1.1                                        A bill for an act&#10;1.2     relating to taxation; conforming certain provisions to changes in the Internal &#10;1.3     Revenue Code; providing an income and corporate franchise tax credit for &#10;1.4     investments in dairy operations; providing an income tax credit for qualified &#10;1.5     citizenship expenditures; accelerating the sales-only apportionment phase-in; &#10;1.6     conforming to federal income tax marriage penalty relief; providing a subtraction &#10;1.7     from federal taxable income for military pensions; providing a sales tax refund &#10;1.8     for certain resort expenditures; imposing levy limits for taxes payable in 2007;&#10;1.9     amending Minnesota Statutes 2004, sections 275.70, by adding a subdivision; &#10;1.10    275.71, subdivisions 2, 4, 5; 275.74, subdivision 2; 290.06, by adding a &#10;1.11    subdivision; 297A.71, by adding a subdivision; Minnesota Statutes 2005 &#10;1.12    Supplement, sections 275.70, subdivision 5; 289A.02, subdivision 7; 290.01, &#10;1.13    subdivisions 19, 19a, 19b, 31; 290.06, subdivision 2c; 290.0675, subdivision &#10;1.14    1; 290.091, subdivision 2; 290.191, subdivision 2; 290A.03, subdivision 15; &#10;1.15    291.005, subdivision 1; 297A.75, subdivisions 1, 2, 3; proposing coding for new &#10;1.16    law in Minnesota Statutes, chapter 290.&#10;1.17    BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:&#10;&#10;<a id="go.0.1.0"></a>1.18        Section 1. Minnesota Statutes 2004, section 275.70, is amended by adding a &#10;1.19    subdivision to read:&#10;1.20        <ins>Subd. 2a.</ins> <ins><b>Levy year.</b></ins> <ins>The phrase "levy year" or "taxes levied in" refers to the year </ins>&#10;1.21    <ins>in which the taxes voted by the local governmental unit are to be certified to the county </ins>&#10;1.22    <ins>auditor under section 275.07, subdivision 1, paragraph (a).</ins>&#10;1.23    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.2.0"></a>1.24        Sec. 2. Minnesota Statutes 2005 Supplement, section 275.70, subdivision 5, is &#10;1.25    amended to read:&#10;1.26        Subd. 5. <b>Special levies.</b> "Special levies" means those portions of ad valorem taxes &#10;1.27    levied by a local governmental unit for the following purposes or in the following manner:&#10;2.1     (1) to pay the costs of the principal and interest on bonded indebtedness or to &#10;2.2     reimburse for the amount of liquor store revenues used to pay the principal and interest &#10;2.3     due on municipal liquor store bonds in the year preceding the year for which the levy &#10;2.4     limit is calculated;&#10;2.5     (2) to pay the costs of principal and interest on certificates of indebtedness issued for &#10;2.6     any corporate purpose except for the following:&#10;2.7     (i) tax anticipation or aid anticipation certificates of indebtedness;&#10;2.8     (ii) certificates of indebtedness issued under sections 298.28 and 298.282;&#10;2.9     (iii) certificates of indebtedness used to fund current expenses or to pay the costs of &#10;2.10    extraordinary expenditures that result from a public emergency; or&#10;2.11    (iv) certificates of indebtedness used to fund an insufficiency in tax receipts or &#10;2.12    an insufficiency in other revenue sources;&#10;2.13    (3) to provide for the bonded indebtedness portion of payments made to another &#10;2.14    political subdivision of the state of Minnesota;&#10;2.15    (4) <del>to fund payments made to the Minnesota State Armory Building Commission </del>&#10;2.16    <del>under section </del><del>193.145, subdivision 2</del><del>, to retire the principal and interest on armory </del>&#10;2.17    <del>construction bonds;</del>&#10;2.18    <del>(5)</del> property taxes approved by voters which are levied against the referendum &#10;2.19    market value as provided under section 275.61;&#10;2.20    <del>(6) to fund matching requirements needed to qualify for federal or state grants or </del>&#10;2.21    <del>programs to the extent that either (i) the matching requirement exceeds the matching </del>&#10;2.22    <del>requirement in calendar year 2001, or (ii) it is a new matching requirement that did not </del>&#10;2.23    <del>exist prior to 2002;</del>&#10;2.24    <del>(7)</del><ins> (5)</ins> to pay the expenses reasonably and necessarily incurred in preparing for or &#10;2.25    repairing the effects of natural disaster including the occurrence or threat of widespread &#10;2.26    or severe damage, injury, or loss of life or property resulting from natural causes, in &#10;2.27    accordance with standards formulated by the Emergency Services Division of the state &#10;2.28    Department of Public Safety, as allowed by the commissioner of revenue under section &#10;2.29    275.74, subdivision 2;&#10;2.30    <del>(8)</del><ins> (6)</ins> pay amounts required to correct an error in the levy certified to the county &#10;2.31    auditor by a city or county in a levy year, but only to the extent that when added to the &#10;2.32    preceding year's levy it is not in excess of an applicable statutory, special law or charter &#10;2.33    limitation, or the limitation imposed on the governmental subdivision by sections 275.70 &#10;2.34    to 275.74 in the preceding levy year;&#10;2.35    <del>(9) to pay an abatement under section </del><del>469.1815</del><del>;</del>&#10;3.1     <del>(10) to pay any costs attributable to increases in the employer contribution rates </del>&#10;3.2     <del>under chapter 353 that are effective after June 30, 2001;</del>&#10;3.3     <del>(11)</del><ins> (7)</ins> to pay the operating or maintenance costs of a county jail as authorized in &#10;3.4     section 641.01 or 641.262, or of a correctional facility as defined in section 241.021, &#10;3.5     subdivision 1, paragraph (f), to the extent that the county can demonstrate to the &#10;3.6     commissioner of revenue that the amount has been included in the county budget as &#10;3.7     a direct result of a rule, minimum requirement, minimum standard, or directive of the &#10;3.8     Department of Corrections, or to pay the operating or maintenance costs of a regional jail &#10;3.9     as authorized in section 641.262. For purposes of this clause, a district court order is &#10;3.10    not a rule, minimum requirement, minimum standard, or directive of the Department of &#10;3.11    Corrections. If the county utilizes this special levy, except to pay operating or maintenance &#10;3.12    costs of a new regional jail facility under sections 641.262 to 641.264 which will not &#10;3.13    replace an existing jail facility, any amount levied by the county in the previous levy year &#10;3.14    for the purposes specified under this clause and included in the county's previous year's &#10;3.15    levy limitation computed under section 275.71, shall be deducted from the levy limit base &#10;3.16    under section 275.71, subdivision 2, when determining the county's current year levy &#10;3.17    limitation. The county shall provide the necessary information to the commissioner of &#10;3.18    revenue for making this determination<del>;</del><ins>.