;
22.23 	(8) machinery and equipment used to furnish the services listed in section 297A.61, 
22.24 	subdivision 3, paragraph (g), clause (6), items (i) to (vi) and (viii);
22.25 	(9) machinery or equipment used in the transportation, transmission, or distribution 
22.26 	of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines, 
22.27 	tanks, mains, or other means of transporting those products. This clause does not apply to 
22.28 	machinery or equipment used to blend petroleum or biodiesel fuel as defined in section 
22.29 	239.77; or
22.30 	(10) any other item that is not essential to the integrated process of manufacturing, 
22.31 	fabricating, mining, or refining.
22.32 	(d) For purposes of this subdivision:
22.33 	(1) "Equipment" means independent devices or tools separate from machinery but 
22.34 	essential to an integrated production process, including computers and computer software, 
22.35 	used in operating, controlling, or regulating machinery and equipment; and any subunit or 
23.1 	assembly comprising a component of any machinery or accessory or attachment parts of 
23.2 	machinery, such as tools, dies, jigs, patterns, and molds.
23.3 	(2) "Fabricating" means to make, build, create, produce, or assemble components or 
23.4 	property to work in a new or different manner.
23.5 	(3) "Integrated production process" means a process or series of operations through 
23.6 	which tangible personal property is manufactured, fabricated, mined, or refined. For 
23.7 	purposes of this clause, (i) manufacturing begins with the removal of raw materials 
23.8 	from inventory and ends when the last process prior to loading for shipment has been 
23.9 	completed; (ii) fabricating begins with the removal from storage or inventory of the 
23.10 	property to be assembled, processed, altered, or modified and ends with the creation 
23.11 	or production of the new or changed product; (iii) mining begins with the removal of 
23.12 	overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and 
23.13 	ends when the last process before stockpiling is completed; and (iv) refining begins with 
23.14 	the removal from inventory or storage of a natural resource and ends with the conversion 
23.15 	of the item to its completed form.
23.16 	(4) "Machinery" means mechanical, electronic, or electrical devices, including 
23.17 	computers and computer software, that are purchased or constructed to be used for the 
23.18 	activities set forth in paragraph (a), beginning with the removal of raw materials from 
23.19 	inventory through completion of the product, including packaging of the product.
23.20 	(5) "Machinery and equipment used for pollution control" means machinery and 
23.21 	equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity 
23.22 	described in paragraph (a).
23.23 	(6) "Manufacturing" means an operation or series of operations where raw materials 
23.24 	are changed in form, composition, or condition by machinery and equipment and which 
23.25 	results in the production of a new article of tangible personal property. For purposes of 
23.26 	this subdivision, "manufacturing" includes the generation of electricity or steam to be 
23.27 	sold at retail.
23.28 	(7) "Mining" means the extraction of minerals, ores, stone, or peat.
23.29 	(8) "Online data retrieval system" means a system whose cumulation of information 
23.30 	is equally available and accessible to all its customers.
23.31 	(9) "Primarily" means machinery and equipment used 50 percent or more of the time 
23.32 	in an activity described in paragraph (a).
23.33 	(10) "Refining" means the process of converting a natural resource to an intermediate 
23.34 	or finished product, including the treatment of water to be sold at retail.
24.1 	(11) This subdivision does not apply to telecommunications equipment as provided 
24.2 	in subdivision 35 35a, and does not apply to wire, cable, fiber, poles, or conduit for 
24.3 	telecommunications services.

24.4 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
24.5 	March 31, 2014.

24.6 	Sec. 4. Minnesota Statutes 2012, section 297A.68, is amended by adding a subdivision 
24.7 	to read:
24.8 		Subd. 35a.Telecommunications, cable television, and direct satellite machinery 
24.9 	and equipment. (a) Telecommunications, cable television, and direct satellite machinery 
24.10 	and equipment purchased or leased for use directly by a telecommunications, cable 
24.11 	television, or direct satellite provider primarily in the provision of telecommunications, 
24.12 	cable television, or direct satellite services that are ultimately to be sold at retail are 
24.13 	exempt, regardless of whether purchased by the owner, a contractor, or a subcontractor.
24.14 	(b) For purposes of this subdivision, "telecommunications, cable television, or direct 
24.15 	satellite machinery and equipment" includes, but is not limited to:
24.16 	(1) machinery, equipment, and fixtures utilized in receiving, initiating, 
24.17 	amplifying, processing, transmitting, retransmitting, recording, switching, or monitoring 
24.18 	telecommunications, cable television, or direct satellite services, such as computers, 
24.19 	transformers, amplifiers, routers, bridges, repeaters, multiplexers, and other items 
24.20 	performing comparable functions;
24.21 	(2) machinery, equipment, and fixtures used in the transportation of 
24.22 	telecommunications, cable television, or direct satellite services, such as radio transmitters 
24.23 	and receivers, satellite equipment, microwave equipment, and other transporting media, 
24.24 	but not wire, cable, fiber, poles, or conduit;
24.25 	(3) ancillary machinery, equipment, and fixtures that regulate, control, protect, or 
24.26 	enable the machinery in clauses (1) and (2) to accomplish its intended function, such as 
24.27 	auxiliary power supply, test equipment, towers, heating, ventilating, and air conditioning 
24.28 	equipment necessary to the operation of the telecommunications, cable television, or direct 
24.29 	satellite equipment; and software necessary to the operation of the telecommunications, 
24.30 	cable television, or direct satellite equipment; and
24.31 	(4) repair and replacement parts, including accessories, whether purchased as spare 
24.32 	parts, repair parts, or as upgrades or modifications to qualified machinery or equipment.

24.33 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
24.34 	March 31, 2014.

