Journal of the House - 7th Day - Wednesday, January 26, 2011

A quorum was present.

Atkins; Huntley; Kahn; Laine; Petersen, B., and Peterson, S., were excused.

The Chief Clerk proceeded to read the Journal of the preceding day. There being no objection, further reading of the Journal was dispensed with and the Journal was approved as corrected by the Chief Clerk.

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REPORTS OF STANDING COMMITTEES AND DIVISIONS

Westrom from the Committee on Civil Law to which was referred:

H. F. No. 1, A bill for an act relating to environment; providing for permitting efficiency; modifying environmental review requirements; amending Minnesota Statutes 2010, sections 84.027, by adding a subdivision; 115.07; 116.03, by adding a subdivision; 116.07, subdivision 2; 116D.04, subdivisions 3a, 10; 116D.045, subdivisions 1, 3.

Reported the same back with the recommendation that the bill pass and be re-referred to the Committee on Judiciary Policy and Finance.

The report was adopted.

Holberg from the Committee on Ways and Means to which was referred:

H. F. No. 130, A bill for an act relating to state government finance; making appropriation reductions for fiscal year 2011, policy changes, and appropriation reductions for fiscal years 2012 and 2013; making changes to tax aids and credits and reducing payments; amending Minnesota Statutes 2010, sections 256B.766; 270A.03, subdivision 7; 273.1384, subdivision 6; 289A.50, subdivision 1; 290.01, subdivision 6; 290A.03, subdivisions 11, 13; 290C.07; 477A.013, subdivision 9; 477A.03; Laws 2010, First Special Session chapter 1, article 5, sections 4; 5; proposing coding for new law in Minnesota Statutes, chapter 477A; repealing Minnesota Statutes 2010, sections 10A.322, subdivision 4; 13.4967, subdivision 2; 290.06, subdivision 23.

Reported the same back with the following amendments:

Page 3, line 29, delete "(32,288,000)" and insert "(19,659,000)" in both places

Page 4, delete lines 3 to 6

Page 4, line 7, delete "(b)" and insert "(a)" and delete "(19,259,000)" and insert "(13,659,000)" in both places

Page 4, line 8, delete "(c)" and insert "(b)" and delete "(7,990,000)" and insert "(5,267,000)" in both places

Page 4, line 11, delete "to $0"

Page 4, line 13, delete "(d)" and insert "(c)" and delete "(1,100,000)" and insert "(733,000)" in both places

Page 4, line 17, delete "to $0"

Page 4, delete subdivision 3

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Page 4, delete article 3 and insert:

"ARTICLE 3

STATE GOVERNMENT REDUCTIONS

Section 1. [43A.175] SALARY FREEZE.

(a) Effective July 1, 2011, or after the current bargaining agreements expire, whichever is later, a state employee may not receive a salary or wage increase. This section prohibits any increases, including but not limited to across-the-board increases, cost-of-living adjustments, increases based on longevity, step increases, increases in the form of lump-sum payments, increases in employer contributions to deferred compensation plans, or any other pay grade adjustments of any kind. This section does not prohibit an increase in the rate of salary and wages for an employee who is promoted or transferred to a position with greater responsibilities and with a higher salary or wage rate.

(b) A state appointing authority may not enter into a collective bargaining agreement or implement a compensation plan that increases salary or wages in a manner prohibited by this section. Neither a state appointing authority nor an exclusive representative of state employees may request interest arbitration in relation to an increase in salary or wages that is prohibited by this section, and an arbitrator may not issue an award that would increase salary or wages in a manner prohibited by this section.

EFFECTIVE DATE. Paragraph (a) is effective June 30, 2011. Paragraph (b) is effective the day following final enactment.

Sec. 2. FISCAL YEAR 2011 REDUCTIONS.

(a) By March 31, 2011, the commissioner of management and budget must allocate a reduction of $199,236,000 for the fiscal year ending June 30, 2011, to general fund appropriations made to executive branch agencies as defined in Minnesota Statutes, section 16A.011, subdivision 12a. Reductions in fiscal year 2011 appropriations cancel to the general fund. Executive branch agencies must cooperate with the commissioner of management and budget in developing and implementing these reductions.

(b) The commissioner may not reduce appropriations for general education programs under Minnesota Statutes, section 126C.10, and special education programs under Minnesota Statutes, sections 125A.76 and 125A.79. The commissioner may not further reduce appropriations to the Board of Trustees of the Minnesota State Colleges and Universities or to the Board of Regents of the University of Minnesota below the reduction in Laws 2010, First Special Session chapter 1, article 5, sections 4 and 5. In allocating the reductions the commissioner must consider appropriation amounts carried forward from fiscal year 2010 into fiscal year 2011. The commissioner must report to the chairs and ranking minority members of the senate Finance Committee and the house of representatives Ways and Means Committee regarding the amount of reductions in spending by each agency and program under this section.

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

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Sec. 3. REDUCTIONS, LEGISLATURE, CONSTITUTIONAL OFFICERS.

Subdivision 1. Reductions. Appropriations for fiscal year 2011 made in Laws 2009, chapter 101, article 1, are reduced by the amount listed in this section. Reductions in this section apply to fiscal year 2011 only.

Subd. 2. House of representatives. $96,000

Subd. 3. State auditor. $41,000

Subd. 4. Attorney general. $500,000

Subd. 5. Secretary of state. $127,000

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

Page 5, delete article 4 and insert:

"ARTICLE 4

TAX AIDS AND CREDITS

Section 1. Minnesota Statutes 2010, section 270A.03, subdivision 7, is amended to read:

Subd. 7. Refund. "Refund" means an individual income tax refund ~~or political contribution refund~~, pursuant to chapter 290, or a property tax credit or refund, pursuant to chapter 290A, or a sustainable forest tax payment to a claimant under chapter 290C.