</ins>&#10;3.19    <del>(12) to pay for operation of a lake improvement district, as authorized under section </del>&#10;3.20    <del>103B.555</del><del>. If the county utilizes this special levy, any amount levied by the county in the </del>&#10;3.21    <del>previous levy year for the purposes specified under this clause and included in the county's </del>&#10;3.22    <del>previous year's levy limitation computed under section </del><del>275.71</del><del> shall be deducted from </del>&#10;3.23    <del>the levy limit base under section </del><del>275.71, subdivision 2</del><del>, when determining the county's </del>&#10;3.24    <del>current year levy limitation. The county shall provide the necessary information to the </del>&#10;3.25    <del>commissioner of revenue for making this determination;</del>&#10;3.26    <del>(13) to repay a state or federal loan used to fund the direct or indirect required </del>&#10;3.27    <del>spending by the local government due to a state or federal transportation project or other </del>&#10;3.28    <del>state or federal capital project. This authority may only be used if the project is not a </del>&#10;3.29    <del>local government initiative;</del>&#10;3.30    <del>(14) to pay for court administration costs as required under section </del><del>273.1398, </del>&#10;3.31    <del>subdivision 4b</del><del>, less the (i) county's share of transferred fines and fees collected by the </del>&#10;3.32    <del>district courts in the county for calendar year 2001 and (ii) the aid amount certified to be </del>&#10;3.33    <del>paid to the county in 2004 under section </del><del>273.1398, subdivision 4c</del><del>; however, for taxes </del>&#10;3.34    <del>levied to pay for these costs in the year in which the court financing is transferred to the </del>&#10;3.35    <del>state, the amount under this clause is limited to the amount of aid the county is certified to </del>&#10;3.36    <del>receive under section </del><del>273.1398, subdivision 4a</del><del>;</del>&#10;4.1     <del>(15) to fund a police or firefighters relief association as required under section </del><del>69.77</del><del> </del>&#10;4.2     <del>to the extent that the required amount exceeds the amount levied for this purpose in 2001;</del>&#10;4.3     <del>(16) for purposes of a storm sewer improvement district under section </del><del>444.20</del><del>; and</del>&#10;4.4     <del>(17) to pay for the maintenance and support of a city or county society for the </del>&#10;4.5     <del>prevention of cruelty to animals under section </del><del>343.11</del><del>. If the city or county uses this </del>&#10;4.6     <del>special levy, any amount levied by the city or county in the previous levy year for the </del>&#10;4.7     <del>purposes specified in this clause and included in the city's or county's previous year's levy </del>&#10;4.8     <del>limit computed under section </del><del>275.71</del><del>, must be deducted from the levy limit base under </del>&#10;4.9     <del>section </del><del>275.71, subdivision 2</del><del>, in determining the city's or county's current year levy limit.</del>&#10;4.10    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.3.0"></a>4.11        Sec. 3. Minnesota Statutes 2004, section 275.71, subdivision 2, is amended to read:&#10;4.12        Subd. 2. <b>Levy limit base.</b> The levy limit base for a local governmental unit for &#10;4.13    taxes <del>levied</del><ins> payable</ins> in <del>2003</del><ins> 2007 only</ins> is equal to <del>its adjusted levy limit base in the </del>&#10;4.14    <del>previous year, subject to</del><ins>: (1) the sum of its total property tax levy for taxes payable in </ins>&#10;4.15    <ins>2006, including any levy of the local governmental unit required to be separately certified </ins>&#10;4.16    <ins>under section 275.07, subdivision 1, paragraph (b), or allowed to be separately certified </ins>&#10;4.17    <ins>under other law, and the total amount of aid it was certified to receive in 2006 under </ins>&#10;4.18    <ins>sections 298.28, 298.282, and 477A.011 to 477A.03; (2) less the sum of the amounts </ins>&#10;4.19    <ins>levied for taxes payable in 2006 that would have qualified as special levies under current </ins>&#10;4.20    <ins>law; and (3) including</ins> any adjustments under section  275.72<del>, plus any aid amounts </del>&#10;4.21    <del>received in 2003 under section  </del><del>273.138</del><del> or  </del><del>273.166</del><del>, minus the difference between its </del>&#10;4.22    <del>levy limit under subdivision 5 for taxes levied in 2002 and the amount it actually levied </del>&#10;4.23    <del>under that subdivision in that year, and certified property tax replacement aid payable </del>&#10;4.24    <del>in 2003 under section  </del><del>174.242</del>. &#10;4.25    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.4.0"></a>4.26        Sec. 4. Minnesota Statutes 2004, section 275.71, subdivision 4, is amended to read:&#10;4.27        Subd. 4. <b>Adjusted levy limit base.</b> <del>(a)</del> For taxes <del>levied</del><ins> payable</ins> in <del>2003</del><ins> 2007 only</ins>, &#10;4.28    the adjusted levy limit base is equal to the levy limit base computed under <del>subdivisions</del><ins> </ins>&#10;4.29    <ins>subdivision</ins> 2 <del>and 3</del> or section  275.72, <del>reduced by 40 percent of the difference between </del>&#10;4.30    <del>(1) the sum of 2003 certified aid payments, under sections  </del><del>273.138</del><del>,  </del><del>273.1398</del><del> except for </del>&#10;4.31    <del>amounts certified under subdivision 4a, paragraph (b),  </del><del>273.166</del><del>,  </del><del>477A.011</del><del> to  </del><del>477A.03</del><del>, </del>&#10;4.32    <del>477A.06</del><del>, and  </del><del>477A.07</del><del>, before any reduction under Laws 2003, First Special Session </del>&#10;4.33    <del>chapter 21, articles 5 and 6, and (2) the sum of the aids paid in 2004 under those same </del>&#10;5.1     <del>sections, after any reductions in 2004 under Laws 2003, First Special Session chapter 21, </del>&#10;5.2     <del>articles 5 and 6.</del><ins> for taxes payable in 2007 multiplied by:</ins> &#10;5.3     <ins>(1) the sum of 100 plus a percentage equal to the percentage increase in the implicit </ins>&#10;5.4     <ins>price deflator divided by 100; and</ins>&#10;5.5     <ins>(2) the sum of 100 plus a percentage equal to the positive percentage increase, if any, </ins>&#10;5.6     <ins>in the number of households in the local governmental unit for the most recent 12-month </ins>&#10;5.7     <ins>period for which data is available divided by 100.</ins>&#10;5.8     <del>(b) For taxes levied in 2003 only, the adjusted levy limit base is increased by 60 </del>&#10;5.9     <del>percent of the difference between a jurisdiction's market value credit in 2003 before any </del>&#10;5.10    <del>reductions under Laws 2003, First Special Session chapter 21, articles 5 and 6, and its </del>&#10;5.11    <del>market value credit in 2004 after reductions in Laws 2003, First Special Session chapter </del>&#10;5.12    <del>21, articles 5 and 6.</del>&#10;5.13    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.5.0"></a>5.14        Sec. 5. Minnesota Statutes 2004, section 275.71, subdivision 5, is amended to read:&#10;5.15        Subd. 5. <b>Property tax levy limit.</b> For taxes <del>levied</del><ins> payable</ins> in <del>2003</del><ins> 2007 only</ins>, the &#10;5.16    property tax levy limit for a local governmental unit is equal to its adjusted levy limit &#10;5.17    base determined <ins>for taxes payable in 2007 </ins>under subdivision 4 plus any additional levy &#10;5.18    authorized <ins>for taxes payable in 2007 </ins>under section  275.73, which is levied against net tax &#10;5.19    capacity, reduced by the sum of (i) the total amount of aids and reimbursements that &#10;5.20    the local governmental unit is certified to receive <ins>in 2007 </ins>under sections  477A.011 to  &#10;5.21    477A.014, except for the increases in city aid bases <del>in calendar year 2002</del><ins> first effective </ins>&#10;5.22    <ins>for aid payable in 2007</ins> under section  477A.011, subdivision 36, <del>paragraphs (l), (n), and </del>&#10;5.23    <del>(o),</del> (ii) <del>homestead and agricultural aids it is certified to receive under section  </del><del>273.1398</del><del>, </del>&#10;5.24    <del>(iii)</del> taconite aids under sections  298.28 and  298.282 including any aid which was required &#10;5.25    to be placed in a special fund for expenditure in the next succeeding year, <del>(iv) temporary </del>&#10;5.26    <del>court aid under section  </del><del>273.1398, subdivision 4a</del><del>,</del> and <del>(v)</del><ins> (iii)</ins> estimated payments to &#10;5.27    the local governmental unit <ins>in 2007 </ins>under section  272.029, adjusted for any error in &#10;5.28    estimation in the preceding year. &#10;5.29    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.6.0"></a>5.30        Sec. 6. Minnesota Statutes 2004, section 275.74, subdivision 2, is amended to read:&#10;5.31        Subd. 2. <b>Authorization for special levies.</b> A local governmental unit may request &#10;5.32    authorization to levy for unreimbursed costs for natural disasters under section  275.70, &#10;5.33    subdivision 5, clause <del>(7)</del><ins> (5)</ins>. The local governmental unit shall submit a request to levy &#10;6.1     under section  275.70, subdivision 5, clause <del>(7)</del><ins> (5)</ins>, to the commissioner of revenue by &#10;6.2     September 30 of the levy year and the request must include information documenting the &#10;6.3     estimated unreimbursed costs. The commissioner of revenue may grant levy authority, &#10;6.4     up to the amount requested based on the documentation submitted. All decisions of the &#10;6.5     commissioner are final. &#10;6.6     <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.7.0"></a>6.7         Sec. 7. Minnesota Statutes 2005 Supplement, section 289A.02, subdivision 7, is &#10;6.8     amended to read:&#10;6.9         Subd. 7. <b>Internal Revenue Code.