Skip to main content Skip to office menu Skip to footer

KEY: stricken = removed, old language.underscored = new language to be added

sch1777a-2

1.1Senator .................... moves to amend H.F. No. 1777 as follows:
1.2Delete everything after the enacting clause and insert:

1.3"ARTICLE 1
1.4INCOME AND CORPORATE FRANCHISE TAX

1.5    Section 1. Minnesota Statutes 2013 Supplement, section 116J.8737, subdivision 1,
1.6is amended to read:
1.7    Subdivision 1. Definitions. (a) For the purposes of this section, the following terms
1.8have the meanings given.
1.9(b) "Qualified small business" means a business that has been certified by the
1.10commissioner under subdivision 2.
1.11(c) "Qualified investor" means an investor who has been certified by the
1.12commissioner under subdivision 3.
1.13(d) "Qualified fund" means a pooled angel investment network fund that has been
1.14certified by the commissioner under subdivision 4.
1.15(e) "Qualified investment" means a cash investment in a qualified small business
1.16of a minimum of:
1.17(1) $10,000 in a calendar year by a qualified investor; or
1.18(2) $30,000 in a calendar year by a qualified fund.
1.19A qualified investment must be made in exchange for common stock, a partnership
1.20or membership interest, preferred stock, debt with mandatory conversion to equity, or an
1.21equivalent ownership interest as determined by the commissioner.
1.22(f) "Family" means a family member within the meaning of the Internal Revenue
1.23Code, section 267(c)(4).
1.24(g) "Pass-through entity" means a corporation that for the applicable taxable year is
1.25treated as an S corporation or a general partnership, limited partnership, limited liability
1.26partnership, trust, or limited liability company and which for the applicable taxable year is
1.27not taxed as a corporation under chapter 290.
1.28(h) "Intern" means a student of an accredited institution of higher education, or a
1.29former student who has graduated in the past six months from an accredited institution
1.30of higher education, who is employed by a qualified small business in a nonpermanent
1.31position for a duration of nine months or less that provides training and experience in the
1.32primary business activity of the business.
1.33(i) "Liquidation event" means a conversion of qualified investment for cash, cash
1.34and other consideration, or any other form of equity or debt interest.
2.1(j) "Qualified greater Minnesota business" means a qualified small business that
2.2is also certified by the commissioner as a qualified greater Minnesota business under
2.3subdivision 2, paragraph (h).
2.4(k) "Minority group member" means a United States citizen who is Asian, Pacific
2.5Islander, Black, Hispanic, or Native American.
2.6(l) "Minority-owned business" means a business for which one or more minority
2.7group members:
2.8(1) own at least 50 percent of the business, or, in the case of a publicly owned
2.9business, own at least 51 percent of the stock; and
2.10(2) manage the business and control the daily business operations.
2.11(m) "Women" means persons of the female gender.
2.12(n) "Women-owned business" means a business for which one or more women:
2.13(1) own at least 50 percent of the business, or, in the case of a publicly owned
2.14business, own at least 51 percent of the stock; and
2.15(2) manage the business and control the daily business operations.
2.16(o) "Officer" means a person elected or appointed by the board of directors to
2.17manage the daily operations of the qualified small business;
2.18(p) "Principal" means a person having authority to act on behalf of the qualified
2.19small business.
2.20EFFECTIVE DATE.This section is effective the day following final enactment for
2.21taxable years beginning after December 31, 2014.

2.22    Sec. 2. Minnesota Statutes 2013 Supplement, section 116J.8737, subdivision 2, is
2.23amended to read:
2.24    Subd. 2. Certification of qualified small businesses. (a) Businesses may apply
2.25to the commissioner for certification as a qualified small business or qualified greater
2.26Minnesota small business for a calendar year. The application must be in the form
2.27and be made under the procedures specified by the commissioner, accompanied by an
2.28application fee of $150. Application fees are deposited in the small business investment
2.29tax credit administration account in the special revenue fund. The application for
2.30certification for 2010 must be made available on the department's Web site by August 1,
2.312010. Applications for subsequent years' certification must be made available on the
2.32department's Web site by November 1 of the preceding year.
2.33(b) Within 30 days of receiving an application for certification under this subdivision,
2.34the commissioner must either certify the business as satisfying the conditions required
2.35of a qualified small business, or qualified greater Minnesota small business, request
3.1additional information from the business, or reject the application for certification. If
3.2the commissioner requests additional information from the business, the commissioner
3.3must either certify the business or reject the application within 30 days of receiving the
3.4additional information. If the commissioner neither certifies the business nor rejects
3.5the application within 30 days of receiving the original application or within 30 days of
3.6receiving the additional information requested, whichever is later, then the application is
3.7deemed rejected, and the commissioner must refund the $150 application fee. A business
3.8that applies for certification and is rejected may reapply.
3.9(c) To receive certification as a qualified small business, a business must satisfy
3.10all of the following conditions:
3.11(1) the business has its headquarters in Minnesota;
3.12(2) at least 51 percent of the business's employees are employed in Minnesota, and
3.1351 percent of the business's total payroll is paid or incurred in the state;
3.14(3) the business is engaged in, or is committed to engage in, innovation in Minnesota
3.15in one of the following as its primary business activity:
3.16(i) using proprietary technology to add value to a product, process, or service in a
3.17qualified high-technology field;
3.18(ii) researching or developing a proprietary product, process, or service in a qualified
3.19high-technology field; or
3.20(iii) researching, developing, or producing a new proprietary technology for use in
3.21the fields of agriculture, tourism, forestry, mining, manufacturing, or transportation;
3.22(4) other than the activities specifically listed in clause (3), the business is not
3.23engaged in real estate development, insurance, banking, lending, lobbying, political
3.24consulting, information technology consulting, wholesale or retail trade, leisure,
3.25hospitality, transportation, construction, ethanol production from corn, or professional
3.26services provided by attorneys, accountants, business consultants, physicians, or health
3.27care consultants;
3.28(5) the business has fewer than 25 employees;
3.29(6) the business must pay its employees annual wages of at least 175 percent of the
3.30federal poverty guideline for the year for a family of four and must pay its interns annual
3.31wages of at least 175 percent of the federal minimum wage used for federally covered
3.32employers, except that this requirement must be reduced proportionately for employees
3.33and interns who work less than full-time, and does not apply to an executive, officer, or
3.34member of the board of the business, or to any employee who owns, controls, or holds
3.35power to vote more than 20 percent of the outstanding securities of the business;
4.1(7) the business has (i) not been in operation for more than ten years, or (ii) not
4.2been in operation for more than 20 years if the business is engaged in the research,
4.3development, or production of medical devices or pharmaceuticals for which United
4.4States Food and Drug Administration approval is required for use in the treatment or
4.5diagnosis of a disease or condition;
4.6(8) the business has not previously received private equity investments of more
4.7than $4,000,000;
4.8    (9) the business is not an entity disqualified under section 80A.50, paragraph (b),
4.9clause (3); and
4.10(10) the business has not issued securities that are traded on a public exchange.
4.11(d) In applying the limit under paragraph (c), clause (5), the employees in all members
4.12of the unitary business, as defined in section 290.17, subdivision 4, must be included.
4.13(e) In order for a qualified investment in a business to be eligible for tax credits:
4.14(1) the business must have applied for and received certification for the calendar
4.15year in which the investment was made prior to the date on which the qualified investment
4.16was made;
4.17(2) the business must not have issued securities that are traded on a public exchange;
4.18(3) the business must not issue securities that are traded on a public exchange within
4.19180 days after the date on which the qualified investment was made; and
4.20(4) the business must not have a liquidation event within 180 days after the date on
4.21which the qualified investment was made.
4.22(f) The commissioner must maintain a list of qualified small businesses and qualified
4.23greater Minnesota businesses certified under this subdivision for the calendar year and
4.24make the list accessible to the public on the department's Web site.
4.25(g) For purposes of this subdivision, the following terms have the meanings given:
4.26(1) "qualified high-technology field" includes aerospace, agricultural processing,
4.27renewable energy, energy efficiency and conservation, environmental engineering, food
4.28technology, cellulosic ethanol, information technology, materials science technology,
4.29nanotechnology, telecommunications, biotechnology, medical device products,
4.30pharmaceuticals, diagnostics, biologicals, chemistry, veterinary science, and similar
4.31fields; and
4.32(2) "proprietary technology" means the technical innovations that are unique and
4.33legally owned or licensed by a business and includes, without limitation, those innovations
4.34that are patented, patent pending, a subject of trade secrets, or copyrighted.; and
4.35(3) "greater Minnesota" means the area of Minnesota located outside of the
4.36metropolitan area as defined in section 473.121, subdivision 2.
5.1(h) To receive certification as a qualified greater Minnesota business, a business must
5.2satisfy all of the requirements of paragraph (c) and must satisfy the following conditions:
5.3(1) the business has its headquarters in greater Minnesota; and
5.4(2) at least 51 percent of the business's employees are employed in greater Minnesota,
5.5and 51 percent of the business's total payroll is paid or incurred in greater Minnesota.
5.6EFFECTIVE DATE.This section is effective the day following final enactment for
5.7taxable years beginning after December 31, 2014.

5.8    Sec. 3. Minnesota Statutes 2012, section 116J.8737, subdivision 5, is amended to read:
5.9    Subd. 5. Credit allowed. (a) (1) A qualified investor or qualified fund is eligible
5.10for a credit equal to 25 percent of the qualified investment in a qualified small business.
5.11Investments made by a pass-through entity qualify for a credit only if the entity is a
5.12qualified fund. The commissioner must not allocate more than $11,000,000:
5.13(i) $15,000,000 in credits to qualified investors or qualified funds for taxable years
5.14beginning after December 31, 2009 2013, and before January 1, 2011, and must not
5.15allocate more than $12,000,000 2015; and
5.16(ii) $15,000,000 in credits per year for taxable years beginning after December 31,
5.172010 2014, and before January 1, 2015 2017;
5.18(2) for taxable years beginning after December 31, 2014, and before January 1,
5.192017, $7,500,000 must be allocated to credits for qualifying investments in qualified
5.20greater Minnesota businesses and minority- or women-owned qualified small businesses
5.21in Minnesota. Any portion of a taxable year's credits that is reserved for qualifying
5.22investments in greater Minnesota businesses and minority- or women-owned qualified
5.23small businesses in Minnesota that is not allocated by September 30 of the taxable year is
5.24available for allocation. Any portion of a taxable year's credits that is not allocated by
5.25the commissioner does not cancel and may be carried forward to subsequent taxable
5.26years until all credits have been allocated.
5.27(b) The commissioner may not allocate more than a total maximum amount in credits
5.28for a taxable year to a qualified investor for the investor's cumulative qualified investments
5.29as an individual qualified investor and as an investor in a qualified fund; for married
5.30couples filing joint returns the maximum is $250,000, and for all other filers the maximum
5.31is $125,000. The commissioner may not allocate more than a total of $1,000,000 in credits
5.32over all taxable years for qualified investments in any one qualified small business.
5.33(c) The commissioner may not allocate a credit to a qualified investor either as an
5.34individual qualified investor or as an investor in a qualified fund if the investor receives
6.1more than 50 percent of the investor's gross annual income from the qualified small business
6.2in which the qualified investment is proposed, at the time the investment is proposed:
6.3(1) the investor is an officer or principal of the qualified small business; or
6.4(2) the investor, either individually or in combination with one or more members of
6.5the investor's family, owns, controls, or holds the power to vote 20 percent or more of
6.6the outstanding securities of the qualified small business.
6.7A member of the family of an individual disqualified by this paragraph is not eligible for a
6.8credit under this section. For a married couple filing a joint return, the limitations in this
6.9paragraph apply collectively to the investor and spouse. For purposes of determining the
6.10ownership interest of an investor under this paragraph, the rules under section 267(c) and
6.11267(e) of the Internal Revenue Code apply.
6.12(d) Applications for tax credits for 2010 must be made available on the department's
6.13Web site by September 1, 2010, and the department must begin accepting applications
6.14by September 1, 2010. Applications for subsequent years must be made available by
6.15November 1 of the preceding year.
6.16(e) Qualified investors and qualified funds must apply to the commissioner for tax
6.17credits. Tax credits must be allocated to qualified investors or qualified funds in the order
6.18that the tax credit request applications are filed with the department. The commissioner
6.19must approve or reject tax credit request applications within 15 days of receiving the
6.20application. The commissioner must allocate credits to approved applications if credits
6.21remain available. The investment specified in the application must be made within 60 days
6.22of the allocation of the credits. If the investment is not made within 60 days, the credit
6.23allocation is canceled and available for reallocation. A qualified investor or qualified fund
6.24that fails to invest as specified in the application, within 60 days of allocation of the
6.25credits, must notify the commissioner of the failure to invest within five business days of
6.26the expiration of the 60-day investment period. Credit applications that were approved but
6.27that did not receive an allocation of credits at the time of approval because the aggregate
6.28limit of credits for the year was exhausted remain eligible for allocation of credits if
6.29additional credits become available due to cancellations under this paragraph or due to
6.30termination of the time period for credits reserved for investment in qualified greater
6.31Minnesota businesses and minority- and women-owned small businesses under paragraph
6.32(a). Approved credit applications that do not receive credit allocations in the tax year must
6.33be resubmitted to be eligible for credit allocations in the following tax year.
6.34(f) All tax credit request applications filed with the department on the same day must
6.35be treated as having been filed contemporaneously. If two or more qualified investors or
6.36qualified funds file tax credit request applications on the same day, and the aggregate
7.1amount of credit allocation claims exceeds the aggregate limit of credits under this section
7.2or the lesser amount of credits that remain unallocated on that day, then the credits must
7.3be allocated among the qualified investors or qualified funds who filed on that day on a
7.4pro rata basis with respect to the amounts claimed. The pro rata allocation for any one
7.5qualified investor or qualified fund is the product obtained by multiplying a fraction,
7.6the numerator of which is the amount of the credit allocation claim filed on behalf of
7.7a qualified investor and the denominator of which is the total of all credit allocation
7.8claims filed on behalf of all applicants on that day, by the amount of credits that remain
7.9unallocated on that day for the taxable year.
7.10(g) A qualified investor or qualified fund, or a qualified small business acting on their
7.11behalf, must notify the commissioner when an investment for which credits were allocated
7.12has been made, and the taxable year in which the investment was made. A qualified fund
7.13must also provide the commissioner with a statement indicating the amount invested by
7.14each investor in the qualified fund based on each investor's share of the assets of the
7.15qualified fund at the time of the qualified investment. After receiving notification that the
7.16investment was made, the commissioner must issue credit certificates for the taxable year
7.17in which the investment was made to the qualified investor or, for an investment made by
7.18a qualified fund, to each qualified investor who is an investor in the fund. The certificate
7.19must state that the credit is subject to revocation if the qualified investor or qualified
7.20fund does not hold the investment in the qualified small business for at least three years,
7.21consisting of the calendar year in which the investment was made and the two following
7.22years. The three-year holding period does not apply if:
7.23(1) the investment by the qualified investor or qualified fund becomes worthless
7.24before the end of the three-year period;
7.25(2) 80 percent or more of the assets of the qualified small business is sold before
7.26the end of the three-year period;
7.27(3) the qualified small business is sold before the end of the three-year period; or
7.28(4) the qualified small business's common stock begins trading on a public exchange
7.29before the end of the three-year period.
7.30(h) The commissioner must notify the commissioner of revenue of credit certificates
7.31issued under this section.
7.32EFFECTIVE DATE.Changes to paragraph (a), clause (1), item (i), are effective
7.33the day following final enactment for taxable years beginning after December 31, 2013,
7.34and before January 1, 2015. Changes to paragraph (a), clause (1), item (ii) and to clause
7.35(2), are effective the day following final enactment for taxable years beginning after
8.1December 31, 2014. Changes to paragraphs (c) and (e) are effective the day following
8.2final enactment for taxable years beginning after December 31, 2014.

8.3    Sec. 4. Minnesota Statutes 2012, section 116J.8737, subdivision 7, is amended to read:
8.4    Subd. 7. Revocation of credits. (a) If the commissioner determines that a
8.5qualified investor or qualified fund did not meet the three-year holding period required in
8.6subdivision 5, paragraph (g), any credit allocated and certified to the investor or fund is
8.7revoked and must be repaid by the investor.
8.8(b) If the commissioner determines that a business did not meet the employment
8.9and payroll requirements in subdivision 2, paragraph (c), clause (2), or paragraph (h), as
8.10applicable, in any of the five calendar years following the year in which an investment in the
8.11business that qualified for a tax credit under this section was made, the business must repay
8.12the following percentage of the credits allowed for qualified investments in the business:
8.13
Year following the year in which
Percentage of credit required
8.14
the investment was made:
to be repaid:
8.15
First
100%
8.16
Second
80%
8.17
Third
60%
8.18
Fourth
40%
8.19
Fifth
20%
8.20
Sixth and later
0
8.21(c) The commissioner must notify the commissioner of revenue of every credit
8.22revoked and subject to full or partial repayment under this section.
8.23(d) For the repayment of credits allowed under this section and section 290.0692,
8.24a qualified small business, qualified investor, or investor in a qualified fund must file an
8.25amended return with the commissioner of revenue and pay any amounts required to be
8.26repaid within 30 days after becoming subject to repayment under this section.
8.27EFFECTIVE DATE.This section is effective the day following final enactment for
8.28taxable years beginning after December 31, 2014.