For purposes of this chapter, lottery prizes, as set forth in section 349A.08, subdivision 8, and amounts granted to persons by the legislature on the recommendation of the joint senate-house of representatives Subcommittee on Claims shall be treated as refunds.

In the case of a joint property tax refund payable to spouses under chapter 290A, the refund shall be considered as belonging to each spouse in the proportion of the total refund that equals each spouse's proportion of the total income determined under section 290A.03, subdivision 3. In the case of a joint income tax refund under chapter 289A, the refund shall be considered as belonging to each spouse in the proportion of the total refund that equals each spouse's proportion of the total taxable income determined under section 290.01, subdivision 29. The commissioner shall remit the entire refund to the claimant agency, which shall, upon the request of the spouse who does not owe the debt, determine the amount of the refund belonging to that spouse and refund the amount to that spouse. For court fines, fees, and surcharges and court-ordered restitution under section 611A.04, subdivision 2, the notice provided by the commissioner of revenue under section 270A.07, subdivision 2, paragraph (b), serves as the appropriate legal notice to the spouse who does not owe the debt.

EFFECTIVE DATE. This section is effective for refund claims based on contributions made after June 30, 2011.

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Sec. 2. Minnesota Statutes 2010, section 273.1384, subdivision 6, is amended to read:

Subd. 6. Credit reduction; towns. In 2011 and each year thereafter, the market value credit reimbursement amount for each ~~taxing jurisdiction~~ town determined under this section is reduced by the dollar amount of the reduction in market value credit reimbursements for that ~~taxing jurisdiction~~ town in 2010 due to the reductions under section 477A.0133. No ~~taxing jurisdiction's~~ town's market value credit reimbursements are reduced to less than zero under this subdivision. The commissioner of revenue shall pay the annual market value credit reimbursement amounts, after reduction under this subdivision, to the affected ~~taxing jurisdictions~~ towns as provided in this section.

EFFECTIVE DATE. This section is effective for credit reimbursements in 2011 and thereafter.

Sec. 3. Minnesota Statutes 2010, section 273.1384, is amended by adding a subdivision to read:

Subd. 7. Credit reductions and limitation; counties and cities. (a) In 2011 and 2012, the market value credit reimbursement payment to each county and city authorized under subdivision 4 may not exceed the reimbursement payment received by the county or city for taxes payable in 2010.

(b) In 2013 and each year thereafter, the market value credit reimbursement amount for each city and county determined under this section is reduced by the dollar amount of the reduction in market value credit reimbursements for that city or county in 2010 due to the reductions under section 477A.0133. No taxing jurisdiction's market value credit reimbursements are reduced to less than zero under this subdivision. The commissioner of revenue shall pay the annual market value credit reimbursement amounts, after reduction under this subdivision, to the affected city or county as provided in this section.

EFFECTIVE DATE. This section is effective for credit reimbursements in 2011 and thereafter.

Sec. 4. Minnesota Statutes 2010, section 289A.50, subdivision 1, is amended to read:

Subdivision 1. General right to refund. (a) Subject to the requirements of this section and section 289A.40, a taxpayer who has paid a tax in excess of the taxes lawfully due and who files a written claim for refund will be refunded or credited the overpayment of the tax determined by the commissioner to be erroneously paid.

(b) The claim must specify the name of the taxpayer, the date when and the period for which the tax was paid, the kind of tax paid, the amount of the tax that the taxpayer claims was erroneously paid, the grounds on which a refund is claimed, and other information relative to the payment and in the form required by the commissioner. An income tax, estate tax, or corporate franchise tax return, or amended return claiming an overpayment constitutes a claim for refund.

(c) When, in the course of an examination, and within the time for requesting a refund, the commissioner determines that there has been an overpayment of tax, the commissioner shall refund or credit the overpayment to the taxpayer and no demand is necessary. If the overpayment exceeds $1, the amount of the overpayment must be refunded to the taxpayer. If the amount of the overpayment is less than $1, the commissioner is not required to refund. In these situations, the commissioner does not have to make written findings or serve notice by mail to the taxpayer.

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(d) If the amount allowable as a credit for withholding, estimated taxes, or dependent care exceeds the tax against which the credit is allowable, the amount of the excess is considered an overpayment. ~~The refund allowed by section 290.06, subdivision 23, is also considered an overpayment.~~ The requirements of section 270C.33 do not apply to the refunding of such an overpayment shown on the original return filed by a taxpayer.

(e) If the entertainment tax withheld at the source exceeds by $1 or more the taxes, penalties, and interest reported in the return of the entertainment entity or imposed by section 290.9201, the excess must be refunded to the entertainment entity. If the excess is less than $1, the commissioner need not refund that amount.

(f) If the surety deposit required for a construction contract exceeds the liability of the out-of-state contractor, the commissioner shall refund the difference to the contractor.

(g) An action of the commissioner in refunding the amount of the overpayment does not constitute a determination of the correctness of the return of the taxpayer.

(h) There is appropriated from the general fund to the commissioner of revenue the amount necessary to pay refunds allowed under this section.

EFFECTIVE DATE. This section is effective for refund claims based on contributions made after June 30, 2011.

Sec. 5. Minnesota Statutes 2010, section 290.01, subdivision 6, is amended to read:

Subd. 6. Taxpayer. The term "taxpayer" means any person or corporation subject to a tax imposed by this chapter. ~~For purposes of section 290.06, subdivision 23, the term "taxpayer" means an individual eligible to vote in Minnesota under section 201.014.~~

EFFECTIVE DATE. This section is effective for refund claims based on contributions made after June 30, 2011.