</b> Unless specifically defined otherwise, "Internal &#10;6.10    Revenue Code" means the Internal Revenue Code of 1986, as amended through <del>April </del>&#10;6.11    <del>15</del><ins> December 31</ins>, 2005.&#10;6.12    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.8.0"></a>6.13        Sec. 8. Minnesota Statutes 2005 Supplement, section 290.01, subdivision 19, is &#10;6.14    amended to read:&#10;6.15        Subd. 19. <b>Net income.</b> The term "net income" means the federal taxable income, &#10;6.16    as defined in section 63 of the Internal Revenue Code of 1986, as amended through the &#10;6.17    date named in this subdivision, incorporating the federal effective dates of changes to the &#10;6.18    Internal Revenue Code and any elections made by the taxpayer in accordance with the &#10;6.19    Internal Revenue Code in determining federal taxable income for federal income tax &#10;6.20    purposes, and with the modifications provided in subdivisions 19a to 19f.&#10;6.21    In the case of a regulated investment company or a fund thereof, as defined in section &#10;6.22    851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment &#10;6.23    company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, &#10;6.24    except that:&#10;6.25    (1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal &#10;6.26    Revenue Code does not apply;&#10;6.27    (2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal &#10;6.28    Revenue Code must be applied by allowing a deduction for capital gain dividends and &#10;6.29    exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal &#10;6.30    Revenue Code; and&#10;6.31    (3) the deduction for dividends paid must also be applied in the amount of any &#10;6.32    undistributed capital gains which the regulated investment company elects to have treated &#10;6.33    as provided in section 852(b)(3)(D) of the Internal Revenue Code.&#10;7.1     The net income of a real estate investment trust as defined and limited by section &#10;7.2     856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust &#10;7.3     taxable income as defined in section 857(b)(2) of the Internal Revenue Code.&#10;7.4     The net income of a designated settlement fund as defined in section 468B(d) of &#10;7.5     the Internal Revenue Code means the gross income as defined in section 468B(b) of the &#10;7.6     Internal Revenue Code.&#10;7.7     The Internal Revenue Code of 1986, as amended through <del>April 15</del><ins> December 31</ins>, &#10;7.8     2005, shall be in effect for taxable years beginning after December 31, 1996.&#10;7.9     Except as otherwise provided, references to the Internal Revenue Code in &#10;7.10    subdivisions 19 to 19f mean the code in effect for purposes of determining net income for &#10;7.11    the applicable year.&#10;7.12    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.9.0"></a>7.13        Sec. 9. Minnesota Statutes 2005 Supplement, section 290.01, subdivision 19a, is &#10;7.14    amended to read:&#10;7.15        Subd. 19a. <b>Additions to federal taxable income.</b> For individuals, estates, and &#10;7.16    trusts, there shall be added to federal taxable income:&#10;7.17    (1)(i) interest income on obligations of any state other than Minnesota or a political &#10;7.18    or governmental subdivision, municipality, or governmental agency or instrumentality &#10;7.19    of any state other than Minnesota exempt from federal income taxes under the Internal &#10;7.20    Revenue Code or any other federal statute; and&#10;7.21    (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue &#10;7.22    Code, except the portion of the exempt-interest dividends derived from interest income &#10;7.23    on obligations of the state of Minnesota or its political or governmental subdivisions, &#10;7.24    municipalities, governmental agencies or instrumentalities, but only if the portion of the &#10;7.25    exempt-interest dividends from such Minnesota sources paid to all shareholders represents &#10;7.26    95 percent or more of the exempt-interest dividends that are paid by the regulated &#10;7.27    investment company as defined in section 851(a) of the Internal Revenue Code, or the &#10;7.28    fund of the regulated investment company as defined in section 851(g) of the Internal &#10;7.29    Revenue Code, making the payment; and&#10;7.30    (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal &#10;7.31    government described in section 7871(c) of the Internal Revenue Code shall be treated as &#10;7.32    interest income on obligations of the state in which the tribe is located;&#10;7.33    (2) the amount of income or sales and use taxes paid or accrued within the taxable &#10;7.34    year under this chapter and the amount of taxes based on net income paid or sales and &#10;7.35    use taxes paid to any other state or to any province or territory of Canada, to the extent &#10;8.1     allowed as a deduction under section 63(d) of the Internal Revenue Code, but the addition &#10;8.2     may not be more than the amount by which the itemized deductions as allowed under &#10;8.3     section 63(d) of the Internal Revenue Code exceeds the amount of the standard deduction &#10;8.4     as defined in section 63(c) of the Internal Revenue Code <del>minus the addition which would </del>&#10;8.5     <del>have been required under clause (10) if the taxpayer had claimed the standard deduction</del>. &#10;8.6     For the purpose of this paragraph, the disallowance of itemized deductions under section &#10;8.7     68 of the Internal Revenue Code of 1986, income or sales and use tax is the last itemized &#10;8.8     deduction disallowed;&#10;8.9     (3) the capital gain amount of a lump sum distribution to which the special tax under &#10;8.10    section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;&#10;8.11    (4) the amount of income taxes paid or accrued within the taxable year under this &#10;8.12    chapter and taxes based on net income paid to any other state or any province or territory &#10;8.13    of Canada, to the extent allowed as a deduction in determining federal adjusted gross &#10;8.14    income. For the purpose of this paragraph, income taxes do not include the taxes imposed &#10;8.15    by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;&#10;8.16    (5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10 &#10;8.17    other than expenses or interest used in computing net interest income for the subtraction &#10;8.18    allowed under subdivision 19b, clause (1);&#10;8.19    (6) the amount of a partner's pro rata share of net income which does not flow &#10;8.20    through to the partner because the partnership elected to pay the tax on the income under &#10;8.21    section 6242(a)(2) of the Internal Revenue Code;&#10;8.22    (7) 80 percent of the depreciation deduction allowed under section 168(k) of the &#10;8.23    Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that &#10;8.24    in the taxable year generates a deduction for depreciation under section 168(k) and the &#10;8.25    activity generates a loss for the taxable year that the taxpayer is not allowed to claim for &#10;8.26    the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is &#10;8.27    limited to excess of the depreciation claimed by the activity under section 168(k) over the &#10;8.28    amount of the loss from the activity that is not allowed in the taxable year. In succeeding &#10;8.29    taxable years when the losses not allowed in the taxable year are allowed, the depreciation &#10;8.30    under section 168(k) is allowed;&#10;8.31    (8) 80 percent of the amount by which the deduction allowed by section 179 of the &#10;8.32    Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal &#10;8.33    Revenue Code of 1986, as amended through December 31, 2003;&#10;8.34    (9) to the extent deducted in computing federal taxable income, the amount of the &#10;8.35    deduction allowable under section 199 of the Internal Revenue Code;<ins> and</ins>&#10;9.1     <del>(10) for tax years beginning after December 31, 2004, to the extent deducted in </del>&#10;9.2     <del>computing federal taxable income, the amount by which the standard deduction allowed </del>&#10;9.3     <del>under section 63(c) of the Internal Revenue Code exceeds the standard deduction </del>&#10;9.4     <del>allowable under section 63(c) of the Internal Revenue Code of 1986, as amended through </del>&#10;9.5     <del>December 31, 2003; and</del>&#10;9.6     <del>(11)</del><ins> (10)</ins> the exclusion allowed under section 139A of the Internal Revenue Code &#10;9.7     for federal subsidies for prescription drug plans.