8.29    Sec. 5. Minnesota Statutes 2012, section 116J.8737, subdivision 9, is amended to read:
8.30    Subd. 9. Report to legislature. Beginning in 2011, the commissioner must
8.31annually report by March 15 to the chairs and ranking minority members of the legislative
8.32committees having jurisdiction over taxes and economic development in the senate and
8.33the house of representatives, in compliance with sections 3.195 and 3.197, on the tax
8.34credits issued under this section. The report must include:
8.35(1) the number and amount of the credits issued;
9.1(2) the recipients of the credits;
9.2(3) for each qualified small business or qualified greater Minnesota business, its
9.3location, line of business, and if it received an investment resulting in certification of
9.4tax credits;
9.5(4) the total amount of investment in each qualified small business resulting in
9.6certification of tax credits;
9.7(5) for each qualified small business that received investments resulting in tax
9.8credits, the total amount of additional investment that did not qualify for the tax credit;
9.9(6) the number and amount of credits revoked under subdivision 7;
9.10(7) the number and amount of credits that are no longer subject to the three-year
9.11holding period because of the exceptions under subdivision 5, paragraph (g), clauses
9.12(1) to (4); and
9.13(8) any other information relevant to evaluating the effect of these credits.
9.14EFFECTIVE DATE.This section is effective the day following final enactment for
9.15taxable years beginning after December 31, 2014.

9.16    Sec. 6. Minnesota Statutes 2012, section 116J.8737, subdivision 12, is amended to read:
9.17    Subd. 12. Sunset. This section expires for taxable years beginning after December
9.1831, 2014 2016, except that reporting requirements under subdivision 6 and revocation
9.19of credits under subdivision 7 remain in effect through 2016 2018 for qualified
9.20investors and qualified funds, and through 2018 2020 for qualified small businesses,
9.21reporting requirements under subdivision 9 remain in effect through 2019 2021, and the
9.22appropriation in subdivision 11 remains in effect through 2018 2020.
9.23EFFECTIVE DATE.This section is effective the day following final enactment.

9.24    Sec. 7. Minnesota Statutes 2012, section 289A.02, subdivision 7, is amended to read:
9.25    Subd. 7. Internal Revenue Code. Unless specifically defined otherwise, "Internal
9.26Revenue Code" means the Internal Revenue Code of 1986, as amended through April 14,
9.272011 December 20, 2013.
9.28EFFECTIVE DATE.This section is effective retroactively for taxable years
9.29beginning after December 31, 2012.

9.30    Sec. 8. Minnesota Statutes 2012, section 289A.08, subdivision 7, is amended to read:
9.31    Subd. 7. Composite income tax returns for nonresident partners, shareholders,
9.32and beneficiaries. (a) The commissioner may allow a partnership with nonresident
10.1partners to file a composite return and to pay the tax on behalf of nonresident partners who
10.2have no other Minnesota source income. This composite return must include the names,
10.3addresses, Social Security numbers, income allocation, and tax liability for the nonresident
10.4partners electing to be covered by the composite return.
10.5(b) The computation of a partner's tax liability must be determined by multiplying
10.6the income allocated to that partner by the highest rate used to determine the tax liability
10.7for individuals under section 290.06, subdivision 2c. Nonbusiness deductions, standard
10.8deductions, or personal exemptions are not allowed.
10.9(c) The partnership must submit a request to use this composite return filing method
10.10for nonresident partners. The requesting partnership must file a composite return in the
10.11form prescribed by the commissioner of revenue. The filing of a composite return is
10.12considered a request to use the composite return filing method.
10.13(d) The electing partner must not have any Minnesota source income other than the
10.14income from the partnership and other electing partnerships. If it is determined that the
10.15electing partner has other Minnesota source income, the inclusion of the income and tax
10.16liability for that partner under this provision will not constitute a return to satisfy the
10.17requirements of subdivision 1. The tax paid for the individual as part of the composite return
10.18is allowed as a payment of the tax by the individual on the date on which the composite
10.19return payment was made. If the electing nonresident partner has no other Minnesota
10.20source income, filing of the composite return is a return for purposes of subdivision 1.
10.21(e) This subdivision does not negate the requirement that an individual pay estimated
10.22tax if the individual's liability would exceed the requirements set forth in section 289A.25.
10.23The individual's liability to pay estimated tax is, however, satisfied when the partnership
10.24pays composite estimated tax in the manner prescribed in section 289A.25.
10.25(f) If an electing partner's share of the partnership's gross income from Minnesota
10.26sources is less than the filing requirements for a nonresident under this subdivision, the tax
10.27liability is zero. However, a statement showing the partner's share of gross income must
10.28be included as part of the composite return.
10.29(g) The election provided in this subdivision is only available to a partner who has
10.30no other Minnesota source income and who is either (1) a full-year nonresident individual
10.31or (2) a trust or estate that does not claim a deduction under either section 651 or 661 of
10.32the Internal Revenue Code.
10.33(h) A corporation defined in section 290.9725 and its nonresident shareholders may
10.34make an election under this paragraph. The provisions covering the partnership apply to
10.35the corporation and the provisions applying to the partner apply to the shareholder.
11.1(i) Estates and trusts distributing current income only and the nonresident individual
11.2beneficiaries of the estates or trusts may make an election under this paragraph. The
11.3provisions covering the partnership apply to the estate or trust. The provisions applying to
11.4the partner apply to the beneficiary.
11.5(j) For the purposes of this subdivision, "income" means the partner's share of
11.6federal adjusted gross income from the partnership modified by the additions provided in
11.7section 290.01, subdivision 19a, clauses (6) to (10) (9), and the subtractions provided in:
11.8(i) section 290.01, subdivision 19b, clause (8), to the extent the amount is assignable or
11.9allocable to Minnesota under section 290.17; and (ii) section 290.01, subdivision 19b,
11.10clause (13). The subtraction allowed under section 290.01, subdivision 19b, clause (8), is
11.11only allowed on the composite tax computation to the extent the electing partner would
11.12have been allowed the subtraction.
11.13EFFECTIVE DATE.This section is effective retroactively for taxable years
11.14beginning after December 31, 2012.

11.15    Sec. 9. Minnesota Statutes 2013 Supplement, section 290.01, subdivision 19, is
11.16amended to read:
11.17    Subd. 19. Net income. The term "net income" means the federal taxable income,
11.18as defined in section 63 of the Internal Revenue Code of 1986, as amended through the
11.19date named in this subdivision, incorporating the federal effective dates of changes to the
11.20Internal Revenue Code and any elections made by the taxpayer in accordance with the
11.21Internal Revenue Code in determining federal taxable income for federal income tax
11.22purposes, and with the modifications provided in subdivisions 19a to 19f.
11.23    In the case of a regulated investment company or a fund thereof, as defined in section
11.24851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
11.25company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
11.26except that:
11.27    (1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
11.28Revenue Code does not apply;
11.29    (2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal
11.30Revenue Code must be applied by allowing a deduction for capital gain dividends and
11.31exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal
11.32Revenue Code; and
11.33    (3) the deduction for dividends paid must also be applied in the amount of any
11.34undistributed capital gains which the regulated investment company elects to have treated
11.35as provided in section 852(b)(3)(D) of the Internal Revenue Code.
12.1    The net income of a real estate investment trust as defined and limited by section
12.2856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
12.3taxable income as defined in section 857(b)(2) of the Internal Revenue Code.
12.4    The net income of a designated settlement fund as defined in section 468B(d) of
12.5the Internal Revenue Code means the gross income as defined in section 468B(b) of the
12.6Internal Revenue Code.
12.7    The Internal Revenue Code of 1986, as amended through April 14, 2011 December
12.820, 2013, shall be in effect for taxable years beginning after December 31, 1996, and
12.9before January 1, 2012, and for taxable years beginning after December 31, 2012. The
12.10Internal Revenue Code of 1986, as amended through January 3, 2013, is in effect for
12.11taxable years beginning after December 31, 2011, and before January 1, 2013.
12.12The provisions of sections 315 and 331 of the American Taxpayer Relief Act of
12.132012, Public Law 112-240, extension of increased expensing limitations and treatment
12.14of certain real property as section 179 property and extension and modification of bonus
12.15depreciation, are effective at the same time they become effective for federal purposes.
12.16    Except as otherwise provided, references to the Internal Revenue Code in
12.17subdivisions 19 to 19f mean the code in effect for purposes of determining net income for
12.18the applicable year.
12.19EFFECTIVE DATE.This section is effective the day following final enactment,
12.20except the changes incorporated by federal changes are effective retroactively at the same
12.21time as the changes were effective for federal purposes.

12.22    Sec. 10. Minnesota Statutes 2012, section 290.01, subdivision 19a, is amended to read:
12.23    Subd. 19a. Additions to federal taxable income. For individuals, estates, and
12.24trusts, there shall be added to federal taxable income:
12.25    (1)(i) interest income on obligations of any state other than Minnesota or a political
12.26or governmental subdivision, municipality, or governmental agency or instrumentality
12.27of any state other than Minnesota exempt from federal income taxes under the Internal
12.28Revenue Code or any other federal statute; and
12.29    (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
12.30Code, except:
12.31(A) the portion of the exempt-interest dividends exempt from state taxation under
12.32the laws of the United States; and
12.33(B) the portion of the exempt-interest dividends derived from interest income
12.34on obligations of the state of Minnesota or its political or governmental subdivisions,
12.35municipalities, governmental agencies or instrumentalities, but only if the portion of the
13.1exempt-interest dividends from such Minnesota sources paid to all shareholders represents
13.295 percent or more of the exempt-interest dividends, including any dividends exempt
13.3under subitem (A), that are paid by the regulated investment company as defined in section
13.4851(a) of the Internal Revenue Code, or the fund of the regulated investment company as
13.5defined in section 851(g) of the Internal Revenue Code, making the payment; and
13.6    (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
13.7government described in section 7871(c) of the Internal Revenue Code shall be treated as
13.8interest income on obligations of the state in which the tribe is located;
13.9    (2) the amount of income, sales and use, motor vehicle sales, or excise taxes paid or
13.10accrued within the taxable year under this chapter and the amount of taxes based on net
13.11income paid, sales and use, motor vehicle sales, or excise taxes paid to any other state or
13.12to any province or territory of Canada, to the extent allowed as a deduction under section
13.1363(d) of the Internal Revenue Code, but the addition may not be more than the amount by
13.14which the itemized deductions as allowed under section 63(d) of the Internal Revenue
13.15Code state itemized deduction exceeds the amount of the standard deduction as defined
13.16in section 63(c) of the Internal Revenue Code, disregarding the amounts allowed under
13.17sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code, minus any addition that
13.18would have been required under clause (21) (17) if the taxpayer had claimed the standard
13.19deduction. For the purpose of this paragraph, the disallowance of itemized deductions
13.20under section 68 of the Internal Revenue Code of 1986 clause, income, sales and use, motor
13.21vehicle sales, or excise taxes are the last itemized deductions disallowed under clause (15);
13.22    (3) the capital gain amount of a lump-sum distribution to which the special tax under
13.23section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
13.24    (4) the amount of income taxes paid or accrued within the taxable year under this
13.25chapter and taxes based on net income paid to any other state or any province or territory
13.26of Canada, to the extent allowed as a deduction in determining federal adjusted gross
13.27income. For the purpose of this paragraph, income taxes do not include the taxes imposed
13.28by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
13.29    (5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
13.30other than expenses or interest used in computing net interest income for the subtraction
13.31allowed under subdivision 19b, clause (1);
13.32    (6) the amount of a partner's pro rata share of net income which does not flow
13.33through to the partner because the partnership elected to pay the tax on the income under
13.34section 6242(a)(2) of the Internal Revenue Code;
13.35    (7) 80 percent of the depreciation deduction allowed under section 168(k) of the
13.36Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
14.1in the taxable year generates a deduction for depreciation under section 168(k) and the
14.2activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
14.3the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
14.4limited to excess of the depreciation claimed by the activity under section 168(k) over the
14.5amount of the loss from the activity that is not allowed in the taxable year. In succeeding
14.6taxable years when the losses not allowed in the taxable year are allowed, the depreciation
14.7under section 168(k) is allowed;
14.8    (8) 80 percent of the amount by which the deduction allowed by section 179 of the
14.9Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
14.10Revenue Code of 1986, as amended through December 31, 2003;
14.11    (9) to the extent deducted in computing federal taxable income, the amount of the
14.12deduction allowable under section 199 of the Internal Revenue Code;
14.13    (10) for taxable years beginning before January 1, 2013, the exclusion allowed under
14.14section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;
14.15(11) the amount of expenses disallowed under section 290.10, subdivision 2;
14.16    (12) (11) for taxable years beginning before January 1, 2010, the amount deducted
14.17for qualified tuition and related expenses under section 222 of the Internal Revenue Code,
14.18to the extent deducted from gross income;
14.19    (13) (12) for taxable years beginning before January 1, 2010, the amount deducted
14.20for certain expenses of elementary and secondary school teachers under section
14.2162(a)(2)(D) of the Internal Revenue Code, to the extent deducted from gross income;
14.22(14) the additional standard deduction for property taxes payable that is allowable
14.23under section 63(c)(1)(C) of the Internal Revenue Code;
14.24(15) the additional standard deduction for qualified motor vehicle sales taxes
14.25allowable under section 63(c)(1)(E) of the Internal Revenue Code;
14.26(16) (13) discharge of indebtedness income resulting from reacquisition of business
14.27indebtedness and deferred under section 108(i) of the Internal Revenue Code;
14.28(17) the amount of unemployment compensation exempt from tax under section
14.2985(c) of the Internal Revenue Code;
14.30(18) (14) changes to federal taxable income attributable to a net operating loss that
14.31the taxpayer elected to carry back for more than two years for federal purposes but for
14.32which the losses can be carried back for only two years under section 290.095, subdivision
14.3311
, paragraph (c);
14.34(19) (15) to the extent included in the computation of federal taxable income in
14.35taxable years beginning after December 31, 2010, the amount of disallowed itemized
14.36deductions, but the amount of disallowed itemized deductions plus the addition required
15.1under clause (2) may not be more than the amount by which the itemized deductions as
15.2allowed under section 63(d) of the Internal Revenue Code exceeds the amount of the
15.3standard deduction as defined in section 63(c) of the Internal Revenue Code, disregarding
15.4the amounts allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue
15.5Code, and reduced by any addition that would have been required under clause (21) (17) if
15.6the taxpayer had claimed the standard deduction:
15.7(i) the amount of disallowed itemized deductions is equal to the lesser of:
15.8(A) three percent of the excess of the taxpayer's federal adjusted gross income
15.9over the applicable amount; or
15.10(B) 80 percent of the amount of the itemized deductions otherwise allowable to the
15.11taxpayer under the Internal Revenue Code for the taxable year;
15.12(ii) the term "applicable amount" means $100,000, or $50,000 in the case of a
15.13married individual filing a separate return. Each dollar amount shall be increased by
15.14an amount equal to:
15.15(A) such dollar amount, multiplied by
15.16(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
15.17Revenue Code for the calendar year in which the taxable year begins, by substituting
15.18"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof;
15.19(iii) the term "itemized deductions" does not include:
15.20(A) the deduction for medical expenses under section 213 of the Internal Revenue
15.21Code;
15.22(B) any deduction for investment interest as defined in section 163(d) of the Internal
15.23Revenue Code; and
15.24(C) the deduction under section 165(a) of the Internal Revenue Code for casualty or
15.25theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue
15.26Code or for losses described in section 165(d) of the Internal Revenue Code;
15.27(20) (16) to the extent included in federal taxable income in taxable years beginning
15.28after December 31, 2010, the amount of disallowed personal exemptions for taxpayers
15.29with federal adjusted gross income over the threshold amount:
15.30(i) the disallowed personal exemption amount is equal to the dollar amount of the
15.31personal exemptions claimed by the taxpayer in the computation of federal taxable income
15.32multiplied by the applicable percentage;
15.33(ii) "applicable percentage" means two percentage points for each $2,500 (or
15.34fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable
15.35year exceeds the threshold amount. In the case of a married individual filing a separate
16.1return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In
16.2no event shall the applicable percentage exceed 100 percent;
16.3(iii) the term "threshold amount" means:
16.4(A) $150,000 in the case of a joint return or a surviving spouse;
16.5(B) $125,000 in the case of a head of a household;
16.6(C) $100,000 in the case of an individual who is not married and who is not a
16.7surviving spouse or head of a household; and
16.8(D) $75,000 in the case of a married individual filing a separate return; and
16.9(iv) the thresholds shall be increased by an amount equal to:
16.10(A) such dollar amount, multiplied by
16.11(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
16.12Revenue Code for the calendar year in which the taxable year begins, by substituting
16.13"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; and
16.14(21) (17) to the extent deducted in the computation of federal taxable income, for
16.15taxable years beginning after December 31, 2010, and before January 1, 2013 2014, the
16.16difference between the standard deduction allowed under section 63(c) of the Internal
16.17Revenue Code and the standard deduction allowed for 2011 and, 2012, and 2013 under the
16.18Internal Revenue Code as amended through December 1, 2010.
16.19EFFECTIVE DATE.This section is effective retroactively for taxable years
16.20beginning after December 31, 2012.