Sec. 6. Minnesota Statutes 2010, section 290A.03, subdivision 11, is amended to read:

Subd. 11. Rent constituting property taxes. "Rent constituting property taxes" means 19 15 percent of the gross rent actually paid in cash, or its equivalent, or the portion of rent paid in lieu of property taxes, in any calendar year by a claimant for the right of occupancy of the claimant's Minnesota homestead in the calendar year, and which rent constitutes the basis, in the succeeding calendar year of a claim for relief under this chapter by the claimant.

EFFECTIVE DATE. This section is effective for claims based on rent paid in 2010 and following years.

Sec. 7. Minnesota Statutes 2010, section 290A.03, subdivision 13, is amended to read:

Subd. 13. Property taxes payable. "Property taxes payable" means the property tax exclusive of special assessments, penalties, and interest payable on a claimant's homestead after deductions made under sections 273.135, 273.1384, 273.1391, 273.42, subdivision 2, and any other state paid property tax credits in any calendar year, and after any refund claimed and allowable under section 290A.04, subdivision 2h, that is first payable in the year that the property tax is payable. In the case of a claimant who makes ground lease payments, "property taxes payable" includes the amount of the payments directly attributable to the property taxes assessed against the parcel

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on which the house is located. No apportionment or reduction of the "property taxes payable" shall be required for the use of a portion of the claimant's homestead for a business purpose if the claimant does not deduct any business depreciation expenses for the use of a portion of the homestead in the determination of federal adjusted gross income. For homesteads which are manufactured homes as defined in section 273.125, subdivision 8, and for homesteads which are park trailers taxed as manufactured homes under section 168.012, subdivision 9, "property taxes payable" shall also include 19 15 percent of the gross rent paid in the preceding year for the site on which the homestead is located. When a homestead is owned by two or more persons as joint tenants or tenants in common, such tenants shall determine between them which tenant may claim the property taxes payable on the homestead. If they are unable to agree, the matter shall be referred to the commissioner of revenue whose decision shall be final. Property taxes are considered payable in the year prescribed by law for payment of the taxes.

In the case of a claim relating to "property taxes payable," the claimant must have owned and occupied the homestead on January 2 of the year in which the tax is payable and (i) the property must have been classified as homestead property pursuant to section 273.124, on or before December 15 of the assessment year to which the "property taxes payable" relate; or (ii) the claimant must provide documentation from the local assessor that application for homestead classification has been made on or before December 15 of the year in which the "property taxes payable" were payable and that the assessor has approved the application.

EFFECTIVE DATE. This section is effective for claims based on rent paid in 2010 and following years.

Sec. 8. Minnesota Statutes 2010, section 290C.07, is amended to read:

290C.07 CALCULATION OF INCENTIVE PAYMENT.

(a) An approved claimant under the sustainable forest incentive program is eligible to receive an annual payment. Subject to the limitation contained in paragraph (b), the payment shall equal the greater of:

(1) the difference between the property tax that would be paid on the land using the previous year's statewide average total township tax rate and a class rate of one percent, if the land were valued at (i) the average statewide managed forest land market value per acre calculated under section 290C.06, and (ii) the average statewide managed forest land current use value per acre calculated under section 290C.02, subdivision 5; or

(2) two-thirds of the property tax amount determined by using the previous year's statewide average total township tax rate, the estimated market value per acre as calculated in section 290C.06, and a class rate of one percent, provided that the payment shall be no less than $7 per acre for each acre enrolled in the sustainable forest incentive program.

(b) The annual payment under this section per each Social Security number or state or federal business tax identification number must not exceed $100,000.

EFFECTIVE DATE. This section is effective for payments in calendar year 2011 and thereafter.

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Sec. 9. Minnesota Statutes 2010, section 477A.0124, is amended by adding a subdivision to read:

Subd. 6. Aid payments in 2011 and 2012. Notwithstanding total aids calculated or certified for 2011 under subdivisions 3, 4, and 5, for 2011 and 2012, each county shall receive an aid distribution under this section equal to the lesser of (1) the total amount of aid it received under this section in 2010 after the reductions under Minnesota Statutes, sections 477A.0133 and 477A.0134, or (2) the total amount the county is certified to receive in 2011 under subdivisions 3 to 5.

EFFECTIVE DATE. This section is effective for aids payable in calendar year 2011 and 2012.

Sec. 10. Minnesota Statutes 2010, section 477A.013, subdivision 9, is amended to read:

Subd. 9. City aid distribution. (a) In calendar year 2009 and thereafter, each city shall receive an aid distribution equal to the sum of (1) the city formula aid under subdivision 8, and (2) its city aid base.

(b) For aids payable in ~~2011~~ 2013 only, the total aid in the previous year for any city shall mean the amount of aid it was certified to receive for aids payable in ~~2010~~ 2011 under this section ~~minus the amount of its aid reduction under section 477A.0134~~. For aids payable in ~~2012~~ 2014 and thereafter, the total aid in the previous year for any city means the amount of aid it was certified to receive under this section in the previous payable year.

(c) For aids payable in 2010 and thereafter, the total aid for any city shall not exceed the sum of (1) ten percent of the city's net levy for the year prior to the aid distribution plus (2) its total aid in the previous year. For aids payable in 2009 and thereafter, the total aid for any city with a population of 2,500 or more may not be less than its total aid under this section in the previous year minus the lesser of $10 multiplied by its population, or ten percent of its net levy in the year prior to the aid distribution.

(d) For aids payable in 2010 and thereafter, the total aid for a city with a population less than 2,500 must not be less than the amount it was certified to receive in the previous year minus the lesser of $10 multiplied by its population, or five percent of its 2003 certified aid amount. For aids payable in 2009 only, the total aid for a city with a population less than 2,500 must not be less than what it received under this section in the previous year unless its total aid in calendar year 2008 was aid under section 477A.011, subdivision 36, paragraph (s), in which case its minimum aid is zero.

