1.1                          A bill for an act 
  1.2             relating to taxation; allocating income for purposes 
  1.3             of income tax; authorizing grants to biotechnology and 
  1.4             health sciences businesses; appropriating money; 
  1.5             amending Minnesota Statutes 2002, section 290.17, 
  1.6             subdivision 2; proposing coding for new law in 
  1.7             Minnesota Statutes, chapter 469. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 2002, section 290.17, 
  1.10  subdivision 2, is amended to read: 
  1.11     Subd. 2.  [INCOME NOT DERIVED FROM CONDUCT OF A TRADE OR 
  1.12  BUSINESS.] The income of a taxpayer subject to the allocation 
  1.13  rules that is not derived from the conduct of a trade or 
  1.14  business must be assigned in accordance with paragraphs (a) to 
  1.15  (f):  
  1.16     (a)(1) Subject to paragraphs (a)(2)~~,~~ and (a)(3), ~~and~~ 
  1.17  ~~(a)(4),~~ income from wages as defined in section 3401(a) and (f) 
  1.18  of the Internal Revenue Code is assigned to this state if, and 
  1.19  to the extent that, the work of the employee is performed within 
  1.20  it; all other income from such sources is treated as income from 
  1.21  sources without this state.  
  1.22     Severance pay shall be considered income from labor or 
  1.23  personal or professional services. 
  1.24     (2) In the case of an individual who is a nonresident of 
  1.25  Minnesota and who is an athlete or entertainer, income from 
  1.26  compensation for labor or personal services performed within 
  2.1   this state shall be determined in the following manner:  
  2.2      (i) The amount of income to be assigned to Minnesota for an 
  2.3   individual who is a nonresident salaried athletic team employee 
  2.4   shall be determined by using a fraction in which the denominator 
  2.5   contains the total number of days in which the individual is 
  2.6   under a duty to perform for the employer, and the numerator is 
  2.7   the total number of those days spent in Minnesota.  For purposes 
  2.8   of this paragraph, off-season training activities, unless 
  2.9   conducted at the team's facilities as part of a team imposed 
  2.10  program, are not included in the total number of duty days.  
  2.11  Bonuses earned as a result of play during the regular season or 
  2.12  for participation in championship, play-off, or all-star games 
  2.13  must be allocated under the formula.  Signing bonuses are not 
  2.14  subject to allocation under the formula if they are not 
  2.15  conditional on playing any games for the team, are payable 
  2.16  separately from any other compensation, and are nonrefundable; 
  2.17  and 
  2.18     (ii) The amount of income to be assigned to Minnesota for 
  2.19  an individual who is a nonresident, and who is an athlete or 
  2.20  entertainer not listed in clause (i), for that person's athletic 
  2.21  or entertainment performance in Minnesota shall be determined by 
  2.22  assigning to this state all income from performances or athletic 
  2.23  contests in this state.  
  2.24     (3) For purposes of this section, amounts received by a 
  2.25  nonresident as "retirement income" as defined in section (b)(1) 
  2.26  of the State Income Taxation of Pension Income Act, Public Law 
  2.27  104-95, are not considered income derived from carrying on a 
  2.28  trade or business or from wages or other compensation for work 
  2.29  an employee performed in Minnesota, and are not taxable under 
  2.30  this chapter.  
  2.31     ~~(4) Wages, otherwise assigned to this state under clause~~ 
  2.32  ~~(1) and not qualifying under clause (3), are not taxable under~~ 
  2.33  ~~this chapter if the following conditions are met:~~ 
  2.34     ~~(i) the recipient was not a resident of this state for any~~ 
  2.35  ~~part of the taxable year in which the wages were received; and~~ 
  2.36     ~~(ii) the wages are for work performed while the recipient~~ 
  3.1   ~~was a resident of this state.~~ 
  3.2      (b) Income or gains from tangible property located in this 
  3.3   state that is not employed in the business of the recipient of 
  3.4   the income or gains must be assigned to this state. 
  3.5      (c) Income or gains from intangible personal property not 
  3.6   employed in the business of the recipient of the income or gains 
  3.7   must be assigned to this state if the recipient of the income or 
  3.8   gains is a resident of this state or is a resident trust or 
  3.9   estate.  