&#10;9.8     <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for tax years beginning after </ins>&#10;9.9     <ins>December 31, 2005.</ins>&#10;&#10;<a id="go.0.10.0"></a>9.10        Sec. 10. Minnesota Statutes 2005 Supplement, section 290.01, subdivision 19b, &#10;9.11    is amended to read:&#10;9.12        Subd. 19b. <b>Subtractions from federal taxable income.</b> For individuals, estates, &#10;9.13    and trusts, there shall be subtracted from federal taxable income:&#10;9.14    (1) net interest income on obligations of any authority, commission, or &#10;9.15    instrumentality of the United States to the extent includable in taxable income for federal &#10;9.16    income tax purposes but exempt from state income tax under the laws of the United States;&#10;9.17    (2) if included in federal taxable income, the amount of any overpayment of income &#10;9.18    tax to Minnesota or to any other state, for any previous taxable year, whether the amount &#10;9.19    is received as a refund or as a credit to another taxable year's income tax liability;&#10;9.20    (3) the amount paid to others, less the amount used to claim the credit allowed under &#10;9.21    section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten &#10;9.22    to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and &#10;9.23    transportation of each qualifying child in attending an elementary or secondary school &#10;9.24    situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a &#10;9.25    resident of this state may legally fulfill the state's compulsory attendance laws, which &#10;9.26    is not operated for profit, and which adheres to the provisions of the Civil Rights Act &#10;9.27    of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or &#10;9.28    tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause, &#10;9.29    "textbooks" includes books and other instructional materials and equipment purchased &#10;9.30    or leased for use in elementary and secondary schools in teaching only those subjects &#10;9.31    legally and commonly taught in public elementary and secondary schools in this state. &#10;9.32    Equipment expenses qualifying for deduction includes expenses as defined and limited in &#10;9.33    section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional &#10;9.34    books and materials used in the teaching of religious tenets, doctrines, or worship, the &#10;9.35    purpose of which is to instill such tenets, doctrines, or worship, nor does it include books &#10;10.1    or materials for, or transportation to, extracurricular activities including sporting events, &#10;10.2    musical or dramatic events, speech activities, driver's education, or similar programs. For &#10;10.3    purposes of the subtraction provided by this clause, "qualifying child" has the meaning &#10;10.4    given in section 32(c)(3) of the Internal Revenue Code;&#10;10.5    (4) income as provided under section 290.0802;&#10;10.6    (5) to the extent included in federal adjusted gross income, income realized on &#10;10.7    disposition of property exempt from tax under section 290.491;&#10;10.8    (6) to the extent not deducted in determining federal taxable income by an individual &#10;10.9    who does not itemize deductions for federal income tax purposes for the taxable year, an &#10;10.10   amount equal to 50 percent of the excess of charitable contributions over $500 allowable &#10;10.11   as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and &#10;10.12   under the provisions of Public Law 109-1;&#10;10.13   (7) for taxable years beginning before January 1, 2008, the amount of the federal &#10;10.14   small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code &#10;10.15   which is included in gross income under section 87 of the Internal Revenue Code;&#10;10.16   (8) for individuals who are allowed a federal foreign tax credit for taxes that do not &#10;10.17   qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover &#10;10.18   of subnational foreign taxes for the taxable year, but not to exceed the total subnational &#10;10.19   foreign taxes reported in claiming the foreign tax credit. For purposes of this clause, &#10;10.20   "federal foreign tax credit" means the credit allowed under section 27 of the Internal &#10;10.21   Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed &#10;10.22   under section 904(c) of the Internal Revenue Code minus national level foreign taxes to &#10;10.23   the extent they exceed the federal foreign tax credit;&#10;10.24   (9) in each of the five tax years immediately following the tax year in which an &#10;10.25   addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case &#10;10.26   of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth &#10;10.27   of the delayed depreciation. For purposes of this clause, "delayed depreciation" means &#10;10.28   the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or &#10;10.29   subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the &#10;10.30   positive value of any net operating loss under section 172 of the Internal Revenue Code &#10;10.31   generated for the tax year of the addition. The resulting delayed depreciation cannot be &#10;10.32   less than zero;&#10;10.33   (10) job opportunity building zone income as provided under section 469.316;&#10;10.34   (11) the amount of compensation paid to members of the Minnesota National Guard &#10;10.35   or other reserve components of the United States military for active service performed &#10;10.36   in Minnesota, excluding compensation for services performed under the Active Guard &#10;11.1    Reserve (AGR) program. For purposes of this clause, "active service" means (i) state &#10;11.2    active service as defined in section 190.05, subdivision 5a, clause (1); (ii) federally &#10;11.3    funded state active service as defined in section 190.05, subdivision 5b; or (iii) federal &#10;11.4    active service as defined in section 190.05, subdivision 5c, but "active service" excludes &#10;11.5    services performed exclusively for purposes of basic combat training, advanced individual &#10;11.6    training, annual training, and periodic inactive duty training; special training periodically &#10;11.7    made available to reserve members; and service performed in accordance with section &#10;11.8    190.08, subdivision 3;&#10;11.9    (12) the amount of compensation paid to Minnesota residents who are members &#10;11.10   of the armed forces of the United States or United Nations for active duty performed &#10;11.11   outside Minnesota;&#10;11.12   (13) an amount, not to exceed $10,000, equal to qualified expenses related to a &#10;11.13   qualified donor's donation, while living, of one or more of the qualified donor's organs &#10;11.14   to another person for human organ transplantation. For purposes of this clause, "organ" &#10;11.15   means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow; &#10;11.16   "human organ transplantation" means the medical procedure by which transfer of a human &#10;11.17   organ is made from the body of one person to the body of another person; "qualified &#10;11.18   expenses" means unreimbursed expenses for both the individual and the qualified donor &#10;11.19   for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses &#10;11.20   may be subtracted under this clause only once; and "qualified donor" means the individual &#10;11.21   or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An &#10;11.22   individual may claim the subtraction in this clause for each instance of organ donation for &#10;11.23   transplantation during the taxable year in which the qualified expenses occur;&#10;11.24   (14) in each of the five tax years immediately following the tax year in which an &#10;11.25   addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a &#10;11.26   shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the &#10;11.27   addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the &#10;11.28   case of a shareholder of a corporation that is an S corporation, minus the positive value of &#10;11.29   any net operating loss under section 172 of the Internal Revenue Code generated for the &#10;11.30   tax year of the addition. If the net operating loss exceeds the addition for the tax year, a &#10;11.31   subtraction is not allowed under this clause;&#10;11.32   (15) to the extent included in federal taxable income, compensation paid to a &#10;11.33   nonresident who is a service member as defined in United States Code, title 10, section &#10;11.34   101(a)(5), for military service as defined in the Service Member Civil Relief Act, Public &#10;11.35   Law 108-189, section 101(2); <del>and</del>&#10;12.1    (16) international economic development zone income as provided under section &#10;12.2    469.325<del>.