(e) A city's aid loss under this section may not exceed $300,000 in any year in which the total city aid appropriation under section 477A.03, subdivision 2a, is equal or greater than the appropriation under that subdivision in the previous year, unless the city has an adjustment in its city net tax capacity under the process described in section 469.174, subdivision 28.

(f) If a city's net tax capacity used in calculating aid under this section has decreased in any year by more than 25 percent from its net tax capacity in the previous year due to property becoming tax-exempt Indian land, the city's maximum allowed aid increase under paragraph (c) shall be increased by an amount equal to (1) the city's tax rate in the year of the aid calculation, multiplied by (2) the amount of its net tax capacity decrease resulting from the property becoming tax exempt.

EFFECTIVE DATE. This section is effective for aids payable in calendar year 2012 and thereafter.

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Sec. 11. Minnesota Statutes 2010, section 477A.013, is amended by adding a subdivision to read:

Subd. 11. Aid payments in 2011 and 2012. Notwithstanding aids calculated or certified for 2011 under subdivision 9, for 2011 and 2012, each city shall receive an aid distribution under this section equal to the lesser of (1) the total amount of aid it received under this section in 2010 after the reductions under sections 477A.0133 and 477A.0134 and reduced by the amount of payments made under section 477A.011, subdivision 36, paragraphs (y) and (z), or (2) the amount it was certified to receive in 2011 under subdivision 9.

EFFECTIVE DATE. This section is effective for aids payable in calendar years 2011 and 2012.

Sec. 12. Minnesota Statutes 2010, section 477A.03, is amended to read:

477A.03 APPROPRIATION.

Subd. 2. Annual appropriation. A sum sufficient to discharge the duties imposed by sections 477A.011 to 477A.014 is annually appropriated from the general fund to the commissioner of revenue.

Subd. 2a. Cities. For aids payable in ~~2011~~ 2013 and thereafter, the total aid paid under section 477A.013, subdivision 9, is $527,100,646.

Subd. 2b. Counties. (a) For aids payable in ~~2011~~ 2013 and thereafter, the total aid payable under section 477A.0124, subdivision 3, is $96,395,000. Each calendar year, $500,000 shall be retained by the commissioner of revenue to make reimbursements to the commissioner of management and budget for payments made under section 611.27. For calendar year 2004, the amount shall be in addition to the payments authorized under section 477A.0124, subdivision 1. For calendar year 2005 and subsequent years, the amount shall be deducted from the appropriation under this paragraph. The reimbursements shall be to defray the additional costs associated with court-ordered counsel under section 611.27. Any retained amounts not used for reimbursement in a year shall be included in the next distribution of county need aid that is certified to the county auditors for the purpose of property tax reduction for the next taxes payable year.

(b) For aids payable in ~~2011~~ 2013 and thereafter, the total aid under section 477A.0124, subdivision 4, is $101,309,575. The commissioner of management and budget shall bill the commissioner of revenue for the cost of preparation of local impact notes as required by section 3.987, not to exceed $207,000 in fiscal year 2004 and thereafter. The commissioner of education shall bill the commissioner of revenue for the cost of preparation of local impact notes for school districts as required by section 3.987, not to exceed $7,000 in fiscal year 2004 and thereafter. The commissioner of revenue shall deduct the amounts billed under this paragraph from the appropriation under this paragraph. The amounts deducted are appropriated to the commissioner of management and budget and the commissioner of education for the preparation of local impact notes.

EFFECTIVE DATE. This section is effective for aids payable in calendar year 2012 and thereafter.

Sec. 13. ADMINISTRATION OF PROPERTY TAX REFUND CLAIMS; 2011.

In administering sections 6 and 7 for claims for refunds submitted using 19 percent of gross rent as rent constituting property taxes under prior law, the commissioner shall recalculate and pay the refund amounts using 15 percent of gross rent. The commissioner shall notify the claimant that the recalculation was mandated by action of the 2011 Legislature.

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

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Sec. 14. REPEALER.

(a) Minnesota Statutes 2010, sections 10A.322, subdivision 4; and 13.4967, subdivision 2, are repealed.

(b) Minnesota Statutes 2010, section 290.06, subdivision 23, is repealed.

EFFECTIVE DATE. Paragraph (a) is effective the day following final enactment. Paragraph (b) is effective for refund claims based on contributions made after June 30, 2011.

ARTICLE 5

FEDERAL UPDATE

Section 1. Minnesota Statutes 2010, section 289A.02, subdivision 7, is amended to read:

Subd. 7. Internal Revenue Code. Unless specifically defined otherwise, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through ~~March 18, 2010~~ September 27, 2010.

EFFECTIVE DATE. This section is effective the day after final enactment.

Sec. 2. Minnesota Statutes 2010, section 290.01, subdivision 19, is amended to read:

Subd. 19. Net income. The term "net income" means the federal taxable income, as defined in section 63 of the Internal Revenue Code of 1986, as amended through the date named in this subdivision, incorporating the federal effective dates of changes to the Internal Revenue Code and any elections made by the taxpayer in accordance with the Internal Revenue Code in determining federal taxable income for federal income tax purposes, and with the modifications provided in subdivisions 19a to 19f.

In the case of a regulated investment company or a fund thereof, as defined in section 851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, except that:

(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal Revenue Code does not apply;

(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal Revenue Code must be applied by allowing a deduction for capital gain dividends and exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal Revenue Code; and

(3) the deduction for dividends paid must also be applied in the amount of any undistributed capital gains which the regulated investment company elects to have treated as provided in section 852(b)(3)(D) of the Internal Revenue Code.

The net income of a real estate investment trust as defined and limited by section 856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust taxable income as defined in section 857(b)(2) of the Internal Revenue Code.