  3.10     Gain on the sale of a partnership interest is allocable to 
  3.11  this state in the ratio of the original cost of partnership 
  3.12  tangible property in this state to the original cost of 
  3.13  partnership tangible property everywhere, determined at the time 
  3.14  of the sale.  If more than 50 percent of the value of the 
  3.15  partnership's assets consists of intangibles, gain or loss from 
  3.16  the sale of the partnership interest is allocated to this state 
  3.17  in accordance with the sales factor of the partnership for its 
  3.18  first full tax period immediately preceding the tax period of 
  3.19  the partnership during which the partnership interest was sold. 
  3.20     Gain on the sale of goodwill or income from a covenant not 
  3.21  to compete that is connected with a business operating all or 
  3.22  partially in Minnesota is allocated to this state to the extent 
  3.23  that the income from the business in the year preceding the year 
  3.24  of sale was assignable to Minnesota under subdivision 3.  
  3.25     When an employer pays an employee for a covenant not to 
  3.26  compete, the income allocated to this state is in the ratio of 
  3.27  the employee's service in Minnesota in the calendar year 
  3.28  preceding leaving the employment of the employer over the total 
  3.29  services performed by the employee for the employer in that year.
  3.30     (d) Income from winnings on a bet made by an individual 
  3.31  while in Minnesota is assigned to this state.  In this 
  3.32  paragraph, "bet" has the meaning given in section 609.75, 
  3.33  subdivision 2, as limited by section 609.75, subdivision 3, 
  3.34  clauses (1), (2), and (3).  
  3.35     (e) All items of gross income not covered in paragraphs (a) 
  3.36  to (d) and not part of the taxpayer's income from a trade or 
  4.1   business shall be assigned to the taxpayer's domicile. 
  4.2      (f) For the purposes of this section, working as an 
  4.3   employee shall not be considered to be conducting a trade or 
  4.4   business. 
  4.5      <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
  4.6   beginning after December 31, 2003. 
  4.7      Sec. 2.  [469.342] [BIOTECHNOLOGY AND HEALTH SCIENCES 
  4.8   INDUSTRY GRANTS.] 
  4.9      Subdivision 1.  [GRANT ELIGIBILITY.] The commissioner shall 
  4.10  make grants to eligible businesses in the biotechnology and 
  4.11  health sciences industry to support the startup and growth of 
  4.12  biotechnology and health sciences businesses.  An eligible 
  4.13  business is a business that: 
  4.14     (1) is engaged primarily in: 
  4.15     (i) researching, developing, and/or manufacturing a 
  4.16  biotechnology product or service or a biotechnology-related 
  4.17  health sciences product or service; 
  4.18     (ii) researching, developing, and/or manufacturing a 
  4.19  biotechnology medical device product or service or a 
  4.20  biotechnology-related medical device product or service; or 
  4.21     (iii) promoting, supplying, or servicing businesses 
  4.22  involved in clause (1) or (2), if the business derives more than 
  4.23  50 percent of its gross receipts from those activities; 
  4.24     (2) pledges that the business will increase full-time 
  4.25  employment in high-paying jobs by at least 20 percent in the 
  4.26  first full year of operation after a grant is awarded; 
  4.27     (3) shows a viable link between a higher education/research 
  4.28  institution and the business activities of the biotechnology or 
  4.29  health sciences business; and 
  4.30     (4) agrees to treat a grant awarded under this section as a 
  4.31  business subsidy under sections 116J.993 to 116J.995, and to 
  4.32  comply with the requirements of that law. 
  4.33     Subd. 2.  [AMOUNT AND LIMITATIONS OF GRANTS.] The amount of 
  4.34  a biotechnology and health sciences industry grant awarded to an 
  4.35  eligible business may not exceed $500,000 annually.  Grants may 
  4.36  not be awarded after December 31, 2007. 
  5.1      Subd. 3.  [APPLICATION AND AWARD OF GRANTS.] A 
  5.2   biotechnology and health sciences business must apply for grants 
  5.3   under this section following the procedures established by the 
  5.4   commissioner.  To be eligible for a grant, a business must 
  5.5   demonstrate to the commissioner that it meets the requirements 
  5.6   under subdivision 1, and provide any information required by the 
  5.7   commissioner to determine eligibility.  All applications must be 
  5.8   received on or before October 1 of each year that grants may be 
  5.9   awarded, and the commissioner must advise each applicant on or 
  5.10  before December 31 of that year that a grant is awarded or an 
  5.11  explanation why a grant is not awarded. 
  5.12     Sec. 3.  [APPROPRIATION.] 
  5.13     The amounts necessary to award grants as provided in this 
  5.14  section shall be annually appropriated to the commissioner of 
  5.15  employment and economic development from the general fund. 
  5.16     <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2004.