16.21    Sec. 11. Minnesota Statutes 2013 Supplement, section 290.01, subdivision 19b,
16.22is amended to read:
16.23    Subd. 19b. Subtractions from federal taxable income. For individuals, estates,
16.24and trusts, there shall be subtracted from federal taxable income:
16.25    (1) net interest income on obligations of any authority, commission, or
16.26instrumentality of the United States to the extent includable in taxable income for federal
16.27income tax purposes but exempt from state income tax under the laws of the United States;
16.28    (2) if included in federal taxable income, the amount of any overpayment of income
16.29tax to Minnesota or to any other state, for any previous taxable year, whether the amount
16.30is received as a refund or as a credit to another taxable year's income tax liability;
16.31    (3) the amount paid to others, less the amount used to claim the credit allowed under
16.32section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
16.33to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
16.34transportation of each qualifying child in attending an elementary or secondary school
16.35situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
17.1resident of this state may legally fulfill the state's compulsory attendance laws, which
17.2is not operated for profit, and which adheres to the provisions of the Civil Rights Act
17.3of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
17.4tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
17.5"textbooks" includes books and other instructional materials and equipment purchased
17.6or leased for use in elementary and secondary schools in teaching only those subjects
17.7legally and commonly taught in public elementary and secondary schools in this state.
17.8Equipment expenses qualifying for deduction includes expenses as defined and limited in
17.9section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
17.10books and materials used in the teaching of religious tenets, doctrines, or worship, the
17.11purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
17.12or materials for, or transportation to, extracurricular activities including sporting events,
17.13musical or dramatic events, speech activities, driver's education, or similar programs. No
17.14deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
17.15the qualifying child's vehicle to provide such transportation for a qualifying child. For
17.16purposes of the subtraction provided by this clause, "qualifying child" has the meaning
17.17given in section 32(c)(3) of the Internal Revenue Code;
17.18    (4) income as provided under section 290.0802;
17.19    (5) to the extent included in federal adjusted gross income, income realized on
17.20disposition of property exempt from tax under section 290.491;
17.21    (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
17.22of the Internal Revenue Code in determining federal taxable income by an individual
17.23who does not itemize deductions for federal income tax purposes for the taxable year, an
17.24amount equal to 50 percent of the excess of charitable contributions over $500 allowable
17.25as a deduction for the taxable year under section 170(a) of the Internal Revenue Code,
17.26under the provisions of Public Law 109-1 and Public Law 111-126;
17.27    (7) for individuals who are allowed a federal foreign tax credit for taxes that do not
17.28qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
17.29of subnational foreign taxes for the taxable year, but not to exceed the total subnational
17.30foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
17.31"federal foreign tax credit" means the credit allowed under section 27 of the Internal
17.32Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
17.33under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
17.34the extent they exceed the federal foreign tax credit;
17.35    (8) in each of the five tax years immediately following the tax year in which an
17.36addition is required under subdivision 19a, clause (7), or 19c, clause (12), in the case of a
18.1shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
18.2delayed depreciation. For purposes of this clause, "delayed depreciation" means the amount
18.3of the addition made by the taxpayer under subdivision 19a, clause (7), or subdivision 19c,
18.4clause (12), in the case of a shareholder of an S corporation, minus the positive value of
18.5any net operating loss under section 172 of the Internal Revenue Code generated for the
18.6tax year of the addition. The resulting delayed depreciation cannot be less than zero;
18.7    (9) job opportunity building zone income as provided under section 469.316;
18.8    (10) to the extent included in federal taxable income, the amount of compensation
18.9paid to members of the Minnesota National Guard or other reserve components of the
18.10United States military for active service, excluding compensation for services performed
18.11under the Active Guard Reserve (AGR) program. For purposes of this clause, "active
18.12service" means (i) state active service as defined in section 190.05, subdivision 5a, clause
18.13(1); or (ii) federally funded state active service as defined in section 190.05, subdivision
18.145b
, but "active service" excludes service performed in accordance with section 190.08,
18.15subdivision 3
;
18.16    (11) to the extent included in federal taxable income, the amount of compensation
18.17paid to Minnesota residents who are members of the armed forces of the United States
18.18or United Nations for active duty performed under United States Code, title 10; or the
18.19authority of the United Nations;
18.20    (12) an amount, not to exceed $10,000, equal to qualified expenses related to a
18.21qualified donor's donation, while living, of one or more of the qualified donor's organs
18.22to another person for human organ transplantation. For purposes of this clause, "organ"
18.23means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
18.24"human organ transplantation" means the medical procedure by which transfer of a human
18.25organ is made from the body of one person to the body of another person; "qualified
18.26expenses" means unreimbursed expenses for both the individual and the qualified donor
18.27for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
18.28may be subtracted under this clause only once; and "qualified donor" means the individual
18.29or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
18.30individual may claim the subtraction in this clause for each instance of organ donation for
18.31transplantation during the taxable year in which the qualified expenses occur;
18.32    (13) in each of the five tax years immediately following the tax year in which an
18.33addition is required under subdivision 19a, clause (8), or 19c, clause (13), in the case of a
18.34shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
18.35addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (13), in the
18.36case of a shareholder of a corporation that is an S corporation, minus the positive value of
19.1any net operating loss under section 172 of the Internal Revenue Code generated for the
19.2tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
19.3subtraction is not allowed under this clause;
19.4    (14) to the extent included in the federal taxable income of a nonresident of
19.5Minnesota, compensation paid to a service member as defined in United States Code, title
19.610, section 101(a)(5), for military service as defined in the Servicemembers Civil Relief
19.7Act, Public Law 108-189, section 101(2);
19.8    (15) to the extent included in federal taxable income, the amount of national service
19.9educational awards received from the National Service Trust under United States Code,
19.10title 42, sections 12601 to 12604, for service in an approved Americorps National Service
19.11program;
19.12(16) to the extent included in federal taxable income, discharge of indebtedness
19.13income resulting from reacquisition of business indebtedness included in federal taxable
19.14income under section 108(i) of the Internal Revenue Code. This subtraction applies only
19.15to the extent that the income was included in net income in a prior year as a result of the
19.16addition under section 290.01, subdivision 19a, clause (16) (13);
19.17(17) the amount of the net operating loss allowed under section 290.095, subdivision
19.1811
, paragraph (c); and
19.19(18) the amount of expenses not allowed for federal income tax purposes due
19.20to claiming the railroad track maintenance credit under section 45G(a) of the Internal
19.21Revenue Code.;
19.22(19) the amount of the limitation on itemized deductions under section 68(b) of
19.23the Internal Revenue Code; and
19.24(20) the amount of the phaseout of personal exemptions under section 151(d) of the
19.25Internal Revenue Code.
19.26EFFECTIVE DATE.This section is effective retroactively for taxable years
19.27beginning after December 31, 2012.

19.28    Sec. 12. Minnesota Statutes 2012, section 290.01, is amended by adding a subdivision
19.29to read:
19.30    Subd. 29a. State itemized deduction. "State itemized deduction" means
19.31federal itemized deductions, as defined in section 63(d) of the Internal Revenue Code,
19.32disregarding any limitation under section 68 of the Internal Revenue Code, and reduced
19.33by the amount of the addition required under subdivision 19a, clause (15).
20.1EFFECTIVE DATE.This section is effective retroactively for taxable years
20.2beginning after December 31, 2012.

20.3    Sec. 13. Minnesota Statutes 2013 Supplement, section 290.01, subdivision 31, is
20.4amended to read:
20.5    Subd. 31. Internal Revenue Code. Unless specifically defined otherwise, for
20.6taxable years beginning before January 1, 2012, and after December 31, 2012, "Internal
20.7Revenue Code" means the Internal Revenue Code of 1986, as amended through April 14,
20.82011; and for taxable years beginning after December 31, 2011, and before January 1,
20.92013, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
20.10through January 3 December 20, 2013. Internal Revenue Code also includes any
20.11uncodified provision in federal law that relates to provisions of the Internal Revenue
20.12Code that are incorporated into Minnesota law. When used in this chapter, the reference
20.13to "subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code" is to the
20.14Internal Revenue Code as amended through March 18, 2010.
20.15EFFECTIVE DATE.This section is effective the day following final enactment,
20.16except the changes incorporated by federal changes are effective retroactively at the same
20.17time the changes were effective for federal purposes.

20.18    Sec. 14. Minnesota Statutes 2013 Supplement, section 290.06, subdivision 2c, is
20.19amended to read:
20.20    Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income
20.21taxes imposed by this chapter upon married individuals filing joint returns and surviving
20.22spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
20.23applying to their taxable net income the following schedule of rates:
20.24    (1) On the first $35,480, 5.35 percent;
20.25    (2) On all over $35,480, but not over $140,960, 7.05 percent;
20.26    (3) On all over $140,960, but not over $250,000, 7.85 percent;
20.27(4) On all over $250,000, 9.85 percent.
20.28    Married individuals filing separate returns, estates, and trusts must compute their
20.29income tax by applying the above rates to their taxable income, except that the income
20.30brackets will be one-half of the above amounts.
20.31    (b) The income taxes imposed by this chapter upon unmarried individuals must be
20.32computed by applying to taxable net income the following schedule of rates:
20.33    (1) On the first $24,270, 5.35 percent;
20.34    (2) On all over $24,270, but not over $79,730, 7.05 percent;
21.1    (3) On all over $79,730, but not over $150,000, 7.85 percent;
21.2(4) On all over $150,000, 9.85 percent.
21.3    (c) The income taxes imposed by this chapter upon unmarried individuals qualifying
21.4as a head of household as defined in section 2(b) of the Internal Revenue Code must be
21.5computed by applying to taxable net income the following schedule of rates:
21.6    (1) On the first $29,880, 5.35 percent;
21.7    (2) On all over $29,880, but not over $120,070, 7.05 percent;
21.8    (3) On all over $120,070, but not over $200,000, 7.85 percent;
21.9(4) On all over $200,000, 9.85 percent.
21.10    (d) In lieu of a tax computed according to the rates set forth in this subdivision, the
21.11tax of any individual taxpayer whose taxable net income for the taxable year is less than
21.12an amount determined by the commissioner must be computed in accordance with tables
21.13prepared and issued by the commissioner of revenue based on income brackets of not
21.14more than $100. The amount of tax for each bracket shall be computed at the rates set
21.15forth in this subdivision, provided that the commissioner may disregard a fractional part of
21.16a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
21.17    (e) An individual who is not a Minnesota resident for the entire year must compute
21.18the individual's Minnesota income tax as provided in this subdivision. After the
21.19application of the nonrefundable credits provided in this chapter, the tax liability must
21.20then be multiplied by a fraction in which:
21.21    (1) the numerator is the individual's Minnesota source federal adjusted gross income
21.22as defined in section 62 of the Internal Revenue Code and increased by the additions
21.23required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12),
21.24(13), and (16) to (18) and (11) to (14), and reduced by the Minnesota assignable portion of
21.25the subtraction for United States government interest under section 290.01, subdivision
21.2619b
, clause (1), and the subtractions under section 290.01, subdivision 19b, clauses (8),
21.27(9), (13), (14), (16), and (17), after applying the allocation and assignability provisions of
21.28section 290.081, clause (a), or 290.17; and
21.29    (2) the denominator is the individual's federal adjusted gross income as defined in
21.30section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
21.31section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), (13), and (16) to
21.32(18) and (11) to (14), and reduced by the amounts specified in section 290.01, subdivision
21.3319b
, clauses (1), (8), (9), (13), (14), (16), and (17).
21.34EFFECTIVE DATE.This section is effective retroactively for taxable years
21.35beginning after December 31, 2012.

22.1    Sec. 15. Minnesota Statutes 2012, section 290.067, subdivision 1, is amended to read:
22.2    Subdivision 1. Amount of credit. (a) A taxpayer may take as a credit against the
22.3tax due from the taxpayer and a spouse, if any, under this chapter an amount equal to the
22.4dependent care credit for which the taxpayer is eligible pursuant to the provisions of
22.5section 21 of the Internal Revenue Code subject to the limitations provided in subdivision
22.62 except that in determining whether the child qualified as a dependent, income received
22.7as a Minnesota family investment program grant or allowance to or on behalf of the child
22.8must not be taken into account in determining whether the child received more than half
22.9of the child's support from the taxpayer, and the provisions of section 32(b)(1)(D) of
22.10the Internal Revenue Code do not apply.
22.11(b) If a child who has not attained the age of six years at the close of the taxable year
22.12is cared for at a licensed family day care home operated by the child's parent, the taxpayer
22.13is deemed to have paid employment-related expenses. If the child is 16 months old or
22.14younger at the close of the taxable year, the amount of expenses deemed to have been paid
22.15equals the maximum limit for one qualified individual under section 21(c) and (d) of the
22.16Internal Revenue Code. If the child is older than 16 months of age but has not attained the
22.17age of six years at the close of the taxable year, the amount of expenses deemed to have
22.18been paid equals the amount the licensee would charge for the care of a child of the same
22.19age for the same number of hours of care.
22.20(c) If a married couple:
22.21(1) has a child who has not attained the age of one year at the close of the taxable year;
22.22(2) files a joint tax return for the taxable year; and
22.23(3) does not participate in a dependent care assistance program as defined in section
22.24129 of the Internal Revenue Code, in lieu of the actual employment related expenses paid
22.25for that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of
22.26(i) the combined earned income of the couple or (ii) the amount of the maximum limit for
22.27one qualified individual under section 21(c) and (d) of the Internal Revenue Code will
22.28be deemed to be the employment related expense paid for that child. The earned income
22.29limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed
22.30amount. These deemed amounts apply regardless of whether any employment-related
22.31expenses have been paid.
22.32(d) If the taxpayer is not required and does not file a federal individual income tax
22.33return for the tax year, no credit is allowed for any amount paid to any person unless:
22.34(1) the name, address, and taxpayer identification number of the person are included
22.35on the return claiming the credit; or
23.1(2) if the person is an organization described in section 501(c)(3) of the Internal
23.2Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code,
23.3the name and address of the person are included on the return claiming the credit.
23.4In the case of a failure to provide the information required under the preceding sentence,
23.5the preceding sentence does not apply if it is shown that the taxpayer exercised due
23.6diligence in attempting to provide the information required.
23.7(e) In the case of a nonresident, part-year resident, or a person who has earned
23.8income not subject to tax under this chapter including earned income excluded pursuant to
23.9section 290.01, subdivision 19b, clause (9), the credit determined under section 21 of the
23.10Internal Revenue Code must be allocated based on the ratio by which the earned income
23.11of the claimant and the claimant's spouse from Minnesota sources bears to the total earned
23.12income of the claimant and the claimant's spouse.
23.13(f) For residents of Minnesota, the subtractions for military pay under section
23.14290.01, subdivision 19b , clauses (10) and (11), are not considered "earned income not
23.15subject to tax under this chapter."
23.16(g) For residents of Minnesota, the exclusion of combat pay under section 112 of
23.17the Internal Revenue Code is not considered "earned income not subject to tax under
23.18this chapter."
23.19EFFECTIVE DATE.This section is effective retroactively for taxable years
23.20beginning after December 31, 2012.

23.21    Sec. 16. Minnesota Statutes 2012, section 290.067, subdivision 2a, is amended to read:
23.22    Subd. 2a. Income. (a) For purposes of this section, "income" means the sum of
23.23the following:
23.24(1) federal adjusted gross income as defined in section 62 of the Internal Revenue
23.25Code; and
23.26(2) the sum of the following amounts to the extent not included in clause (1):
23.27(i) all nontaxable income;
23.28(ii) the amount of a passive activity loss that is not disallowed as a result of section
23.29469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity
23.30loss carryover allowed under section 469(b) of the Internal Revenue Code;
23.31(iii) an amount equal to the total of any discharge of qualified farm indebtedness
23.32of a solvent individual excluded from gross income under section 108(g) of the Internal
23.33Revenue Code;
23.34(iv) cash public assistance and relief;
24.1(v) any pension or annuity (including railroad retirement benefits, all payments
24.2received under the federal Social Security Act, supplemental security income, and veterans
24.3benefits), which was not exclusively funded by the claimant or spouse, or which was
24.4funded exclusively by the claimant or spouse and which funding payments were excluded
24.5from federal adjusted gross income in the years when the payments were made;
24.6(vi) interest received from the federal or a state government or any instrumentality
24.7or political subdivision thereof;
24.8(vii) workers' compensation;
24.9(viii) nontaxable strike benefits;
24.10(ix) the gross amounts of payments received in the nature of disability income or
24.11sick pay as a result of accident, sickness, or other disability, whether funded through
24.12insurance or otherwise;
24.13(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of
24.141986, as amended through December 31, 1995;
24.15(xi) contributions made by the claimant to an individual retirement account,
24.16including a qualified voluntary employee contribution; simplified employee pension plan;
24.17self-employed retirement plan; cash or deferred arrangement plan under section 401(k)
24.18of the Internal Revenue Code; or deferred compensation plan under section 457 of the
24.19Internal Revenue Code;
24.20(xii) nontaxable scholarship or fellowship grants;
24.21(xiii) the amount of deduction allowed under section 199 of the Internal Revenue
24.22Code;
24.23(xiv) the amount of deduction allowed under section 220 or 223 of the Internal
24.24Revenue Code;
24.25(xv) the amount of deducted for tuition expenses required to be added to income
24.26under section 290.01, subdivision 19a, clause (12) under section 222 of the Internal
24.27Revenue Code; and
24.28(xvi) the amount deducted for certain expenses of elementary and secondary school
24.29teachers under section 62(a)(2)(D) of the Internal Revenue Code; and.
24.30(xvii) unemployment compensation.
24.31In the case of an individual who files an income tax return on a fiscal year basis, the
24.32term "federal adjusted gross income" means federal adjusted gross income reflected in the
24.33fiscal year ending in the next calendar year. Federal adjusted gross income may not be
24.34reduced by the amount of a net operating loss carryback or carryforward or a capital loss
24.35carryback or carryforward allowed for the year.
24.36(b) "Income" does not include:
25.1(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;
25.2(2) amounts of any pension or annuity that were exclusively funded by the claimant
25.3or spouse if the funding payments were not excluded from federal adjusted gross income
25.4in the years when the payments were made;
25.5(3) surplus food or other relief in kind supplied by a governmental agency;
25.6(4) relief granted under chapter 290A;
25.7(5) child support payments received under a temporary or final decree of dissolution
25.8or legal separation; and
25.9(6) restitution payments received by eligible individuals and excludable interest as
25.10defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of
25.112001, Public Law 107-16.
25.12EFFECTIVE DATE.This section is effective retroactively for taxable years
25.13beginning after December 31, 2012.

25.14    Sec. 17. Minnesota Statutes 2012, section 290.067, is amended by adding a subdivision
25.15to read:
25.16    Subd. 2c. Dependent care credit; temporary definition. For taxable years
25.17beginning after December 31, 2012, and before January 1, 2014, for purposes of this
25.18section, "section 21 of the Internal Revenue Code" means section 21 of the Internal
25.19Revenue Code as amended through June 1, 2001.
25.20EFFECTIVE DATE.This section is effective retroactively for taxable years
25.21beginning after December 31, 2012.

25.22    Sec. 18. Minnesota Statutes 2012, section 290.0671, subdivision 1, is amended to read:
25.23    Subdivision 1. Credit allowed. (a) An individual is allowed a credit against the tax
25.24imposed by this chapter equal to a percentage of earned income. To receive a credit, a
25.25taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code.
25.26(b) For individuals with no qualifying children, the credit equals 1.9125 2.10 percent
25.27of the first $4,620 $6,180 of earned income. The credit is reduced by 1.9125 2.01 percent
25.28of earned income or adjusted gross income, whichever is greater, in excess of $5,770
25.29 $8,130, but in no case is the credit less than zero.
25.30(c) For individuals with one qualifying child, the credit equals 8.5 9.35 percent of
25.31the first $6,920 $11,120 of earned income and 8.5 percent of earned income over $12,080
25.32but less than $13,450. The credit is reduced by 5.73 6.02 percent of earned income or
26.1adjusted gross income, whichever is greater, in excess of $15,080 $21,190, but in no
26.2case is the credit less than zero.
26.3(d) For individuals with two or more qualifying children, the credit equals ten 11
26.4 percent of the first $9,720 $18,240 of earned income and 20 percent of earned income
26.5over $14,860 but less than $16,800. The credit is reduced by 10.3 10.82 percent of earned
26.6income or adjusted gross income, whichever is greater, in excess of $17,890 $25,130,
26.7but in no case is the credit less than zero.
26.8(e) For a nonresident or part-year resident, the credit must be allocated based on the
26.9percentage calculated under section 290.06, subdivision 2c, paragraph (e).
26.10(f) For a person who was a resident for the entire tax year and has earned income
26.11not subject to tax under this chapter, including income excluded under section 290.01,
26.12subdivision 19b
, clause (9), the credit must be allocated based on the ratio of federal
26.13adjusted gross income reduced by the earned income not subject to tax under this chapter
26.14over federal adjusted gross income. For purposes of this paragraph, the subtractions
26.15for military pay under section 290.01, subdivision 19b, clauses (10) and (11), are not
26.16considered "earned income not subject to tax under this chapter."
26.17For the purposes of this paragraph, the exclusion of combat pay under section 112
26.18of the Internal Revenue Code is not considered "earned income not subject to tax under
26.19this chapter."
26.20(g) For tax years beginning after December 31, 2007, and before December 31, 2010,
26.21and for tax years beginning after December 31, 2017, the $5,770 $8,130 in paragraph
26.22(b), the $15,080 $21,190 in paragraph (c), and the $17,890 $25,130 in paragraph (d),
26.23after being adjusted for inflation under subdivision 7, are each increased by $3,000 for
26.24married taxpayers filing joint returns. For tax years beginning after December 31, 2008,
26.25the commissioner shall annually adjust the $3,000 by the percentage determined pursuant
26.26to the provisions of section 1(f) of the Internal Revenue Code, except that in section
26.271(f)(3)(B), the word "2007" shall be substituted for the word "1992." For 2009, the
26.28commissioner shall then determine the percent change from the 12 months ending on
26.29August 31, 2007, to the 12 months ending on August 31, 2008, and in each subsequent
26.30year, from the 12 months ending on August 31, 2007, to the 12 months ending on August
26.3131 of the year preceding the taxable year. The earned income thresholds as adjusted
26.32for inflation must be rounded to the nearest $10. If the amount ends in $5, the amount
26.33is rounded up to the nearest $10. The determination of the commissioner under this
26.34subdivision is not a rule under the Administrative Procedure Act.
26.35(h) For tax years beginning after December 31, 2010, and before January 1, 2012, and
26.36for tax years beginning after December 31, 2013, and before January 1, 2018, the $5,770
27.1 $8,130 in paragraph (b), the $15,080 $21,190 in paragraph (c), and the $17,890 $25,130 in
27.2paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by
27.3$5,000 for married taxpayers filing joint returns. For tax years beginning after December
27.431, 2010, and before January 1, 2012, and for tax years beginning after December 31,
27.52013, and before January 1, 2018, the commissioner shall annually adjust the $5,000
27.6by the percentage determined pursuant to the provisions of section 1(f) of the Internal
27.7Revenue Code, except that in section 1(f)(3)(B), the word "2008" shall be substituted for
27.8the word "1992." For 2011, the commissioner shall then determine the percent change
27.9from the 12 months ending on August 31, 2008, to the 12 months ending on August 31,
27.102010, and in each subsequent year, from the 12 months ending on August 31, 2008, to
27.11the 12 months ending on August 31 of the year preceding the taxable year. The earned
27.12income thresholds as adjusted for inflation must be rounded to the nearest $10. If the
27.13amount ends in $5, the amount is rounded up to the nearest $10. The determination of the
27.14commissioner under this subdivision is not a rule under the Administrative Procedure Act.
27.15(i) The commissioner shall construct tables showing the amount of the credit at
27.16various income levels and make them available to taxpayers. The tables shall follow
27.17the schedule contained in this subdivision, except that the commissioner may graduate
27.18the transition between income brackets.
27.19EFFECTIVE DATE.This section is effective for taxable years beginning after
27.20December 31, 2013.

27.21    Sec. 19. Minnesota Statutes 2012, section 290.0671, subdivision 7, is amended to read:
27.22    Subd. 7. Inflation adjustment. The earned income amounts used to calculate
27.23the credit and the income thresholds at which the maximum credit begins to be reduced
27.24in subdivision 1 must be adjusted for inflation. The commissioner shall adjust by the
27.25percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue
27.26Code, except that in section 1(f)(3)(B) the word "1999" "2013" shall be substituted for
27.27the word "1992." For 2001 2015, the commissioner shall then determine the percent
27.28change from the 12 months ending on August 31, 1999 2013, to the 12 months ending
27.29on August 31, 2000 2014, and in each subsequent year, from the 12 months ending on
27.30August 31, 1999 2013, to the 12 months ending on August 31 of the year preceding the
27.31taxable year. The earned income thresholds as adjusted for inflation must be rounded to
27.32the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest
27.33$10 amount. The determination of the commissioner under this subdivision is not a rule
27.34under the Administrative Procedure Act.
28.1EFFECTIVE DATE.This section is effective for taxable years beginning after
28.2December 31, 2013.

28.3    Sec. 20. Minnesota Statutes 2012, section 290.0675, subdivision 1, is amended to read:
28.4    Subdivision 1. Definitions. (a) For purposes of this section the following terms
28.5have the meanings given.
28.6(b) "Earned income" means the sum of the following, to the extent included in
28.7Minnesota taxable income:
28.8(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
28.9(2) income received from a retirement pension, profit-sharing, stock bonus, or
28.10annuity plan; and
28.11(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue
28.12Code.
28.13(c) "Taxable income" means net income as defined in section 290.01, subdivision 19.
28.14(d) "Earned income of lesser-earning spouse" means the earned income of the spouse
28.15with the lesser amount of earned income as defined in paragraph (b) for the taxable year
28.16minus the sum of (i) the amount for one exemption under section 151(d) of the Internal
28.17Revenue Code and (ii) one-half the amount of the standard deduction under section
28.1863(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition required
28.19under section 290.01, subdivision 19a, clause (21) (17), and one-half of the addition that
28.20would have been required under section 290.01, subdivision 19a, clause (21) (17), if the
28.21taxpayer had claimed the standard deduction.
28.22EFFECTIVE DATE.This section is effective retroactively for taxable years
28.23beginning after December 31, 2012.

28.24    Sec. 21. Minnesota Statutes 2013 Supplement, section 290.091, subdivision 2, is
28.25amended to read:
28.26    Subd. 2. Definitions. For purposes of the tax imposed by this section, the following
28.27terms have the meanings given:
28.28    (a) "Alternative minimum taxable income" means the sum of the following for
28.29the taxable year:
28.30    (1) the taxpayer's federal alternative minimum taxable income as defined in section
28.3155(b)(2) of the Internal Revenue Code;
28.32    (2) the taxpayer's itemized deductions allowed in computing federal alternative
28.33minimum taxable income, but excluding:
29.1    (i) the charitable contribution deduction under section 170 of the Internal Revenue
29.2Code;
29.3    (ii) the medical expense deduction;
29.4    (iii) the casualty, theft, and disaster loss deduction; and
29.5    (iv) the impairment-related work expenses of a disabled person;
29.6    (3) for depletion allowances computed under section 613A(c) of the Internal
29.7Revenue Code, with respect to each property (as defined in section 614 of the Internal
29.8Revenue Code), to the extent not included in federal alternative minimum taxable income,
29.9the excess of the deduction for depletion allowable under section 611 of the Internal
29.10Revenue Code for the taxable year over the adjusted basis of the property at the end of the
29.11taxable year (determined without regard to the depletion deduction for the taxable year);
29.12    (4) to the extent not included in federal alternative minimum taxable income, the
29.13amount of the tax preference for intangible drilling cost under section 57(a)(2) of the
29.14Internal Revenue Code determined without regard to subparagraph (E);
29.15    (5) to the extent not included in federal alternative minimum taxable income, the
29.16amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and
29.17    (6) the amount of addition required by section 290.01, subdivision 19a, clauses (7)
29.18to (9), (12), (13), and (16) to (18) and (11) to (14);
29.19    less the sum of the amounts determined under the following:
29.20    (1) interest income as defined in section 290.01, subdivision 19b, clause (1);
29.21    (2) an overpayment of state income tax as provided by section 290.01, subdivision
29.2219b
, clause (2), to the extent included in federal alternative minimum taxable income;
29.23    (3) the amount of investment interest paid or accrued within the taxable year on
29.24indebtedness to the extent that the amount does not exceed net investment income, as
29.25defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include
29.26amounts deducted in computing federal adjusted gross income;
29.27    (4) amounts subtracted from federal taxable income as provided by section 290.01,
29.28subdivision 19b
, clauses (6), (8) to (14), and (16); and
29.29(5) the amount of the net operating loss allowed under section 290.095, subdivision
29.3011
, paragraph (c).
29.31    In the case of an estate or trust, alternative minimum taxable income must be
29.32computed as provided in section 59(c) of the Internal Revenue Code.
29.33    (b) "Investment interest" means investment interest as defined in section 163(d)(3)
29.34of the Internal Revenue Code.
29.35    (c) "Net minimum tax" means the minimum tax imposed by this section.
30.1    (d) "Regular tax" means the tax that would be imposed under this chapter (without
30.2regard to this section and section 290.032), reduced by the sum of the nonrefundable
30.3credits allowed under this chapter.
30.4    (e) "Tentative minimum tax" equals 6.75 percent of alternative minimum taxable
30.5income after subtracting the exemption amount determined under subdivision 3.
30.6EFFECTIVE DATE.This section is effective retroactively for taxable years
30.7beginning after December 31, 2012.

30.8    Sec. 22. Minnesota Statutes 2013 Supplement, section 290A.03, subdivision 15,
30.9is amended to read:
30.10    Subd. 15. Internal Revenue Code. For taxable years beginning before January 1,
30.112012, and after December 31, 2012, "Internal Revenue Code" means the Internal Revenue
30.12Code of 1986, as amended through April 14, 2011; and for taxable years beginning after
30.13December 31, 2011, and before January 1, 2013, "Internal Revenue Code" means the
30.14Internal Revenue Code of 1986, as amended through January 3 December 20, 2013.
30.15EFFECTIVE DATE.This section is effective retroactively for property tax refunds
30.16based on property taxes payable after December 31, 2013, and rent paid after December
30.1731, 2012.

30.18    Sec. 23. INDIVIDUAL INCOME TAX COLLECTION ACTION PROHIBITED.
30.19Notwithstanding any law to the contrary, the commissioner shall not increase the
30.20amount due or decrease the refund for an individual income tax return for the taxable
30.21year beginning after December 31, 2012, and before January 1, 2014, to the extent the
30.22amount due was understated or the refund was overstated because the taxpayer calculated
30.23the tax or refund based on the Internal Revenue Code, as amended through April 14,
30.242011, rather than based on the Internal Revenue Code, as amended through December
30.2520, 2013, as provided in this act.
30.26EFFECTIVE DATE.This section is effective the day following final enactment.

30.27ARTICLE 2
30.28SALES AND USE TAXES

30.29    Section 1. Minnesota Statutes 2013 Supplement, section 297A.61, subdivision 3,
30.30is amended to read:
30.31    Subd. 3. Sale and purchase. (a) "Sale" and "purchase" include, but are not limited
30.32to, each of the transactions listed in this subdivision. In applying the provisions of this
31.1chapter, the terms "tangible personal property" and "retail sale" include the taxable
31.2services listed in paragraph (g), clause (6), items (i) to (vi) and (viii), and the provision
31.3of these taxable services, unless specifically provided otherwise. Services performed by
31.4an employee for an employer are not taxable. Services performed by a partnership or
31.5association for another partnership or association are not taxable if one of the entities owns
31.6or controls more than 80 percent of the voting power of the equity interest in the other
31.7entity. Services performed between members of an affiliated group of corporations are not
31.8taxable. For purposes of the preceding sentence, "affiliated group of corporations" means
31.9those entities that would be classified as members of an affiliated group as defined under
31.10United States Code, title 26, section 1504, disregarding the exclusions in section 1504(b).
31.11    (b) Sale and purchase include:
31.12    (1) any transfer of title or possession, or both, of tangible personal property, whether
31.13absolutely or conditionally, for a consideration in money or by exchange or barter; and
31.14    (2) the leasing of or the granting of a license to use or consume, for a consideration
31.15in money or by exchange or barter, tangible personal property, other than a manufactured
31.16home used for residential purposes for a continuous period of 30 days or more.
31.17    (c) Sale and purchase include the production, fabrication, printing, or processing of
31.18tangible personal property for a consideration for consumers who furnish either directly or
31.19indirectly the materials used in the production, fabrication, printing, or processing.
31.20    (d) Sale and purchase include the preparing for a consideration of food.
31.21Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited
31.22to, the following:
31.23    (1) prepared food sold by the retailer;
31.24    (2) soft drinks;
31.25    (3) candy;
31.26    (4) dietary supplements; and
31.27    (5) all food sold through vending machines.
31.28    (e) A sale and a purchase includes the furnishing for a consideration of electricity,
31.29gas, water, or steam for use or consumption within this state.
31.30    (f) A sale and a purchase includes the transfer for a consideration of prewritten
31.31computer software whether delivered electronically, by load and leave, or otherwise.
31.32    (g) A sale and a purchase includes the furnishing for a consideration of the following
31.33services:
31.34    (1) the privilege of admission to places of amusement, recreational areas, or athletic
31.35events, and the making available of amusement devices, tanning facilities, reducing
31.36salons, steam baths, Turkish baths, health clubs, and spas or athletic facilities;
32.1    (2) lodging and related services by a hotel, rooming house, resort, campground,
32.2motel, or trailer camp, including furnishing the guest of the facility with access to
32.3telecommunication services, and the granting of any similar license to use real property in
32.4a specific facility, other than the renting or leasing of it for a continuous period of 30 days
32.5or more under an enforceable written agreement that may not be terminated without prior
32.6notice and including accommodations intermediary services provided in connection with
32.7other services provided under this clause;
32.8    (3) nonresidential parking services, whether on a contractual, hourly, or other
32.9periodic basis, except for parking at a meter;
32.10    (4) the granting of membership in a club, association, or other organization if:
32.11    (i) the club, association, or other organization makes available for the use of its
32.12members sports and athletic facilities, without regard to whether a separate charge is
32.13assessed for use of the facilities; and
32.14    (ii) use of the sports and athletic facility is not made available to the general public
32.15on the same basis as it is made available to members.
32.16Granting of membership means both onetime initiation fees and periodic membership
32.17dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and
32.18squash courts; basketball and volleyball facilities; running tracks; exercise equipment;
32.19swimming pools; and other similar athletic or sports facilities;
32.20    (5) delivery of aggregate materials by a third party, excluding delivery of aggregate
32.21material used in road construction; and delivery of concrete block by a third party if the
32.22delivery would be subject to the sales tax if provided by the seller of the concrete block.
32.23For purposes of this clause, "road construction" means construction of:
32.24    (i) public roads;
32.25    (ii) cartways; and
32.26    (iii) private roads in townships located outside of the seven-county metropolitan area
32.27up to the point of the emergency response location sign; and
32.28    (6) services as provided in this clause:
32.29    (i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
32.30and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
32.31drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
32.32include services provided by coin operated facilities operated by the customer;
32.33    (ii) motor vehicle washing, waxing, and cleaning services, including services
32.34provided by coin operated facilities operated by the customer, and rustproofing,
32.35undercoating, and towing of motor vehicles;
33.1    (iii) building and residential cleaning, maintenance, and disinfecting services and
33.2pest control and exterminating services;
33.3    (iv) detective, security, burglar, fire alarm, and armored car services; but not
33.4including services performed within the jurisdiction they serve by off-duty licensed peace
33.5officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit
33.6organization or any organization at the direction of a county for monitoring and electronic
33.7surveillance of persons placed on in-home detention pursuant to court order or under the
33.8direction of the Minnesota Department of Corrections;
33.9    (v) pet grooming services;
33.10    (vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
33.11and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor
33.12plant care; tree, bush, shrub, and stump removal, except when performed as part of a land
33.13clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for
33.14public utility lines. Services performed under a construction contract for the installation of
33.15shrubbery, plants, sod, trees, bushes, and similar items are not taxable;
33.16    (vii) massages, except when provided by a licensed health care facility or
33.17professional or upon written referral from a licensed health care facility or professional for
33.18treatment of illness, injury, or disease; and
33.19    (viii) the furnishing of lodging, board, and care services for animals in kennels and
33.20other similar arrangements, but excluding veterinary and horse boarding services.
33.21    (h) A sale and a purchase includes the furnishing for a consideration of tangible
33.22personal property or taxable services by the United States or any of its agencies or
33.23instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political
33.24subdivisions.
33.25    (i) A sale and a purchase includes the furnishing for a consideration of
33.26telecommunications services, ancillary services associated with telecommunication
33.27services, and pay television services. Telecommunication services include, but are
33.28not limited to, the following services, as defined in section 297A.669: air-to-ground
33.29radiotelephone service, mobile telecommunication service, postpaid calling service,
33.30prepaid calling service, prepaid wireless calling service, and private communication
33.31services. The services in this paragraph are taxed to the extent allowed under federal law.
33.32    (j) A sale and a purchase includes the furnishing for a consideration of installation if
33.33the installation charges would be subject to the sales tax if the installation were provided
33.34by the seller of the item being installed.
33.35    (k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer
33.36to a customer when (1) the vehicle is rented by the customer for a consideration, or (2)
34.1the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section
34.259B.02, subdivision 11.
34.3    (l) A sale and a purchase includes furnishing for a consideration of specified digital
34.4products or other digital products or granting the right for a consideration to use specified
34.5digital products or other digital products on a temporary or permanent basis and regardless
34.6of whether the purchaser is required to make continued payments for such right. Wherever
34.7the term "tangible personal property" is used in this chapter, other than in subdivisions 10
34.8and 38, the provisions also apply to specified digital products, or other digital products,
34.9unless specifically provided otherwise or the context indicates otherwise.
34.10(m) A sale and purchase includes the furnishing for consideration of the following
34.11services:
34.12(1) repairing and maintaining electronic and precision equipment, which service can
34.13be deducted as a business expense under the Internal Revenue Code. This includes, but
34.14is not limited to, repair or maintenance of electronic devices, computers and computer
34.15peripherals, monitors, computer terminals, storage devices, and CD-ROM drives; other
34.16office equipment such as photocopying machines, printers, and facsimile machines;
34.17televisions, stereos, sound systems, video or digital recorders and players; two-way radios
34.18and other communications equipment; radar and sonar equipment, scientific instruments,
34.19microscopes, and medical equipment;
34.20(2) repairing and maintaining commercial and industrial machinery and equipment.
34.21For purposes of this subdivision, the following items are not commercial or industrial
34.22machinery and equipment: (i) motor vehicles; (ii) furniture and fixtures; (iii) ships; (iv)
34.23railroad stock; and (v) aircraft; and
34.24(3) warehousing or storage services for tangible personal property, excluding:
34.25(i) agricultural products;
34.26(ii) refrigerated storage;
34.27(iii) electronic data; and
34.28(iv) self-storage services and storage of motor vehicles, recreational vehicles, and
34.29boats, not eligible to be deducted as a business expense under the Internal Revenue Code.
34.30EFFECTIVE DATE.This section is effective for sales and purchases made after
34.31March 31, 2014.

34.32    Sec. 2. Minnesota Statutes 2013 Supplement, section 297A.68, subdivision 5, is
34.33amended to read:
34.34    Subd. 5. Capital equipment. (a) Capital equipment is exempt.
35.1"Capital equipment" means machinery and equipment purchased or leased, and used
35.2in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining,
35.3or refining tangible personal property to be sold ultimately at retail if the machinery and
35.4equipment are essential to the integrated production process of manufacturing, fabricating,
35.5mining, or refining. Capital equipment also includes machinery and equipment
35.6used primarily to electronically transmit results retrieved by a customer of an online
35.7computerized data retrieval system.
35.8(b) Capital equipment includes, but is not limited to:
35.9(1) machinery and equipment used to operate, control, or regulate the production
35.10equipment;
35.11(2) machinery and equipment used for research and development, design, quality
35.12control, and testing activities;
35.13(3) environmental control devices that are used to maintain conditions such as
35.14temperature, humidity, light, or air pressure when those conditions are essential to and are
35.15part of the production process;
35.16(4) materials and supplies used to construct and install machinery or equipment;
35.17(5) repair and replacement parts, including accessories, whether purchased as spare
35.18parts, repair parts, or as upgrades or modifications to machinery or equipment;
35.19(6) materials used for foundations that support machinery or equipment;
35.20(7) materials used to construct and install special purpose buildings used in the
35.21production process;
35.22(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed
35.23as part of the delivery process regardless if mounted on a chassis, repair parts for
35.24ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and
35.25(9) machinery or equipment used for research, development, design, or production
35.26of computer software.
35.27(c) Capital equipment does not include the following:
35.28(1) motor vehicles taxed under chapter 297B;
35.29(2) machinery or equipment used to receive or store raw materials;
35.30(3) building materials, except for materials included in paragraph (b), clauses (6)
35.31and (7);
35.32(4) machinery or equipment used for nonproduction purposes, including, but not
35.33limited to, the following: plant security, fire prevention, first aid, and hospital stations;
35.34support operations or administration; pollution control; and plant cleaning, disposal of
35.35scrap and waste, plant communications, space heating, cooling, lighting, or safety;
36.1(5) farm machinery and aquaculture production equipment as defined by section
36.2297A.61 , subdivisions 12 and 13;
36.3(6) machinery or equipment purchased and installed by a contractor as part of an
36.4improvement to real property;
36.5(7) machinery and equipment used by restaurants in the furnishing, preparing, or
36.6serving of prepared foods as defined in section 297A.61, subdivision 31;
36.7(8) machinery and equipment used to furnish the services listed in section 297A.61,
36.8subdivision 3
, paragraph (g), clause (6), items (i) to (vi) and (viii);
36.9(9) machinery or equipment used in the transportation, transmission, or distribution
36.10of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines,
36.11tanks, mains, or other means of transporting those products. This clause does not apply to
36.12machinery or equipment used to blend petroleum or biodiesel fuel as defined in section
36.13239.77 ; or
36.14(10) any other item that is not essential to the integrated process of manufacturing,
36.15fabricating, mining, or refining.
36.16(d) For purposes of this subdivision:
36.17(1) "Equipment" means independent devices or tools separate from machinery but
36.18essential to an integrated production process, including computers and computer software,
36.19used in operating, controlling, or regulating machinery and equipment; and any subunit or
36.20assembly comprising a component of any machinery or accessory or attachment parts of
36.21machinery, such as tools, dies, jigs, patterns, and molds.
36.22(2) "Fabricating" means to make, build, create, produce, or assemble components or
36.23property to work in a new or different manner.
36.24(3) "Integrated production process" means a process or series of operations through
36.25which tangible personal property is manufactured, fabricated, mined, or refined. For
36.26purposes of this clause, (i) manufacturing begins with the removal of raw materials
36.27from inventory and ends when the last process prior to loading for shipment has been
36.28completed; (ii) fabricating begins with the removal from storage or inventory of the
36.29property to be assembled, processed, altered, or modified and ends with the creation
36.30or production of the new or changed product; (iii) mining begins with the removal of
36.31overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
36.32ends when the last process before stockpiling is completed; and (iv) refining begins with
36.33the removal from inventory or storage of a natural resource and ends with the conversion
36.34of the item to its completed form.
36.35(4) "Machinery" means mechanical, electronic, or electrical devices, including
36.36computers and computer software, that are purchased or constructed to be used for the
37.1activities set forth in paragraph (a), beginning with the removal of raw materials from
37.2inventory through completion of the product, including packaging of the product.
37.3(5) "Machinery and equipment used for pollution control" means machinery and
37.4equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
37.5described in paragraph (a).
37.6(6) "Manufacturing" means an operation or series of operations where raw materials
37.7are changed in form, composition, or condition by machinery and equipment and which
37.8results in the production of a new article of tangible personal property. For purposes of
37.9this subdivision, "manufacturing" includes the generation of electricity or steam to be
37.10sold at retail.
37.11(7) "Mining" means the extraction of minerals, ores, stone, or peat.
37.12(8) "Online data retrieval system" means a system whose cumulation of information
37.13is equally available and accessible to all its customers.
37.14(9) "Primarily" means machinery and equipment used 50 percent or more of the time
37.15in an activity described in paragraph (a).
37.16(10) "Refining" means the process of converting a natural resource to an intermediate
37.17or finished product, including the treatment of water to be sold at retail.
37.18(11) This subdivision does not apply to telecommunications equipment as provided
37.19in subdivision 35 35a, and does not apply to wire, cable, fiber, poles, or conduit for
37.20telecommunications services.
37.21EFFECTIVE DATE.This section is effective for sales and purchases made after
37.22March 31, 2014.

37.23    Sec. 3. Minnesota Statutes 2012, section 297A.68, is amended by adding a subdivision
37.24to read:
37.25    Subd. 35a. Telecommunications, cable television, and direct satellite machinery
37.26and equipment. (a) Telecommunications, cable television, and direct satellite machinery
37.27and equipment purchased or leased for use directly by a telecommunications, cable
37.28television, or direct satellite provider primarily in the provision of telecommunications,
37.29cable television, or direct satellite services that are ultimately to be sold at retail are
37.30exempt, regardless of whether purchased by the owner, a contractor, or a subcontractor.
37.31(b) For purposes of this subdivision, "telecommunications, cable television, or direct
37.32satellite machinery and equipment" includes, but is not limited to:
37.33(1) machinery, equipment, and fixtures utilized in receiving, initiating,
37.34amplifying, processing, transmitting, retransmitting, recording, switching, or monitoring
37.35telecommunications, cable television, or direct satellite services, such as computers,
38.1transformers, amplifiers, routers, bridges, repeaters, multiplexers, and other items
38.2performing comparable functions;
38.3(2) machinery, equipment, and fixtures used in the transportation of
38.4telecommunications, cable television, or direct satellite services, such as radio transmitters
38.5and receivers, satellite equipment, microwave equipment, and other transporting media,
38.6but not wire, cable, fiber, poles, or conduit;
38.7(3) ancillary machinery, equipment, and fixtures that regulate, control, protect, or
38.8enable the machinery in clauses (1) and (2) to accomplish its intended function, such as
38.9auxiliary power supply, test equipment, towers, heating, ventilating, and air conditioning
38.10equipment necessary to the operation of the telecommunications, cable television, or direct
38.11satellite equipment; and software necessary to the operation of the telecommunications,
38.12cable television, or direct satellite equipment; and
38.13(4) repair and replacement parts, including accessories, whether purchased as spare
38.14parts, repair parts, or as upgrades or modifications to qualified machinery or equipment.
38.15EFFECTIVE DATE.This section is effective for sales and purchases made after
38.16March 31, 2014.

38.17    Sec. 4. Laws 2013, chapter 143, article 8, section 26, the effective date, is amended to
38.18read:
38.19EFFECTIVE DATE.This section is effective for sales and purchases made after
38.20August 31, 2014 June 30, 2015.

38.21    Sec. 5. REPEALER.
38.22Minnesota Statutes 2013 Supplement, section 297A.61, subdivision 57, is repealed.
38.23EFFECTIVE DATE.This section is effective for sales and purchases made after
38.24March 31, 2014.

38.25ARTICLE 3
38.26ESTATE AND GIFT TAX

38.27    Section 1. Minnesota Statutes 2013 Supplement, section 289A.10, subdivision 1,
38.28is amended to read:
38.29    Subdivision 1. Return required. In the case of a decedent who has an interest in
38.30property with a situs in Minnesota, the personal representative must submit a Minnesota
38.31estate tax return to the commissioner, on a form prescribed by the commissioner, if:
38.32(1) a federal estate tax return is required to be filed; or
39.1(2) the sum of the federal gross estate and federal adjusted taxable gifts, as defined in
39.2section 2001(b) of the Internal Revenue Code, made within three years of the date of the
39.3decedent's death exceeds $1,000,000 $1,200,000 for estates of decedents dying in 2014;
39.4$2,000,000 for estates of decedents dying in 2015; $3,000,000 for estates of decedents
39.5dying in 2016; $4,000,000 for estates of decedents dying in 2017; and $5,000,000 for
39.6estates of decedents dying in 2018 and thereafter.
39.7The return must contain a computation of the Minnesota estate tax due. The return
39.8must be signed by the personal representative.
39.9EFFECTIVE DATE.This section is effective retroactively for estates of decedents
39.10dying after December 31, 2013.

39.11    Sec. 2. Minnesota Statutes 2012, section 289A.18, subdivision 3, is amended to read:
39.12    Subd. 3. Estate tax returns. An estate tax return must be filed with the
39.13commissioner within nine months after the decedent's death. Except in the case of the
39.14estate of a decedent dying after December 31, 2009, and before December 17, 2010, then
39.15an estate tax return must be filed with the commissioner within nine months after the
39.16decedent's death; within the time provided by section 289A.19, subdivision 4; or before
39.17September 20, 2011; whichever is later.
39.18EFFECTIVE DATE.This section is effective the day following final enactment.

39.19    Sec. 3. Minnesota Statutes 2013 Supplement, section 291.005, subdivision 1, is
39.20amended to read:
39.21    Subdivision 1. Scope. Unless the context otherwise clearly requires, the following
39.22terms used in this chapter shall have the following meanings:
39.23    (1) "Commissioner" means the commissioner of revenue or any person to whom the
39.24commissioner has delegated functions under this chapter.
39.25    (2) "Federal gross estate" means the gross estate of a decedent as required to be valued
39.26and otherwise determined for federal estate tax purposes under the Internal Revenue Code.
39.27    (3) "Internal Revenue Code" means the United States Internal Revenue Code of
39.281986, as amended through January 3, 2013, but without regard to the provisions of section
39.292011, paragraph (f), of the Internal Revenue Code March 1, 2014.
39.30    (4) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
39.31defined by section 2011(b)(3) of the Internal Revenue Code, plus
39.32(i) the amount of deduction for state death taxes allowed under section 2058 of the
39.33Internal Revenue Code;
40.1(ii) the amount of taxable gifts, as defined in section 292.16, and made by the
40.2decedent within three years of the decedent's date of death; less
40.3(iii)(A) the value of qualified small business property under section 291.03,
40.4subdivision 9
, and the value of qualified farm property under section 291.03, subdivision
40.510
, or (B) $4,000,000, whichever is less.
40.6    (5) (4) "Minnesota gross estate" means the federal gross estate of a decedent after (a)
40.7excluding therefrom any property included therein in the estate which has its situs outside
40.8Minnesota, and (b) including therein any property omitted from the federal gross estate
40.9which is includable therein in the estate, has its situs in Minnesota, and was not disclosed
40.10to federal taxing authorities.
40.11    (6) (5) "Nonresident decedent" means an individual whose domicile at the time
40.12of death was not in Minnesota.
40.13    (7) (6) "Personal representative" means the executor, administrator or other person
40.14appointed by the court to administer and dispose of the property of the decedent. If there
40.15is no executor, administrator or other person appointed, qualified, and acting within this
40.16state, then any person in actual or constructive possession of any property having a situs in
40.17this state which is included in the federal gross estate of the decedent shall be deemed
40.18to be a personal representative to the extent of the property and the Minnesota estate tax
40.19due with respect to the property.
40.20    (8) (7) "Resident decedent" means an individual whose domicile at the time of
40.21death was in Minnesota.
40.22    (9) (8) "Situs of property" means, with respect to:
40.23    (i) real property, the state or country in which it is located;
40.24    (ii) tangible personal property, the state or country in which it was normally kept
40.25or located at the time of the decedent's death or for a gift of tangible personal property
40.26within three years of death, the state or country in which it was normally kept or located
40.27when the gift was executed; and
40.28    (iii) intangible personal property, the state or country in which the decedent was
40.29domiciled at death or for a gift of intangible personal property within three years of death,
40.30the state or country in which the decedent was domiciled when the gift was executed.
40.31    For a nonresident decedent with an ownership interest in a pass-through entity
40.32with assets that include real or tangible personal property, situs of the real or tangible
40.33personal property is determined as if the pass-through entity does not exist and the real
40.34or tangible personal property is personally owned by the decedent. If the pass-through
40.35entity is owned by a person or persons in addition to the decedent, ownership of the
41.1property is attributed to the decedent in proportion to the decedent's capital ownership
41.2share of the pass-through entity.
41.3(10) (9) "Pass-through entity" includes the following:
41.4(i) an entity electing S corporation status under section 1362 of the Internal Revenue
41.5Code;
41.6(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;
41.7(iii) a single-member limited liability company or similar entity, regardless of
41.8whether it is taxed as an association or is disregarded for federal income tax purposes
41.9under Code of Federal Regulations, title 26, section 301.7701-3; or
41.10(iv) a trust to the extent the property is includible in the decedent's federal gross estate.
41.11EFFECTIVE DATE.This section is effective retroactively for estates of decedents
41.12dying after December 31, 2013.

41.13    Sec. 4. [291.016] MINNESOTA TAXABLE ESTATE.
41.14    Subdivision 1. General. For purposes of the tax under this chapter, the Minnesota
41.15taxable estate equals the federal taxable estate as provided under section 2051 of the Internal
41.16Revenue Code, without regard to whether the estate is subject to the federal estate tax:
41.17(1) increased by the additions under subdivision 2; and
41.18(2) decreased by the subtraction under subdivision 3.
41.19    Subd. 2. Additions. The following amounts, to the extent deducted in computing
41.20the federal taxable estate, must be added in computing the Minnesota taxable estate:
41.21(1) the amount of the deduction for state death taxes allowed under section 2058 of
41.22the Internal Revenue Code;
41.23(2) the amount of the deduction for foreign death taxes allowed under section
41.242053(d) of the Internal Revenue Code; and
41.25(3) the aggregate amount of taxable gifts as defined in section 2053 of the Internal
41.26Revenue Code, made by the decedent within three years of the date of death. For purposes
41.27of this clause, the amount of the addition equals the value of the gift under section 2512 of
41.28the Internal Revenue Code and excludes any value of the gift included in the federal estate.
41.29    Subd. 3. Subtraction. (a) The value of qualified small business property under
41.30section 291.03, subdivision 9, and the value of qualified farm property under section
41.31291.03, subdivision 10, or the result of $5,000,000 minus the amount for the year of death
41.32listed in paragraph (b), whichever is less, may be subtracted in computing the Minnesota
41.33taxable estate but must not reduce the Minnesota taxable estate to less than zero.
41.34(b) $1,200,000 for estates of decedents dying in 2014; $2,000,000 for estates of
41.35decedents dying in 2015; $3,000,000 for estates of decedents dying in 2016; $4,000,000
42.1for estates of decedents dying in 2017; and $5,000,000 for estates of decedents dying in
42.22018 and thereafter.
42.3EFFECTIVE DATE.This section is effective retroactively for estates of decedents
42.4dying after December 31, 2013.

42.5    Sec. 5. Minnesota Statutes 2013 Supplement, section 291.03, subdivision 1, is
42.6amended to read:
42.7    Subdivision 1. Tax amount. (a) The tax imposed shall be an amount equal to the
42.8proportion of the maximum credit for state death taxes computed under section 2011 of
42.9the Internal Revenue Code, but using Minnesota adjusted taxable estate instead of federal
42.10adjusted taxable estate, as the Minnesota gross estate bears to the value of the federal
42.11gross estate. The tax is reduced by:
42.12    (1) the gift tax paid by the decedent under section 292.17 on gifts included in the
42.13Minnesota adjusted taxable estate and not subtracted as qualified farm or small business
42.14property; and
42.15    (2) any credit allowed under subdivision 1c.
42.16    (b) The tax determined under this subdivision must not be greater than the sum of
42.17the following amounts multiplied by a fraction, the numerator of which is the Minnesota
42.18gross estate and the denominator of which is the federal gross estate:
42.19    (1) the rates and brackets under section 2001(c) of the Internal Revenue Code
42.20multiplied by the sum of:
42.21    (i) the taxable estate, as defined under section 2051 of the Internal Revenue Code; plus
42.22    (ii) adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue
42.23Code; less
42.24(iii) the lesser of (A) the sum of the value of qualified small business property
42.25under subdivision 9, and the value of qualified farm property under subdivision 10, or
42.26(B) $4,000,000; less
42.27    (2) the amount of tax allowed under section 2001(b)(2) of the Internal Revenue
42.28Code; and less
42.29    (3) the federal credit allowed under section 2010 of the Internal Revenue Code.
42.30    (c) For purposes of this subdivision, "Internal Revenue Code" means the Internal
42.31Revenue Code of 1986, as amended through December 31, 2000.
42.32    The tax imposed must be computed by applying to the Minnesota taxable estate the
42.33following schedule of rates and then the resulting amount multiplied by a fraction, not
42.34greater than one, the numerator of which is the value of the Minnesota gross estate plus
42.35the value of gifts under section 291.016, subdivision 2, clause (3), with a Minnesota situs,
43.1and the denominator of which is the federal gross estate plus the value of gifts under
43.2section 291.016, subdivision 2, clause (3):
43.3    (a) For estates of decedents dying in 2014:
43.4
Amount of Minnesota Taxable Estate
Rate of Tax
43.5
Not over $1,200,000
None
43.6
Over $1,200,000, but not over $3,000,000
ten percent of the excess over $1,200,000
43.7
43.8
Over $3,000,000, but not over $10,000,000
$180,000 plus 14 percent of the excess over
$3,000,000
43.9
43.10
Over $10,000,000
$1,160,000 plus 18 percent of the excess
over $10,000,000
43.11(b) For estates of decedents dying in 2015:
43.12
Amount of Minnesota Taxable Estate
Rate of Tax
43.13
Not over $2,000,000
None
43.14
Over $2,000,000, but not over $3,000,000
ten percent of the excess over $2,000,000
43.15
43.16
Over $3,000,000, but not over $10,000,000
$100,000 plus 14 percent of the excess over
$3,000,000
43.17
43.18
Over $10,000,000
$1,080,000 plus 18 percent of the excess
over $10,000,000
43.19(c) For estates of decedents dying in 2016:
43.20
Amount of Minnesota Taxable Estate
Rate of Tax
43.21
Not over $3,000,000
None
43.22
Over $3,000,000, but not over $10,000,000
14 percent of the excess over $3,000,000
43.23
43.24
Over $10,000,000
$980,000 plus 18 percent of the excess over
$10,000,000
43.25(d) For estates of decedents dying in 2017:
43.26
Amount of Minnesota Taxable Estate
Rate of Tax
43.27
Not over $4,000,000
None
43.28
Over $4,000,000, but not over $10,000,000
14 percent of the excess over $4,000,000
43.29
43.30
Over $10,000,000
$840,000 plus 18 percent of the excess over
$10,000,000
43.31(e) For estates of decedents dying in 2018 and thereafter:
43.32
Amount of Minnesota Taxable Estate
Rate of Tax
43.33
Not over $5,000,000
None
43.34
Over $5,000,000, but not over $10,000,000
14 percent of the excess over $5,000,000
43.35
43.36
Over $10,000,000
$700,000 plus 18 percent of the excess over
$10,000,000
43.37EFFECTIVE DATE.This section is effective retroactively for estates of decedents
43.38dying after December 31, 2013.

44.1    Sec. 6. Minnesota Statutes 2012, section 291.03, is amended by adding a subdivision
44.2to read:
44.3    Subd. 1d. Elections. (a) For the purposes of this section, the value of the Minnesota
44.4taxable estate is determined by taking into account the deduction available under section
44.52056(b) of the Internal Revenue Code. An election under section 2056(b) of the Internal
44.6Revenue Code may be made for Minnesota estate tax purposes regardless of whether the
44.7election is made for federal estate tax purposes. The value of the gross estate includes
44.8the value of any property in which the decedent had a qualifying income interest for life
44.9for which an election was made under this subdivision.
44.10(b) Except for an election made under section 2056(b) of the Internal Revenue Code,
44.11no federal election is allowable in computing the tax under this chapter unless the estate is
44.12required to file a federal estate tax return, the election is made on the federal estate tax
44.13return, and the election is allowed under federal law.
44.14EFFECTIVE DATE.This section is effective for estates of decedents dying after
44.15December 31, 2013.

44.16    Sec. 7. [291.031] CREDITS.
44.17(a) The estate of a nonresident decedent that is subject to tax under this chapter on
44.18the value of Minnesota situs property held in a pass-through entity is allowed a credit
44.19against the tax due under this section equal to the lesser of:
44.20(1) the amount of estate or inheritance tax paid to another state that is attributable to
44.21the Minnesota situs property held in the pass-through entity; or
44.22(2) the amount of tax paid under this section attributable to the Minnesota situs
44.23property held in the pass-through entity.
44.24(b) The amount of tax attributable to the Minnesota situs property held in the
44.25pass-through entity must be determined by the increase in the estate or inheritance tax that
44.26results from including the market value of the property in the estate or treating the value
44.27as a taxable inheritance to the recipient of the property.
44.28EFFECTIVE DATE.This section is effective retroactively for estates of decedents
44.29dying after December 31, 2013.

44.30    Sec. 8. REPEALER.
44.31(a) Minnesota Statutes 2013 Supplement, sections 292.16; 292.17; 292.18; 292.19;
44.32292.20; and 292.21, are repealed.
45.1(b) Minnesota Statutes 2012, section 291.03, subdivision 1b, and Minnesota Statutes
45.22013 Supplement, section 291.03, subdivision 1c, are repealed.
45.3(c) Minnesota Statutes 2012, sections 291.41; 291.42; 291.43; 291.44; 291.45;
45.4291.46; and 291.47, are repealed.
45.5EFFECTIVE DATE.Paragraph (a) is effective retroactively for gifts made after
45.6June 30, 2013. Paragraph (b) is effective retroactively for estates of decedents dying after
45.7December 31, 2013. Paragraph (c) is effective the day following final enactment.

45.8ARTICLE 4
45.9PROPERTY TAX

45.10    Section 1. Minnesota Statutes 2013 Supplement, section 126C.10, subdivision 1, is
45.11amended to read:
45.12    Subdivision 1. General education revenue. (a) For fiscal years 2013 and 2014, the
45.13general education revenue for each district equals the sum of the district's basic revenue,
45.14extended time revenue, gifted and talented revenue, small schools revenue, basic skills
45.15revenue, secondary sparsity revenue, elementary sparsity revenue, transportation sparsity
45.16revenue, total operating capital revenue, equity revenue, alternative teacher compensation
45.17revenue, and transition revenue.
45.18(b) For fiscal year 2015 and later, the general education revenue for each district
45.19equals the sum of the district's basic revenue, extended time revenue, gifted and talented
45.20revenue, declining enrollment revenue, location equity local optional revenue, small
45.21schools revenue, basic skills revenue, secondary sparsity revenue, elementary sparsity
45.22revenue, transportation sparsity revenue, total operating capital revenue, equity revenue,
45.23pension adjustment revenue, and transition revenue.
45.24EFFECTIVE DATE.This section is effective for revenue in fiscal year 2016 and
45.25later.

45.26    Sec. 2. Minnesota Statutes 2013 Supplement, section 126C.10, subdivision 2e, is
45.27amended to read:
45.28    Subd. 2e. Location equity Local optional revenue. (a) For a school district
45.29with any of its area located within the seven-county metropolitan area, location equity
45.30 Local optional revenue for a school district equals $424 times the adjusted pupil units of
45.31the district for that school year.
46.1(b) For all other school districts with more than 2,000 pupils in adjusted average
46.2daily membership for the fiscal year ending in the year before the levy is certified, location
46.3equity revenue equals $212 times the adjusted pupil units of the district for that year.
46.4(c) A district's location equity local optional levy equals its location equity local
46.5optional revenue times the lesser of one or the ratio of its referendum market value per
46.6resident pupil unit to $510,000. The location equity local optional revenue levy must be
46.7spread on referendum market value. A district may levy less than the permitted amount.
46.8(d) (c) A district's location equity local optional aid equals its location equity local
46.9optional revenue less its location equity local optional levy, times the ratio of the actual
46.10amount levied to the permitted levy.
46.11(e) A school district may elect not to participate in the location equity revenue
46.12program by a board vote taken prior to September 1 of the fiscal year before the fiscal year
46.13for which the decision not to participate becomes effective. The board resolution must
46.14state which fiscal years the district will not participate. A copy of the board resolution
46.15to not participate must be submitted to the commissioner.
46.16EFFECTIVE DATE.This section is effective for revenue in fiscal year 2016 and
46.17later.