25.1 	Sec. 5. Minnesota Statutes 2013 Supplement, section 297A.70, subdivision 2, is 
25.2 	amended to read:
25.3 		Subd. 2.Sales to government. (a) All sales, except those listed in paragraph (b), 
25.4 	to the following governments and political subdivisions, or to the listed agencies or 
25.5 	instrumentalities of governments and political subdivisions, are exempt:
25.6 	(1) the United States and its agencies and instrumentalities;
25.7 	(2) school districts, local governments, the University of Minnesota, state universities, 
25.8 	community colleges, technical colleges, state academies, the Perpich Minnesota Center for 
25.9 	Arts Education, and an instrumentality of a political subdivision that is accredited as an 
25.10 	optional/special function school by the North Central Association of Colleges and Schools;
25.11 	(3) hospitals and nursing homes owned and operated by political subdivisions of 
25.12 	the state of tangible personal property and taxable services used at or by hospitals and 
25.13 	nursing homes;
25.14 	(4) the Metropolitan Council, for its purchases of vehicles and repair parts to equip 
25.15 	operations provided for in section 473.4051;
25.16 	(5) (4) other states or political subdivisions of other states, if the sale would be 
25.17 	exempt from taxation if it occurred in that state; and
25.18 	(6) (5) public libraries, public library systems, multicounty, multitype library systems 
25.19 	as defined in section 134.001, county law libraries under chapter 134A, state agency 
25.20 	libraries, the state library under section 480.09, and the Legislative Reference Library.
25.21 	(b) This exemption does not apply to the sales of the following products and services:
25.22 	(1) building, construction, or reconstruction materials purchased by a contractor 
25.23 	or a subcontractor as a part of a lump-sum contract or similar type of contract with a 
25.24 	guaranteed maximum price covering both labor and materials for use in the construction, 
25.25 	alteration, or repair of a building or facility;
25.26 	(2) construction materials purchased by tax exempt entities or their contractors to 
25.27 	be used in constructing buildings or facilities which will not be used principally by the 
25.28 	tax exempt entities;
25.29 	(3) the leasing of a motor vehicle as defined in section 297B.01, subdivision 11, 
25.30 	except for leases entered into by the United States or its agencies or instrumentalities;
25.31 	(4) lodging as defined under section 297A.61, subdivision 3, paragraph (g), clause 
25.32 	(2), and prepared food, candy, soft drinks, and alcoholic beverages as defined in section 
25.33 	297A.67, subdivision 2, except for lodging, prepared food, candy, soft drinks, and alcoholic 
25.34 	beverages purchased directly by the United States or its agencies or instrumentalities; or
26.1 	(5) goods or services purchased by a local government as inputs to goods and 
26.2 	services that are generally provided by a private business and the purchases would be 
26.3 	taxable if made by a private business engaged in the same activity.
26.4 	(c) As used in this subdivision, "school districts" means public school entities and 
26.5 	districts of every kind and nature organized under the laws of the state of Minnesota, and 
26.6 	any instrumentality of a school district, as defined in section 471.59.
26.7 	(d) As used in this subdivision, "local governments" means cities, counties, 
26.8 	and townships, special districts as defined in section 6.465, any instrumentality of a 
26.9 	city, county, or township as defined in section 471.59, and any joint powers board or 
26.10 	organization created under section 471.59.
26.11 	(e) As used in this subdivision, "goods or services generally provided by a private 
26.12 	business" include, but are not limited to, goods or services provided by liquor stores, gas 
26.13 	and electric utilities, golf courses, marinas, health and fitness centers, campgrounds, cafes, 
26.14 	and laundromats. "Goods or services generally provided by a private business" do not 
26.15 	include housing services, sewer and water services, wastewater treatment, ambulance and 
26.16 	other public safety services, correctional services, chore or homemaking services provided 
26.17 	to elderly or disabled individuals, or road and street maintenance or lighting.

26.18 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
26.19 	June 30, 2014.

26.20 	Sec. 6. Minnesota Statutes 2013 Supplement, section 297A.70, subdivision 13, is 
26.21 	amended to read:
26.22 		Subd. 13.Fund-raising sales by or for nonprofit groups. (a) The following 
26.23 	sales by the specified organizations for fund-raising purposes are exempt, subject to the 
26.24 	limitations listed in paragraph (b):
26.25 	(1) all sales made by a nonprofit organization that exists solely for the purpose of 
26.26 	providing educational or social activities for young people primarily age 18 and under;
26.27 	(2) all sales made by an organization that is a senior citizen group or association of 
26.28 	groups if (i) in general it limits membership to persons age 55 or older; (ii) it is organized 
26.29 	and operated exclusively for pleasure, recreation, and other nonprofit purposes; and (iii) 
26.30 	no part of its net earnings inures to the benefit of any private shareholders;
26.31 	(3) the sale or use of tickets or admissions to a golf tournament held in Minnesota if 
26.32 	the beneficiary of the tournament's net proceeds qualifies as a tax-exempt organization 
26.33 	under section 501(c)(3) of the Internal Revenue Code; and
26.34 	(4) sales of candy sold for fund-raising purposes by a nonprofit organization that 
26.35 	provides educational and social activities primarily for young people age 18 and under.
27.1 	(b) The exemptions listed in paragraph (a) are limited in the following manner:
27.2 	(1) the exemption under paragraph (a), clauses (1) and (2), applies only if to the first 
27.3 	$20,000 of the gross annual receipts of the organization from fund-raising do not exceed 
27.4 	$10,000; and
27.5 	(2) the exemption under paragraph (a), clause (1), does not apply if the sales are 
27.6 	derived from admission charges or from activities for which the money must be deposited 
27.7 	with the school district treasurer under section 123B.49, subdivision 2, or be recorded in 
27.8 	the same manner as other revenues or expenditures of the school district under section 
27.9 	123B.49, subdivision 4.
27.10 	(c) Sales of tangible personal property and services are exempt if the entire proceeds, 
27.11 	less the necessary expenses for obtaining the property or services, will be contributed to 
27.12 	a registered combined charitable organization described in section 43A.50, to be used 
27.13 	exclusively for charitable, religious, or educational purposes, and the registered combined 
27.14 	charitable organization has given its written permission for the sale. Sales that occur over 
27.15 	a period of more than 24 days per year are not exempt under this paragraph.
27.16 	(d) For purposes of this subdivision, a club, association, or other organization of 
27.17 	elementary or secondary school students organized for the purpose of carrying on sports, 
27.18 	educational, or other extracurricular activities is a separate organization from the school 
27.19 	district or school for purposes of applying the $10,000 $20,000 limit.