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The net income of a designated settlement fund as defined in section 468B(d) of the Internal Revenue Code means the gross income as defined in section 468B(b) of the Internal Revenue Code.

The Internal Revenue Code of 1986, as amended through ~~March 18, 2010~~ September 27, 2010, shall be in effect for taxable years beginning after December 31, 1996. The provisions of the act of January 22, 2010, Public Law 111-126, to accelerate the benefits for charitable cash contributions for the relief of victims of the Haitian earthquake, are effective at the same time it became effective for federal purposes and apply to the subtraction under subdivision 19b, clause (6).

Except as otherwise provided, references to the Internal Revenue Code in subdivisions 19 to 19f mean the code in effect for purposes of determining net income for the applicable year.

EFFECTIVE DATE. This section is effective the day after final enactment.

Sec. 3. Minnesota Statutes 2010, section 290.01, subdivision 19a, is amended to read:

Subd. 19a. Additions to federal taxable income. For individuals, estates, and trusts, there shall be added to federal taxable income:

(1)(i) interest income on obligations of any state other than Minnesota or a political or governmental subdivision, municipality, or governmental agency or instrumentality of any state other than Minnesota exempt from federal income taxes under the Internal Revenue Code or any other federal statute; and

(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue Code, except:

(A) the portion of the exempt-interest dividends exempt from state taxation under the laws of the United States; and

(B) the portion of the exempt-interest dividends derived from interest income on obligations of the state of Minnesota or its political or governmental subdivisions, municipalities, governmental agencies or instrumentalities, but only if the portion of the exempt-interest dividends from such Minnesota sources paid to all shareholders represents 95 percent or more of the exempt-interest dividends, including any dividends exempt under subitem (A), that are paid by the regulated investment company as defined in section 851(a) of the Internal Revenue Code, or the fund of the regulated investment company as defined in section 851(g) of the Internal Revenue Code, making the payment; and

(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal government described in section 7871(c) of the Internal Revenue Code shall be treated as interest income on obligations of the state in which the tribe is located;

(2) the amount of income, sales and use, motor vehicle sales, or excise taxes paid or accrued within the taxable year under this chapter and the amount of taxes based on net income paid, sales and use, motor vehicle sales, or excise taxes paid to any other state or to any province or territory of Canada, to the extent allowed as a deduction under section 63(d) of the Internal Revenue Code, but the addition may not be more than the amount by which the itemized deductions as allowed under section 63(d) of the Internal Revenue Code exceeds the amount of the standard deduction as defined in section 63(c) of the Internal Revenue Code, disregarding the amounts allowed

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under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code. For the purpose of this paragraph, the disallowance of itemized deductions under section 68 of the Internal Revenue Code of 1986, income, sales and use, motor vehicle sales, or excise taxes are the last itemized deductions disallowed;

(3) the capital gain amount of a lump-sum distribution to which the special tax under section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the taxable year under this chapter and taxes based on net income paid to any other state or any province or territory of Canada, to the extent allowed as a deduction in determining federal adjusted gross income. For the purpose of this paragraph, income taxes do not include the taxes imposed by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10 other than expenses or interest used in computing net interest income for the subtraction allowed under subdivision 19b, clause (1);

(6) the amount of a partner's pro rata share of net income which does not flow through to the partner because the partnership elected to pay the tax on the income under section 6242(a)(2) of the Internal Revenue Code;

(7) 80 percent of the depreciation deduction allowed under section 168(k) of the Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that in the taxable year generates a deduction for depreciation under section 168(k) and the activity generates a loss for the taxable year that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is limited to excess of the depreciation claimed by the activity under section 168(k) over the amount of the loss from the activity that is not allowed in the taxable year. In succeeding taxable years when the losses not allowed in the taxable year are allowed, the depreciation under section 168(k) is allowed;

(8) for taxable years beginning before January 1, 2011, 80 percent of the amount by which the deduction allowed by section 179 of the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal Revenue Code of 1986, as amended through December 31, 2003;

(9) to the extent deducted in computing federal taxable income, the amount of the deduction allowable under section 199 of the Internal Revenue Code;

(10) for taxable years beginning before January 1, 2013, the exclusion allowed under section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;

(11) the amount of expenses disallowed under section 290.10, subdivision 2;

(12) the amount deducted for qualified tuition and related expenses under section 222 of the Internal Revenue Code, to the extent deducted from gross income;

(13) the amount deducted for certain expenses of elementary and secondary school teachers under section 62(a)(2)(D) of the Internal Revenue Code, to the extent deducted from gross income;

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(14) the additional standard deduction for property taxes payable that is allowable under section 63(c)(1)(C) of the Internal Revenue Code;

(15) the additional standard deduction for qualified motor vehicle sales taxes allowable under section 63(c)(1)(E) of the Internal Revenue Code;

(16) discharge of indebtedness income resulting from reacquisition of business indebtedness and deferred under section 108(i) of the Internal Revenue Code; and

(17) the amount of unemployment compensation exempt from tax under section 85(c) of the Internal Revenue Code.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2009.