46.18    Sec. 3. Minnesota Statutes 2013 Supplement, section 126C.13, subdivision 4, is
46.19amended to read:
46.20    Subd. 4. General education aid. (a) For fiscal years 2013 and 2014 only, a district's
46.21general education aid is the sum of the following amounts:
46.22    (1) general education revenue, excluding equity revenue, total operating capital
46.23revenue, alternative teacher compensation revenue, and transition revenue;
46.24    (2) operating capital aid under section 126C.10, subdivision 13b;
46.25    (3) equity aid under section 126C.10, subdivision 30;
46.26    (4) alternative teacher compensation aid under section 126C.10, subdivision 36;
46.27    (5) transition aid under section 126C.10, subdivision 33;
46.28    (6) shared time aid under section 126C.01, subdivision 7;
46.29    (7) referendum aid under section 126C.17, subdivisions 7 and 7a; and
46.30    (8) online learning aid according to section 124D.096.
46.31(b) For fiscal year 2015 and later, a district's general education aid equals:
46.32(1) general education revenue, excluding operating capital revenue, equity revenue,
46.33location equity local optional revenue, and transition revenue, minus the student
46.34achievement levy, multiplied times the ratio of the actual amount of student achievement
46.35levy levied to the permitted student achievement levy; plus
47.1(2) equity aid under section 126C.10, subdivision 30; plus
47.2(3) transition aid under section 126C.10, subdivision 33; plus
47.3(4) shared time aid under section 126C.10, subdivision 7; plus
47.4(5) referendum aid under section 126C.17, subdivisions 7 and 7a; plus
47.5(6) online learning aid under section 124D.096; plus
47.6(7) location equity local optional aid according to section 126C.10, subdivision
47.72d
, paragraph (d).
47.8EFFECTIVE DATE.This section is effective for revenue in fiscal year 2016 and
47.9later.

47.10    Sec. 4. Minnesota Statutes 2013 Supplement, section 126C.17, subdivision 1, is
47.11amended to read:
47.12    Subdivision 1. Referendum allowance. (a) A district's initial referendum allowance
47.13for fiscal year 2015 equals the result of the following calculations:
47.14(1) multiply the referendum allowance the district would have received for fiscal
47.15year 2015 under Minnesota Statutes 2012, section 126C.17, subdivision 1, based on
47.16elections held before July 1, 2013, by the resident marginal cost pupil units the district
47.17would have counted for fiscal year 2015 under Minnesota Statutes 2012, section 126C.05;
47.18(2) add to the result of clause (1) the adjustment the district would have received
47.19under Minnesota Statutes 2012, section 127A.47, subdivision 7, paragraphs (a), (b), and
47.20(c), based on elections held before July 1, 2013;
47.21(3) divide the result of clause (2) by the district's adjusted pupil units for fiscal
47.22year 2015; and
47.23(4) add to the result of clause (3) any additional referendum allowance per adjusted
47.24pupil unit authorized by elections held between July 1, 2013, and December 31, 2013;
47.25(5) add to the result in clause (4) any additional referendum allowance resulting from
47.26inflation adjustments approved by the voters prior to January 1, 2014;
47.27(6) subtract from the result of clause (5), the sum of a district's actual local optional
47.28levy and location equity aid under section 126C.10, subdivision 2e, divided by the
47.29adjusted pupil units of the district for that school year; and
47.30(4) (7) if the result of clause (3) (6) is less than zero, set the allowance to zero.
47.31(b) A district's referendum allowance equals the sum of the district's initial
47.32referendum allowance for fiscal year 2015, plus any additional referendum allowance per
47.33adjusted pupil unit authorized after June 30 December 31, 2013, minus (i) the location
47.34equity revenue subtraction, and (ii) any allowances expiring in fiscal year 2016 or later,
47.35provided that the allowance may not be less than zero. For a district with more than one
48.1referendum allowance for fiscal year 2015 under Minnesota Statutes 2012, section 126C.17,
48.2the allowance calculated under paragraph (a), clause (3), must be divided into components
48.3such that the same percentage of the district's allowance expires at the same time as the old
48.4allowances would have expired under Minnesota Statutes 2012, section 126C.17. For a
48.5district with more than one allowance for fiscal year 2015 that expires in the same year, the
48.6reduction under paragraph (a), clause (6), to offset local optional revenue shall be made
48.7first from any allowances that do not have an inflation adjustment approved by the voters.
48.8(c) For purposes of this subdivision, a district's location equity revenue subtraction
48.9equals $424 for a district receiving location equity revenue under section 126C.10,
48.10subdivision 2d, paragraph (a), $212 for a district receiving location equity revenue under
48.11section 126C.10, subdivision 2d, paragraph (b), and zero for all other school districts.
48.12EFFECTIVE DATE.This section is effective for revenue for fiscal year 2016
48.13and later.

48.14    Sec. 5. Minnesota Statutes 2013 Supplement, section 273.117, is amended to read:
48.15273.117 CONSERVATION PROPERTY TAX VALUATION.
48.16    The value of real property which is subject to a conservation restriction or easement
48.17shall not be reduced by the assessor if:
48.18    (a) the restriction or easement is for a conservation purpose as defined in section
48.1984.64, subdivision 2, and is recorded on the property; and
48.20    (b) the property is being used in accordance with the terms of the conservation
48.21restriction or easement.
48.22This section does not apply to (1) conservation restrictions or easements covering
48.23riparian buffers along lakes, rivers, and streams that are used for water quantity or quality
48.24control; or (2) easements in a county that has adopted, by referendum, a program to protect
48.25farmland and natural areas since 1999; or (3) conservation restrictions or easements
48.26entered into prior to May 23, 2013.
48.27EFFECTIVE DATE.This section is effective the day following final enactment.

48.28    Sec. 6. SUPPLEMENTAL COUNTY PROGRAM AID PAYMENTS.
48.29(a) Before the money appropriated to county need aid is apportioned among the
48.30counties, as provided in Minnesota Statutes, section 477A.0124, subdivision 3, for aids
48.31payable in 2015 through 2024 only, the total aid paid to Beltrami County shall be increased
48.32by $3,000,000. The increased aid shall be used for out-of-home placement costs.
49.1(b) Before the money appropriated to county need aid is apportioned among the
49.2counties, as provided in Minnesota Statutes, section 477A.0124, subdivision 3, for aids
49.3payable in 2015 only, the total aid paid to Mahnomen County shall be increased by
49.4$1,500,000. Of this amount, $750,000 shall be paid from Mahnomen County to the White
49.5Earth Band of Ojibwe for transition costs associated with health and human services.
49.6(c) The increased aid under this section shall be paid in the same manner and at the
49.7same time as the regular aid payments under Minnesota Statutes, section 477A.0124.
49.8(d) For aids payable in 2015 only, the total aid paid to counties under Minnesota
49.9Statutes, section 477A.03, subdivision 2b, paragraph (a), is $105,295,000
49.10(e) For aids payable in 2016 through 2024 only, the total aid paid to counties under
49.11Minnesota Statutes, section 477A.03, subdivision 2b, paragraph (a), is $103,795,000.
49.12EFFECTIVE DATE.This section is effective for aids payable in 2015 through 2024.

49.13ARTICLE 5
49.14PUBLIC FINANCE

49.15    Section 1. Minnesota Statutes 2012, section 37.31, subdivision 8, is amended to read:
49.16    Subd. 8. Expiration. The authority to issue bonds, other than bonds to refund
49.17outstanding bonds, under this section expires July 1, 2015 2025.
49.18EFFECTIVE DATE.This section is effective the day following final enactment.

49.19    Sec. 2. Minnesota Statutes 2012, section 473.39, is amended by adding a subdivision
49.20to read:
49.21    Subd. 1t. Obligations. In addition to other authority in this section, the council may
49.22issue certificates of indebtedness, bonds, or other obligations under this section in an
49.23amount not exceeding $75,300,000 for capital expenditures as prescribed in the council's
49.24transit capital improvement program and for related costs, including the costs of issuance
49.25and sale of the obligations. Of this authorization, after July 1, 2014, the council may
49.26issue certificates of indebtedness, bonds, or other obligations in an amount not exceeding
49.27$37,000,000 and after July 1, 2015, the council may issue certificates of indebtedness,
49.28bonds, or other obligations in an additional amount not exceeding $38,300,000.
49.29EFFECTIVE DATE; APPLICATION.This section is effective the day following
49.30final enactment and applies in the counties of Anoka, Carver, Dakota, Hennepin, Ramsey,
49.31Scott, and Washington.

49.32    Sec. 3. Laws 2003, chapter 127, article 12, section 28, is amended to read:
50.1    Sec. 28. NURSING HOME BONDS AUTHORIZED.
50.2    Itasca County may issue bonds under Minnesota Statutes, sections 376.55 and
50.3376.56 , to finance the construction of a 35-bed nursing home facility to replace an existing
50.435-bed private facility located in the county. The bonds issued under this section must
50.5 may be payable solely from revenues and or may not be general obligations of the county.
50.6EFFECTIVE DATE; LOCAL APPROVAL.This section is effective the day after
50.7compliance by the governing body of Itasca County and its chief clerical officer with
50.8Minnesota Statutes, section 645.021, subdivisions 2 and 3.

50.9    Sec. 4. Laws 2006, chapter 259, article 10, section 13, subdivision 4, is amended to read:
50.10    Subd. 4. Expiration. The authority to approve tax increment financing plans to
50.11establish a tax increment financing redevelopment district subject to this section expires
50.12on December 31, 2014 2016.
50.13EFFECTIVE DATE.This section is effective upon approval of the governing body
50.14of the city of Detroit Lakes and compliance with Minnesota Statutes, section 645.021,
50.15subdivisions 2 and 3.

50.16    Sec. 5. Laws 2008, chapter 366, article 5, section 36, subdivision 3, is amended to read:
50.17    Subd. 3. Authorized expenditures. Tax increment from the district may be
50.18expended only to pay principal and interest on bond obligations issued by the city of St.
50.19Paul Housing and Redevelopment Authority in 1996 2009 for the convention center
50.20 RiverCentre Arena, including payment of principal and interest on any bonds issued to
50.21repay the bonds or loans. All such expenditures are deemed to be activities within the
50.22district under Minnesota Statutes, section 469.1763, subdivisions 2, 3, and 4.
50.23EFFECTIVE DATE.This section is effective without local approval under
50.24Minnesota Statutes, section 645.023, subdivision 1, paragraph (a).

50.25ARTICLE 6
50.26MISCELLANEOUS

50.27    Section 1. Minnesota Statutes 2012, section 16A.152, subdivision 1b, is amended to
50.28read:
50.29    Subd. 1b. Budget reserve increase level. On July 1, 2003, (a) The commissioner
50.30of management and budget shall transfer $300,000,000 to the budget reserve account in
50.31the general fund. On July 1, 2004, the commissioner of management and budget shall
50.32transfer $296,000,000 to the budget reserve account in the general fund. The amounts
51.1necessary for this purpose are appropriated from the general fund calculate the budget
51.2reserve level by multiplying the current biennium's general fund nondedicated revenues
51.3and the most recent budget reserve percentage under subdivision 8.
51.4(b) If, on the basis of a forecast of general fund revenues and expenditures, the
51.5commissioner of management and budget determines that there will be a positive
51.6unrestricted general fund balance at the close of the biennium and that the provisions of
51.7subdivision 2, clauses (1), (2), (3), and (4), are satisfied, the commissioner shall transfer
51.8to the budget reserve account in the general fund the amount necessary to increase the
51.9budget reserve to the budget reserve level determined under paragraph (a). The amount
51.10of the transfer authorized in this paragraph shall not exceed 33 percent of the positive
51.11unrestricted general fund balance determined in the forecast.
51.12EFFECTIVE DATE.This section is effective for forecasts issued following final
51.13enactment.

51.14    Sec. 2. Minnesota Statutes 2012, section 16A.152, subdivision 2, is amended to read:
51.15    Subd. 2. Additional revenues; priority. (a) If on the basis of a forecast of general
51.16fund revenues and expenditures, the commissioner of management and budget determines
51.17that there will be a positive unrestricted budgetary general fund balance at the close of
51.18the biennium, the commissioner of management and budget must allocate money to the
51.19following accounts and purposes in priority order:
51.20    (1) the cash flow account established in subdivision 1 until that account reaches
51.21$350,000,000;
51.22    (2) the budget reserve account established in subdivision 1a until that account
51.23reaches $653,000,000 $810,992,000;
51.24    (3) the amount necessary to increase the aid payment schedule for school district
51.25aids and credits payments in section 127A.45 to not more than 90 percent rounded to the
51.26nearest tenth of a percent without exceeding the amount available and with any remaining
51.27funds deposited in the budget reserve; and
51.28    (4) the amount necessary to restore all or a portion of the net aid reductions under
51.29section 127A.441 and to reduce the property tax revenue recognition shift under section
51.30123B.75, subdivision 5 , by the same amount; and.
51.31(5) to the state airports fund, the amount necessary to restore the amount transferred
51.32from the state airports fund under Laws 2008, chapter 363, article 11, section 3,
51.33subdivision 5.
51.34    (b) The amounts necessary to meet the requirements of this section are appropriated
51.35from the general fund within two weeks after the forecast is released or, in the case of
52.1transfers under paragraph (a), clauses (3) and (4), as necessary to meet the appropriations
52.2schedules otherwise established in statute.
52.3    (c) The commissioner of management and budget shall certify the total dollar
52.4amount of the reductions under paragraph (a), clauses (3) and (4), to the commissioner of
52.5education. The commissioner of education shall increase the aid payment percentage and
52.6reduce the property tax shift percentage by these amounts and apply those reductions to
52.7the current fiscal year and thereafter.
52.8EFFECTIVE DATE.This section is effective for forecasts issued following final
52.9enactment.

52.10    Sec. 3. Minnesota Statutes 2012, section 16A.152, subdivision 8, is amended to read:
52.11    Subd. 8. Report on budget reserve percentage. (a) The commissioner of
52.12management and budget must periodically review the formula developed as part of the
52.13Budget Trends Study Commission authorized by Laws 2007, chapter 148, article 2, section
52.1481, to estimate the percentage of the preceding biennium's general fund expenditures
52.15and transfers recommended as a budget reserve The commissioner of management and
52.16budget shall develop and annually review a methodology for evaluating the adequacy of
52.17the budget reserve based on the volatility of Minnesota's general fund tax structure. The
52.18review must take into consideration relevant statistical and economic literature. After
52.19completing the review, the commissioner may revise the methodology if necessary. The
52.20commissioner must use the methodology to annually estimate the percentage of the current
52.21biennium's general fund nondedicated revenues recommended as a budget reserve.
52.22    (b) The commissioner must annually review the variables and coefficients in the
52.23formula used to model the base of the general fund taxes and the mix of taxes that provide
52.24revenues to the general fund. If the commissioner determines that the variables and
52.25coefficients have changed enough to result in a change in the percentage of the preceding
52.26biennium's general fund expenditures and transfers recommended as a budget reserve,
52.27the commissioner must update the variables and coefficients in the formula to reflect the
52.28current base and mix of general fund taxes By January 15 of each year, the commissioner
52.29shall report the percentage of the current biennium's general fund nondedicated revenue
52.30that is recommended as a budget reserve to the chairs and ranking minority members of
52.31the legislative committees with jurisdiction over the Department of Management and
52.32Budget. The report must also specify:
52.33    (1) whether the commissioner revised the recommendation as a result of significant
52.34changes in the mix of general fund taxes or the base of one or more general fund taxes;
53.1    (2) whether the commissioner revised the recommendation as a result of a revision
53.2to the methodology; and
53.3    (3) any additional appropriate information.
53.4    (c) Every ten years, the commissioner must review the methodology underlying the
53.5formula, taking into consideration relevant economic literature from the past ten years,
53.6and determine if the formula remains adequate as a tool for estimating the percentage of
53.7the preceding biennium's general fund expenditures and transfers recommended as a
53.8budget reserve. If the commissioner determines that the methodology underlying the
53.9formula is outdated, the commissioner must revise the formula.
53.10    (d) By January 15 of each year, the commissioner must report to the chairs and
53.11ranking minority members of the house of representatives Committee on Ways and Means
53.12and the senate Committee on Finance, in compliance with sections 3.195 and 3.197,
53.13on the percentage of the preceding biennium's general fund expenditures and transfers
53.14recommended as a budget reserve. The report must specify:
53.15    (1) if the commissioner updated the variables and coefficients in the formula to
53.16reflect significant changes to either the base of one or more general fund taxes or to the
53.17mix of taxes that provide revenues to the general fund as provided in paragraph (b);
53.18    (2) if the commissioner revised the formula after determining the methodology was
53.19outdated as provided in paragraph (c); and
53.20    (3) if the percentage of the preceding biennium's general fund expenditures and
53.21transfers recommended as a budget reserve has changed as a result of an update of or a
53.22revision to the formula.
53.23EFFECTIVE DATE.This section is effective the day following final enactment.

53.24    Sec. 4. Minnesota Statutes 2012, section 276A.01, is amended by adding a subdivision
53.25to read:
53.26    Subd. 17. School fund allocation. (a) "School fund allocation" means an amount
53.27up to 25 percent of the areawide levy certified by the Iron Range Resources and
53.28Rehabilitation Board to be used for the purposes of the Iron Range school consolidation
53.29and cooperatively operated school account under section 298.28, subdivision 7a.
53.30(b) The allocation under paragraph (a) shall only be made after the Iron Range
53.31Resources and Rehabilitation Board has certified by June 30 that the Iron Range school
53.32consolidation and cooperatively operated account has insufficient funds to make payments
53.33as authorized under section 298.28, subdivision 7a.
53.34EFFECTIVE DATE.This section is effective beginning with taxes payable in 2015.

54.1    Sec. 5. Minnesota Statutes 2012, section 276A.06, subdivision 3, is amended to read:
54.2    Subd. 3. Apportionment of levy. The county auditor shall apportion the levy of
54.3each governmental unit in the county in the manner prescribed by this subdivision. The
54.4auditor shall:
54.5(a) by August 20 of 1997 2014 and each subsequent year, determine the areawide
54.6portion of the levy for each governmental unit by multiplying the local tax rate of the
54.7governmental unit for the preceding levy year times the distribution value set forth in
54.8subdivision 2, clause (b), times a fraction, the numerator of which is the difference
54.9between the sum of the areawide levies for all governmental units in the area minus
54.10the school fund allocation and the denominator is the sum of the areawide levy for all
54.11governmental units in the area; and
54.12(b) by September 5 of 1997 2014 and each subsequent year, determine the local
54.13portion of the current year's levy by subtracting the resulting amount from clause (a) from
54.14the governmental unit's current year's levy; and
54.15(c) for determinations made under paragraph (a) in the case of school districts,
54.16for taxes payable in 2002, exclude the general education tax rate and the portion of the
54.17referendum tax rate attributable to the first $415 per pupil unit from the local tax rate for
54.18the preceding levy year.
54.19EFFECTIVE DATE.This section is effective beginning with taxes payable in 2015.

54.20    Sec. 6. Minnesota Statutes 2012, section 276A.06, subdivision 5, is amended to read:
54.21    Subd. 5. Areawide tax rate. On or before August 25 of 1997 and each subsequent
54.22year, the county auditor shall certify to the administrative auditor that portion of the
54.23levy of each governmental unit determined pursuant to subdivision 3, clause (a). The
54.24administrative auditor shall then determine the areawide tax rate sufficient to yield an
54.25amount equal to the sum of the levies from the areawide net tax capacity plus the school
54.26fund allocation. On or before September 1, the administrative auditor shall certify the
54.27areawide tax rate to each of the county auditors.
54.28EFFECTIVE DATE.This section is effective beginning with taxes payable in 2015.

54.29    Sec. 7. Minnesota Statutes 2012, section 276A.06, subdivision 8, is amended to read:
54.30    Subd. 8. Certification of values; payment. The administrative auditor shall
54.31determine for each county the difference between the total levy on distribution value
54.32pursuant to subdivision 3, clause (a), including the school fund allocation within the
54.33county and the total tax on contribution value pursuant to subdivision 7, within the county.
55.1On or before May 16 of each year, the administrative auditor shall certify the differences
55.2so determined and the county's portion of the school fund allocation to each county
55.3auditor. In addition, the administrative auditor shall certify to those county auditors for
55.4whose county the total tax on contribution value exceeds the total levy on distribution
55.5value the settlement the county is to make to the other counties of the excess of the total
55.6tax on contribution value over the total levy on distribution value in the county. On or
55.7before June 15 and November 15 of each year, each county treasurer in a county having a
55.8total tax on contribution value in excess of the total levy on distribution value shall pay
55.9one-half of the excess to the other counties in accordance with the administrative auditor's
55.10certification. On or before June 15 and November 15 of each year, each county treasurer
55.11shall pay to the administrative auditor that county's share of the school fund allocation. On
55.12or before December 1 of each year, the administrative auditor shall pay the school fund
55.13allocation to the Iron Range Resources and Rehabilitation Board for deposit in the Iron
55.14Range school consolidation and cooperatively operated account.
55.15EFFECTIVE DATE.This section is effective beginning with taxes payable in 2015.

55.16    Sec. 8. Minnesota Statutes 2013 Supplement, section 298.17, is amended to read:
55.17298.17 OCCUPATION TAXES TO BE APPORTIONED.
55.18(a) All occupation taxes paid by persons, copartnerships, companies, joint stock
55.19companies, corporations, and associations, however or for whatever purpose organized,
55.20engaged in the business of mining or producing iron ore or other ores, when collected
55.21shall be apportioned and distributed in accordance with the Constitution of the state of
55.22Minnesota, article X, section 3, in the manner following: 90 percent shall be deposited
55.23in the state treasury and credited to the general fund of which four-ninths shall be used
55.24for the support of elementary and secondary schools; and ten percent of the proceeds of
55.25the tax imposed by this section shall be deposited in the state treasury and credited to the
55.26general fund for the general support of the university.
55.27(b) Of the money apportioned to the general fund by this section: (1) there is annually
55.28appropriated and credited to the mining environmental and regulatory account in the
55.29special revenue fund an amount equal to that which would have been generated by a 2-1/2
55.30cent tax imposed by section 298.24 on each taxable ton produced in the preceding calendar
55.31year. Money in the mining environmental and regulatory account is appropriated annually
55.32to the commissioner of natural resources to fund agency staff to work on environmental
55.33issues and provide regulatory services for ferrous and nonferrous mining operations in this
55.34state. Payment to the mining environmental and regulatory account shall be made by July
56.11 annually. The commissioner of natural resources shall execute an interagency agreement
56.2with the Pollution Control Agency to assist with the provision of environmental regulatory
56.3services such as monitoring and permitting required for ferrous and nonferrous mining
56.4operations; and (2) there is annually appropriated and credited to the Iron Range Resources
56.5and Rehabilitation Board account in the special revenue fund an amount equal to that which
56.6would have been generated by a 1.5 cent tax imposed by section 298.24 on each taxable
56.7ton produced in the preceding calendar year, to be expended for the purposes of section
56.8298.22 ; and (3) there is annually appropriated and credited to the Iron Range Resources
56.9and Rehabilitation Board account in the special revenue fund for transfer to the Iron Range
56.10school consolidation and cooperatively operated school account under section 298.28,
56.11subdivision 7a, an amount equal to that which would have been generated by a six cent tax
56.12imposed by section 298.24 on each taxable ton produced in the preceding calendar year.
56.13(c) The money appropriated pursuant to paragraph (b), clause (2), shall be used (i)
56.14to provide environmental development grants to local governments located within any
56.15county in region 3 as defined in governor's executive order number 60, issued on June
56.1612, 1970, which does not contain a municipality qualifying pursuant to section 273.134,
56.17paragraph (b)
, or (ii) to provide economic development loans or grants to businesses
56.18located within any such county, provided that the county board or an advisory group
56.19appointed by the county board to provide recommendations on economic development
56.20shall make recommendations to the Iron Range Resources and Rehabilitation Board
56.21regarding the loans. Payment to the Iron Range Resources and Rehabilitation Board
56.22account shall be made by May 15 annually.
56.23(d) Of the money allocated to Koochiching County, one-third must be paid to the
56.24Koochiching County Economic Development Commission.
56.25EFFECTIVE DATE.This section is effective beginning with the 2014 production
56.26year.

56.27    Sec. 9. Minnesota Statutes 2012, section 298.28, subdivision 5, is amended to read:
56.28    Subd. 5. Counties. (a) 26.05 21.05 cents per taxable ton is allocated to counties to
56.29be distributed, based upon certification by the commissioner of revenue, under paragraphs
56.30(b) to (d).
56.31    (b) 15.525 10.525 cents per taxable ton shall be distributed to the county in which
56.32the taconite is mined or quarried or in which the concentrate is produced, less any
56.33amount which is to be distributed pursuant to paragraph (c). The apportionment formula
56.34prescribed in subdivision 2 is the basis for the distribution.
57.1    (c) If an electric power plant owned by and providing the primary source of power for
57.2a taxpayer mining and concentrating taconite is located in a county other than the county
57.3in which the mining and the concentrating processes are conducted, one cent per taxable
57.4ton of the tax distributed to the counties pursuant to paragraph (b) and imposed on and
57.5collected from such taxpayer shall be paid to the county in which the power plant is located.
57.6    (d) 10.525 cents per taxable ton shall be paid to the county from which the taconite
57.7was mined, quarried or concentrated to be deposited in the county road and bridge fund.
57.8If the mining, quarrying and concentrating, or separate steps in any of those processes
57.9are carried on in more than one county, the commissioner shall follow the apportionment
57.10formula prescribed in subdivision 2.
57.11EFFECTIVE DATE.This section is effective beginning with the 2015 distribution.

57.12    Sec. 10. Minnesota Statutes 2012, section 298.28, is amended by adding a subdivision
57.13to read:
57.14    Subd. 7a. Iron Range school consolidation and cooperatively operated school
57.15account. (a) 10 cents per taxable ton shall be allocated to the Iron Range Resources
57.16and Rehabilitation Board to be deposited in an Iron Range school consolidation and
57.17cooperatively operated school account that is hereby created. Expenditures from
57.18this account shall be made only to provide disbursements to assist school districts in
57.19the payment of bonds that were issued for qualified school projects, or for any other
57.20disbursement as approved by the Iron Range Resources and Rehabilitation Board. For
57.21purposes of this section, "qualified school projects" means school projects within the
57.22taconite assistance area, as defined in section 273.1341, that were (1) approved, by
57.23referendum, after December 7, 2009; and (2) approved by the commissioner of education
57.24pursuant to section 123B.71.
57.25(b) No expenditure under paragraph (a) shall be made unless approved by seven
57.26members of the Iron Range Resources and Rehabilitation Board.
57.27EFFECTIVE DATE.This section is effective beginning with the 2015 distribution.

57.28    Sec. 11. Minnesota Statutes 2012, section 298.28, subdivision 9a, is amended to read:
57.29    Subd. 9a. Taconite economic development fund. (a) 30.1 25.1 cents per ton for
57.30distributions in 2002 and thereafter must be paid to the taconite economic development
57.31fund. No distribution shall be made under this paragraph in 2004 or any subsequent year
57.32in which total industry production falls below 30 million tons. Distribution shall only be
57.33made to a taconite producer's fund under section 298.227 if the producer timely pays its
58.1tax under section 298.24 by the dates provided under section 298.27, or pursuant to the
58.2due dates provided by an administrative agreement with the commissioner.
58.3(b) An amount equal to 50 percent of the tax under section 298.24 for concentrate
58.4sold in the form of pellet chips and fines not exceeding 5/16 inch in size and not including
58.5crushed pellets shall be paid to the taconite economic development fund. The amount
58.6paid shall not exceed $700,000 annually for all companies. If the initial amount to be
58.7paid to the fund exceeds this amount, each company's payment shall be prorated so the
58.8total does not exceed $700,000.
58.9EFFECTIVE DATE.This section is effective beginning with the 2015 distribution.

58.10    Sec. 12. Minnesota Statutes 2012, section 298.28, subdivision 11, is amended to read:
58.11    Subd. 11. Remainder. (a) The proceeds of the tax imposed by section 298.24 which
58.12remain after the distributions and payments in subdivisions 2 to 10a, as certified by the
58.13commissioner of revenue, and paragraphs (b), (c), and (d) have been made, together with
58.14interest earned on all money distributed under this section prior to distribution, shall be
58.15divided between the taconite environmental protection fund created in section 298.223
58.16and, the Douglas J. Johnson economic protection trust fund created in section 298.292, and
58.17the Iron Range school consolidation and cooperatively operated school fund in subdivision
58.187a, as follows: Two-thirds to the taconite environmental protection fund, except that
58.19for production years 2014 through 2016 only, the amount allocated to the taconite
58.20environmental protection fund shall be deposited into the Iron Range school consolidation
58.21and cooperatively operated school fund and one-third to the Douglas J. Johnson economic
58.22protection trust fund. The proceeds shall be placed in the respective special accounts.
58.23(b) There shall be distributed to each city, town, and county the amount that it
58.24received under section 294.26 in calendar year 1977; provided, however, that the amount
58.25distributed in 1981 to the unorganized territory number 2 of Lake County and the town
58.26of Beaver Bay based on the between-terminal trackage of Erie Mining Company will be
58.27distributed in 1982 and subsequent years to the unorganized territory number 2 of Lake
58.28County and the towns of Beaver Bay and Stony River based on the miles of track of Erie
58.29Mining Company in each taxing district.
58.30(c) There shall be distributed to the Iron Range Resources and Rehabilitation Board
58.31the amounts it received in 1977 under section 298.22. The amount distributed under
58.32this paragraph shall be expended within or for the benefit of the taconite assistance area
58.33defined in section 273.1341.
58.34(d) There shall be distributed to each school district 62 percent of the amount that it
58.35received under section 294.26 in calendar year 1977.
59.1EFFECTIVE DATE.This section is effective beginning with the 2014 distribution.

59.2    Sec. 13. BUDGET RESERVE INCREASE.
59.3On July 1, 2014, the commissioner of management and budget shall transfer
59.4$150,000,000 to the budget reserve in the general fund.
59.5EFFECTIVE DATE.This section is effective July 1, 2014.

59.6    Sec. 14. APPROPRIATION.
59.7$1,000,000 is appropriated for fiscal years 2014 and 2015 from the general fund to
59.8the commissioner of revenue for the cost of administering this act. This is a onetime
59.9appropriation and does not renew or become part of the base budget.
59.10EFFECTIVE DATE.This section is effective the day following final enactment."
59.11Delete the title and insert:
59.12"A bill for an act
59.13relating to financing and operation of state and local government; making
59.14changes to individual income, corporate franchise, property, sales and use, estate,
59.15mineral, local, and other taxes and tax-related provisions; changing property
59.16tax aids and credits; modifying education aids and levies; making changes to
59.17additions and subtractions from federal taxable income; providing for federal
59.18conformity; changing tax rates for estates; modifying income tax credits;
59.19modifying estate tax provisions; repealing the gift tax; modifying the definition
59.20of sale and purchase; modifying sales tax exemptions; modifying tax increment
59.21financing rules; modifying the distribution of taconite production taxes;
59.22modifying and providing provisions for public finance; report; appropriating
59.23money;amending Minnesota Statutes 2012, sections 16A.152, subdivisions
59.241b, 2, 8; 37.31, subdivision 8; 116J.8737, subdivisions 5, 7, 9, 12; 276A.01,
59.25by adding a subdivision; 276A.06, subdivisions 3, 5, 8; 289A.02, subdivision
59.267; 289A.08, subdivision 7; 289A.18, subdivision 3; 290.01, subdivision 19a,
59.27by adding a subdivision; 290.067, subdivisions 1, 2a, by adding a subdivision;
59.28290.0671, subdivisions 1, 7; 290.0675, subdivision 1; 291.03, by adding a
59.29subdivision; 297A.68, by adding a subdivision; 298.28, subdivisions 5, 9a, 11, by
59.30adding a subdivision; 473.39, by adding a subdivision; Minnesota Statutes 2013
59.31Supplement, sections 116J.8737, subdivisions 1, 2; 126C.10, subdivisions 1, 2e;
59.32126C.13, subdivision 4; 126C.17, subdivision 1; 273.117; 289A.10, subdivision
59.331; 290.01, subdivisions 19, 19b, 31; 290.06, subdivision 2c; 290.091, subdivision
59.342; 290A.03, subdivision 15; 291.005, subdivision 1; 291.03, subdivision 1;
59.35297A.61, subdivision 3; 297A.68, subdivision 5; 298.17; Laws 2003, chapter
59.36127, article 12, section 28; Laws 2006, chapter 259, article 10, section 13,
59.37subdivision 4; Laws 2008, chapter 366, article 5, section 36, subdivision 3;
59.38Laws 2013, chapter 143, article 8, section 26; proposing coding for new law in
59.39Minnesota Statutes, chapter 291; repealing Minnesota Statutes 2012, sections
59.40291.03, subdivision 1b; 291.41; 291.42; 291.43; 291.44; 291.45; 291.46; 291.47;
59.41Minnesota Statutes 2013 Supplement, sections 291.03, subdivision 1c; 292.16;
59.42292.17; 292.18; 292.19; 292.20; 292.21; 297A.61, subdivision 57."