27.20 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
27.21 	June 30, 2014.

27.22 	Sec. 7. Minnesota Statutes 2013 Supplement, section 297A.70, subdivision 14, is 
27.23 	amended to read:
27.24 		Subd. 14.Fund-raising events sponsored by nonprofit groups. (a) Sales of 
27.25 	tangible personal property or services at, and admission charges for fund-raising events 
27.26 	sponsored by, a nonprofit organization are exempt if:
27.27 	(1) all gross receipts are recorded as such, in accordance with generally accepted 
27.28 	accounting practices, on the books of the nonprofit organization; and
27.29 	(2) the entire proceeds, less the necessary expenses for the event, will be used solely 
27.30 	and exclusively for charitable, religious, or educational purposes. Exempt sales include 
27.31 	the sale of prepared food, candy, and soft drinks at the fund-raising event.
27.32 	(b) This exemption is limited in the following manner:
27.33 	(1) it does not apply to admission charges for events involving bingo or other 
27.34 	gambling activities or to charges for use of amusement devices involving bingo or other 
27.35 	gambling activities;
28.1 	(2) all gross receipts are taxable if the profits are not used solely and exclusively for 
28.2 	charitable, religious, or educational purposes;
28.3 	(3) it does not apply unless the organization keeps a separate accounting record, 
28.4 	including receipts and disbursements from each fund-raising event that documents all 
28.5 	deductions from gross receipts with receipts and other records;
28.6 	(4) it does not apply to any sale made by or in the name of a nonprofit corporation as 
28.7 	the active or passive agent of a person that is not a nonprofit corporation;
28.8 	(5) all gross receipts are taxable if fund-raising events exceed 24 days per year;
28.9 	(6) it does not apply to fund-raising events conducted on premises leased for more 
28.10 	than five days but less than 30 days; and
28.11 	(7) it does not apply if the risk of the event is not borne by the nonprofit organization 
28.12 	and the benefit to the nonprofit organization is less than the total amount of the state and 
28.13 	local tax revenues forgone by this exemption.
28.14 	(c) For purposes of this subdivision, a "nonprofit organization" means any unit of 
28.15 	government, corporation, society, association, foundation, or institution organized and 
28.16 	operated for charitable, religious, educational, civic, fraternal, and senior citizens' or 
28.17 	veterans' purposes, no part of the net earnings of which inures to the benefit of a private 
28.18 	individual.
28.19 	(d) For purposes of this subdivision, "fund-raising events" means activities of 
28.20 	limited duration, not regularly carried out in the normal course of business, that attract 
28.21 	patrons for community, social, and entertainment purposes, such as auctions, bake sales, 
28.22 	ice cream socials, block parties, carnivals, competitions, concerts, concession stands, 
28.23 	craft sales, bazaars, dinners, dances, door-to-door sales of merchandise, fairs, fashion 
28.24 	shows, festivals, galas, special event workshops, sporting activities such as marathons and 
28.25 	tournaments, and similar events. Fund-raising events do not include the operation of a 
28.26 	regular place of business in which services are provided or sales are made during regular 
28.27 	hours such as bookstores, thrift stores, gift shops, restaurants, ongoing Internet sales, 
28.28 	regularly scheduled classes, or other activities carried out in the normal course of business.

28.29 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
28.30 	June 30, 2014.

28.31 	Sec. 8.  REPEALER.
 28.32 	Minnesota Statutes 2013 Supplement, section 297A.61, subdivision 57, is repealed.

28.33 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
28.34 	March 31, 2014.

29.1 	ARTICLE 3
29.2 	ESTATE AND GIFT TAX REFORM

29.3 	Section 1. Minnesota Statutes 2013 Supplement, section 289A.10, subdivision 1, 
29.4 	is amended to read:
29.5 		Subdivision 1.Return required. In the case of a decedent who has an interest in 
29.6 	property with a situs in Minnesota, the personal representative must submit a Minnesota 
29.7 	estate tax return to the commissioner, on a form prescribed by the commissioner, if:
29.8 	(1) a federal estate tax return is required to be filed; or
29.9 	(2) the sum of the federal gross estate and federal adjusted taxable gifts, as defined in 
29.10 	section 2001(b) of the Internal Revenue Code, made within three years of the date of the 
29.11 	decedent's death exceeds $1,000,000 $1,200,000 for estates of decedents dying in 2014; 
29.12 	$1,400,000 for estates of decedents dying in 2015; $1,600,000 for estates of decedents 
29.13 	dying in 2016; $1,800,000 for estates of decedents dying in 2017; and $2,000,000 for 
29.14 	estates of decedents dying in 2018 and thereafter.
29.15 	The return must contain a computation of the Minnesota estate tax due. The return 
29.16 	must be signed by the personal representative.

29.17 	EFFECTIVE DATE. This section is effective retroactively for estates of decedents 
29.18 	dying after December 31, 2013.

29.19 	Sec. 2. Minnesota Statutes 2012, section 289A.18, subdivision 3, is amended to read:
29.20 		Subd. 3.Estate tax returns. An estate tax return must be filed with the 
29.21 	commissioner within nine months after the decedent's death. Except in the case of the 
29.22 	estate of a decedent dying after December 31, 2009, and before December 17, 2010, then 
29.23 	an estate tax return must be filed with the commissioner within nine months after the 
29.24 	decedent's death; within the time provided by section 289A.19, subdivision 4; or before 
29.25 	September 20, 2011; whichever is later.