Sec. 4. Minnesota Statutes 2010, section 290.01, subdivision 19c, is amended to read:

Subd. 19c. Corporations; additions to federal taxable income. For corporations, there shall be added to federal taxable income:

(1) the amount of any deduction taken for federal income tax purposes for income, excise, or franchise taxes based on net income or related minimum taxes, including but not limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota, another state, a political subdivision of another state, the District of Columbia, or any foreign country or possession of the United States;

(2) interest not subject to federal tax upon obligations of: the United States, its possessions, its agencies, or its instrumentalities; the state of Minnesota or any other state, any of its political or governmental subdivisions, any of its municipalities, or any of its governmental agencies or instrumentalities; the District of Columbia; or Indian tribal governments;

(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal Revenue Code;

(4) the amount of any net operating loss deduction taken for federal income tax purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss deduction under section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal income tax purposes under sections 241 to 247 and 965 of the Internal Revenue Code;

(6) losses from the business of mining, as defined in section 290.05, subdivision 1, clause (a), that are not subject to Minnesota income tax;

(7) the amount of any capital losses deducted for federal income tax purposes under sections 1211 and 1212 of the Internal Revenue Code;

(8) the exempt foreign trade income of a foreign sales corporation under sections 921(a) and 291 of the Internal Revenue Code;

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(9) the amount of percentage depletion deducted under sections 611 through 614 and 291 of the Internal Revenue Code;

(10) for certified pollution control facilities placed in service in a taxable year beginning before December 31, 1986, and for which amortization deductions were elected under section 169 of the Internal Revenue Code of 1954, as amended through December 31, 1985, the amount of the amortization deduction allowed in computing federal taxable income for those facilities;

(11) the amount of any deemed dividend from a foreign operating corporation determined pursuant to section 290.17, subdivision 4, paragraph (g). The deemed dividend shall be reduced by the amount of the addition to income required by clauses (20), (21), (22), and (23);

(12) the amount of a partner's pro rata share of net income which does not flow through to the partner because the partnership elected to pay the tax on the income under section 6242(a)(2) of the Internal Revenue Code;

(13) the amount of net income excluded under section 114 of the Internal Revenue Code;

(14) any increase in subpart F income, as defined in section 952(a) of the Internal Revenue Code, for the taxable year when subpart F income is calculated without regard to the provisions of Division C, title III, section 303(b) of Public Law 110-343;

(15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A) and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that in the taxable year generates a deduction for depreciation under section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the amount of the loss from the activity that is not allowed in the taxable year. In succeeding taxable years when the losses not allowed in the taxable year are allowed, the depreciation under section 168(k)(1)(A) and (k)(4)(A) is allowed;

(16) for taxable years beginning before January 1, 2011, 80 percent of the amount by which the deduction allowed by section 179 of the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal Revenue Code of 1986, as amended through December 31, 2003;

(17) to the extent deducted in computing federal taxable income, the amount of the deduction allowable under section 199 of the Internal Revenue Code;

(18) for taxable years beginning before January 1, 2013, the exclusion allowed under section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;

(19) the amount of expenses disallowed under section 290.10, subdivision 2;

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(20) an amount equal to the interest and intangible expenses, losses, and costs paid, accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit of a corporation that is a member of the taxpayer's unitary business group that qualifies as a foreign operating corporation. For purposes of this clause, intangible expenses and costs include:

(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition, use, maintenance or management, ownership, sale, exchange, or any other disposition of intangible property;

(ii) losses incurred, directly or indirectly, from factoring transactions or discounting transactions;

(iii) royalty, patent, technical, and copyright fees;

(iv) licensing fees; and

(v) other similar expenses and costs.

For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent applications, trade names, trademarks, service marks, copyrights, mask works, trade secrets, and similar types of intangible assets.

This clause does not apply to any item of interest or intangible expenses or costs paid, accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect to such item of income to the extent that the income to the foreign operating corporation is income from sources without the United States as defined in subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code;

(21) except as already included in the taxpayer's taxable income pursuant to clause (20), any interest income and income generated from intangible property received or accrued by a foreign operating corporation that is a member of the taxpayer's unitary group. For purposes of this clause, income generated from intangible property includes:

(i) income related to the direct or indirect acquisition, use, maintenance or management, ownership, sale, exchange, or any other disposition of intangible property;

(ii) income from factoring transactions or discounting transactions;

(iii) royalty, patent, technical, and copyright fees;

(iv) licensing fees; and

(v) other similar income.

This clause does not apply to any item of interest or intangible income received or accrued by a foreign operating corporation with respect to such item of income to the extent that the income is income from sources without the United States as defined in subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code;

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(22) the dividends attributable to the income of a foreign operating corporation that is a member of the taxpayer's unitary group in an amount that is equal to the dividends paid deduction of a real estate investment trust under section 561(a) of the Internal Revenue Code for amounts paid or accrued by the real estate investment trust to the foreign operating corporation;

(23) the income of a foreign operating corporation that is a member of the taxpayer's unitary group in an amount that is equal to gains derived from the sale of real or personal property located in the United States;

(24) the additional amount allowed as a deduction for donation of computer technology and equipment under section 170(e)(6) of the Internal Revenue Code, to the extent deducted from taxable income; and

(25) discharge of indebtedness income resulting from reacquisition of business indebtedness and deferred under section 108(i) of the Internal Revenue Code.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2009.

Sec. 5. Minnesota Statutes 2010, section 290.01, subdivision 31, is amended to read:

Subd. 31. Internal Revenue Code. Unless specifically defined otherwise, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through ~~March 18, 2010~~ September 27, 2010. Internal Revenue Code also includes any uncodified provision in federal law that relates to provisions of the Internal Revenue Code that are incorporated into Minnesota law.

EFFECTIVE DATE. This section is effective the day following final enactment except that the changes incorporated by federal changes are effective at the same time as the changes were effective for federal purposes.

Sec. 6. Minnesota Statutes 2010, section 290A.03, subdivision 15, is amended to read:

Subd. 15. Internal Revenue Code. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through ~~March 18, 2010~~ September 27, 2010.

EFFECTIVE DATE. This section is effective for property tax refunds based on property taxes payable on or after December 31, 2010, and rent paid on or after December 31, 2009.

Sec. 7. CORRECTED FORM W-2 NOT REQUIRED.

Employers who have prepared and distributed form W-2, wage and tax statement, for tax year 2010, that reported to employees the amount of health coverage provided to adult children under age 27 includable in net income under prior law, are not required to prepare and distribute corrected tax year 2010 form W-2.