</del><ins>; and</ins>&#10;12.3    <ins>(17) to the extent included in federal taxable income, a percentage of compensation </ins>&#10;12.4    <ins>received from a pension or other retirement pay from the government for service in the </ins>&#10;12.5    <ins>armed forces of the United States, up to a maximum amount. For taxable years beginning </ins>&#10;12.6    <ins>after December 31, 2005, and before January 1, 2007, the percentage is 25 percent and </ins>&#10;12.7    <ins>the maximum amount is $7,500; for taxable years beginning after December 31, 2006, </ins>&#10;12.8    <ins>and before January 1, 2008, the percentage is 50 percent and the maximum amount is </ins>&#10;12.9    <ins>$15,000; for taxable years beginning after December 31, 2007, and before January 1, </ins>&#10;12.10   <ins>2009, the percentage is 75 percent and the maximum amount is $22,500; and for taxable </ins>&#10;12.11   <ins>years beginning after December 31, 2008, the percentage is 100 percent and there is no </ins>&#10;12.12   <ins>maximum amount.</ins>&#10;12.13   <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for tax years beginning after </ins>&#10;12.14   <ins>December 31, 2005.</ins>&#10;&#10;<a id="go.0.11.0"></a>12.15       Sec. 11. Minnesota Statutes 2005 Supplement, section 290.01, subdivision 31, is &#10;12.16   amended to read:&#10;12.17       Subd. 31. <b>Internal Revenue Code.</b> Unless specifically defined otherwise, "Internal &#10;12.18   Revenue Code" means the Internal Revenue Code of 1986, as amended through <del>April </del>&#10;12.19   <del>15</del><ins> December 31</ins>, 2005.&#10;12.20   <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment </ins>&#10;12.21   <ins>except the changes incorporated by federal changes are effective at the same times as the </ins>&#10;12.22   <ins>changes were effective for federal purposes.</ins>&#10;&#10;<a id="go.0.12.0"></a>12.23       Sec. 12. Minnesota Statutes 2005 Supplement, section 290.06, subdivision 2c, is &#10;12.24   amended to read:&#10;12.25       Subd. 2c. <b>Schedules of rates for individuals, estates, and trusts.</b> (a) The income &#10;12.26   taxes imposed by this chapter upon married individuals filing joint returns and surviving &#10;12.27   spouses as defined in section 2(a) of the Internal Revenue Code must be computed by &#10;12.28   applying to their taxable net income the following schedule of rates:&#10;12.29   (1) On the first $25,680, 5.35 percent;&#10;12.30   (2) On all over $25,680, but not over $102,030, 7.05 percent;&#10;12.31   (3) On all over $102,030, 7.85 percent.&#10;13.1    Married individuals filing separate returns, estates, and trusts must compute their &#10;13.2    income tax by applying the above rates to their taxable income, except that the income &#10;13.3    brackets will be one-half of the above amounts.&#10;13.4    (b) The income taxes imposed by this chapter upon unmarried individuals must be &#10;13.5    computed by applying to taxable net income the following schedule of rates:&#10;13.6    (1) On the first $17,570, 5.35 percent;&#10;13.7    (2) On all over $17,570, but not over $57,710, 7.05 percent;&#10;13.8    (3) On all over $57,710, 7.85 percent.&#10;13.9    (c) The income taxes imposed by this chapter upon unmarried individuals qualifying &#10;13.10   as a head of household as defined in section 2(b) of the Internal Revenue Code must be &#10;13.11   computed by applying to taxable net income the following schedule of rates:&#10;13.12   (1) On the first $21,630, 5.35 percent;&#10;13.13   (2) On all over $21,630, but not over $86,910, 7.05 percent;&#10;13.14   (3) On all over $86,910, 7.85 percent.&#10;13.15   (d) In lieu of a tax computed according to the rates set forth in this subdivision, the &#10;13.16   tax of any individual taxpayer whose taxable net income for the taxable year is less than &#10;13.17   an amount determined by the commissioner must be computed in accordance with tables &#10;13.18   prepared and issued by the commissioner of revenue based on income brackets of not &#10;13.19   more than $100. The amount of tax for each bracket shall be computed at the rates set &#10;13.20   forth in this subdivision, provided that the commissioner may disregard a fractional part of &#10;13.21   a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.&#10;13.22   (e) An individual who is not a Minnesota resident for the entire year must compute &#10;13.23   the individual's Minnesota income tax as provided in this subdivision. <del>After</del><ins> Before</ins> the &#10;13.24   application of the nonrefundable credits provided in this chapter, the tax liability must &#10;13.25   then be multiplied by a fraction in which:&#10;13.26   (1) the numerator is the individual's Minnesota source federal adjusted gross &#10;13.27   income as defined in section 62 of the Internal Revenue Code and increased by the &#10;13.28   additions required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), &#10;13.29   and (9), and reduced by the Minnesota assignable portion of the subtraction for United &#10;13.30   States government interest under section 290.01, subdivision 19b, clause (1), and the &#10;13.31   subtractions under section 290.01, subdivision 19b, clauses (9), (10), (14), (15), <del>and</del> (16), &#10;13.32   <ins>and 17, </ins>after applying the allocation and assignability provisions of section 290.081, &#10;13.33   clause (a), or 290.17; and&#10;13.34   (2) the denominator is the individual's federal adjusted gross income as defined in &#10;13.35   section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in &#10;13.36   section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), and (9), and reduced by the &#10;14.1    amounts specified in section 290.01, subdivision 19b, clauses (1), (9), (10), (14), (15), &#10;14.2    <del>and</del> (16)<ins>, and (17)</ins>.&#10;14.3    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for tax years beginning after </ins>&#10;14.4    <ins>December 31, 2005.</ins>&#10;&#10;<a id="go.0.13.0"></a>14.5        Sec. 13. Minnesota Statutes 2004, section 290.06, is amended by adding a subdivision &#10;14.6    to read:&#10;14.7        <ins>Subd. 33.</ins> <ins><b>Dairy investment credit.</b></ins> <ins>(a) A dairy investment credit is allowed against </ins>&#10;14.8    <ins>the tax due under this chapter equal to ten percent of the amount paid or incurred by the </ins>&#10;14.9    <ins>taxpayer, on the first $500,000 of qualifying expenditures made in the qualifying period.</ins>&#10;14.10   <ins>(b) "Qualifying expenditures" means for purposes of this subdivision the amount </ins>&#10;14.11   <ins>spent for the acquisition, construction, or improvement of buildings or facilities, or the </ins>&#10;14.12   <ins>acquisition of equipment, for dairy animal housing, confinement, animal feeding, milk </ins>&#10;14.13   <ins>production, and waste management, including the following, if related to dairy animals in </ins>&#10;14.14   <ins>this state:</ins>&#10;14.15   <ins>(1) freestall barns;</ins>&#10;14.16   <ins>(2) fences;</ins>&#10;14.17   <ins>(3) watering facilities;</ins>&#10;14.18   <ins>(4) feed storage and handling equipment;</ins>&#10;14.19   <ins>(5) milking parlors;</ins>&#10;14.20   <ins>(6) robotic equipment;</ins>&#10;14.21   <ins>(7) scales;</ins>&#10;14.22   <ins>(8) milk storage and cooling facilities;</ins>&#10;14.23   <ins>(9) bulk tanks;</ins>&#10;14.24   <ins>(10) manure pumping and storage facilities;</ins>&#10;14.25   <ins>(11) digesters; and </ins>&#10;14.26   <ins>(12) equipment used to produce energy.</ins>&#10;14.27   <ins>Qualified expenditures only include amounts that are capitalized and deducted </ins>&#10;14.28   <ins>under either section 167 or 179 of the Internal Revenue Code in computing federal </ins>&#10;14.29   <ins>taxable income.</ins>&#10;14.30   <ins>(c) The credit is limited to the liability for tax, as computed under this chapter for the </ins>&#10;14.31   <ins>taxable year.  If the amount of the credit determined under this section for any taxable year </ins>&#10;14.32   <ins>exceeds this limitation, the excess is a dairy investment credit carryover to each of the 15 </ins>&#10;14.33   <ins>succeeding taxable years.  The entire amount of the excess unused credit for the taxable </ins>&#10;14.34   <ins>year is carried first to the earliest of the taxable years to which the credit may be carried </ins>&#10;14.35   <ins>and then to each successive year to which the credit may be carried.  The amount of the </ins>&#10;15.1    <ins>unused credit which may be added under this paragraph shall not exceed the taxpayer's </ins>&#10;15.2    <ins>liability for tax less the dairy investment credit for the taxable year.</ins>&#10;15.3    <ins>(d) The qualifying period is that time after December 31, 2005, and before January </ins>&#10;15.4    <ins>1, 2012.</ins>&#10;15.5    <ins>(e) The $50,000 maximum credit applies at the entity level for partnerships, S </ins>&#10;15.6    <ins>corporations, trusts, and estates as well as at the individual level.  In the case of married </ins>&#10;15.7    <ins>individuals, the credit is limited to $50,000 for a married couple.</ins>&#10;15.8    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for tax years beginning after </ins>&#10;15.9    <ins>December 31, 2005.</ins>&#10;&#10;<a id="go.0.14.0"></a>15.10       Sec. 14. Minnesota Statutes 2005 Supplement, section 290.0675, subdivision 1, &#10;15.11   is amended to read:&#10;15.12       Subdivision 1. <b>Definitions.</b> (a) For purposes of this section the following terms &#10;15.13   have the meanings given.&#10;15.14   (b) "Earned income" means the sum of the following, to the extent included in &#10;15.15   Minnesota taxable income:&#10;15.16   (1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;&#10;15.17   (2) income received from a retirement pension, profit-sharing, stock bonus, or &#10;15.18   annuity plan; and&#10;15.19   (3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue &#10;15.20   Code.&#10;15.21   (c) "Taxable income" means net income as defined in section 290.01, subdivision 19.&#10;15.22   (d) "Earned income of lesser-earning spouse" means the earned income of the &#10;15.23   spouse with the lesser amount of earned income as defined in paragraph (b) for the taxable &#10;15.24   year minus the sum of (i) the amount for one exemption under section 151(d) of the &#10;15.25   Internal Revenue Code and (ii) one-half the amount of the standard deduction under &#10;15.26   section 63(c)(2)(A) and (4) of the Internal Revenue Code <del>minus one-half of any addition </del>&#10;15.27   <del>required under section </del><del>290.01, subdivision 19a</del><del>, clause (10), and one-half of the addition </del>&#10;15.28   <del>which would have been required under section </del><del>290.01, subdivision 19a</del><del>, clause (10), if the </del>&#10;15.29   <del>taxpayer had claimed the standard deduction</del>.&#10;15.30   <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for tax years beginning after </ins>&#10;15.31   <ins>December 31, 2005.</ins>&#10;&#10;<a id="go.0.15.0"></a>15.32       Sec. 15. <ins><b>[290.0677] CITIZENSHIP CREDIT.</b></ins>&#10;16.1        <ins>Subdivision 1.</ins> <ins><b>Credit allowed.</b></ins> <ins>A taxpayer who is not a dependent, as defined in </ins>&#10;16.2    <ins>Internal Revenue Code, sections 151 and 152, is allowed a credit against the tax imposed </ins>&#10;16.3    <ins>by this chapter in the amount of qualified citizenship expenses incurred for a qualified </ins>&#10;16.4    <ins>individual.</ins>&#10;16.5        <ins>Subd. 2.</ins> <ins><b>Limitations on credit.</b></ins> <ins>The maximum credit allowed a taxpayer and the </ins>&#10;16.6    <ins>taxpayer's spouse under this section is $300 per year. The credit is not allowed if the </ins>&#10;16.7    <ins>sum of the taxpayer's and taxpayer's spouse's income, as defined in section 290.067, </ins>&#10;16.8    <ins>subdivision 2a, exceeds $30,000. For a taxpayer who is not a Minnesota resident for the </ins>&#10;16.9    <ins>entire year, the maximum credit must be allocated using the percentage calculated in </ins>&#10;16.10   <ins>section 290.06, subdivision 2c, paragraph (e).</ins>&#10;16.11       <ins>Subd. 3.</ins> <ins><b>Qualified individual.</b></ins> <ins>A "qualified individual" is the taxpayer, the </ins>&#10;16.12   <ins>taxpayer's spouse, or an individual who qualifies as a dependent of the taxpayer under </ins>&#10;16.13   <ins>sections 151 and 152 of the Internal Revenue Code. These individuals are only qualified </ins>&#10;16.14   <ins>individuals from the time the individual submits an I-485 Application to Register </ins>&#10;16.15   <ins>Permanent Residence or at the time the individual enters the United States on an immigrant </ins>&#10;16.16   <ins>visa, to the time the individual becomes a naturalized United States citizen.</ins>&#10;16.17       <ins>Subd. 4.</ins> <ins><b>Qualified citizenship expense.</b></ins> <ins> Qualified citizenship expenses are limited </ins>&#10;16.18   <ins>to: </ins>&#10;16.19   <ins>(1) filing fees, both application and biometric fingerprint fees, paid to United </ins>&#10;16.20   <ins>States Citizenship and Immigration Services in connection with an N-400 naturalization </ins>&#10;16.21   <ins>application for a qualified individual; and </ins>&#10;16.22   <ins>(2) amounts paid for enrollment of a qualified individual over the age of 18 at the </ins>&#10;16.23   <ins>beginning of the year in an English language class offered by a school district in Minnesota </ins>&#10;16.24   <ins>or a school that has been approved as a licensed school by the state of Minnesota.</ins>&#10;16.25       <ins>Subd. 5.</ins> <ins><b>Credit to be refundable.</b></ins> <ins>If the amount of credit that the taxpayer is </ins>&#10;16.26   <ins>eligible to receive under this section exceeds the taxpayer's tax liability under this chapter, </ins>&#10;16.27   <ins>the commissioner shall refund the excess to the taxpayer.</ins>&#10;16.28       <ins>Subd. 6.</ins> <ins><b>Appropriation.</b></ins> <ins>An amount sufficient to pay the refunds required by this </ins>&#10;16.29   <ins>section is appropriated to the commissioner from the general fund.</ins>&#10;16.30   <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for tax years beginning after </ins>&#10;16.31   <ins>December 31, 2005.</ins>&#10;&#10;<a id="go.0.16.0"></a>16.32       Sec. 16. Minnesota Statutes 2005 Supplement, section 290.091, subdivision 2, is &#10;16.33   amended to read:&#10;16.34       Subd. 2. <b>Definitions.</b> For purposes of the tax imposed by this section, the following &#10;16.35   terms have the meanings given:&#10;17.1    (a) "Alternative minimum taxable income" means the sum of the following for &#10;17.2    the taxable year:&#10;17.3    (1) the taxpayer's federal alternative minimum taxable income as defined in section &#10;17.4    55(b)(2) of the Internal Revenue Code;&#10;17.5    (2) the taxpayer's itemized deductions allowed in computing federal alternative &#10;17.6    minimum taxable income, but excluding:&#10;17.7    (i) the charitable contribution deduction under section 170 of the Internal Revenue &#10;17.8    Code:&#10;17.9    (A) for taxable years beginning before January 1, 2006, to the extent that the &#10;17.10   deduction exceeds 1.0 percent of adjusted gross income;&#10;17.11   (B) for taxable years beginning after December 31, 2005, to the full extent of the &#10;17.12   deduction.&#10;17.13   For purposes of this clause, "adjusted gross income" has the meaning given in &#10;17.14   section 62 of the Internal Revenue Code;&#10;17.15   (ii) the medical expense deduction;&#10;17.16   (iii) the casualty, theft, and disaster loss deduction; and&#10;17.17   (iv) the impairment-related work expenses of a disabled person;&#10;17.18   (3) for depletion allowances computed under section 613A(c) of the Internal &#10;17.19   Revenue Code, with respect to each property (as defined in section 614 of the Internal &#10;17.20   Revenue Code), to the extent not included in federal alternative minimum taxable income, &#10;17.21   the excess of the deduction for depletion allowable under section 611 of the Internal &#10;17.22   Revenue Code for the taxable year over the adjusted basis of the property at the end of the &#10;17.23   taxable year (determined without regard to the depletion deduction for the taxable year);&#10;17.24   (4) to the extent not included in federal alternative minimum taxable income, the &#10;17.25   amount of the tax preference for intangible drilling cost under section 57(a)(2) of the &#10;17.26   Internal Revenue Code determined without regard to subparagraph (E);&#10;17.27   (5) to the extent not included in federal alternative minimum taxable income, the &#10;17.28   amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and&#10;17.29   (6) the amount of addition required by section 290.01, subdivision 19a, clauses &#10;17.30   (7), (8), and (9);&#10;17.31   less the sum of the amounts determined under the following:&#10;17.32   (1) interest income as defined in section 290.01, subdivision 19b, clause (1);&#10;17.33   (2) an overpayment of state income tax as provided by section 290.01, subdivision &#10;17.34   19b, clause (2), to the extent included in federal alternative minimum taxable income;&#10;17.35   (3) the amount of investment interest paid or accrued within the taxable year on &#10;17.36   indebtedness to the extent that the amount does not exceed net investment income, as &#10;18.1    defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include &#10;18.2    amounts deducted in computing federal adjusted gross income; and&#10;18.3    (4) amounts subtracted from federal taxable income as provided by section 290.01, &#10;18.4    subdivision 19b, clauses (9) to <del>(16)</del><ins> (17)</ins>.&#10;18.5    In the case of an estate or trust, alternative minimum taxable income must be &#10;18.6    computed as provided in section 59(c) of the Internal Revenue Code.&#10;18.7    (b) "Investment interest" means investment interest as defined in section 163(d)(3) &#10;18.8    of the Internal Revenue Code.&#10;18.9    (c) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable &#10;18.10   income after subtracting the exemption amount determined under subdivision 3.&#10;18.11   (d) "Regular tax" means the tax that would be imposed under this chapter (without &#10;18.12   regard to this section and section 290.032), reduced by the sum of the nonrefundable &#10;18.13   credits allowed under this chapter.&#10;18.14   (e) "Net minimum tax" means the minimum tax imposed by this section.&#10;18.15   <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for tax years beginning after </ins>&#10;18.16   <ins>December 31, 2005.</ins>&#10;&#10;<a id="go.0.17.0"></a>18.17       Sec. 17. Minnesota Statutes 2005 Supplement, section 290.191, subdivision 2, is &#10;18.18   amended to read:&#10;18.19       Subd. 2. <b>Apportionment formula of general application.</b> (a) Except for those &#10;18.20   trades or businesses required to use a different formula under subdivision 3 or section &#10;18.21   290.36, and for those trades or businesses that receive permission to use some other &#10;18.22   method under section 290.20 or under subdivision 4, a trade or business required to &#10;18.23   apportion its net income must apportion its income to this state on the basis of the &#10;18.24   percentage obtained by taking the sum of:&#10;18.25   (1) the percent for the sales factor under paragraph (b) of the percentage which &#10;18.26   the sales made within this state in connection with the trade or business during the tax &#10;18.27   period are of the total sales wherever made in connection with the trade or business during &#10;18.28   the tax period;&#10;18.29   (2) the percent for the property factor under paragraph (b) of the percentage which &#10;18.30   the total tangible property used by the taxpayer in this state in connection with the trade or &#10;18.31   business during the tax period is of the total tangible property, wherever located, used by &#10;18.32   the taxpayer in connection with the trade or business during the tax period; and&#10;18.33   (3) the percent for the payroll factor under paragraph (b) of the percentage which &#10;18.34   the taxpayer's total payrolls paid or incurred in this state or paid in respect to labor &#10;18.35   performed in this state in connection with the trade or business during the tax period are &#10;19.1    of the taxpayer's total payrolls paid or incurred in connection with the trade or business &#10;19.2    during the tax period.&#10;19.3    (b) For purposes of paragraph (a) and subdivision 3, the following percentages apply &#10;19.4    for the taxable years specified:&#10;<rs_table>19.5    Taxable years                                                         &#10;19.6    beginning                  Sales             Property         Payroll &#10;19.7    during                     factor            factor           factor  &#10;19.8    calendar year              percent           percent          percent &#10;19.9         2007                   <del>78</del><ins> 80</ins>              <del>11</del><ins> 10</ins>           <del>11</del><ins> 10</ins>  &#10;19.10        2008                   <del>81</del><ins> 85</ins>             <del>9.5</del><ins> 7.5</ins>         <del>9.5</del><ins> 7.5</ins> &#10;19.11        2009                   <del>84</del><ins> 90</ins>               <del>8</del><ins> 5</ins>             <del>8</del><ins> 5</ins>   &#10;19.12        2010                   <del>87</del><ins> 95</ins>             <del>6.5</del><ins> 2.5</ins>         <del>6.5</del><ins> 2.5</ins> &#10;19.13        2011                  <del>90</del><ins> 100</ins>              <del>5</del><ins> 0</ins>             <del>5</del><ins>0</ins>   &#10;19.14        <del>2012</del>                    <del>93</del>                <del>3.5</del>             <del>3.5</del>   &#10;19.15        <del>2013</del>                    <del>96</del>                 <del>2</del>               <del>2</del>    &#10;19.16   <del>2014</del> and later                                                        &#10;19.17   calendar years               <del>100</del>                 <del>0</del>               <del>0</del>    &#10;</rs_table><rs_table></rs_table>19.18   <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for tax years beginning after </ins>&#10;19.19   <ins>December 31, 2006.</ins>&#10;&#10;<a id="go.0.18.0"></a>19.20       Sec. 18. Minnesota Statutes 2005 Supplement, section 290A.03, subdivision 15, &#10;19.21   is amended to read:&#10;19.22       Subd. 15. <b>Internal Revenue Code.</b> "Internal Revenue Code" means the Internal &#10;19.23   Revenue Code of 1986, as amended through <del>April 15</del><ins> December 31</ins>, 2005.&#10;19.24   <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for property tax refunds based on </ins>&#10;19.25   <ins>property taxes payable on or after December 31, 2005, and rent paid on or after December </ins>&#10;19.26   <ins>31, 2004.</ins>&#10;&#10;<a id="go.0.19.0"></a>19.27       Sec. 19. Minnesota Statutes 2005 Supplement, section 291.005, subdivision 1, is &#10;19.28   amended to read:&#10;19.29       Subdivision 1. <b>Scope.</b> Unless the context otherwise clearly requires, the following &#10;19.30   terms used in this chapter shall have the following meanings:&#10;20.1    (1) "Federal gross estate" means the gross estate of a decedent as valued and &#10;20.2    otherwise determined for federal estate tax purposes by federal taxing authorities pursuant &#10;20.3    to the provisions of the Internal Revenue Code.&#10;20.4    (2) "Minnesota gross estate" means the federal gross estate of a decedent after (a) &#10;20.5    excluding therefrom any property included therein which has its situs outside Minnesota, &#10;20.6    and (b) including therein any property omitted from the federal gross estate which is &#10;20.7    includable therein, has its situs in Minnesota, and was not disclosed to federal taxing &#10;20.8    authorities.&#10;20.9    (3) "Personal representative" means the executor, administrator or other person &#10;20.10   appointed by the court to administer and dispose of the property of the decedent. If there &#10;20.11   is no executor, administrator or other person appointed, qualified, and acting within this &#10;20.12   state, then any person in actual or constructive possession of any property having a situs in &#10;20.13   this state which is included in the federal gross estate of the decedent shall be deemed &#10;20.14   to be a personal representative to the extent of the property and the Minnesota estate tax &#10;20.15   due with respect to the property.&#10;20.16   (4) "Resident decedent" means an individual whose domicile at the time of death &#10;20.17   was in Minnesota.&#10;20.18   (5) "Nonresident decedent" means an individual whose domicile at the time of &#10;20.19   death was not in Minnesota.&#10;20.20   (6) "Situs of property" means, with respect to real property, the state or country in &#10;20.21   which it is located; with respect to tangible personal property, the state or country in which &#10;20.22   it was normally kept or located at the time of the decedent's death; and with respect to &#10;20.23   intangible personal property, the state or country in which the decedent was domiciled &#10;20.24   at death.&#10;20.25   (7) "Commissioner" means the commissioner of revenue or any person to whom the &#10;20.26   commissioner has delegated functions under this chapter.&#10;20.27   (8) "Internal Revenue Code" means the United States Internal Revenue Code of &#10;20.28   1986, as amended through <del>April 15</del><ins> December 31</ins>, 2005.&#10;20.29   (9) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as &#10;20.30   defined by section 2011(b)(3) of the Internal Revenue Code, increased by the amount of &#10;20.31   deduction for state death taxes allowed under section 2058 of the Internal Revenue Code.&#10;20.32   <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for estates of decedents dying after </ins>&#10;20.33   <ins>December 31, 2005.</ins>&#10;&#10;<a id="go.0.20.0"></a>20.34       Sec. 20. Minnesota Statutes 2004, section 297A.71, is amended by adding a &#10;20.35   subdivision to read:&#10;21.1        <ins>Subd. 37.</ins> <ins><b>Construction materials and supplies; certain resorts.</b></ins> <ins>Construction </ins>&#10;21.2    <ins>materials and supplies used or consumed in physically expanding or making capital </ins>&#10;21.3    <ins>improvements to a resort classified as class 1c or 4c, under section 273.13, subdivision 22 </ins>&#10;21.4    <ins>or 25, including any portion of a 1c or 4c resort classified as class 3 under section 273.13, </ins>&#10;21.5    <ins>subdivision 24, are exempt, up to a maximum refund of $10,000 in each calendar year for </ins>&#10;21.6    <ins>each resort. The tax must be imposed and collected as if the rate under section 297A.62, </ins>&#10;21.7    <ins>subdivision 1, applied, and then refunded in the manner provided in section 297A.75.</ins>&#10;21.8    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for sales and purchases made after </ins>&#10;21.9    <ins>June 30, 2006.</ins>&#10;&#10;<a id="go.0.21.0"></a>21.10       Sec. 21. Minnesota Statutes 2005 Supplement, section 297A.75, subdivision 1, is &#10;21.11   amended to read:&#10;21.12       Subdivision 1. <b>Tax collected.</b> The tax on the gross receipts from the sale of the &#10;21.13   following exempt items must be imposed and collected as if the sale were taxable and the &#10;21.14   rate under section 297A.62, subdivision 1, applied. The exempt items include:&#10;21.15   (1) capital equipment exempt under section 297A.68, subdivision 5;&#10;21.16   (2) building materials for an agricultural processing facility exempt under section &#10;21.17   297A.71, subdivision 13;&#10;21.18   (3) building materials for mineral production facilities exempt under section &#10;21.19   297A.71, subdivision 14;&#10;21.20   (4) building materials for correctional facilities under section 297A.71, subdivision &#10;21.21   3;&#10;21.22   (5) building materials used in a residence for disabled veterans exempt under section &#10;21.23   297A.71, subdivision 11;&#10;21.24   (6) elevators and building materials exempt under section 297A.71, subdivision 12;&#10;21.25   (7) building materials for the Long Lake Conservation Center exempt under section &#10;21.26   297A.71, subdivision 17;&#10;21.27   (8) materials, supplies, fixtures, furnishings, and equipment for a county law &#10;21.28   enforcement and family service center under section 297A.71, subdivision 26;&#10;21.29   (9) materials and supplies for qualified low-income housing under section 297A.71, &#10;21.30   subdivision 23; <del>and</del>&#10;21.31   (10) materials, supplies, and equipment for municipal electric utility facilities under &#10;21.32   section 297A.71, subdivision 35<ins>; and</ins>&#10;21.33   <ins>(11) materials and supplies for qualified resorts under section 297A.71, subdivision </ins>&#10;21.34   <ins>37</ins>.&#10;22.1    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for sales and purchases made after </ins>&#10;22.2    <ins>June 30, 2006.</ins>&#10;&#10;<a id="go.0.22.0"></a>22.3        Sec. 22. Minnesota Statutes 2005 Supplement, section 297A.75, subdivision 2, is &#10;22.4    amended to read:&#10;22.5        Subd. 2. <b>Refund; eligible persons.</b> Upon application on forms prescribed by the &#10;22.6    commissioner, a refund equal to the tax paid on the gross receipts of the exempt items &#10;22.7    must be paid to the applicant. Only the following persons may apply for the refund:&#10;22.8    (1) for subdivision 1, clauses (1) to (3), the applicant must be the purchaser;&#10;22.9    (2) for subdivision 1, clauses (4), (7), and (8), the applicant must be the governmental &#10;22.10   subdivision;&#10;22.11   (3) for subdivision 1, clause (5), the applicant must be the recipient of the benefits &#10;22.12   provided in United States Code, title 38, chapter 21;&#10;22.13   (4) for subdivision 1, clause (6), the applicant must be the owner of the homestead &#10;22.14   property;&#10;22.15   (5) for subdivision 1, clause (9), the owner of the qualified low-income housing &#10;22.16   project; <del>and</del>&#10;22.17   (6) for subdivision 1, clause (10), the applicant must be a municipal electric utility or &#10;22.18   a joint venture of municipal electric utilities<ins>; and</ins>&#10;22.19   <ins>(7) for subdivision 1, clause (11), the owner of the resort</ins>.&#10;22.20   <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for sales and purchases made after </ins>&#10;22.21   <ins>June 30, 2006.</ins>&#10;&#10;<a id="go.0.23.0"></a>22.22       Sec. 23. Minnesota Statutes 2005 Supplement, section 297A.75, subdivision 3, is &#10;22.23   amended to read:&#10;22.24       Subd. 3. <b>Application.</b> (a) The application must include sufficient information &#10;22.25   to permit the commissioner to verify the tax paid. If the tax was paid by a contractor, &#10;22.26   subcontractor, or builder, under subdivision 1, clause (4), (5), (6), (7), (8), (9), <del>or</del> (10), &#10;22.27   <ins>or (11), </ins>the contractor, subcontractor, or builder must furnish to the refund applicant a &#10;22.28   statement including the cost of the exempt items and the taxes paid on the items unless &#10;22.29   otherwise specifically provided by this subdivision. The provisions of sections 289A.40 &#10;22.30   and 289A.50 apply to refunds under this section.&#10;22.31   (b) An applicant may not file more than two applications per calendar year for &#10;22.32   refunds for taxes paid on capital equipment exempt under section 297A.68, subdivision 5.&#10;23.1    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective for sales and purchases made after </ins>&#10;23.2    <ins>June 30, 2006.</ins>&#10;&#10;<a id="go.0.24.0"></a>23.3        Sec. 24. <ins><b>NET INCOME; FEDERAL CONFORMITY.</b></ins>&#10;23.4    <ins>For tax years beginning after December 31, 2004, and before December 31, 2006, </ins>&#10;23.5    <ins>the definition of "net income" in Minnesota Statutes, section 290.01, subdivision 19, </ins>&#10;23.6    <ins>must be interpreted by the Department of Revenue to conform to the position taken by </ins>&#10;23.7    <ins>the Internal Revenue Service in Revenue Notice 2005-68.</ins>&#10;