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

29.27 	Sec. 3. Minnesota Statutes 2013 Supplement, section 291.005, subdivision 1, is 
29.28 	amended to read:
29.29 		Subdivision 1.Scope. Unless the context otherwise clearly requires, the following 
29.30 	terms used in this chapter shall have the following meanings:
29.31 	(1) "Commissioner" means the commissioner of revenue or any person to whom the 
29.32 	commissioner has delegated functions under this chapter.
30.1 	(2) "Federal gross estate" means the gross estate of a decedent as required to be valued 
30.2 	and otherwise determined for federal estate tax purposes under the Internal Revenue Code.
30.3 	(3) "Internal Revenue Code" means the United States Internal Revenue Code of 
30.4 	1986, as amended through January 3, 2013, but without regard to the provisions of section 
30.5 	2011, paragraph (f), of the Internal Revenue Code March 1, 2014.
30.6 	(4) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as 
30.7 	defined by section 2011(b)(3) of the Internal Revenue Code, plus
30.8 	(i) the amount of deduction for state death taxes allowed under section 2058 of the 
30.9 	Internal Revenue Code;
30.10 	(ii) the amount of taxable gifts, as defined in section 292.16, and made by the 
30.11 	decedent within three years of the decedent's date of death; less
30.12 	(iii)(A) the value of qualified small business property under section 291.03, 
30.13 	subdivision 9, and the value of qualified farm property under section 291.03, subdivision 
30.14 	10, or (B) $4,000,000, whichever is less.
30.15 	(5) (4) "Minnesota gross estate" means the federal gross estate of a decedent after (a) 
30.16 	excluding therefrom any property included therein in the estate which has its situs outside 
30.17 	Minnesota, and (b) including therein any property omitted from the federal gross estate 
30.18 	which is includable therein in the estate, has its situs in Minnesota, and was not disclosed 
30.19 	to federal taxing authorities.
30.20 	(6) (5) "Nonresident decedent" means an individual whose domicile at the time 
30.21 	of death was not in Minnesota.
30.22 	(7) (6) "Personal representative" means the executor, administrator or other person 
30.23 	appointed by the court to administer and dispose of the property of the decedent. If there 
30.24 	is no executor, administrator or other person appointed, qualified, and acting within this 
30.25 	state, then any person in actual or constructive possession of any property having a situs in 
30.26 	this state which is included in the federal gross estate of the decedent shall be deemed 
30.27 	to be a personal representative to the extent of the property and the Minnesota estate tax 
30.28 	due with respect to the property.
30.29 	(8) (7) "Resident decedent" means an individual whose domicile at the time of 
30.30 	death was in Minnesota.
30.31 	(9) (8) "Situs of property" means, with respect to:
30.32 	(i) real property, the state or country in which it is located;
30.33 	(ii) tangible personal property, the state or country in which it was normally kept 
30.34 	or located at the time of the decedent's death or for a gift of tangible personal property 
30.35 	within three years of death, the state or country in which it was normally kept or located 
30.36 	when the gift was executed; and
31.1 	(iii) intangible personal property, the state or country in which the decedent was 
31.2 	domiciled at death or for a gift of intangible personal property within three years of death, 
31.3 	the state or country in which the decedent was domiciled when the gift was executed.
31.4 	For a nonresident decedent with an ownership interest in a pass-through entity 
31.5 	with assets that include real or tangible personal property, situs of the real or tangible 
31.6 	personal property is determined as if the pass-through entity does not exist and the real 
31.7 	or tangible personal property is personally owned by the decedent. If the pass-through 
31.8 	entity is owned by a person or persons in addition to the decedent, ownership of the 
31.9 	property is attributed to the decedent in proportion to the decedent's capital ownership 
31.10 	share of the pass-through entity.
31.11 	(10) (9) "Pass-through entity" includes the following:
31.12 	(i) an entity electing S corporation status under section 1362 of the Internal Revenue 
31.13 	Code;
31.14 	(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;
31.15 	(iii) a single-member limited liability company or similar entity, regardless of 
31.16 	whether it is taxed as an association or is disregarded for federal income tax purposes 
31.17 	under Code of Federal Regulations, title 26, section 301.7701-3; or
31.18 	(iv) a trust to the extent the property is includible in the decedent's federal gross estate.

31.19 	EFFECTIVE DATE. This section is effective retroactively for estates of decedents 
31.20 	dying after December 31, 2013.

31.21 	Sec. 4. [291.016] MINNESOTA TAXABLE ESTATE.
31.22 		Subdivision 1.General. For purposes of the tax under this chapter, the Minnesota 
31.23 	taxable estate equals the federal taxable estate as provided under section 2051 of the Internal 
31.24 	Revenue Code, without regard to whether the estate is subject to the federal estate tax:
31.25 	(1) increased by the additions under subdivision 2; and
31.26 	(2) decreased by the subtraction under subdivision 3.
31.27 		Subd. 2.Additions. The following amounts, to the extent deducted in computing 
31.28 	the federal taxable estate, must be added in computing the Minnesota taxable estate:
31.29 	(1) the amount of the deduction for state death taxes allowed under section 2058 of 
31.30 	the Internal Revenue Code;
31.31 	(2) the amount of the deduction for foreign death taxes allowed under section 
31.32 	2053(d) of the Internal Revenue Code; and
31.33 	(3) the aggregate amount of taxable gifts as defined in section 2053 of the Internal 
31.34 	Revenue Code, made by the decedent within three years of the date of death. For purposes 
32.1 	of this clause, the amount of the addition equals the value of the gift under section 2512 of 
32.2 	the Internal Revenue Code and excludes any value of the gift included in the federal estate.
32.3 		Subd. 3.Subtraction. (a) The value of qualified small business property under 
32.4 	section 291.03, subdivision 9, and the value of qualified farm property under section 
32.5 	291.03, subdivision 10, or the result of $5,000,000 minus the amount for the year of death 
32.6 	listed in paragraph (b), whichever is less, may be subtracted in computing the Minnesota 
32.7 	taxable estate but must not reduce the Minnesota taxable estate to less than zero.
32.8 	(b) $1,200,000 for estates of decedents dying in 2014; $1,400,000 for estates of 
32.9 	decedents dying in 2015; $1,600,000 for estates of decedents dying in 2016; $1,800,000 
32.10 	for estates of decedents dying in 2017; and $2,000,000 for estates of decedents dying in 
32.11 	2018 and thereafter.

32.12 	EFFECTIVE DATE. This section is effective retroactively for estates of decedents 
32.13 	dying after December 31, 2013.