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

Renumber the sections in sequence and correct the internal references

Amend the title accordingly

With the recommendation that when so amended the bill pass.

The report was adopted.

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SECOND READING OF HOUSE BILLS

H. F. No. 130 was read for the second time.

FISCAL CALENDAR ANNOUNCEMENT

Pursuant to rule 1.22, Holberg announced her intention to place H. F. No. 130 on the Fiscal Calendar for Thursday, January 27, 2011.

INTRODUCTION AND FIRST READING OF HOUSE BILLS

The following House Files were introduced:

Howes introduced:

H. F. No. 214, A bill for an act relating to taxation; sales and use; expanding the exemption for certain public safety radio equipment; amending Minnesota Statutes 2010, section 297A.70, subdivision 8.

The bill was read for the first time and referred to the Committee on Taxes.

Rukavina and Anzelc introduced:

H. F. No. 215, A bill for an act relating to retirement; public employees retirement association; Virginia Fire Department Relief Association; authorizing an administrative consolidation of the relief association; amending Minnesota Statutes 2010, sections 69.77, subdivisions 1a, 4; 353.01, subdivision 2a; 353.05; 353.06; 353.15, subdivision 1; 353.37, subdivision 1; 353.65, subdivision 1, by adding a subdivision; 353.68, subdivision 1; 356.20, subdivision 2; 356.214, subdivision 1; 356.215, subdivisions 8, 11; 356.401, subdivision 3; 356.407, subdivision 2; 356.465, subdivision 3; 423A.02, subdivision 1b; proposing coding for new law in Minnesota Statutes, chapter 353.

The bill was read for the first time and referred to the Committee on Government Operations and Elections.

Benson, J., and Tillberry introduced:

H. F. No. 216, A bill for an act relating to education finance; eliminating the referendum allowance limit; repealing Minnesota Statutes 2010, section 126C.17, subdivisions 2, 3.

The bill was read for the first time and referred to the Committee on Education Finance.

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Benson, J., and Tillberry introduced:

H. F. No. 217, A bill for an act relating to education finance; modifying the equity revenue formula; amending Minnesota Statutes 2010, section 126C.10, subdivision 24.

The bill was read for the first time and referred to the Committee on Education Finance.

Benson, J., and Tillberry introduced:

H. F. No. 218, A bill for an act relating to education finance; creating a location equity index; modifying the general education revenue formula; increasing revenue for some school districts; amending Minnesota Statutes 2010, sections 126C.01, by adding a subdivision; 126C.10, subdivision 1, by adding a subdivision.

The bill was read for the first time and referred to the Committee on Education Finance.

Benson, J.; Tillberry and Slocum introduced:

H. F. No. 219, A bill for an act relating to education finance; reducing school district mandates; allowing additional flexibility; authorizing certain fund transfers; amending Minnesota Statutes 2010, sections 120A.41; 123A.15, subdivision 5; 123A.32, subdivision 5; 123B.12; 123B.29; 123B.38; 123B.51, subdivision 5; 123B.52, subdivisions 1, 1a; 123B.71, subdivision 12; 123B.79, by adding a subdivision; 123B.80, subdivision 3; 126C.54; 205A.07, subdivisions 3, 3a; 645.13; Laws 2009, chapter 96, article 2, section 64.

The bill was read for the first time and referred to the Committee on Education Reform.

Hancock and Fabian introduced:

H. F. No. 220, A bill for an act relating to energy; modifying definition used to calculate renewable energy standard obligation; amending Minnesota Statutes 2010, section 216B.1691, subdivision 1.

The bill was read for the first time and referred to the Committee on Environment, Energy and Natural Resources Policy and Finance.

Hosch introduced:

H. F. No. 221, A bill for an act relating to transportation; providing for use of certain funds for Paynesville airport.

The bill was read for the first time and referred to the Committee on Transportation Policy and Finance.

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Gottwalt, Abeler, Mack, Torkelson and Vogel introduced:

H. F. No. 222, A bill for an act relating to health insurance; requiring guaranteed issue in the individual market; requiring MCHA to reinsure ceded risk on certain health plans; ending additional enrollment in MCHA; amending Minnesota Statutes 2010, sections 62A.65, subdivision 2, by adding a subdivision; 62E.10, subdivision 7; 62E.11, subdivision 1; 62E.14, subdivision 1; repealing Minnesota Statutes 2010, section 62A.65, subdivision 6.

The bill was read for the first time and referred to the Committee on Commerce and Regulatory Reform.

Scalze introduced:

H. F. No. 223, A bill for an act relating to human services; expanding use of public assistance reporting information system; amending Minnesota Statutes 2010, section 256.01, subdivision 18a.

The bill was read for the first time and referred to the Veterans Services Division.

Kelly, Pelowski, Beard, Howes, Hausman, Gauthier, Huntley and Murphy, M., introduced:

H. F. No. 224, A bill for an act relating to capital investment; appropriating money for the port development assistance program; authorizing the sale and issuance of state bonds.

The bill was read for the first time and referred to the Committee on Transportation Policy and Finance.

Hackbarth introduced:

H. F. No. 225, A bill for an act relating to game and fish; limiting number of experimental and special management waters designated for northern pike; proposing coding for new law in Minnesota Statutes, chapter 97C.

The bill was read for the first time and referred to the Committee on Environment, Energy and Natural Resources Policy and Finance.

Davids introduced:

H. F. No. 226, A bill for an act relating to veterans; specifying the county in which a new veterans cemetery must be located; amending Laws 2010, chapter 333, article 2, section 23.

The bill was read for the first time and referred to the Veterans Services Division.