32.14 	Sec. 5. Minnesota Statutes 2013 Supplement, section 291.03, subdivision 1, is 
32.15 	amended to read:
32.16 		Subdivision 1.Tax amount. (a) The tax imposed shall be an amount equal to the 
32.17 	proportion of the maximum credit for state death taxes computed under section 2011 of 
32.18 	the Internal Revenue Code, but using Minnesota adjusted taxable estate instead of federal 
32.19 	adjusted taxable estate, as the Minnesota gross estate bears to the value of the federal 
32.20 	gross estate. The tax is reduced by:
32.21 	(1) the gift tax paid by the decedent under section 292.17 on gifts included in the 
32.22 	Minnesota adjusted taxable estate and not subtracted as qualified farm or small business 
32.23 	property; and
32.24 	(2) any credit allowed under subdivision 1c.
32.25 	(b) The tax determined under this subdivision must not be greater than the sum of 
32.26 	the following amounts multiplied by a fraction, the numerator of which is the Minnesota 
32.27 	gross estate and the denominator of which is the federal gross estate:
32.28 	(1) the rates and brackets under section 2001(c) of the Internal Revenue Code 
32.29 	multiplied by the sum of:
32.30 	(i) the taxable estate, as defined under section 2051 of the Internal Revenue Code; plus
32.31 	(ii) adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue 
32.32 	Code; less
32.33 	(iii) the lesser of (A) the sum of the value of qualified small business property 
32.34 	under subdivision 9, and the value of qualified farm property under subdivision 10, or 
32.35 	(B) $4,000,000; less
33.1 	(2) the amount of tax allowed under section 2001(b)(2) of the Internal Revenue 
33.2 	Code; and less
33.3 	(3) the federal credit allowed under section 2010 of the Internal Revenue Code.
33.4 	(c) For purposes of this subdivision, "Internal Revenue Code" means the Internal 
33.5 	Revenue Code of 1986, as amended through December 31, 2000.
33.6 	The tax imposed must be computed by applying to the Minnesota taxable estate the 
33.7 	following schedule of rates and then the resulting amount multiplied by a fraction, not 
33.8 	greater than one, the numerator of which is the value of the Minnesota gross estate plus 
33.9 	the value of gifts under section 291.016, subdivision 2, clause (3), with a Minnesota situs, 
33.10 	and the denominator of which is the federal gross estate plus the value of gifts under 
33.11 	section 291.016, subdivision 2, clause (3):
33.12 	(a) For estate of decedents dying in 2014:

33.13	Amount of Minnesota Taxable Estate
	Rate of Tax
	
33.14	Not over $1,200,000
	None
	
33.15	Over $1,200,000 but not over $1,400,000
	nine percent of the excess over $1,200,000
	
33.16
33.17	Over $1,400,000 but not over $3,600,000
	$18,000 plus ten percent of the excess over 
$1,400,000
	
33.18
33.19	Over $3,600,000 but not over $4,100,000
	$238,000 plus 10.4 percent of the excess 
over $3,600,000
	
33.20
33.21	Over $4,100,000 but not over $5,100,000
	$290,000 plus 11.2 percent of the excess 
over $4,100,000
	
33.22
33.23	Over $5,100,000 but not over $6,100,000
	$402,000 plus 12 percent of the excess over 
$5,100,000
	
33.24
33.25	Over $6,100,000 but not over $7,100,000
	$522,000 plus 12.8 percent of the excess 
over $6,100,000
	
33.26
33.27	Over $7,100,000 but not over $8,100,000
	$650,000 plus 13.6 percent of the excess 
over $7,100,000
	
33.28
33.29	Over $8,100,000 but not over $9,100,000
	$786,000 plus 14.4 percent of the excess 
over $8,100,000
	
33.30
33.31	Over $9,100,000 but not over $10,100,000
	$930,000 plus 15.2 percent of the excess 
over $9,100,000
	
33.32
33.33	Over $10,100,000
	$1,082,000 plus 16 percent of the excess 
over $10,100,000
	
33.34 	(b) For estate of decedents dying in 2015:

33.35	Amount of Minnesota Taxable Estate
	Rate of Tax
	
33.36	Not over $1,400,000
	None
	
33.37	Over $1,400,000 but not over $3,600,000
	ten percent of the excess over $1,400,000
	
33.38
33.39	Over $3,600,000 but not over $6,100,000
	$220,000 plus 12 percent of the excess over 
$3,600,000
	
33.40
33.41	Over $6,100,000 but not over $7,100,000
	$520,000 plus 12.8 percent of the excess 
over $6,100,000
	
33.42
33.43	Over $7,100,000 but not over $8,100,000
	$648,000 plus 13.6 percent of the excess 
over $7,100,000
	
34.1
34.2	Over $8,100,000 but not over $9,100,000
	$784,000 plus 14.4 percent of the excess 
over $8,100,000
	
34.3
34.4	Over $9,100,000 but not over $10,100,000
	$928,000 plus 15.2 percent of the excess 
over $9,100,000
	
34.5
34.6	Over $10,100,000 
	$1,080,000 plus 16 percent of the excess 
over $10,100,000
	
34.7 	(c) For estate of decedents dying in 2016:

34.8	Amount of Minnesota Taxable Estate
	Rate of Tax
	
34.9	Not over $1,600,000
	None
	
34.10	Over $1,600,000 but not over $2,600,000
	ten percent of the excess over $1,600,000
	
34.11
34.12	Over $2,600,000 but not over $6,100,000
	$100,000 plus 12 percent of the excess over 
$2,600,000
	
34.13
34.14	Over $6,100,000 but not over $7,100,000
	$520,000 plus 12.8 percent of the excess 
over $6,100,000
	
34.15
34.16	Over $7,100,000 but not over $8,100,000
	$648,000 plus 13.6 percent of the excess 
over $7,100,000
	
34.17
34.18	Over $8,100,000 but not over $9,100,000
	$784,000 plus 14.4 percent of the excess 
over $8,100,000
	
34.19
34.20	Over $9,100,000 but not over $10,100,000
	$928,000 plus 15.2 percent of the excess 
over $9,100,000
	
34.21
34.22	Over $10,100,000 
	$1,080,000 plus 16 percent of the excess 
over $10,100,000
	
34.23 	(d) For estates of decedents dying in 2017:

34.24	Amount of Minnesota Taxable Estate
	Rate of Tax
	
34.25	Not over $1,800,000
	None
	
34.26	Over $1,800,000 but not over $2,100,000
	ten percent of the excess over $1,800,000
	
34.27
34.28	Over $2,100,000 but not over $5,100,000
	$30,000 plus 12 percent of the excess over 
$2,100,000
	
34.29
34.30	Over $5,100,000 but not over $7,100,000
	$390,000 plus 12.8 percent of the excess 
over $5,100,000
	
34.31
34.32	Over $7,100,000 but not over $8,100,000
	$646,000 plus 13.6 percent of the excess 
over $7,100,000
	
34.33
34.34	Over $8,100,000 but not over $9,100,000
	$782,000 plus 14.4 percent of the excess 
over $8,100,000
	
34.35
34.36	Over $9,100,000 but not over $10,100,000
	$926,000 plus 15.2 percent of the excess 
over $9,100,000
	
34.37
34.38	Over $10,100,000 
	$1,078,000 plus 16 percent of the excess 
over $10,100,000
	
34.39 	(e) For estates of decedents dying in 2018 and thereafter:

34.40	Amount of Minnesota Taxable Estate
	Rate of Tax
	
34.41	Not over $2,000,000
	None
	
34.42	Over $2,000,000 but not over $2,600,000
	ten percent of the excess over $2,000,000
	
34.43
34.44	Over $2,600,000 but not over $7,100,000
	$60,000 plus 13 percent of the excess over 
$2,600,000
	
35.1
35.2	Over $7,100,000 but not over $8,100,000
	$645,000 plus 13.6 percent of the excess 
over $7,100,000
	
35.3
35.4	Over $8,100,000 but not over $9,100,000
	$781,000 plus 14.4 percent of the excess 
over $8,100,000
	
35.5
35.6	Over $9,100,000 but not over $10,100,000
	$925,000 plus 15.2 percent of the excess 
over $9,100,000
	
35.7
35.8	Over $10,100,000 
	$1,077,000 plus 16 percent of the excess 
over $10,100,000

35.9 	EFFECTIVE DATE. This section is effective retroactively for estates of decedents 
35.10 	dying after December 31, 2013.

35.11 	Sec. 6. Minnesota Statutes 2012, section 291.03, is amended by adding a subdivision 
35.12 	to read:
35.13 		Subd. 1d.Elections. (a) For the purposes of this section, the value of the Minnesota 
35.14 	taxable estate is determined by taking into account the deduction available under section 
35.15 	2056(b) of the Internal Revenue Code. An election under section 2056(b) of the Internal 
35.16 	Revenue Code may be made for Minnesota estate tax purposes regardless of whether the 
35.17 	election is made for federal estate tax purposes. The value of the gross estate includes 
35.18 	the value of any property in which the decedent had a qualifying income interest for life 
35.19 	for which an election was made under this subdivision.
35.20 	(b) Except for an election made under section 2056(b) of the Internal Revenue Code, 
35.21 	no federal election is allowable in determining the value of the Minnesota taxable estate 
35.22 	unless the election is made on the federal estate tax return and the election is allowed 
35.23 	under federal law.

35.24 	EFFECTIVE DATE. This section is effective retroactively for estates of decedents 
35.25 	dying after December 31, 2013.

35.26 	Sec. 7. [291.031] CREDITS.
35.27 	(a) The estate of a nonresident decedent that is subject to tax under this chapter on 
35.28 	the value of Minnesota situs property held in a pass-through entity is allowed a credit 
35.29 	against the tax due under this section equal to the lesser of:
35.30 	(1) the amount of estate or inheritance tax paid to another state that is attributable to 
35.31 	the Minnesota situs property held in the pass-through entity; or
35.32 	(2) the amount of tax paid under this section attributable to the Minnesota situs 
35.33 	property held in the pass-through entity.
35.34 	(b) The amount of tax attributable to the Minnesota situs property held in the 
35.35 	pass-through entity must be determined by the increase in the estate or inheritance tax that 
36.1 	results from including the market value of the property in the estate or treating the value 
36.2 	as a taxable inheritance to the recipient of the property.

36.3 	EFFECTIVE DATE. This section is effective retroactively for estates of decedents 
36.4 	dying after December 31, 2013.

36.5 	Sec. 8.  REPEALER.
 36.6 	(a) Minnesota Statutes 2013 Supplement, sections 292.16; 292.17; 292.18; 292.19; 
36.7 	292.20; and 292.21, are repealed.
36.8 	(b) Minnesota Statutes 2012, section 291.03, subdivision 1b, and Minnesota Statutes 
36.9 	2013 Supplement, section 291.03, subdivision 1c, are repealed.

36.10 	EFFECTIVE DATE. Paragraph (a) is effective retroactively for gifts made after 
36.11 	June 30, 2013. Paragraph (b) is effective retroactively for estates of decedents dying 
36.12 	after December 31, 2013.

36.13 	ARTICLE 4
36.14 	ANGEL INVESTMENT CREDIT

36.15 	Section 1. Minnesota Statutes 2012, section 116J.8737, subdivision 5, is amended to 
36.16 	read:
36.17 		Subd. 5.Credit allowed. (a) A qualified investor or qualified fund is eligible for 
36.18 	a credit equal to 25 percent of the qualified investment in a qualified small business. 
36.19 	Investments made by a pass-through entity qualify for a credit only if the entity is a 
36.20 	qualified fund. The commissioner must not allocate more than $11,000,000 $27,000,000
36.21 	 in credits to qualified investors or qualified funds for taxable years beginning after 
36.22 	December 31, 2009 2013, and before January 1, 2011 2015, and must not allocate more 
36.23 	than $12,000,000 $15,000,000 in credits per year for taxable years beginning after 
36.24 	December 31, 2010 2014, and before January 1, 2015 2017. Any portion of a taxable 
36.25 	year's credits that is not allocated by the commissioner does not cancel and may be carried 
36.26 	forward to subsequent taxable years until all credits have been allocated.
36.27 	(b) The commissioner may not allocate more than a total maximum amount in credits 
36.28 	for a taxable year to a qualified investor for the investor's cumulative qualified investments 
36.29 	as an individual qualified investor and as an investor in a qualified fund; for married 
36.30 	couples filing joint returns the maximum is $250,000, and for all other filers the maximum 
36.31 	is $125,000. The commissioner may not allocate more than a total of $1,000,000 in credits 
36.32 	over all taxable years for qualified investments in any one qualified small business.
37.1 	(c) The commissioner may not allocate a credit to a qualified investor either as an 
37.2 	individual qualified investor or as an investor in a qualified fund if the investor receives 
37.3 	more than 50 percent of the investor's gross annual income from the qualified small 
37.4 	business in which the qualified investment is proposed. A member of the family of an 
37.5 	individual disqualified by this paragraph is not eligible for a credit under this section. For 
37.6 	a married couple filing a joint return, the limitations in this paragraph apply collectively 
37.7 	to the investor and spouse. For purposes of determining the ownership interest of an 
37.8 	investor under this paragraph, the rules under section 267(c) and 267(e) of the Internal 
37.9 	Revenue Code apply.
37.10 	(d) Applications for tax credits for 2010 must be made available on the department's 
37.11 	Web site by September 1, 2010, and the department must begin accepting applications 
37.12 	by September 1, 2010. Applications for subsequent years must be made available by 
37.13 	November 1 of the preceding year.
37.14 	(e) Qualified investors and qualified funds must apply to the commissioner for tax 
37.15 	credits. Tax credits must be allocated to qualified investors or qualified funds in the order 
37.16 	that the tax credit request applications are filed with the department. The commissioner 
37.17 	must approve or reject tax credit request applications within 15 days of receiving the 
37.18 	application. The investment specified in the application must be made within 60 days of 
37.19 	the allocation of the credits. If the investment is not made within 60 days, the credit 
37.20 	allocation is canceled and available for reallocation. A qualified investor or qualified fund 
37.21 	that fails to invest as specified in the application, within 60 days of allocation of the 
37.22 	credits, must notify the commissioner of the failure to invest within five business days of 
37.23 	the expiration of the 60-day investment period.
37.24 	(f) All tax credit request applications filed with the department on the same day must 
37.25 	be treated as having been filed contemporaneously. If two or more qualified investors or 
37.26 	qualified funds file tax credit request applications on the same day, and the aggregate 
37.27 	amount of credit allocation claims exceeds the aggregate limit of credits under this section 
37.28 	or the lesser amount of credits that remain unallocated on that day, then the credits must 
37.29 	be allocated among the qualified investors or qualified funds who filed on that day on a 
37.30 	pro rata basis with respect to the amounts claimed. The pro rata allocation for any one 
37.31 	qualified investor or qualified fund is the product obtained by multiplying a fraction, 
37.32 	the numerator of which is the amount of the credit allocation claim filed on behalf of 
37.33 	a qualified investor and the denominator of which is the total of all credit allocation 
37.34 	claims filed on behalf of all applicants on that day, by the amount of credits that remain 
37.35 	unallocated on that day for the taxable year.
38.1 	(g) A qualified investor or qualified fund, or a qualified small business acting on their 
38.2 	behalf, must notify the commissioner when an investment for which credits were allocated 
38.3 	has been made, and the taxable year in which the investment was made. A qualified fund 
38.4 	must also provide the commissioner with a statement indicating the amount invested by 
38.5 	each investor in the qualified fund based on each investor's share of the assets of the 
38.6 	qualified fund at the time of the qualified investment. After receiving notification that the 
38.7 	investment was made, the commissioner must issue credit certificates for the taxable year 
38.8 	in which the investment was made to the qualified investor or, for an investment made by 
38.9 	a qualified fund, to each qualified investor who is an investor in the fund. The certificate 
38.10 	must state that the credit is subject to revocation if the qualified investor or qualified 
38.11 	fund does not hold the investment in the qualified small business for at least three years, 
38.12 	consisting of the calendar year in which the investment was made and the two following 
38.13 	years. The three-year holding period does not apply if:
38.14 	(1) the investment by the qualified investor or qualified fund becomes worthless 
38.15 	before the end of the three-year period;
38.16 	(2) 80 percent or more of the assets of the qualified small business is sold before 
38.17 	the end of the three-year period;
38.18 	(3) the qualified small business is sold before the end of the three-year period; or
38.19 	(4) the qualified small business's common stock begins trading on a public exchange 
38.20 	before the end of the three-year period; or
38.21 	(5) the qualified investor dies before the end of the three-year period.
38.22 	(h) The commissioner must notify the commissioner of revenue of credit certificates 
38.23 	issued under this section.

38.24 	EFFECTIVE DATE. This section is effective the day following final enactment 
38.25 	and applies regardless of the taxable year in which the credit was originally allowed.

38.26 	Sec. 2. Minnesota Statutes 2012, section 116J.8737, subdivision 12, is amended to read:
38.27 		Subd. 12.Sunset. This section expires for taxable years beginning after December 
38.28 	31, 2014 2016, except that reporting requirements under subdivision 6 and revocation 
38.29 	of credits under subdivision 7 remain in effect through 2016 2018 for qualified 
38.30 	investors and qualified funds, and through 2018 2020 for qualified small businesses, 
38.31 	reporting requirements under subdivision 9 remain in effect through 2019 2021, and the 
38.32 	appropriation in subdivision 11 remains in effect through 2018 2020.

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

39.1 	ARTICLE 5
39.2 	MISCELLANEOUS

39.3 	Section 1. Minnesota Statutes 2012, section 272.03, subdivision 1, is amended to read:
39.4 		Subdivision 1.Real property. (a) For the purposes of taxation, "real property" 
39.5 	includes the land itself, rails, ties, and other track materials annexed to the land, and all 
39.6 	buildings, structures, and improvements or other fixtures on it, bridges of bridge companies, 
39.7 	and all rights and privileges belonging or appertaining to the land, and all mines, iron ore 
39.8 	and taconite minerals not otherwise exempt, quarries, fossils, and trees on or under it.
39.9 	(b) A building or structure shall include the building or structure itself, together with 
39.10 	all improvements or fixtures annexed to the building or structure, which are integrated 
39.11 	with and of permanent benefit to the building or structure, regardless of the present use 
39.12 	of the building, and which cannot be removed without substantial damage to itself or to 
39.13 	the building or structure.
39.14 	(c)(i) Real property does not include tools, implements, machinery, and equipment 
39.15 	attached to or installed in real property for use in the business or production activity 
39.16 	conducted thereon, regardless of size, weight or method of attachment, and mine shafts, 
39.17 	tunnels, and other underground openings used to extract ores and minerals taxed under 
39.18 	chapter 298 together with steel, concrete, and other materials used to support such openings.
39.19 	(ii) The exclusion provided in clause (i) shall not apply to machinery and equipment 
39.20 	includable as real estate by paragraphs (a) and (b) even though such machinery and 
39.21 	equipment is used in the business or production activity conducted on the real property if 
39.22 	and to the extent such business or production activity consists of furnishing services or 
39.23 	products to other buildings or structures which are subject to taxation under this chapter.
39.24 	(iii) The exclusion provided in clause (i) does not apply to the exterior shell of a 
39.25 	structure which constitutes walls, ceilings, roofs, or floors if the shell of the structure has 
39.26 	structural, insulation, or temperature control functions or provides protection from the 
39.27 	elements, unless the structure is primarily used in the production of biofuels, wine, beer, 
39.28 	distilled beverages, or dairy products. Such an exterior shell is included in the definition 
39.29 	of real property even if it also has special functions distinct from that of a building, or if 
39.30 	such an exterior shell is primarily used for the storage of ingredients or materials used in 
39.31 	the production of biofuels, wine, beer, distilled beverages, or dairy products, or for the 
39.32 	storage of biofuels, wine, beer, distilled beverages, or dairy products.
39.33 	(d) The term real property does not include tools, implements, machinery, 
39.34 	equipment, poles, lines, cables, wires, conduit, and station connections which are part of a 
40.1 	telephone communications system, regardless of attachment to or installation in real 
40.2 	property and regardless of size, weight, or method of attachment or installation.

40.3 	EFFECTIVE DATE. This section is effective beginning with assessment year 2015.

40.4 	Sec. 2. [477A.18] PRODUCTION PROPERTY TRANSITION AID.
40.5 		Subdivision 1.Definitions. (a) When used in this section, the following terms 
40.6 	have the meanings indicated in this section.
40.7 	(b) "Local unit" means a home rule charter or statutory city, or a town.
40.8 	(c) "Net tax capacity differential" means the positive difference, if any, by which the 
40.9 	local unit's net tax capacity was reduced from assessment year 2014 to assessment year 
40.10 	2015 due to the change in the definition of real property in section 272.03, subdivision 1, 
40.11 	enacted by article 5, section 1, of this act. For purposes of determining the net tax capacity 
40.12 	differential, any property in a job opportunity building zone under section 469.314 may 
40.13 	not be included when calculating a local unit's net tax capacity.
40.14 		Subd. 2.Aid eligibility; payment. (a) If the net tax capacity differential of the local 
40.15 	unit exceeds five percent of its 2015 net tax capacity, the local unit is eligible for transition 
40.16 	aid computed under paragraphs (b) to (f).
40.17 	(b) For aids payable in 2016, transition aid under this section for an eligible local 
40.18 	unit equals (1) the net tax capacity differential, times (2) the jurisdiction's tax rate for 
40.19 	taxes payable in 2015.
40.20 	(c) For aids payable in 2017, transition aid under this section for an eligible local 
40.21 	unit equals 80 percent of (1) the net tax capacity differential, times (2) the jurisdiction's 
40.22 	tax rate for taxes payable in 2016.
40.23 	(d) For aids payable in 2018, transition aid under this section for an eligible local 
40.24 	unit equals 60 percent of (1) the net tax capacity differential, times (2) the jurisdiction's 
40.25 	tax rate for taxes payable in 2017.
40.26 	(e) For aids payable in 2019, transition aid under this section for an eligible local 
40.27 	unit equals 40 percent of (1) the net tax capacity differential, times (2) the jurisdiction's 
40.28 	tax rate for taxes payable in 2018.
40.29 	(f) For aids payable in 2020, transition aid under this section for an eligible local 
40.30 	unit equals 20 percent of (1) the net tax capacity differential, times (2) the jurisdiction's 
40.31 	tax rate for taxes payable in 2019.
40.32 	(g) No aids shall be payable under this section in 2021 and thereafter.
40.33 	(h) The commissioner of revenue shall compute the amount of transition aid payable 
40.34 	to each local unit under this section. On or before August 1 of each year, the commissioner 
40.35 	shall certify the amount of transition aid computed for aids payable in the following year 
41.1 	for each recipient local unit. The commissioner shall pay transition aid to local units 
41.2 	annually at the times provided in section 477A.015.
41.3 	(i) The commissioner of revenue may require counties to provide any data that the 
41.4 	commissioner deems necessary to administer this section.
41.5 		Subd. 3.Appropriation. An amount sufficient to pay transition aid under this 
41.6 	section is annually appropriated to the commissioner of revenue from the general fund.

41.7 	EFFECTIVE DATE. This section is effective beginning with assessment year 2015.

41.8 	Sec. 3. BUDGET RESERVE INCREASE.
 41.9 	By June 30, 2014, based on the February 2014 budget and economic forecast 
41.10 	adjusted for any revenue or expenditure changes enacted in the 2014 legislative session, 
41.11 	the commissioner of management and budget shall transfer the projected general fund 
41.12 	budgetary balance for the current biennium to the budget reserve account under Minnesota 
41.13 	Statutes, section 16A.152, subdivision 1a.

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