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Carlson and Huntley introduced:

H. F. No. 227, A bill for an act relating to finance; requiring balanced budget for an additional biennium; amending Minnesota Statutes 2010, section 16A.11, subdivisions 2, 3.

The bill was read for the first time and referred to the Committee on Government Operations and Elections.

Carlson, Ward, Huntley and Peterson, S., introduced:

H. F. No. 228, A bill for an act relating to pupil transportation; amending seat belt equipment requirements for procurement of school buses; amending Minnesota Statutes 2010, sections 169.447, subdivision 2a; 169.685, subdivision 1.

The bill was read for the first time and referred to the Committee on Education Reform.

Downey, Scott, Kelly and Westrom introduced:

H. F. No. 229, A bill for an act relating to public safety; authorizing judges to prohibit certain juvenile sex offenders from residing near their victims; amending Minnesota Statutes 2010, section 260B.198, subdivision 1, by adding a subdivision.

The bill was read for the first time and referred to the Committee on Judiciary Policy and Finance.

McFarlane and Slocum introduced:

H. F. No. 230, A bill for an act relating to education finance; modifying the alternative teacher pay calculation for intermediate school districts; amending Minnesota Statutes 2010, sections 122A.415, subdivision 1; 126C.10, subdivision 34.

The bill was read for the first time and referred to the Committee on Education Finance.

Rukavina, Mahoney, Anzelc and Howes introduced:

H. F. No. 231, A bill for an act relating to unemployment insurance; modifying eligibility for children of business owners; amending Minnesota Statutes 2010, section 268.085, subdivision 9.

The bill was read for the first time and referred to the Committee on Jobs and Economic Development Finance.

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Kriesel, Daudt, Erickson, Dettmer and McElfatrick introduced:

H. F. No. 232, A bill for an act relating to motor vehicles; expanding eligibility for gold star license plates to surviving legal guardians and siblings; amending Minnesota Statutes 2010, section 168.1253, subdivision 1.

The bill was read for the first time and referred to the Veterans Services Division.

Sanders; Abeler; Barrett; Anderson, S., and Scott introduced:

H. F. No. 233, A bill for an act relating to state government; requiring the Department of Human Services to issue a request for proposals for a Medicaid fraud detection and business intelligence contract.

The bill was read for the first time and referred to the Committee on Health and Human Services Reform.

Davids introduced:

H. F. No. 234, A bill for an act relating to taxation; the city of Rochester; modifying the allowed uses of its local sales tax revenues; amending Laws 1998, chapter 389, article 8, section 43, subdivision 3, as amended.

The bill was read for the first time and referred to the Committee on Taxes.

Holberg introduced:

H. F. No. 235, A bill for an act relating to human services; enacting Hannah's Law by modifying cardiopulmonary resuscitation requirements for child care center staff; amending Minnesota Statutes 2010, section 245A.40, subdivision 4.

The bill was read for the first time and referred to the Committee on Health and Human Services Reform.

Anzelc and Rukavina introduced:

H. F. No. 236, A bill for an act relating to health; providing an exemption from using a licensed well contractor; proposing coding for new law in Minnesota Statutes, chapter 103I.

The bill was read for the first time and referred to the Committee on Health and Human Services Reform.

Marquart introduced:

H. F. No. 237, A bill for an act relating to elections; authorizing certain persons who are 17 years old to vote in a primary; amending Minnesota Statutes 2008, section 201.014, by adding a subdivision.

The bill was read for the first time and referred to the Committee on Government Operations and Elections.

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MOTIONS AND RESOLUTIONS

LeMieur moved that the name of O'Driscoll be added as an author on H. F. No. 12. The motion prevailed.

Kriesel moved that the name of Morrow be added as an author on H. F. No. 57. The motion prevailed.

Davids moved that the name of Atkins be added as an author on H. F. No. 96. The motion prevailed.

Davids moved that the name of Atkins be added as an author on H. F. No. 97. The motion prevailed.

Murray moved that the name of Kath be added as an author on H. F. No. 103. The motion prevailed.

Peterson, S., moved that the name of Davnie be added as an author on H. F. No. 117. The motion prevailed.

Holberg moved that the name of Hackbarth be added as an author on H. F. No. 124. The motion prevailed.

Cornish moved that the names of Scalze and Atkins be added as authors on H. F. No. 141. The motion prevailed.

Kiffmeyer moved that the name of Banaian be added as an author on H. F. No. 148. The motion prevailed.

Lillie moved that the name of Atkins be added as an author on H. F. No. 164. The motion prevailed.

Daudt moved that the names of Wardlow and Anderson, S., be added as authors on H. F. No. 171. The motion prevailed.

Peppin moved that the name of Drazkowski be added as an author on H. F. No. 173. The motion prevailed.

Downey moved that the names of Anderson, S.; Hancock and Lenczewski be added as authors on H. F. No. 178. The motion prevailed.

Urdahl moved that the name of Ward be added as an author on H. F. No. 186. The motion prevailed.

Downey moved that the name of Scott be added as an author on H. F. No. 191. The motion prevailed.

Anderson, S., moved that the name of Banaian be added as an author on H. F. No. 193. The motion prevailed.

Gottwalt moved that the name of Gruenhagen be added as an author on H. F. No. 199. The motion prevailed.

Gottwalt moved that the name of Ward be added as an author on H. F. No. 200. The motion prevailed.

Petersen, B., moved that the name of Nelson be added as an author on H. F. No. 205. The motion prevailed.

Wardlow moved that the name of Runbeck be added as an author on H. F. No. 211. The motion prevailed.

Marquart moved that H. F. No. 130, now on the General Register, be re-referred to the Property and Local Tax Division.

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A roll call was requested and properly seconded.

The question was taken on the Marquart motion and the roll was called. There were 56 yeas and 71 nays as follows:

Those who voted in the affirmative were: