Journal of the House - 38th Day - Friday, April 12, 2019 - Top of Page 3215

STATE OF MINNESOTA

 

Journal of the House

 

NINETY-FIRST SESSION - 2019

 

_____________________

 

THIRTY-EIGHTH DAY

 

Saint Paul, Minnesota, Friday, April 12, 2019

 

 

      The House of Representatives convened at 9:30 a.m. and was called to order by Melissa Hortman, Speaker of the House.

 

      Prayer was offered by Representative Todd Lippert, District 20B, Northfield, Minnesota.

 

      The members of the House gave the pledge of allegiance to the flag of the United States of America.

 

      The roll was called and the following members were present:

 


Acomb

Albright

Anderson

Backer

Bahner

Bahr

Becker-Finn

Bennett

Bernardy

Bierman

Brand

Cantrell

Carlson, A.

Carlson, L.

Christensen

Claflin

Considine

Daniels

Daudt

Davnie

Dehn

Demuth

Dettmer

Drazkowski

Ecklund

Edelson

Elkins

Fabian

Fischer

Freiberg

Garofalo

Gomez

Green

Haley

Halverson

Hamilton

Hansen

Hassan

Hausman

Her

Hornstein

Howard

Huot

Johnson

Jurgens

Klevorn

Koegel

Kotyza-Witthuhn

Koznick

Kresha

Kunesh-Podein

Layman

Lee

Lesch

Liebling

Lien

Lillie

Lippert

Lislegard

Loeffler

Long

Lucero

Lueck

Mahoney

Mann

Mariani

Marquart

Masin

Mekeland

Miller

Moller

Moran

Morrison

Munson

Murphy

Nash

Nelson, M.

Noor

Nornes

O'Driscoll

Olson

O'Neill

Pelowski

Persell

Petersburg

Pierson

Pinto

Poppe

Pryor

Richardson

Robbins

Runbeck

Sandell

Sandstede

Sauke

Schomacker

Schultz

Scott

Stephenson

Sundin

Swedzinski

Tabke

Theis

Torkelson

Urdahl

Vang

Vogel

Wagenius

Wazlawik

Winkler

Wolgamott

Xiong, J.

Xiong, T.

Youakim

Spk. Hortman


 

      A quorum was present.

 

      Baker; Boe; Davids; Erickson; Franson; Grossell; Gruenhagen; Gunther; Heinrich; Heintzeman; Hertaus; Kiel; McDonald; Nelson, N.; Neu; Poston; Quam; West and Zerwas 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

 

 

Marquart from the Committee on Taxes to which was referred:

 

H. F. No. 1555, A bill for an act relating to transportation; establishing a budget for transportation; appropriating money for transportation purposes, including Department of Transportation, Metropolitan Council, and Department of Public Safety activities; modifying driver's licenses and identification cards; modifying motor vehicle taxes and fees; modifying various provisions governing transportation policy and finance; allocating certain sales and use tax revenue; establishing accounts; making technical changes; authorizing the sale and issuance of state bonds; requiring reports; amending Minnesota Statutes 2018, sections 13.461, by adding a subdivision; 13.6905, by adding a subdivision; 13.72, subdivision 10; 80E.13; 160.02, subdivision 1a; 160.262, subdivision 3; 160.266, subdivision 1b, by adding a subdivision; 161.115, subdivision 46; 161.14, subdivision 16, by adding subdivisions; 161.45, subdivision 2; 161.46, subdivision 2; 168.013, subdivisions 1a, 1m, 6, 21; 168.10, subdivision 1h; 168.123, subdivision 2; 168.27, by adding subdivisions; 168.301, subdivision 3; 168.33, subdivisions 7, 8a; 168.346, subdivision 1; 168A.02, subdivision 1; 168A.085, by adding a subdivision; 168A.09, subdivision 1; 168A.12, subdivision 2; 168A.17, by adding a subdivision; 168A.29, subdivision 1; 169.011, subdivisions 5, 9, 64, by adding subdivisions; 169.035, by adding a subdivision; 169.06, subdivision 4a; 169.18, subdivisions 3, 8, 11; 169.20, subdivision 7; 169.222, subdivisions 1, 4; 169.26, subdivisions 1, 4; 169.28; 169.29; 169.443, subdivision 2; 169.4503, subdivision 5; 169.64, subdivision 9; 169.71, subdivision 4; 169.81, by adding a subdivision; 169.864; 169.865, subdivisions 1, 2, by adding a subdivision; 169.92, subdivision 4; 171.01, by adding subdivisions; 171.04, subdivision 5; 171.06, subdivisions 2, 3, by adding subdivisions; 171.061, subdivision 4; 171.07, subdivisions 1, 3, by adding a subdivision; 171.12, subdivisions 7a, 9, by adding subdivisions; 171.16, subdivisions 2, 3; 171.18, subdivision 1; 174.01, subdivision 2; 174.03, subdivision 7, by adding subdivisions; 174.24, subdivision 2; 174.37; 174.57; 201.061, subdivision 3; 219.015, subdivisions 1, 2, by adding a subdivision; 219.1651; 221.031, by adding a subdivision; 296A.07, subdivision 3; 296A.08, subdivision 2; 297A.815, subdivision 3; 297A.94; 297A.99, subdivision 1; 297B.02, subdivision 1; 297B.09; 299A.12, subdivisions 1, 2, 3; 299A.13; 299A.14, subdivision 3; 299D.03, subdivision 5; 325F.185; 360.013, by adding subdivisions; 360.024; 360.55, by adding a subdivision; 360.59, subdivision 10; 360.62; 363A.28, by adding a subdivision; 473.386, subdivision 3, by adding a subdivision; 473.388, subdivision 4a; 473.39, subdivision 6, by adding a subdivision; 473.391, by adding a subdivision; 473.4052, subdivision 4; 480.15, by adding a subdivision; Laws 1994, chapter 643, section 15, subdivision 8; proposing coding for new law in Minnesota Statutes, chapters 161; 168; 168A; 169; 171; 174; 219; 297A; 360; repealing Minnesota Statutes 2018, sections 169.18, subdivision 12; 171.015, subdivision 7; 299A.12, subdivision 4; 299A.18; Laws 2002, chapter 393, section 85.

 

Reported the same back with the recommendation that the bill be placed on the General Register.

 

      The report was adopted.

 

 

Marquart from the Committee on Taxes to which was referred:

 

H. F. No. 2125, A bill for an act relating to taxation; providing conformity and nonconformity to certain federal tax law changes; modifying individual income and corporate franchise taxes, sales and use taxes, property taxes, local government aids, tobacco taxes, special taxes, and other miscellaneous taxes and tax provisions; expanding and increasing working family credit; expanding and modifying threshold for social security subtraction; modifying the qualified data center exemption; changing qualification and application provisions for the senior property tax deferral program; providing a riparian buffer credit; providing an increase to local government aid and county program aid; reinstating the inflator for the state general levy; reinstating the annual indexing for the cigarette tax; reinstating a higher rate for premium cigars; eliminating the increase in the estate tax exclusion amount; modifying sales tax exemptions for local governments and nonprofits; appropriating money; amending Minnesota Statutes


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2018, sections 116J.8737, subdivisions 1, 2, 3, 4, 5, 6, 12; 270A.03, subdivision 5; 272.115, subdivision 1; 273.124, subdivisions 13, 13c, 13d, 14; 273.1245, subdivision 1; 273.13, subdivision 35; 273.1315, subdivision 2; 273.1384, subdivision 2; 273.1392; 273.1393; 275.025, subdivision 1; 275.065, subdivision 3; 276.04, subdivision 2; 287.21, subdivision 1; 289A.08, subdivisions 1, 7; 289A.10, subdivision 1; 289A.11, by adding a subdivision; 289A.20, by adding a subdivision; 289A.60, subdivision 29; 290.01, subdivisions 29a, 31, by adding subdivisions; 290.0131, subdivisions 1, 3, 12, 13, by adding subdivisions; 290.0132, subdivisions 1, 7, 20, 26, by adding subdivisions; 290.0133, subdivision 6; 290.032, subdivision 2; 290.05, subdivision 3; 290.06, subdivisions 2c, 2d, 2h; 290.0671, subdivisions 1, 7; 290.0672, subdivision 2; 290.0681, subdivisions 3, 4; 290.0684, subdivision 2; 290.0802, subdivision 2; 290.091, subdivision 3; 290.0921, subdivisions 1, 8; 290.0922, subdivision 1; 290.095, subdivision 2; 290.21, by adding a subdivision; 290.92, subdivision 1; 290A.03, subdivision 12; 290A.04, subdivision 4; 290B.03, subdivision 1; 290B.04, subdivision 1; 291.016, subdivision 3; 297A.66; 297A.68, subdivisions 25, 42; 297A.71, by adding a subdivision; 297A.75, subdivisions 1, 2, 3; 297A.83, subdivision 1; 297B.03; 297F.01, subdivision 13a; 297F.05, subdivisions 3a, 4a, by adding a subdivision; 469.316, subdivision 1; 477A.03, subdivisions 2a, 2b; Minnesota Statutes 2019 Supplement, sections 289A.02, subdivision 7; 289A.12, subdivision 14; 289A.35; 290.01, subdivision 19; 290.0131, subdivision 10; 290.0132, subdivision 21; 290.0133, subdivision 12; 290.067, subdivision 2b; 290.0672, subdivision 1; 290.0681, subdivisions 1, 2; 290.0684, subdivisions 1, 2; 290.091, subdivision 2; 290.17, subdivision 2; 290A.03, subdivision 15; 291.005, subdivision 1; 462D.06, subdivisions 1, 2; proposing coding for new law in Minnesota Statutes, chapters 273; 290; repealing Minnesota Statutes 2018, sections 290.0131, subdivisions 7, 11; 290.0133, subdivisions 13, 14; 290.10, subdivision 2.

 

Reported the same back with the following amendments:

 

Delete everything after the enacting clause and insert:

 

"ARTICLE 1

FEDERAL CONFORMITY

 

Section 1.  Minnesota Statutes 2018, section 270A.03, subdivision 5, is amended to read:

 

Subd. 5.  Debt; debtor.  (a) "Debt" means a legal obligation of a natural person to pay a fixed and certain amount of money, which equals or exceeds $25 and which is due and payable to a claimant agency.  The term includes criminal fines imposed under section 609.10 or 609.125, fines imposed for petty misdemeanors as defined in section 609.02, subdivision 4a, and restitution.  A debt may arise under a contractual or statutory obligation, a court order, or other legal obligation, but need not have been reduced to judgment.

 

A debt includes any legal obligation of a current recipient of assistance which is based on overpayment of an assistance grant where that payment is based on a client waiver or an administrative or judicial finding of an intentional program violation; or where the debt is owed to a program wherein the debtor is not a client at the time notification is provided to initiate recovery under this chapter and the debtor is not a current recipient of food support, transitional child care, or transitional medical assistance.

 

(b) A debt does not include any legal obligation to pay a claimant agency for medical care, including hospitalization if the income of the debtor at the time when the medical care was rendered does not exceed the following amount:

 

(1) for an unmarried debtor, an income of $12,560 or less;

 

(2) for a debtor with one dependent, an income of $16,080 or less;

 

(3) for a debtor with two dependents, an income of $19,020 or less;


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(4) for a debtor with three dependents, an income of $21,580 or less;

 

(5) for a debtor with four dependents, an income of $22,760 or less; and

 

(6) for a debtor with five or more dependents, an income of $23,730 or less.

 

For purposes of this paragraph, "debtor" means the individual whose income, together with the income of the individual's spouse, other than a separated spouse, brings the individual within the income provisions of this paragraph.  For purposes of this paragraph, a spouse, other than a separated spouse, shall be considered a dependent.

 

(c) The commissioner shall annually adjust the income amounts in paragraph (b) by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) the word "2014" shall be substituted for the word "1992."  For 2016, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2014, to the 12 months ending on August 31, 2015, and in each subsequent year, from the 12 months ending on August 31, 2014, to the 12 months ending on August 31 of the year preceding the taxable year.  The determination of the commissioner pursuant to this subdivision shall not be considered a "rule" and shall not be subject to the Administrative Procedure Act contained in chapter 14.  The income amount as adjusted must be rounded to the nearest $10 amount.  If the amount ends in $5, the amount is rounded up to the nearest $10 amount as provided in section 270C.22.  The statutory year is taxable year 2019.

 

(d) Debt also includes an agreement to pay a MinnesotaCare premium, regardless of the dollar amount of the premium authorized under section 256L.15, subdivision 1a.

 

EFFECTIVE DATE.  This section is effective for adjustments beginning with taxable years beginning after December 31, 2019.

 

Sec. 2.  [270C.22] COST OF LIVING ADJUSTMENT.

 

Subdivision 1.  Adjustment; definition; period; rounding.  (a) The commissioner shall annually make a cost of living adjustment to the dollar amounts noted in sections that reference this section.  The commissioner shall adjust the amounts based on the index as provided in this section.  For purposes of this section, "index" means the Chained Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics.  The values of the index used to determine the adjustments under this section are the latest published values when the Bureau of Labor Statistics publishes the initial value of the index for August of the year preceding the year to which the adjustment applies.

 

(b) For the purposes of this section, "statutory year" means the year preceding the first year for which dollar amounts are to be adjusted for inflation under sections that reference this section.  For adjustments under chapter 290A, "statutory year" means the year in which refunds are payable preceding the first year for which amounts in chapter 290A are indexed under this section.

 

(c) To determine the dollar amounts for taxable year 2020, the commissioner shall determine the percentage change in the index for the 12-month period ending on August 31, 2019, and increase each of the unrounded dollar amounts in the sections referencing this section by that percentage change.  For each subsequent taxable year, the commissioner shall increase the dollar amounts by the percentage change in the index from August 31 of the year preceding the statutory year to August 31 of the year preceding the taxable year.

 

(d) To determine the dollar amounts for refunds payable in 2021 under chapter 290A, the commissioner shall determine the percentage change in the index for the 12-month period ending on August 31, 2020, and increase each of the unrounded dollar amounts in the sections referencing this section by that percentage change.  For each


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subsequent year, the commissioner shall increase the dollar amounts by the percentage change in the index from August 31 of the year preceding the statutory year to August 31 of the year preceding the year in which refunds are payable.

 

(e) Unless otherwise provided, the commissioner shall round the amounts as adjusted to the nearest $10 amount.  If an amount ends in $5, the amount is rounded up to the nearest $10 amount.

 

Subd. 2.  Publication.  The commissioner shall announce and publish the adjusted dollar amounts required by subdivision 1 on the Department of Revenue's website on or before December 15 of each year.

 

Subd. 3.  Special provision.  The determination of the commissioner under this subdivision is not a rule and is not subject to the Administrative Procedure Act under chapter 14, including section 14.386.

 

EFFECTIVE DATE.  This section is effective for adjustments beginning with taxable years beginning after December 31, 2019, calendar years beginning after December 31, 2019, and for refunds based on rent paid in 2019 and property taxes payable in 2020.

 

Sec. 3.  Minnesota Statutes 2018, 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 December 16, 2016 December 31, 2018.

 

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

 

Sec. 4.  Minnesota Statutes 2018, section 289A.08, subdivision 1, is amended to read:

 

Subdivision 1.  Generally; individuals.  (a) A taxpayer must file a return for each taxable year the taxpayer is required to file a return under section 6012 of the Internal Revenue Code or meets the requirements under paragraph (d) to file a return, except that:

 

(1) an individual who is not a Minnesota resident for any part of the year is not required to file a Minnesota income tax return if the individual's gross income derived from Minnesota sources as determined under sections 290.081, paragraph (a), and 290.17, is less than the filing requirements for a single individual who is a full year resident of Minnesota; and

 

(2) an individual who is a Minnesota resident is not required to file a Minnesota income tax return if the individual's gross income derived from Minnesota sources as determined under section 290.17, less the subtractions allowed under section 290.0132, subdivisions 12 and 15, is less than the filing requirements for a single individual who is a full-year resident of Minnesota.

 

(b) The decedent's final income tax return, and other income tax returns for prior years where the decedent had gross income in excess of the minimum amount at which an individual is required to file and did not file, must be filed by the decedent's personal representative, if any.  If there is no personal representative, the return or returns must be filed by the transferees, as defined in section 270C.58, subdivision 3, who receive property of the decedent.

 

(c) The term "gross income," as it is used in this section, has the same meaning given it in section 290.01, subdivision 20.


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(d) The commissioner of revenue must annually determine the gross income levels at which individuals are required to file a return for each taxable year based on the amounts that may be subtracted under section 290.0132, subdivision 19.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 5.  Minnesota Statutes 2018, section 289A.08, subdivision 7, is amended to read:

 

Subd. 7.  Composite income tax returns for nonresident partners, shareholders, and beneficiaries.  (a) The commissioner may allow a partnership with nonresident partners to file a composite return and to pay the tax on behalf of nonresident partners who have no other Minnesota source income.  This composite return must include the names, addresses, Social Security numbers, income allocation, and tax liability for the nonresident partners electing to be covered by the composite return.

 

(b) The computation of a partner's tax liability must be determined by multiplying the income allocated to that partner by the highest rate used to determine the tax liability for individuals under section 290.06, subdivision 2c.  Nonbusiness deductions, standard deductions, or personal exemptions are not allowed.

 

(c) The partnership must submit a request to use this composite return filing method for nonresident partners.  The requesting partnership must file a composite return in the form prescribed by the commissioner of revenue.  The filing of a composite return is considered a request to use the composite return filing method.

 

(d) The electing partner must not have any Minnesota source income other than the income from the partnership and other electing partnerships.  If it is determined that the electing partner has other Minnesota source income, the inclusion of the income and tax liability for that partner under this provision will not constitute a return to satisfy the requirements of subdivision 1.  The tax paid for the individual as part of the composite return is allowed as a payment of the tax by the individual on the date on which the composite return payment was made.  If the electing nonresident partner has no other Minnesota source income, filing of the composite return is a return for purposes of subdivision 1.

 

(e) This subdivision does not negate the requirement that an individual pay estimated tax if the individual's liability would exceed the requirements set forth in section 289A.25.  The individual's liability to pay estimated tax is, however, satisfied when the partnership pays composite estimated tax in the manner prescribed in section 289A.25.

 

(f) If an electing partner's share of the partnership's gross income from Minnesota sources is less than the filing requirements for a nonresident under this subdivision, the tax liability is zero.  However, a statement showing the partner's share of gross income must be included as part of the composite return.

 

(g) The election provided in this subdivision is only available to a partner who has no other Minnesota source income and who is either (1) a full-year nonresident individual or (2) a trust or estate that does not claim a deduction under either section 651 or 661 of the Internal Revenue Code.

 

(h) A corporation defined in section 290.9725 and its nonresident shareholders may make an election under this paragraph.  The provisions covering the partnership apply to the corporation and the provisions applying to the partner apply to the shareholder.

 

(i) Estates and trusts distributing current income only and the nonresident individual beneficiaries of the estates or trusts may make an election under this paragraph.  The provisions covering the partnership apply to the estate or trust.  The provisions applying to the partner apply to the beneficiary.


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(j) For the purposes of this subdivision, "income" means the partner's share of federal adjusted gross income from the partnership modified by the additions provided in section 290.0131, subdivisions 8 to 11 10 and 16, and the subtractions provided in:  (1) section 290.0132, subdivision 9, to the extent the amount is assignable or allocable to Minnesota under section 290.17; and (2) section 290.0132, subdivision 14.  The subtraction allowed under section 290.0132, subdivision 9, is only allowed on the composite tax computation to the extent the electing partner would have been allowed the subtraction.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 6.  Minnesota Statutes 2018, section 289A.12, subdivision 14, is amended to read:

 

Subd. 14.  Reporting exempt interest and exempt-interest dividends.  (a) A regulated investment company paying $10 or more in exempt-interest dividends to an individual who is a resident of Minnesota, or any person receiving $10 or more of exempt interest or exempt-interest dividends and paying as nominee to an individual who is a resident of Minnesota, must make a return indicating the amount of the exempt interest or exempt-interest dividends, the name, address, and Social Security number of the recipient, and any other information that the commissioner specifies.  The return must be provided to the recipient by February 15 of the year following the year of the payment.  The return provided to the recipient must include a clear statement, in the form prescribed by the commissioner, that the exempt interest or exempt-interest dividends must be included in the computation of Minnesota taxable income.  By June 1 of each year, the payer must file a copy of the return with the commissioner.

 

(b) For purposes of this subdivision, the following definitions apply.

 

(1) "Exempt-interest dividends" mean exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue Code, but does not include the portion of exempt-interest dividends that are not required to be added to federal taxable adjusted gross income under section 290.0131, subdivision 2, paragraph (b).

 

(2) "Regulated investment company" means regulated investment company as defined in section 851(a) of the Internal Revenue Code or a fund of the regulated investment company as defined in section 851(g) of the Internal Revenue Code.

 

(3) "Exempt interest" means 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, and exempt from federal income taxes under the Internal Revenue Code or any other federal statute.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 7.  Minnesota Statutes 2018, section 289A.20, is amended by adding a subdivision to read:

 

Subd. 1a.  Tax on deferred foreign income; election to pay in installments.  (a) A taxpayer subject to tax under section 290.06, subdivision 1, may elect to pay the net tax liability on the deferred foreign income in installments in the same percentages of the net tax liability for each taxable year as provided in section 965(h)(1) of the Internal Revenue Code.  Payment of an installment for a taxable year is due on the due date, determined without regard to any extensions of time for filing the return, for the tax return for that taxable year.

 

(b) If an acceleration of payment applies for federal income tax purposes under section 965(h)(3) of the Internal Revenue Code, the unpaid portion of the remaining installments due under chapter 290 must be paid on the same date as the federal tax is due.  Assessment of deficiencies must be prorated as provided under section 965(h)(4) of the Internal Revenue Code.


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(c) For purposes of determining date and time limits under sections 270C.62, 270C.63, 270C.67, and 270C.68, the date on which an installment is due under paragraph (a), including any acceleration under paragraph (b), must be treated as the assessment date, due date, or other date from which the time limit must be determined for that payment.

 

(d) For purposes of this subdivision, "net tax liability" means the excess of:

 

(1) the tax liability, determined under chapter 290, for the taxable year in which the deferred foreign income was includable in federal taxable income; over

 

(2) the tax liability, determined under chapter 290, for that taxable year computed after excluding the deferred foreign income under section 965 of the Internal Revenue Code.

 

(e) If a taxpayer has not made the first installment payment under paragraph (a), the taxpayer must pay the first installment payment at the same time and due date as the second installment payment.  For purposes of paragraph (c), payments under this paragraph are deemed to be due at the same time the second installment is due.

 

EFFECTIVE DATE.  This section is effective retroactively at the same time as the changes in Public Law 115‑97 relating to deferred foreign income were effective for federal purposes.

 

Sec. 8.  Minnesota Statutes 2018, section 289A.35, is amended to read:

 

289A.35 ASSESSMENTS ON RETURNS.

 

(a) The commissioner may audit and adjust the taxpayer's computation of federal adjusted gross income, federal taxable income, items of federal tax preferences, or federal credit amounts to make them conform with the provisions of chapter 290 or section 298.01.  If a return has been filed, the commissioner shall enter the liability reported on the return and may make any audit or investigation that is considered necessary.

 

(b) Upon petition by a taxpayer, and when the commissioner determines that it is in the best interest of the state, the commissioner may allow S corporations and partnerships to receive orders of assessment issued under section 270C.33, subdivision 4, on behalf of their owners, and to pay liabilities shown on such orders.  In such cases, the owners' liability must be calculated using the method provided in section 289A.08, subdivision 7, paragraph (b).

 

(c) A taxpayer may petition the commissioner for the use of the method described in paragraph (b) after the taxpayer is notified that an audit has been initiated and before an order of assessment has been issued.

 

(d) A determination of the commissioner under paragraph (b) to grant or deny the petition of a taxpayer cannot be appealed to the Tax Court or any other court.

 

(e) The commissioner may audit and adjust the taxpayer's computation of tax under chapter 291.  In the case of a return filed pursuant to section 289A.10, the commissioner shall notify the estate no later than nine months after the filing date, as provided by section 289A.38, subdivision 2, whether the return is under examination or the return has been processed as filed.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 9.  Minnesota Statutes 2018, section 290.01, is amended by adding a subdivision to read:

 

Subd. 3c.  Determination of marital status.  The determination of marital status is made by section 7703 of the Internal Revenue Code.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.


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Sec. 10.  Minnesota Statutes 2018, section 290.01, is amended by adding a subdivision to read:

 

Subd. 14a.  Surviving spouse.  The term "surviving spouse" means an individual who is a surviving spouse under section 2(a) of the Internal Revenue Code for the taxable year.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 11.  Minnesota Statutes 2018, section 290.01, subdivision 19, is amended to read:

 

Subd. 19.  Net income.  (a) For a trust or estate taxable under section 290.03, and a corporation taxable under section 290.02, 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 sections 290.0131 to 290.0136.

 

(b) For an individual, the term "net income" means federal adjusted gross income with the modifications provided in sections 290.0131, 290.0132, and 290.0135 to 290.0137.

 

(c) 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.

 

(d) 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.

 

(e) 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.

 

(f) The Internal Revenue Code of 1986, as amended through December 16, 2016 December 31, 2018, shall be in effect for taxable years beginning after December 31, 1996.

 

(g) Except as otherwise provided, references to the Internal Revenue Code in this subdivision and sections 290.0131 to 290.0136 mean the code in effect for purposes of determining net income for the applicable year.

 

EFFECTIVE DATE.  (a) The amendments to paragraphs (a) and (b) are effective for taxable years beginning after December 31, 2018.


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(b) The amendment to paragraph (f) is effective the day following final enactment, except the changes incorporated by federal changes are effective retroactively at the same time as the changes became effective for federal purposes, but are subject to the application of Minnesota Statutes, section 290.993.

 

Sec. 12.  Minnesota Statutes 2018, section 290.01, is amended by adding a subdivision to read:

 

Subd. 19i.  Deferred foreign income.  "Deferred foreign income" means the income of a domestic corporation that is included in net income under section 965 of the Internal Revenue Code, exclusive of the deduction allowed under section 965(c) of the Internal Revenue Code.

 

EFFECTIVE DATE.  This section is effective retroactively at the same time as the changes in Public Law 115‑97 relating to deferred foreign income were effective for federal purposes.

 

Sec. 13.  Minnesota Statutes 2018, section 290.01, is amended by adding a subdivision to read:

 

Subd. 21a.  Adjusted gross income; federal adjusted gross income.  The terms "adjusted gross income" and "federal adjusted gross income" mean adjusted gross income, as defined in section 62 of the Internal Revenue Code, as amended through the date named in subdivision 19, incorporating the federal effective date of changes to the Internal Revenue Code and any elections made by the taxpayer under the Internal Revenue Code in determining federal adjusted gross income for federal income tax purposes.

 

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

 

Sec. 14.  Minnesota Statutes 2018, section 290.01, subdivision 29a, is amended to read:

 

Subd. 29a.  State itemized deduction.  "State itemized deduction deductions" means federal itemized deductions, as defined in section 63(d) of the Internal Revenue Code, disregarding any limitation under section 68 of the Internal Revenue Code, and reduced by the amount of the addition required under section 290.0131, subdivision 13 the itemized deductions for individual income tax allowed under section 290.0122, subdivision 1, reduced by the limit under subdivision 10.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 15.  Minnesota Statutes 2018, 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 December 16, 2016 December 31, 2018.  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 the changes incorporated by the federal changes are effective retroactively at the same time as the changes became effective for federal purposes, but are subject to the application of Minnesota Statutes, section 290.993.

 

Sec. 16.  [290.0121] DEPENDENT EXEMPTION.

 

Subdivision 1.  Exemption amount.  (a) A taxpayer's dependent exemption equals:

 

(1) the exemption amount multiplied by the number of individuals who are dependents, as defined in section 152 of the Internal Revenue Code, of the taxpayer for the taxable year; minus


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(2) the disallowed exemption amount under subdivision 2, but the remainder may not be less than zero.

 

(b) The exemption amount equals $4,250.

 

Subd. 2.  Disallowed exemption amount(a) The disallowed exemption amount equals the exemption amount allowed under subdivision 1 multiplied by the applicable percentage.

 

(b) For a married individual filing a separate return, "applicable percentage" means two percentage points for each $1,250, or fraction of that amount, by which the taxpayer's federal adjusted gross income for the taxable year exceeds the threshold amount.  For all other filers, applicable percentage means two percentage points for each $2,500, or fraction of that amount, by which the taxpayer's federal adjusted gross income for the taxable year exceeds the threshold amount.  The applicable percentage must not exceed 100 percent.

 

(c) "Threshold amount" means:

 

(1) $291,950 for a joint return or a surviving spouse;

 

(2) $243,300 for a head of a household;

 

(3) $194,650 for an individual who is not married and who is not a surviving spouse or head of a household; and

 

(4) half the amount for a joint return for a married individual filing a separate return.

 

Subd. 3.  Inflation adjustment.  For taxable years beginning after December 31, 2019, the commissioner must adjust for inflation the exemption amount in subdivision 1, paragraph (a), clause (1), and the threshold amounts in subdivision 2, as provided in section 270C.22.  The statutory year is taxable year 2019.  The amounts as adjusted must be rounded down to the nearest $50 amount.  If the amount ends in $25, the amount is rounded down to the nearest $50 amount.  The threshold amount for married individuals filing separate returns must be one-half of the adjusted amount for married individuals filing joint returns.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 17.  [290.0122] ITEMIZED DEDUCTIONS.

 

Subdivision 1.  Itemized deductions.  A taxpayer's itemized deductions equal the sum of the amounts allowed as a deduction under this section, reduced by the amount calculated under subdivision 2.

 

Subd. 2.  Deductions limited; inflation adjustment.  (a) The itemized deductions of a taxpayer with adjusted gross income in excess of the applicable amount are reduced by the lesser of:

 

(1) three percent of the excess of the taxpayer's federal adjusted gross income over the applicable amount; or

 

(2) 80 percent of the amount of the taxpayer's itemized deductions.

 

(b) "Applicable amount" means $194,650, or $97,325 for a married individual filing a separate return.

 

(c) For the purposes of this subdivision, "itemized deductions" means the itemized deductions otherwise allowable to the taxpayer under subdivision 1, except itemized deductions excludes:

 

(1) the portion of the deduction for interest under subdivision 5 that represents investment interest;

 


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(2) the deduction for medical expenses under subdivision 6; and

 

(3) the deduction for losses under subdivision 8.

 

(d) For taxable years beginning after December 31, 2019, the commissioner must adjust for inflation the applicable amounts under paragraph (b) as provided in section 270C.22.  The statutory year is taxable year 2019.  The amounts as adjusted must be rounded down to the nearest $50 amount.  If the amount ends in $25, the amount is rounded down to the nearest $50 amount.  The threshold amount for married individuals filing separate returns must be one-half of the adjusted amount for married individuals filing joint returns.

 

Subd. 3.  Taxes paid.  (a) A taxpayer is allowed a deduction for taxes paid.  The deduction equals the sum of the following amounts for the taxable year:

 

(1) state and local personal property taxes, and state, local, and foreign real property taxes, in a total amount for both types not to exceed $10,000, or $5,000 for a married couple filing separate returns;

 

(2) foreign income, war profits, and excess profits taxes to the extent not reduced by the federal foreign tax credit; and

 

(3) for individuals who are allowed a federal foreign tax credit for taxes that do not qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover of subnational foreign taxes for the taxable year, but not to exceed the total subnational foreign taxes reported in claiming the foreign tax credit, and to the extent not deducted under clause (2).

 

(b) For purposes of this subdivision, the following terms have the meanings given them:

 

(1) "carryover of subnational foreign taxes" equals the carryover allowed under section 904(c) of the Internal Revenue Code minus national level foreign taxes to the extent they exceed the federal foreign tax credit;

 

(2) "federal foreign tax credit" means the credit allowed under section 27 of the Internal Revenue Code; and

 

(3) "foreign, income, war profits, and excess profits taxes" and "state and local real and personal property taxes" have the meanings given in section 164 of the Internal Revenue Code.

 

Subd. 4.  Charitable contributions.  (a) A taxpayer is allowed a deduction for charitable contributions.  The deduction equals the amount of the charitable contribution deduction allowable to the taxpayer under section 170 of the Internal Revenue Code, except that the provisions of section 170(b)(1)(G) apply regardless of the taxable year.

 

(b) For taxable years beginning after December 31, 2017, the determination of carryover amounts must be made by applying the rules under section 170 of the Internal Revenue Code based on the charitable contribution deductions claimed and allowable under this section.

 

Subd. 5.  Interest.  A taxpayer is allowed a deduction for interest.  The deduction equals the amount allowed to the taxpayer as interest paid or accrued during the taxable year under section 163 of the Internal Revenue Code with the following exceptions:

 

(1) qualified residence interest excludes home equity interest;

 

(2) acquisition indebtedness must not exceed $750,000, or $375,000 for a married separate return, for indebtedness incurred on or after December 16, 2017; and


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(3) mortgage insurance premiums treated as interest under section 163(h)(3)(E) are not interest for the purposes of this subdivision.

 

The definitions of terms under section 163 of the Internal Revenue Code apply for purposes of this subdivision.

 

Subd. 6.  Medical expenses.  A taxpayer is allowed a deduction for medical expenses.  The deduction equals the amount allowed under section 213 of the Internal Revenue Code, except that the threshold percentage of adjusted gross income in paragraph (a) is ten percent regardless of the federal percentage for the taxable year.

 

Subd. 7.  Unreimbursed employee expenses.  A taxpayer is allowed a deduction for unreimbursed employee expenses.  The deduction equals the amount of the taxpayer's trade or business expenses incurred as an employee and allowed under section 162 of the Internal Revenue Code in excess of two percent of the taxpayer's adjusted gross income, disregarding the suspension of the deduction in section 67, paragraph (g), of the Internal Revenue Code.

 

Subd. 8.  Losses.  A taxpayer is allowed a deduction for losses.  The deduction equals the amount allowed under sections 165(d) and 165(h) of the Internal Revenue Code, disregarding the limitation on personal casualty losses in paragraph (h)(5).

 

Subd. 9.  Miscellaneous deduction.  A taxpayer is allowed a miscellaneous deduction.  The deduction equals the sum of the following amounts for the taxable year:

 

(1) impairment-related work expenses allowed under section 67(d) of the Internal Revenue Code;

 

(2) the deduction for estate tax under section 691(c) of the Internal Revenue Code;

 

(3) any deduction allowable in connection with personal property used in a short sale as described under section 67(b)(8);

 

(4) the deduction under section 1341 of the Internal Revenue Code;

 

(5) the deduction under section 72(b)(3) of the Internal Revenue Code;

 

(6) the deduction under section 171 of the Internal Revenue Code; and

 

(7) the deduction under section 216 of the Internal Revenue Code.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 18.  [290.0123] STANDARD DEDUCTION.

 

Subdivision 1.  Standard deduction amount.  A taxpayer's standard deduction equals:

 

(1) for a married joint filer or a surviving spouse, $24,400;

 

(2) for a head of household filer, $18,350; or

 

(3) for any other filer, $12,200; plus

 

(4) the additional amount for the taxpayer under subdivision 2.

 

A taxpayer's standard deduction amount is reduced in accordance with subdivision 5.


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Subd. 2.  Additional amount for seniors or blind taxpayers.  (a) The additional amount equals the sum of the following amounts:

 

(1) $1,300 if the taxpayer has attained age 65 before the close of the taxable year or $1,650 for such a taxpayer who is not married or a surviving spouse;

 

(2) $1,300 for the spouse of the taxpayer if the spouse has attained the age of 65 before the close of the taxable year and qualifies for an exemption under section 151(b) of the Internal Revenue Code;

 

(3) $1,300 if the taxpayer is blind at the close of the taxable year or $1,650 for such a taxpayer who is not married or a surviving spouse; and

 

(4) $1,300 for the spouse of the taxpayer if the spouse is blind as of the close of the taxable year and qualifies for an exemption under section 151(b) of the Internal Revenue Code.

 

(b) The commissioner must disregard section 151(d)(5) of the Internal Revenue Code when determining if the taxpayer's spouse is eligible for an exemption under paragraph (a).

 

Subd. 3.  Amount for dependents.  For an individual who is a dependent, as defined in section 152 of the Internal Revenue Code, of another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins, the standard deduction for that individual is limited to the greater of:

 

(1) $500; or

 

(2) the sum of $250 and that individual's earned income, as defined in section 32(c) of the Internal Revenue Code.

 

Subd. 4.  Deduction disallowed.  The standard deduction is zero for (1) a married individual filing a separate return if either spouse itemizes deductions, and (2) an individual making a return for a period of less than twelve months on account of changes in the annual accounting period.

 

Subd. 5.  Deduction limited.  (a) The standard deduction of a taxpayer with adjusted gross income in excess of the applicable amount is reduced by the lesser of:

 

(1) three percent of the excess of the taxpayer's federal adjusted gross income over the applicable amount; or

 

(2) 80 percent of the standard deduction otherwise allowable under this section.

 

(b) "Applicable amount" means $194,650, or $97,325 for a married individual filing a separate return.

 

Subd. 6.  Inflation adjustment.  For taxable years beginning after December 31, 2019, the commissioner must adjust for inflation the standard deduction amounts in subdivision 1, the additional amounts in subdivision 2, and the applicable amounts in subdivision 5 as provided in section 270C.22.  The statutory year is taxable year 2019.  The amounts as adjusted must be rounded down to the nearest $50 amount.  The standard deduction amount for married individuals filing separate returns is one-half of the adjusted amount for married individuals filing joint returns.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.


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Sec. 19.  Minnesota Statutes 2018, section 290.0131, subdivision 1, is amended to read:

 

Subdivision 1.  Definition; scope.  (a) For the purposes of this section, "addition" means an amount that must be added to federal taxable income for a trust or an estate or federal adjusted gross income for an individual in computing net income for the taxable year to which the amounts relate.

 

(b) The additions in this section apply to individuals, estates, and trusts.

 

(c) Unless specifically indicated or unless the context clearly indicates otherwise, only amounts that were deducted or excluded in computing federal taxable income for a trust or an estate or federal adjusted gross income for individuals are an addition under this section.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 20.  Minnesota Statutes 2018, section 290.0131, subdivision 3, is amended to read:

 

Subd. 3.  Income, sales and use, motor vehicle sales, or excise taxes paid.  (a) For trusts and estates, 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, sales and use, motor vehicle sales, or excise taxes paid to any other state or to any province or territory of Canada is an addition to the extent deducted under section 63(d) of the Internal Revenue Code.

 

(b) The addition under paragraph (a) may not be more than the amount by which the state itemized deduction exceeds the amount of the standard deduction as defined in section 63(c) of the Internal Revenue Code.  For the purpose of this subdivision, income, sales and use, motor vehicle sales, or excise taxes are the last itemized deductions disallowed under subdivision 12.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 21.  Minnesota Statutes 2018, section 290.0131, subdivision 10, is amended to read:

 

Subd. 10.  Section 179 expensing.  For property placed in service in taxable years beginning before January 1, 2018, 80 percent of the amount by which the deduction allowed under the dollar limits of section 179 of the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal Revenue Code, as amended through December 31, 2003, is an addition.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2017.

 

Sec. 22.  Minnesota Statutes 2018, section 290.0131, is amended by adding a subdivision to read:

 

Subd. 15.  529 plan addition.  The lesser of the following amounts is an addition:

 

(1) the total distributions for the taxable year from a qualified plan under section 529 of the Internal Revenue Code, owned by the taxpayer, that are expended for qualified higher education expenses under section 529(c)(7) of the Internal Revenue Code (expenses for tuition for elementary or secondary public, private, or religious school); or

 

(2) the total amount required to be reported to the taxpayer by any trustee of a qualified tuition plan under section 529 of the Internal Revenue Code as earnings on Internal Revenue Service Form 1099Q for the taxable year.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2017.


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Sec. 23.  Minnesota Statutes 2018, section 290.0131, is amended by adding a subdivision to read:

 

Subd. 16.  Section 199A addition.  For trusts and estates, the amount deducted under section 199A of the Internal Revenue Code in computing the trust or estate's federal taxable income is an addition.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 24.  Minnesota Statutes 2018, section 290.0131, is amended by adding a subdivision to read:

 

Subd. 17.  Excess business losses.  (a) For taxable years beginning after December 31, 2025, the amount of a disallowed excess business loss under section 461(l) of the Internal Revenue Code is an addition, notwithstanding the limit on the limitation in section 461(l)(1) of the Internal Revenue Code to taxable years beginning before January 1, 2026. 

 

(b) A net operating loss carryover is allowed in an amount equal to the amount allowed under section 461(l)(2) of the Internal Revenue Code, but only to the extent that the amount of losses allowed under section 172 of the Internal Revenue Code plus the amount of the carryover allowed under this subdivision does not exceed the limitation on the net operating loss deduction under section 172(a) of the Internal Revenue Code for any taxable year.

 

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

 

Sec. 25.  Minnesota Statutes 2018, section 290.0131, is amended by adding a subdivision to read:

 

Subd. 18.  Moving expenses.  (a) For taxable years beginning after December 31, 2025, the amount of moving expenses deducted from adjusted gross income under section 217 of the Internal Revenue Code is an addition.

 

(b) For taxable years beginning after December 31, 2025, the amount of moving expenses excluded from gross income under section 132(a)(6) of the Internal Revenue Code is an addition, except in the case of a member of the Armed Forces of the United States on active duty who moves pursuant to a military order and incident to a permanent change of station.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2025.

 

Sec. 26.  Minnesota Statutes 2018, section 290.0132, subdivision 1, is amended to read:

 

Subdivision 1.  Definition; scope.  (a) For the purposes of this section, "subtraction" means an amount that shall be subtracted from federal taxable income for a trust or an estate or federal adjusted gross income for an individual in computing net income for the taxable year to which the amounts relate.

 

(b) The subtractions in this section apply to individuals, estates, and trusts.

 

(c) Unless specifically indicated or unless the context clearly indicates otherwise, no amount deducted, subtracted, or otherwise excluded in computing federal taxable income for a trust or an estate or federal adjusted gross income for an individual is a subtraction under this section.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 27.  Minnesota Statutes 2018, section 290.0132, subdivision 7, is amended to read:

 

Subd. 7.  Charitable contributions for taxpayers who do not itemize.  To the extent not deducted or not deductible under section 408(d)(8)(E) of the Internal Revenue Code in determining federal taxable income by For an individual who does not itemize deductions for federal income tax purposes under section 290.0132, subdivision 19,


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for the taxable year, an amount equal to 50 percent of the excess of charitable contributions over $500 allowable as a deduction for the taxable year under section 170(a) of the Internal Revenue Code 290.0122, subdivision 4, is a subtraction.  The subtraction under this subdivision must not include a distribution that is excluded from federal adjusted gross income and that is not deductible under section 408(d)(8)(E) of the Internal Revenue Code.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 28.  Minnesota Statutes 2018, section 290.0132, subdivision 18, is amended to read:

 

Subd. 18.  Net operating losses.  (a) The amount of the net operating loss allowed under section 290.095, subdivision 11, paragraph (c), is a subtraction.

 

(b) The amount of the net operating loss carryover allowed under section 290.0131, subdivision 17, is a subtraction.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2025.

 

Sec. 29.  Minnesota Statutes 2018, section 290.0132, subdivision 19, is amended to read:

 

Subd. 19.  Disallowed Standard or itemized deductions.  (a) The standard deduction amount allowed under section 290.0123, subdivision 1, is a subtraction.

 

(b) A taxpayer may elect to claim a subtraction equal to the amount of the limitation on itemized deductions calculated under section 68(b) of the Internal Revenue Code is a subtraction 290.0122, subdivision 1, in lieu of the subtraction for the standard deduction in paragraph (a).

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 30.  Minnesota Statutes 2018, section 290.0132, subdivision 20, is amended to read:

 

Subd. 20.  Disallowed Personal Dependent exemption.  The amount of the phaseout of personal exemptions under section 151(d) of the Internal Revenue Code is a subtraction.  The dependent exemption amount under section 290.0121 is a subtraction.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 31.  Minnesota Statutes 2018, section 290.0132, subdivision 21, is amended to read:

 

Subd. 21.  Military service pension; retirement pay.  To the extent included in federal taxable adjusted gross income, compensation received from a pension or other retirement pay from the federal government for service in the military, as computed under United States Code, title 10, sections 1401 to 1414, 1447 to 1455, and 12733, is a subtraction.  The subtraction is limited to individuals who do not claim the credit under section 290.0677.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 32.  Minnesota Statutes 2018, section 290.0132, is amended by adding a subdivision to read:

 

Subd. 27.  Deferred foreign income of nonresidents.  For a nonresident individual the amount of deferred foreign income as defined in section 290.01, subdivision 19, is a subtraction.

 

EFFECTIVE DATE.  This section is effective retroactively at the same time as the changes in Public Law 115‑97 relating to deferred foreign income were effective for federal purposes.


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Sec. 33.  Minnesota Statutes 2018, section 290.0132, is amended by adding a subdivision to read:

 

Subd. 28.  Global intangible low-taxed income.  The amount of global intangible low-taxed income included in gross income under section 951A of the Internal Revenue Code is a subtraction.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2017.

 

Sec. 34.  Minnesota Statutes 2018, section 290.0133, subdivision 6, is amended to read:

 

Subd. 6.  Special deductions.  (a) The amount of any special deductions under sections 241 to 247, 250, and 965, except paragraph (h) of section 965, of the Internal Revenue Code is an addition.

 

(b) The addition under this subdivision is reduced by the amount of the deduction under section 245A of the Internal Revenue Code for an amount included in federal taxable income in a prior taxable year under section 965 of the Internal Revenue Code.

 

EFFECTIVE DATE.  This section is effective retroactively at the same time as the changes in Public Law 115‑97, relating to deferred foreign income and global intangible low-taxed income, were effective for federal purposes.

 

Sec. 35.  Minnesota Statutes 2018, section 290.0133, subdivision 12, is amended to read:

 

Subd. 12.  Section 179 expensing.  For property placed in service in taxable years beginning before January 1, 2018, 80 percent of the amount by which the deduction allowed under the dollar limits of section 179 of the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal Revenue Code, as amended through December 31, 2003, is an addition.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2017.

 

Sec. 36.  Minnesota Statutes 2018, section 290.0134, is amended by adding a subdivision to read:

 

Subd. 27.  Global intangible low-taxed income.  The amount of global intangible low-taxed income included in gross income under section 951A of the Internal Revenue Code is a subtraction.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2017.

 

Sec. 37.  Minnesota Statutes 2018, section 290.032, subdivision 2, is amended to read:

 

Subd. 2.  Computation.  The amount of tax imposed by subdivision 1 shall be computed in the same way as the tax imposed under section 402(d) of the Internal Revenue Code of 1986, as amended through December 31, 1995, except that the initial separate tax shall be an amount equal to five times the tax which would be imposed by section 290.06, subdivision 2c, if the recipient was an unmarried individual, and the taxable net income was an amount equal to one-fifth of the excess of

 

(i) the total taxable amount of the lump-sum distribution for the year, over

 

(ii) the minimum distribution allowance, and except that references in section 402(d) of the Internal Revenue Code of 1986, as amended through December 31, 1995, to paragraph (1)(A) thereof shall instead be references to subdivision 1, and the excess, if any, of the subtraction base amount over federal taxable net income for a qualified individual as provided under section 290.0802, subdivision 2.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.


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Sec. 38.  Minnesota Statutes 2018, section 290.05, subdivision 3, is amended to read:

 

Subd. 3.  Taxes imposed on exempt entities.  (a) An organization exempt from taxation under subdivision 2 shall, nevertheless, be subject to tax under this chapter to the extent provided in the following provisions of the Internal Revenue Code:

 

(1) section 527 (dealing with political organizations);

 

(2) section 528 (dealing with certain homeowners associations);

 

(3) sections 511 to 515 (dealing with unrelated business income);

 

(4) section 521 (dealing with farmers' cooperatives); and

 

(5) section 6033(e)(2) (dealing with lobbying expense); but notwithstanding this subdivision, shall be considered an organization exempt from income tax for the purposes of any law which refers to organizations exempt from income taxes.

 

(b) The tax shall be imposed on the taxable income of political organizations or homeowner associations or the unrelated business taxable income, as defined in section 512 of the Internal Revenue Code, of organizations defined in section 511 of the Internal Revenue Code, provided that the tax is not imposed on:

 

(1) advertising revenues from a newspaper published by an organization described in section 501(c)(4) of the Internal Revenue Code; or

 

(2) revenues from lawful gambling authorized under chapter 349 that are expended for purposes that qualify for the deduction for charitable contributions under section 170 of the Internal Revenue Code, disregarding the limitation under section 170(b)(2), but only to the extent the contributions are not deductible in computing federal taxable income; or

 

(3) amounts included in unrelated business taxable income under section 512(a)(7) of the Internal Revenue Code.

 

The tax shall be at the corporate rates.  The tax shall only be imposed on income and deductions assignable to this state under sections 290.17 to 290.20.  To the extent deducted in computing federal taxable income, the deductions contained in section 290.21 shall not be allowed in computing Minnesota taxable net income.

 

(c) The tax shall be imposed on organizations subject to federal tax under section 6033(e)(2) of the Internal Revenue Code, in an amount equal to the corporate tax rate multiplied by the amount of lobbying expenses taxed under section 6033(e)(2) which are attributable to lobbying the Minnesota state government.

 

(d) In calculating unrelated business taxable income under section 512 of the Internal Revenue Code, the amount of any net operating loss deduction claimed under section 172 of the Internal Revenue Code is an addition.  Taxpayers making an addition under this paragraph may deduct a net operating loss for the taxable year in the same manner as a corporation under section 290.095, in a form and manner prescribed by the commissioner, and may calculate the loss without the application of the limitation provided for under section 512(a)(6) of the Internal Revenue Code.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2017.


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Sec. 39.  Minnesota Statutes 2018, section 290.06, subdivision 2d, is amended to read:

 

Subd. 2d.  Inflation adjustment of brackets.  (a) For taxable years beginning after December 31, 2013, The commissioner shall annually adjust the minimum and maximum dollar amounts for each rate bracket for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the percentage determined under paragraph (b).  For the purpose of making the adjustment as provided in this subdivision all of the rate brackets provided in subdivision 2c shall be the rate brackets as they existed for taxable years beginning after December 31, 2012, and before January 1, 2014 as provided in section 270C.22.  The statutory year is taxable year 2019.  The rate applicable to any rate bracket must not be changed.  The dollar amounts setting forth the tax shall be adjusted to reflect the changes in the rate brackets.  The rate brackets as adjusted must be rounded to the nearest $10 amount.  If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.

 

(b) The commissioner shall adjust the rate brackets and by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) the word "2012" shall be substituted for the word "1992."  For 2014, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2012, to the 12 months ending on August 31, 2013, and in each subsequent year, from the 12 months ending on August 31, 2012, to the 12 months ending on August 31 of the year preceding the taxable year.  The determination of the commissioner pursuant to this subdivision shall not be considered a "rule" and shall not be subject to the Administrative Procedure Act contained in chapter 14.

 

No later than December 15 of each year, the commissioner shall announce the specific percentage that will be used to adjust the tax rate brackets.

 

EFFECTIVE DATE.  This section is effective for adjustments beginning with taxable years beginning after December 31, 2019.

 

Sec. 40.  Minnesota Statutes 2018, section 290.06, subdivision 2h, is amended to read:

 

Subd. 2h.  Section 529 plan recapture.  (a) For the purposes of this subdivision:

 

(1) the definitions under section 290.0684 apply;

 

(2) "account owner" means an individual who owns one or more qualified accounts;

 

(3) "credit ratio" means the ratio of (i) two times the total amount of credits that an account owner claimed under section 290.0684 for contributions to the account owner's qualified accounts to (ii) the total contributions in all taxable years to the account owner's qualified accounts; and

 

(4) "qualified higher education expenses" has the meaning given in section 529(e)(3) of the Internal Revenue Code, except section 529(c)(7) does not apply; and

 

(5) "subtraction ratio" means the ratio of (i) the total amount of subtractions that an account owner claimed under section 290.0132, subdivision 23, for contributions to the account owner's qualified accounts to (ii) the total contributions in all taxable years to the account owner's qualified accounts.

 

(b) If a distribution from a qualified account is used for a purpose other than to pay for qualified higher education expenses, the account owner must pay an additional tax equal to:

 

(1) 50 percent of the product of the credit ratio and the amount of the distribution; plus

 

(2) ten percent of the product of the subtraction ratio and the amount of the distribution.


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(c) The additional tax under this subdivision does not apply to any portion of a distribution that is subject to the additional tax under section 529(c)(6) of the Internal Revenue Code.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2017.

 

Sec. 41.  Minnesota Statutes 2018, section 290.067, subdivision 2b, is amended to read:

 

Subd. 2b.  Inflation adjustment.  The commissioner shall annually adjust the dollar amount of the income threshold at which the maximum credit begins to be reduced under subdivision 1 by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) the word "2016" shall be substituted for the word "1992."  For 2018, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2016, to the 12 months ending on August 31, 2017, and in each subsequent year, from the 12 months ending on August 31, 2016, to the 12 months ending on August 31 of the year preceding the taxable year.  The determination of the commissioner pursuant to this subdivision must not be considered a "rule" and is not subject to the Administrative Procedure Act contained in chapter 14.  The threshold amount as adjusted must be rounded to the nearest $10 amount.  If the amount ends in $5, the amount is rounded up to the nearest $10 amount as provided in section 270C.22.  The statutory year is taxable year 2019.

 

EFFECTIVE DATE.  This section is effective for adjustments beginning with taxable years beginning after December 31, 2019.

 

Sec. 42.  Minnesota Statutes 2018, section 290.0671, subdivision 7, is amended to read:

 

Subd. 7.  Inflation adjustment.  The commissioner shall annually adjust the earned income amounts used to calculate the credit and the income phase-out thresholds at which the maximum credit begins to be reduced in subdivision 1 must be adjusted for inflation.  The commissioner shall adjust by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) the word "2013" shall be substituted for the word "1992."  For 2015, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2013, to the 12 months ending on August 31, 2014, and in each subsequent year, from the 12 months ending on August 31, 2013, to the 12 months ending on August 31 of the year preceding the taxable year.  The earned income thresholds as adjusted for inflation must be rounded to the nearest $10 amount.  If the amount ends in $5, the amount is rounded up to the nearest $10 amount.  The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act as provided in section 270C.22.  The statutory year is taxable year 2019.

 

EFFECTIVE DATE.  This section is effective for adjustments for taxable years beginning after December 31, 2019.

 

Sec. 43.  Minnesota Statutes 2018, section 290.0672, subdivision 1, is amended to read:

 

Subdivision 1.  Definitions.  (a) For purposes of this section, the following terms have the meanings given.

 

(b) "Long-term care insurance" means a policy that:

 

(1) qualifies for a deduction under section 213 of the Internal Revenue Code, disregarding the adjusted gross income test; or meets the requirements given in section 62A.46; or provides similar coverage issued under the laws of another jurisdiction; and

 

(2) has a lifetime long-term care benefit limit of not less than $100,000; and

 

(3) has been offered in compliance with the inflation protection requirements of section 62S.23.


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(c) "Qualified beneficiary" means the taxpayer or the taxpayer's spouse.

 

(d) "Premiums deducted in determining federal taxable net income" means the lesser of (1) long-term care insurance premiums that qualify as deductions under section 213 of the Internal Revenue Code; and (2) the total amount deductible for medical care under section 213 of the Internal Revenue Code section 290.0122, subdivision 6, if the taxpayer itemizes deductions for the tax year.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 44.  Minnesota Statutes 2018, section 290.0672, subdivision 2, is amended to read:

 

Subd. 2.  Credit.  A taxpayer is allowed a credit against the tax imposed by this chapter for long-term care insurance policy premiums paid during the tax year.  The credit for each policy equals 25 percent of premiums paid to the extent not deducted in determining federal taxable net income.  A taxpayer may claim a credit for only one policy for each qualified beneficiary.  A maximum of $100 applies to each qualified beneficiary.  The maximum total credit allowed per year is $200 for married couples filing joint returns and $100 for all other filers.  For a nonresident or part-year resident, the credit determined under this section must be allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 45.  Minnesota Statutes 2018, section 290.0675, subdivision 1, is amended to read:

 

Subdivision 1.  Definitions.  (a) For purposes of this section the following terms have the meanings given.

 

(b) "Earned income" means the sum of the following, to the extent included in Minnesota taxable income:

 

(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;

 

(2) income received from a retirement pension, profit-sharing, stock bonus, or annuity plan; and

 

(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue Code.

 

(c) "Taxable income" means net income as defined in section 290.01, subdivision 19.

 

(d) "Earned income of lesser-earning spouse" means the earned income of the spouse with the lesser amount of earned income as defined in paragraph (b) for the taxable year minus the sum of (i) the amount for one exemption under section 151(d) of the Internal Revenue Code 290.0121, subdivision 1, paragraph (b), and (ii) one-half the amount of the standard deduction under section 63(c)(2)(A) and (4) of the Internal Revenue Code 290.0123.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 46.  Minnesota Statutes 2018, section 290.0681, subdivision 1, is amended to read:

 

Subdivision 1.  Definitions.  (a) For purposes of this section, the following terms have the meanings given.

 

(b) "Account" means the historic credit administration account in the special revenue fund.

 

(c) "Office" means the State Historic Preservation Office of the Department of Administration.


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(d) "Project" means rehabilitation of a certified historic structure, as defined in section 47(c)(3)(A) of the Internal Revenue Code, that is located in Minnesota and is allowed a federal credit.

 

(e) "Federal credit" means the credit allowed under section 47(a)(2) of the Internal Revenue Code, except that the amount allowed is deemed to be allocated in the taxable year that the project is placed in service.

 

(f) "Placed in service" has the meaning used in section 47 of the Internal Revenue Code.

 

(g) "Qualified rehabilitation expenditures" has the meaning given in section 47 of the Internal Revenue Code.

 

EFFECTIVE DATE.  This section is effective for applications for allocation certificates submitted after December 31, 2018.

 

Sec. 47.  Minnesota Statutes 2018, section 290.0681, subdivision 2, is amended to read:

 

Subd. 2.  Credit or grant allowed; certified historic structure.  (a) A credit is allowed against the tax imposed under this chapter equal to not more than 100 percent of the credit allowed under section 47(a)(2) 47(a) of the Internal Revenue Code for a project.  The credit is payable in full in the taxable year the project is placed in service.  To qualify for the credit:

 

(1) the project must receive Part 3 certification and be placed in service during the taxable year; and

 

(2) the taxpayer must be allowed the federal credit and be issued a credit certificate for the taxable year as provided in subdivision 4.

 

(b) The commissioner of administration may pay a grant in lieu of the credit.  The grant equals 90 percent of the credit that would be allowed for the project.  The grant is payable in full in the taxable year the project is placed in service.

 

(c) In lieu of the credit under paragraph (a), an insurance company may claim a credit against the insurance premiums tax imposed under chapter 297I.

 

EFFECTIVE DATE.  This section is effective for applications for allocation certificates submitted after December 31, 2018.

 

Sec. 48.  Minnesota Statutes 2018, section 290.0684, subdivision 1, is amended to read:

 

Subdivision 1.  Definitions.  (a) For purposes of this section, the following terms have the meanings given them.

 

(b) "Contribution" means the amount contributed to one or more qualified accounts except that the amount:

 

(1) is reduced by any withdrawals or distributions, other than transfers or rollovers to another qualified account, from a qualified account during the taxable year; and

 

(2) excludes the amount of any transfers or rollovers from a qualified account made during the taxable year.

 

(c) "Federal adjusted gross income" has the meaning given under section 62(a) of the Internal Revenue Code.

 

(d) "Qualified account" means an account qualifying under section 529 of the Internal Revenue Code.

 

(e) "Qualified higher education expenses" has the meaning given in section 529 of the Internal Revenue Code.

 

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


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Sec. 49.  Minnesota Statutes 2018, section 290.0684, subdivision 2, is amended to read:

 

Subd. 2.  Credit allowed.  (a) An individual who is a resident of Minnesota is allowed a credit against the tax imposed by this chapter.  The credit is not allowed to an individual who is eligible to be claimed as a dependent, as defined in sections 151 and 152 of the Internal Revenue Code.  The credit may not exceed the liability for tax under this chapter.

 

(b) The amount of the credit allowed equals 50 percent of contributions for the taxable year.  The maximum credit is $500, subject to the phaseout in paragraphs (c) and (d).  In no case is the credit less than zero.

 

(c) For individual filers, the maximum credit is reduced by two percent of adjusted gross income in excess of $75,000.

 

(d) For married couples filing a joint return, the maximum credit is phased out as follows:

 

(1) for married couples with adjusted gross income in excess of $75,000, but not more than $100,000, the maximum credit is reduced by one percent of adjusted gross income in excess of $75,000;

 

(2) for married couples with adjusted gross income in excess of $100,000, but not more than $135,000, the maximum credit is $250; and

 

(3) for married couples with adjusted gross income in excess of $135,000, the maximum credit is $250, reduced by one percent of adjusted gross income in excess of $135,000.

 

(e) The commissioner shall annually adjust the income thresholds in paragraphs (c) and (d) used to calculate the maximum credit must be adjusted for inflation.  The commissioner shall adjust the income thresholds by the percentage determined under the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) the word "2016" is substituted for the word "1992."  For 2018, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2016, to the 12 months ending on August 31, 2017, and in each subsequent year, from the 12 months ending on August 31, 2016, to the 12 months ending on August 31 of the year preceding the taxable year.  The income thresholds as adjusted for inflation must be rounded to the nearest $10 amount.  If the amount ends in $5, the amount is rounded up to the nearest $10 amount.  The determination of the commissioner under this subdivision is not subject to chapter 14, including section 14.386 as provided in section 270C.22.  The statutory year is taxable year 2019.

 

EFFECTIVE DATE.  This section is effective for adjustments beginning with taxable years beginning after December 31, 2019.

 

Sec. 50.  Minnesota Statutes 2018, section 290.0802, subdivision 2, is amended to read:

 

Subd. 2.  Subtraction.  (a) A qualified individual is allowed a subtraction from federal taxable adjusted gross income of the individual's subtraction base amount.  The excess of the subtraction base amount over the taxable net income computed without regard to the subtraction for the elderly or disabled under section 290.0132, subdivision 5, may be used to reduce the amount of a lump sum distribution subject to tax under section 290.032.

 

(b)(1) The initial subtraction base amount equals

 

(i) $12,000 for a married taxpayer filing a joint return if a spouse is a qualified individual,

 

(ii) $9,600 for a single taxpayer, and

 

(iii) $6,000 for a married taxpayer filing a separate federal return.


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(2) The qualified individual's initial subtraction base amount, then, must be reduced by the sum of nontaxable retirement and disability benefits and one-half of the amount of adjusted gross income in excess of the following thresholds:

 

(i) $18,000 for a married taxpayer filing a joint return if both spouses are qualified individuals,

 

(ii) $14,500 for a single taxpayer or for a married couple filing a joint return if only one spouse is a qualified individual, and

 

(iii) $9,000 for a married taxpayer filing a separate federal return.

 

(3) In the case of a qualified individual who is under the age of 65, the maximum amount of the subtraction base may not exceed the taxpayer's disability income.

 

(4) The resulting amount is the subtraction base amount.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 51.  Minnesota Statutes 2018, section 290.091, subdivision 2, is amended to read:

 

Subd. 2.  Definitions.  For purposes of the tax imposed by this section, the following terms have the meanings given.

 

(a) "Alternative minimum taxable income" means the sum of the following for the taxable year:

 

(1) the taxpayer's federal alternative minimum taxable income as defined in section 55(b)(2) of the Internal Revenue Code;

 

(2) the taxpayer's itemized deductions allowed in computing federal alternative minimum taxable income, but excluding:

 

(i) the charitable contribution deduction under section 170 of the Internal Revenue Code;

 

(ii) the medical expense deduction;

 

(iii) the casualty, theft, and disaster loss deduction; and

 

(iv) the impairment-related work expenses of a disabled person;

 

(3) for depletion allowances computed under section 613A(c) of the Internal Revenue Code, with respect to each property (as defined in section 614 of the Internal Revenue Code), to the extent not included in federal alternative minimum taxable income, the excess of the deduction for depletion allowable under section 611 of the Internal Revenue Code for the taxable year over the adjusted basis of the property at the end of the taxable year (determined without regard to the depletion deduction for the taxable year);

 

(4) to the extent not included in federal alternative minimum taxable income, the amount of the tax preference for intangible drilling cost under section 57(a)(2) of the Internal Revenue Code determined without regard to subparagraph (E);

 

(5) to the extent not included in federal alternative minimum taxable income, the amount of interest income as provided by section 290.0131, subdivision 2; and


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(6) the amount of addition required by section 290.0131, subdivisions 9 to 11;, 10, and 16; and

 

(7) the deduction allowed under section 199A of the Internal Revenue Code, to the extent not included in the addition required under clause (6);

 

less the sum of the amounts determined under the following:

 

(i) interest income as defined in section 290.0132, subdivision 2;

 

(ii) an overpayment of state income tax as provided by section 290.0132, subdivision 3, to the extent included in federal alternative minimum taxable income;

 

(iii) the amount of investment interest paid or accrued within the taxable year on indebtedness to the extent that the amount does not exceed net investment income, as defined in section 163(d)(4) of the Internal Revenue Code.  Interest does not include amounts deducted in computing federal adjusted gross income;

 

(iv) amounts subtracted from federal taxable income as provided by section 290.0132, subdivisions 7, 9 to 15, 17, 21, 24, and 26 to 29; and

 

(v) the amount of the net operating loss allowed under section 290.095, subdivision 11, paragraph (c); and

 

(vi) the amount allowable as a Minnesota itemized deduction under section 290.0122, subdivision 7.

 

In the case of an estate or trust, alternative minimum taxable income must be computed as provided in section 59(c) of the Internal Revenue Code, except alternative minimum taxable income must be increased by the addition in section 290.0131, subdivision 16.

 

(b) "Investment interest" means investment interest as defined in section 163(d)(3) of the Internal Revenue Code.

 

(c) "Net minimum tax" means the minimum tax imposed by this section.

 

(d) "Regular tax" means the tax that would be imposed under this chapter (without regard to this section and section 290.032), reduced by the sum of the nonrefundable credits allowed under this chapter.

 

(e) "Tentative minimum tax" equals 6.75 percent of alternative minimum taxable income after subtracting the exemption amount determined under subdivision 3.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 52.  Minnesota Statutes 2018, section 290.091, subdivision 3, is amended to read:

 

Subd. 3.  Exemption amount.  (a) For purposes of computing the alternative minimum tax, the exemption amount is, for taxable years beginning after December 31, 2005, $60,000 for married couples filing joint returns, $30,000 for married individuals filing separate returns, estates, and trusts, and $45,000 for unmarried individuals.

 

(b) The exemption amount determined under this subdivision is subject to the phase out under section 55(d)(3) 55(d)(2) of the Internal Revenue Code, except that alternative minimum taxable income as determined under this section must be substituted in the computation of the phase out, and section 55(d)(4) of the Internal Revenue Code does not apply.


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(c) For taxable years beginning after December 31, 2006, The commissioner shall annually adjust the exemption amount under amounts in paragraph (a) must be adjusted for inflation.  The commissioner shall adjust the exemption amount by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) the word "2005" shall be substituted for the word "1992."  For 2007, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2005, to the 12 months ending on August 31, 2006, and in each subsequent year, from the 12 months ending on August 31, 2005, to the 12 months ending on August 31 of the year preceding the taxable year.  The exemption amount as adjusted must be rounded to the nearest $10.  If the amount ends in $5, it must be rounded up to the nearest $10 amount.  The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act as provided in section 270C.22.  The statutory year is taxable year 2019.

 

EFFECTIVE DATE.  (a) The amendment to paragraph (b) is effective the day following final enactment.

 

(b) The amendment to paragraph (c) is effective for taxable years beginning after December 31, 2019.

 

Sec. 53.  Minnesota Statutes 2018, section 290.0921, subdivision 2, is amended to read:

 

Subd. 2.  Definitions.  (a) For purposes of this section, the following terms have the meanings given them.

 

(b) "Alternative minimum taxable net income" is alternative minimum taxable income,

 

(1) less the exemption amount, and

 

(2) apportioned or allocated to Minnesota under section 290.17, 290.191, or 290.20.

 

(c) The "exemption amount" is $40,000, reduced, but not below zero, by 25 percent of the excess of alternative minimum taxable income over $150,000.

 

(d) "Minnesota alternative minimum taxable income" is alternative minimum taxable net income, less the deductions for alternative tax net operating loss under subdivision 4; and dividends received under subdivision 6.  The sum of the deductions under this paragraph may not exceed 90 percent of alternative minimum taxable net income.  This limitation does not apply to:

 

(1) a deduction for dividends paid to or received from a corporation which is subject to tax under section 290.36 and which is a member of an affiliated group of corporations as defined by the Internal Revenue Code; or

 

(2) a deduction for dividends received from a property and casualty insurer as defined under section 60A.60, subdivision 8, which is a member of an affiliated group of corporations as defined by the Internal Revenue Code and either:  (i) the dividend is eliminated in consolidation under Treasury Regulation 1.1502-14(a), as amended through December 31, 1989; or (ii) the dividend is deducted under an election under section 243(b) of the Internal Revenue Code.

 

(e) "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through December 16, 2016.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 54.  Minnesota Statutes 2018, section 290.0922, subdivision 1, is amended to read:

 

Subdivision 1.  Imposition.  (a) In addition to the tax imposed by this chapter without regard to this section, the franchise tax imposed on a corporation required to file under section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation under section 290.9725 for the taxable year includes a tax equal to the following amounts:


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If the sum of the corporation's Minnesota property, payrolls, and sales or receipts is: 

 

 

 

the tax equals: 

 

 

 

less than

 

 

$930,000

 

 

$0

 

 

 

$930,000

to

 

$1,869,999

 

 

$190

 

 

 

$1,870,000

to

 

$9,339,999

 

 

$560

 

 

 

$9,340,000

to

 

$18,679,999

 

 

$1,870

 

 

 

$18,680,000

to

 

$37,359,999

 

 

$3,740

 

 

 

$37,360,000

or

more

 

 

 

$9,340

 

 

(b) A tax is imposed for each taxable year on a corporation required to file a return under section 289A.12, subdivision 3, that is treated as an "S" corporation under section 290.9725 and on a partnership required to file a return under section 289A.12, subdivision 3, other than a partnership that derives over 80 percent of its income from farming.  The tax imposed under this paragraph is due on or before the due date of the return for the taxpayer due under section 289A.18, subdivision 1.  The commissioner shall prescribe the return to be used for payment of this tax.  The tax under this paragraph is equal to the following amounts:

 

If the sum of the S corporation's or partnership's Minnesota property, payrolls, and sales or receipts is:

 

 

 

the tax equals: 

 

 

 

less than

 

 

$930,000

 

 

$0

 

 

 

$930,000

to

 

$1,869,999

 

 

$190

 

 

 

$1,870,000

to

 

$9,339,999

 

 

$560

 

 

 

$9,340,000

to

 

$18,679,999

 

 

$1,870

 

 

 

$18,680,000

to

 

$37,359,999

 

 

$3,740

 

 

 

$37,360,000

or

more

 

 

 

$9,340

 

 

(c) The commissioner shall annually adjust the dollar amounts of both the tax and the property, payrolls, and sales or receipts thresholds in paragraphs (a) and (b) by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) the word "2012" must be substituted for the word "1992."  For 2014, the commissioner shall determine the percentage change from the 12 months ending on August 31, 2012, to the 12 months ending on August 31, 2013, and in each subsequent year, from the 12 months ending on August 31, 2012, to the 12 months ending on August 31 of the year preceding the taxable year.  The determination of the commissioner pursuant to this subdivision is not a "rule" subject to the Administrative Procedure Act contained in chapter 14 as provided in section 270C.22.  The statutory year is taxable year 2019.  The tax amounts as adjusted must be rounded to the nearest $10 amount and the threshold amounts must be adjusted to the nearest $10,000 amount.  For tax amounts that end in $5, the amount is rounded up to the nearest $10 amount and for the threshold amounts that end in $5,000, the amount is rounded up to the nearest $10,000.

 

EFFECTIVE DATE.  This section is effective for adjustments beginning with taxable years beginning after December 31, 2019.

 

Sec. 55.  Minnesota Statutes 2018, section 290.095, subdivision 2, is amended to read:

 

Subd. 2.  Defined and limited.  (a) The term "net operating loss" as used in this section shall mean a net operating loss as defined in section 172(c) of the Internal Revenue Code, with the modifications specified in subdivision 4.  The deductions provided in section 290.21 cannot be used in the determination of a net operating loss.

 

(b) The term "net operating loss deduction" as used in this section means the aggregate of the net operating loss carryovers to the taxable year, computed in accordance with subdivision 3.  The provisions of section 172(b) of the Internal Revenue Code relating to the carryback of net operating losses, do not apply.


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(c) The amount of net operating loss deduction under this section must not exceed 80 percent of taxable net income in a single taxable year.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2017.

 

Sec. 56.  Minnesota Statutes 2018, section 290.17, subdivision 2, is amended to read:

 

Subd. 2.  Income not derived from conduct of a trade or business.  The income of a taxpayer subject to the allocation rules that is not derived from the conduct of a trade or business must be assigned in accordance with paragraphs (a) to (f):

 

(a)(1) Subject to paragraphs (a)(2) and (a)(3), income from wages as defined in section 3401(a) and, (f), and (i) of the Internal Revenue Code is assigned to this state if, and to the extent that, the work of the employee is performed within it; all other income from such sources is treated as income from sources without this state.

 

Severance pay shall be considered income from labor or personal or professional services.

 

(2) In the case of an individual who is a nonresident of Minnesota and who is an athlete or entertainer, income from compensation for labor or personal services performed within this state shall be determined in the following manner:

 

(i) the amount of income to be assigned to Minnesota for an individual who is a nonresident salaried athletic team employee shall be determined by using a fraction in which the denominator contains the total number of days in which the individual is under a duty to perform for the employer, and the numerator is the total number of those days spent in Minnesota.  For purposes of this paragraph, off-season training activities, unless conducted at the team's facilities as part of a team imposed program, are not included in the total number of duty days.  Bonuses earned as a result of play during the regular season or for participation in championship, play-off, or all-star games must be allocated under the formula.  Signing bonuses are not subject to allocation under the formula if they are not conditional on playing any games for the team, are payable separately from any other compensation, and are nonrefundable; and

 

(ii) the amount of income to be assigned to Minnesota for an individual who is a nonresident, and who is an athlete or entertainer not listed in item (i), for that person's athletic or entertainment performance in Minnesota shall be determined by assigning to this state all income from performances or athletic contests in this state.

 

(3) For purposes of this section, amounts received by a nonresident as "retirement income" as defined in section (b)(1) of the State Income Taxation of Pension Income Act, Public Law 104-95, are not considered income derived from carrying on a trade or business or from wages or other compensation for work an employee performed in Minnesota, and are not taxable under this chapter.

 

(b) Income or gains from tangible property located in this state that is not employed in the business of the recipient of the income or gains must be assigned to this state.

 

(c) Income or gains from intangible personal property not employed in the business of the recipient of the income or gains must be assigned to this state if the recipient of the income or gains is a resident of this state or is a resident trust or estate.

 

Gain on the sale of a partnership interest is allocable to this state in the ratio of the original cost of partnership tangible property in this state to the original cost of partnership tangible property everywhere, determined at the time of the sale.  If more than 50 percent of the value of the partnership's assets consists of intangibles, gain or loss from the sale of the partnership interest is allocated to this state in accordance with the sales factor of the partnership for its first full tax period immediately preceding the tax period of the partnership during which the partnership interest was sold.


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Gain on the sale of an interest in a single member limited liability company that is disregarded for federal income tax purposes is allocable to this state as if the single member limited liability company did not exist and the assets of the limited liability company are personally owned by the sole member.

 

Gain on the sale of goodwill or income from a covenant not to compete that is connected with a business operating all or partially in Minnesota is allocated to this state to the extent that the income from the business in the year preceding the year of sale was allocable to Minnesota under subdivision 3.

 

When an employer pays an employee for a covenant not to compete, the income allocated to this state is in the ratio of the employee's service in Minnesota in the calendar year preceding leaving the employment of the employer over the total services performed by the employee for the employer in that year.

 

(d) Income from winnings on a bet made by an individual while in Minnesota is assigned to this state.  In this paragraph, "bet" has the meaning given in section 609.75, subdivision 2, as limited by section 609.75, subdivision 3, clauses (1), (2), and (3).

 

(e) All items of gross income not covered in paragraphs (a) to (d) and not part of the taxpayer's income from a trade or business shall be assigned to the taxpayer's domicile.

 

(f) For the purposes of this section, working as an employee shall not be considered to be conducting a trade or business.

 

EFFECTIVE DATE.  This section is effective for wages paid after December 31, 2018.

 

Sec. 57.  Minnesota Statutes 2018, section 290.17, is amended by adding a subdivision to read:

 

Subd. 4a.  Controlled foreign corporations.  (a) For purposes of applying subdivision 4, a controlled foreign corporation as defined in section 957 of the Internal Revenue Code is deemed to be a domestic corporation if:

 

(1) a United States shareholder of a controlled foreign corporation is required for the taxable year to include in gross income the shareholder's global intangible low-taxed income under section 951A of the Internal Revenue Code; and

 

(2) the commissioner determines that the controlled foreign corporation is a member of a unitary group.

 

The determination made by the commissioner under clause (2) is prima facie correct and valid and the taxpayer subject to this determination has the burden of establishing the determination's incorrectness or invalidity in any related action or proceeding.

 

(b) For purposes of imposing a tax under this chapter, the federal taxable income of a controlled foreign corporation deemed to be a domestic corporation under this subdivision must be computed as follows:

 

(1) a profit and loss statement must be prepared in the currency in which the books of account of the controlled foreign corporation are regularly maintained;

 

(2) except as determined by the commissioner, adjustments must be made to the profit and loss statement to conform the statement to the accounting principles generally accepted in the United States for the preparation of those statements;

 

(3) adjustments must be made to the profit and loss statement to conform it to the tax accounting standards required by the commissioner;


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(4) unless otherwise authorized by the commissioner, the profit and loss statement of each member of the combined group, and the apportionment factors related to the combined group, whether domestic or foreign, must be converted into the currency in which the parent company maintains its books and records; and

 

(5) income apportioned to this state must be expressed in United States dollars.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 58.  Minnesota Statutes 2018, section 290.17, is amended by adding a subdivision to read:

 

Subd. 4b.  Worldwide election.  (a) Taxpayer members of a unitary group, one or more members of which are subject to the requirements of subdivision 4a, paragraph (a), for the taxable year may elect to determine each of their apportioned shares of the net business income or loss of the combined group under a worldwide election.  Under such an election, taxpayer members must take into account the entire income and apportionment factors of each member of the unitary group, regardless of the place where a member is incorporated or formed.  Corporations or other entities incorporated or formed outside of the United States are subject to the requirements of subdivision 4a, paragraph (b), in reporting their income.

 

(b) A worldwide election is effective only if made on a timely filed, original return for the tax year by each member of the unitary group subject to tax under this chapter.

 

(c) A worldwide election is binding for and applies to the taxable year it is made and for the ten following taxable years.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 59.  Minnesota Statutes 2018, section 290.17, is amended by adding a subdivision to read:

 

Subd. 4c.  Withdrawal; reinstitution.  (a) The election under subdivision 4b, paragraph (a), may be withdrawn:

 

(1) after expiration of the ten-year period in subdivision 4b, paragraph (c), provided that the withdrawal is made in writing within one year of the expiration of the election; or

 

(2) prior to the expiration of the ten-year period, if the taxpayer members:

 

(i) file a written withdrawal request with the commissioner of revenue;

 

(ii) would experience an extraordinary hardship due to unforeseen changes in this state's tax statutes, laws, or policies; and

 

(iii) receive written permission from the commissioner approving the withdrawal, which the commissioner may grant.

 

(b) A withdrawal made under paragraph (a) is binding for ten years.  If no withdrawal is properly made under paragraph (a), clause (1), the worldwide election is binding for an additional ten taxable years.  If the commissioner grants written permission to withdraw under paragraph (a), clause (2), the commissioner must impose any requirement deemed necessary to prevent evasion of tax or to clearly reflect income for the election period before or after withdrawal.


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(c) Notwithstanding the requirement binding withdrawal for ten years under paragraph (b), the election may be reinstituted if the taxpayer members:

 

(1) file a written reinstitution request with the commissioner of revenue;

 

(2) would experience an extraordinary hardship due to unforeseen changes in this state's tax statutes, laws, or policies; and

 

(3) receive written permission from the commissioner approving the reinstitution, which the commissioner may grant.

 

(d) A reinstitution under paragraph (c) is binding for a period of ten years.  The withdrawal provisions of paragraph (a) apply to a reinstitution under paragraph (c), and the provisions of paragraph (c) apply to a reinstitution following a subsequent withdrawal.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 60.  Minnesota Statutes 2018, section 290.21, is amended by adding a subdivision to read:

 

Subd. 9.  Controlled foreign corporations.  The net income of a domestic corporation that is included pursuant to sections 951 and 965 of the Internal Revenue Code is dividend income.

 

EFFECTIVE DATE.  This section is effective retroactively at the same time as the changes in Public Law 115‑97 relating to deferred foreign income were effective for federal purposes.

 

Sec. 61.  Minnesota Statutes 2018, section 290.34, is amended by adding a subdivision to read:

 

Subd. 5.  Insurance companies; interest expense limitation.  To be consistent with the federal treatment of the interest expense limitation under section 163(j) of the Internal Revenue Code for an affiliated group that includes an insurance company taxable under chapter 297I and exempt from taxation under section 290.05, subdivision 1, clause (c), the rules under this subdivision apply.  In that case, the interest expense limitation under section 163(j) of the Internal Revenue Code must be computed for the corporation subject to tax under this chapter using the adjusted taxable income of the insurance companies that are part of the affiliated group and taxed under chapter 297I.  For purposes of this subdivision, "affiliated group" means the corporations included in the federal consolidated return for the taxable year.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2017.

 

Sec. 62.  Minnesota Statutes 2018, section 290.34, is amended by adding a subdivision to read:

 

Subd. 6.  Affiliated corporations filing a combined report; interest expense limitation.  Section 163(j) of the Internal Revenue Code shall be applied to affiliated corporations permitted or required to file a combined report under section 290.17, subdivision 4, consistent with the application of section 163(j) to a consolidated group of corporations for federal income tax purposes.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2017.

 

Sec. 63.  Minnesota Statutes 2018, section 290.92, subdivision 1, is amended to read:

 

Subdivision 1.  Definitions.  (1) Wages.  For purposes of this section, the term "wages" means the same as that term is defined in section 3401(a) and, (f), and (i) of the Internal Revenue Code.


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(2) Payroll period.  For purposes of this section the term "payroll period" means a period for which a payment of wages is ordinarily made to the employee by the employee's employer, and the term "miscellaneous payroll period" means a payroll period other than a daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual, or annual payroll period.

 

(3) Employee.  For purposes of this section the term "employee" means any resident individual performing services for an employer, either within or without, or both within and without the state of Minnesota, and every nonresident individual performing services within the state of Minnesota, the performance of which services constitute, establish, and determine the relationship between the parties as that of employer and employee.  As used in the preceding sentence, the term "employee" includes an officer of a corporation, and an officer, employee, or elected official of the United States, a state, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing.

 

(4) Employer.  For purposes of this section the term "employer" means any person, including individuals, fiduciaries, estates, trusts, partnerships, limited liability companies, and corporations transacting business in or deriving any income from sources within the state of Minnesota for whom an individual performs or performed any service, of whatever nature, as the employee of such person, except that if the person for whom the individual performs or performed the services does not have control of the payment of the wages for such services, the term "employer," except for purposes of paragraph (1), means the person having control of the payment of such wages.  As used in the preceding sentence, the term "employer" includes any corporation, individual, estate, trust, or organization which is exempt from taxation under section 290.05 and further includes, but is not limited to, officers of corporations who have control, either individually or jointly with another or others, of the payment of the wages.

 

(5) Number of withholding exemptions claimed.  For purposes of this section, the term "number of withholding exemptions claimed" means the number of withholding exemptions claimed in a withholding exemption certificate in effect under subdivision 5, except that if no such certificate is in effect, the number of withholding exemptions claimed shall be considered to be zero.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 64.  Minnesota Statutes 2018, section 290.92, subdivision 5, is amended to read:

 

Subd. 5.  Exemptions.  (1) Entitlement.  An employee receiving wages shall on any day be entitled to claim withholding exemptions in a number not to exceed the number of withholding exemptions that the employee claims and that are allowable pursuant to section 3402(f)(1), (m), and (n) of the Internal Revenue Code for federal withholding purposes, except:

 

(i) the standard deduction amount for the purposes of section 3402(f)(1)(E) of the Internal Revenue Code shall be the amount calculated under section 290.0123, subdivision 1; and

 

(ii) the exemption amount for the purposes of section 3402(f)(1)(A) of the Internal Revenue Code shall be the amount calculated under section 290.0121, subdivision 1.

 

(2) Withholding exemption certificate.  The provisions concerning exemption certificates contained in section 3402(f)(2) and (3) of the Internal Revenue Code shall apply.

 

(3) Form of certificate.  Withholding exemption certificates shall be in such form and contain such information as the commissioner may by rule prescribe.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.


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Sec. 65.  [290.993] SPECIAL LIMITED ADJUSTMENT.

 

(a) For an individual income taxpayer subject to tax under section 290.06, subdivision 2c, or a partnership that elects to file a composite return under section 289A.08, subdivision 7, for taxable years beginning after December 31, 2017, and before January 1, 2019, the following special rules apply:

 

(1) an individual income taxpayer may:  (i) take the standard deduction; or (ii) make an election under section 63(e) of the Internal Revenue Code to itemize, for Minnesota individual income tax purposes, regardless of the choice made on their federal return; and

 

(2) there is an adjustment to tax equal to the difference between the tax calculated under this chapter using the Internal Revenue Code as amended through December 16, 2016, and the tax calculated under this chapter using the Internal Revenue Code amended through December 31, 2018, before the application of credits.  The end result must be zero additional tax due or refund.

 

(b) The adjustment in paragraph (a), clause (2), does not apply to any changes due to sections 11012, 13101, 13201, 13202, 13203, 13204, 13205, 13207, 13301, 13302, 13303, 13313, 13502, 13503, 13801, 14101, 14102, 14103, 14202, 14211 through 14215, and 14501 of Public Law 115-97; and section 40411 of Public Law 115-123.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2017, and before January 1, 2019.

 

Sec. 66.  Minnesota Statutes 2018, section 290A.03, subdivision 3, is amended to read:

 

Subd. 3.  Income.  (a) "Income" means the sum of the following:

 

(1) federal adjusted gross income as defined in the Internal Revenue Code; and

 

(2) the sum of the following amounts to the extent not included in clause (1):

 

(i) all nontaxable income;

 

(ii) the amount of a passive activity loss that is not disallowed as a result of section 469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity loss carryover allowed under section 469(b) of the Internal Revenue Code;

 

(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a solvent individual excluded from gross income under section 108(g) of the Internal Revenue Code;

 

(iv) cash public assistance and relief;

 

(v) any pension or annuity (including railroad retirement benefits, all payments received under the federal Social Security Act, Supplemental Security Income, and veterans benefits), which was not exclusively funded by the claimant or spouse, or which was funded exclusively by the claimant or spouse and which funding payments were excluded from federal adjusted gross income in the years when the payments were made;

 

(vi) interest received from the federal or a state government or any instrumentality or political subdivision thereof;

 

(vii) workers' compensation;


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(viii) nontaxable strike benefits;

 

(ix) the gross amounts of payments received in the nature of disability income or sick pay as a result of accident, sickness, or other disability, whether funded through insurance or otherwise;

 

(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 1986, as amended through December 31, 1995;

 

(xi) contributions made by the claimant to an individual retirement account, including a qualified voluntary employee contribution; simplified employee pension plan; self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal Revenue Code, to the extent the sum of amounts exceeds the retirement base amount for the claimant and spouse;

 

(xii) to the extent not included in federal adjusted gross income, distributions received by the claimant or spouse from a traditional or Roth style retirement account or plan;

 

(xiii) nontaxable scholarship or fellowship grants;

 

(xiv) the amount of deduction allowed under section 199 of the Internal Revenue Code alimony received to the extent not included in the recipient's income;

 

(xv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue Code;

 

(xvi) the amount deducted for tuition expenses under section 222 of the Internal Revenue Code; and

 

(xvii) the amount deducted for certain expenses of elementary and secondary school teachers under section 62(a)(2)(D) of the Internal Revenue Code.

 

In the case of an individual who files an income tax return on a fiscal year basis, the term "federal adjusted gross income" shall mean federal adjusted gross income reflected in the fiscal year ending in the calendar year.  Federal adjusted gross income shall not be reduced by the amount of a net operating loss carryback or carryforward or a capital loss carryback or carryforward allowed for the year.

 

(b) "Income" does not include:

 

(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;

 

(2) amounts of any pension or annuity which was exclusively funded by the claimant or spouse and which funding payments were not excluded from federal adjusted gross income in the years when the payments were made;

 

(3) to the extent included in federal adjusted gross income, amounts contributed by the claimant or spouse to a traditional or Roth style retirement account or plan, but not to exceed the retirement base amount reduced by the amount of contributions excluded from federal adjusted gross income, but not less than zero;

 

(4) surplus food or other relief in kind supplied by a governmental agency;

 

(5) relief granted under this chapter;

 

(6) child support payments received under a temporary or final decree of dissolution or legal separation; or


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(7) restitution payments received by eligible individuals and excludable interest as defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107-16.; or

 

(8) alimony paid.

 

(c) The sum of the following amounts may be subtracted from income:

 

(1) for the claimant's first dependent, the exemption amount multiplied by 1.4;

 

(2) for the claimant's second dependent, the exemption amount multiplied by 1.3;

 

(3) for the claimant's third dependent, the exemption amount multiplied by 1.2;

 

(4) for the claimant's fourth dependent, the exemption amount multiplied by 1.1;

 

(5) for the claimant's fifth dependent, the exemption amount; and

 

(6) if the claimant or claimant's spouse was disabled or attained the age of 65 on or before December 31 of the year for which the taxes were levied or rent paid, the exemption amount.

 

(d) For purposes of this subdivision, the following terms have the meanings given: 

 

(1) "exemption amount" means the exemption amount under section 151(d) of the Internal Revenue Code 290.0121, subdivision 1, paragraph (b), for the taxable year for which the income is reported;

 

(2) "retirement base amount" means the deductible amount for the taxable year for the claimant and spouse under section 219(b)(5)(A) of the Internal Revenue Code, adjusted for inflation as provided in section 219(b)(5)(C) of the Internal Revenue Code, without regard to whether the claimant or spouse claimed a deduction; and

 

(3) "traditional or Roth style retirement account or plan" means retirement plans under sections 401, 403, 408, 408A, and 457 of the Internal Revenue Code.

 

EFFECTIVE DATE.  This section is effective beginning with refunds based on property taxes payable in 2020 and rent paid in 2019.

 

Sec. 67.  Minnesota Statutes 2018, section 290A.03, subdivision 12, is amended to read:

 

Subd. 12.  Gross rent.  (a) "Gross rent" means rental paid for the right of occupancy, at arm's length, of a homestead, exclusive of charges for any medical services furnished by the landlord as a part of the rental agreement, whether expressly set out in the rental agreement or not.

 

(b) The gross rent of a resident of a nursing home or intermediate care facility is $350 per month.  The gross rent of a resident of an adult foster care home is $550 per month.  Beginning for rent paid in 2002, The commissioner shall annually adjust for inflation the gross rent amounts stated in this paragraph.  The adjustment must be made in accordance with section 1(f) of the Internal Revenue Code, except that for purposes of this paragraph the percentage increase shall be determined from the year ending on June 30, 2001, to the year ending on June 30 of the year in which the rent is paid.  The commissioner shall round the gross rents to the nearest $10 amount.  If the amount ends in $5, the commissioner shall round it up to the next $10 amount.  The determination of the commissioner under this paragraph is not a rule under the Administrative Procedure Act as provided in section 270C.22.  The statutory year is 2020.


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(c) If the landlord and tenant have not dealt with each other at arm's length and the commissioner determines that the gross rent charged was excessive, the commissioner may adjust the gross rent to a reasonable amount for purposes of this chapter.

 

(d) Any amount paid by a claimant residing in property assessed pursuant to section 273.124, subdivision 3, 4, 5, or 6 for occupancy in that property shall be excluded from gross rent for purposes of this chapter.  However, property taxes imputed to the homestead of the claimant or the dwelling unit occupied by the claimant that qualifies for homestead treatment pursuant to section 273.124, subdivision 3, 4, 5, or 6 shall be included within the term "property taxes payable" as defined in subdivision 13, notwithstanding the fact that ownership is not in the name of the claimant.

 

EFFECTIVE DATE.  This section is effective for adjustments beginning with refunds based on rent paid in 2019.

 

Sec. 68.  Minnesota Statutes 2018, 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 December 16, 2016 December 31, 2018.

 

EFFECTIVE DATE.  This section is effective beginning with refunds based on property taxes payable in 2020 and rent paid in 2019.

 

Sec. 69.  Minnesota Statutes 2018, section 290A.04, subdivision 4, is amended to read:

 

Subd. 4.  Inflation adjustment.  (a) Beginning for property tax refunds payable in calendar year 2002, The commissioner shall annually adjust the dollar amounts of the income thresholds and the maximum refunds under subdivisions 2 and 2a for inflation.  The commissioner shall make the inflation adjustments in accordance with section 1(f) of the Internal Revenue Code, except that for purposes of this subdivision the percentage increase shall be determined as provided in this subdivision as provided in section 270C.22.  The statutory year is 2020.

 

(b) In adjusting the dollar amounts of the income thresholds and the maximum refunds under subdivision 2 for inflation, the percentage increase shall be determined from the year ending on June 30, 2013, to the year ending on June 30 of the year preceding that in which the refund is payable.

 

(c) In adjusting the dollar amounts of the income thresholds and the maximum refunds under subdivision 2a for inflation, the percentage increase shall be determined from the year ending on June 30, 2013, to the year ending on June 30 of the year preceding that in which the refund is payable.

 

(d) The commissioner shall use the appropriate percentage increase to annually adjust the income thresholds and maximum refunds under subdivisions 2 and 2a for inflation without regard to whether or not the income tax brackets are adjusted for inflation in that year.  The commissioner shall round the thresholds and the maximum amounts, as adjusted to the nearest $10 amount.  If the amount ends in $5, the commissioner shall round it up to the next $10 amount.

 

(e) The commissioner shall annually announce the adjusted refund schedule at the same time provided under section 290.06.  The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.

 

EFFECTIVE DATE.  This section is effective for adjustments for refunds based on rent paid in 2020 and property taxes payable in 2021.


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Sec. 70.  Minnesota Statutes 2018, section 291.005, subdivision 1, is amended to read:

 

Subdivision 1.  Scope.  Unless the context otherwise clearly requires, the following terms used in this chapter shall have the following meanings:

 

(1) "Commissioner" means the commissioner of revenue or any person to whom the commissioner has delegated functions under this chapter.

 

(2) "Federal gross estate" means the gross estate of a decedent as required to be valued and otherwise determined for federal estate tax purposes under the Internal Revenue Code, increased by the value of any property in which the decedent had a qualifying income interest for life and for which an election was made under section 291.03, subdivision 1d, for Minnesota estate tax purposes, but was not made for federal estate tax purposes.

 

(3) "Internal Revenue Code" means the United States Internal Revenue Code of 1986, as amended through December 16, 2016 December 31, 2018.

 

(4) "Minnesota gross estate" means the federal gross estate of a decedent after (a) excluding therefrom any property included in the estate which has its situs outside Minnesota, and (b) including any property omitted from the federal gross estate which is includable in the estate, has its situs in Minnesota, and was not disclosed to federal taxing authorities.

 

(5) "Nonresident decedent" means an individual whose domicile at the time of death was not in Minnesota.

 

(6) "Personal representative" means the executor, administrator or other person appointed by the court to administer and dispose of the property of the decedent.  If there is no executor, administrator or other person appointed, qualified, and acting within this state, then any person in actual or constructive possession of any property having a situs in this state which is included in the federal gross estate of the decedent shall be deemed to be a personal representative to the extent of the property and the Minnesota estate tax due with respect to the property.

 

(7) "Resident decedent" means an individual whose domicile at the time of death was in Minnesota.  The provisions of section 290.01, subdivision 7, paragraphs (c) and (d), apply to determinations of domicile under this chapter.

 

(8) "Situs of property" means, with respect to:

 

(i) real property, the state or country in which it is located;

 

(ii) tangible personal property, the state or country in which it was normally kept or located at the time of the decedent's death or for a gift of tangible personal property within three years of death, the state or country in which it was normally kept or located when the gift was executed;

 

(iii) a qualified work of art, as defined in section 2503(g)(2) of the Internal Revenue Code, owned by a nonresident decedent and that is normally kept or located in this state because it is on loan to an organization, qualifying as exempt from taxation under section 501(c)(3) of the Internal Revenue Code, that is located in Minnesota, the situs of the art is deemed to be outside of Minnesota, notwithstanding the provisions of item (ii); and

 

(iv) intangible personal property, the state or country in which the decedent was domiciled at death or for a gift of intangible personal property within three years of death, the state or country in which the decedent was domiciled when the gift was executed.


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For a nonresident decedent with an ownership interest in a pass-through entity with assets that include real or tangible personal property, situs of the real or tangible personal property, including qualified works of art, is determined as if the pass-through entity does not exist and the real or tangible personal property is personally owned by the decedent.  If the pass-through entity is owned by a person or persons in addition to the decedent, ownership of the property is attributed to the decedent in proportion to the decedent's capital ownership share of the pass-through entity.

 

(9) "Pass-through entity" includes the following:

 

(i) an entity electing S corporation status under section 1362 of the Internal Revenue Code;

 

(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;

 

(iii) a single-member limited liability company or similar entity, regardless of whether it is taxed as an association or is disregarded for federal income tax purposes under Code of Federal Regulations, title 26, section 301.7701-3; or

 

(iv) a trust to the extent the property is includible includable in the decedent's federal gross estate; but excludes

 

(v) an entity whose ownership interest securities are traded on an exchange regulated by the Securities and Exchange Commission as a national securities exchange under section 6 of the Securities Exchange Act, United States Code, title 15, section 78f.

 

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

 

Sec. 71.  Minnesota Statutes 2018, section 297A.68, subdivision 25, is amended to read:

 

Subd. 25.  Sale of property used in a trade or business.  (a) The sale of tangible personal property primarily used in a trade or business is exempt if the sale is not made in the normal course of business of selling that kind of property and if one of the following conditions is satisfied:

 

(1) the sale occurs in a transaction subject to or described in section 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, or 1033 of the Internal Revenue Code, as amended through December 16, 2016;

 

(2) the sale is between members of a controlled group as defined in section 1563(a) of the Internal Revenue Code;

 

(3) the sale is a sale of farm machinery;

 

(4) the sale is a farm auction sale;

 

(5) the sale is a sale of substantially all of the assets of a trade or business; or

 

(6) the total amount of gross receipts from the sale of trade or business property made during the calendar month of the sale and the preceding 11 calendar months does not exceed $1,000.

 

The use, storage, distribution, or consumption of tangible personal property acquired as a result of a sale exempt under this subdivision is also exempt.

 

(b) For purposes of this subdivision, the following terms have the meanings given.


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(1) A "farm auction" is a public auction conducted by a licensed auctioneer if substantially all of the property sold consists of property used in the trade or business of farming and property not used primarily in a trade or business.

 

(2) "Trade or business" includes the assets of a separate division, branch, or identifiable segment of a trade or business if, before the sale, the income and expenses attributable to the separate division, branch, or identifiable segment could be separately ascertained from the books of account or record (the lease or rental of an identifiable segment does not qualify for the exemption).

 

(3) A "sale of substantially all of the assets of a trade or business" must occur as a single transaction or a series of related transactions within the 12-month period beginning on the date of the first sale of assets intended to qualify for the exemption provided in paragraph (a), clause (5).

 

EFFECTIVE DATE.  This section is effective retroactively for sales and purchases made after December 31, 2017.

 

Sec. 72.  Minnesota Statutes 2018, section 297B.03, is amended to read:

 

297B.03 EXEMPTIONS.

 

There is specifically exempted from the provisions of this chapter and from computation of the amount of tax imposed by it the following:

 

(1) purchase or use, including use under a lease purchase agreement or installment sales contract made pursuant to section 465.71, of any motor vehicle by the United States and its agencies and instrumentalities and by any person described in and subject to the conditions provided in section 297A.67, subdivision 11;

 

(2) purchase or use of any motor vehicle by any person who was a resident of another state or country at the time of the purchase and who subsequently becomes a resident of Minnesota, provided the purchase occurred more than 60 days prior to the date such person began residing in the state of Minnesota and the motor vehicle was registered in the person's name in the other state or country;

 

(3) purchase or use of any motor vehicle by any person making a valid election to be taxed under the provisions of section 297A.90;

 

(4) purchase or use of any motor vehicle previously registered in the state of Minnesota when such transfer constitutes a transfer within the meaning of section 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 1563(a) of the Internal Revenue Code, as amended through December 16, 2016;

 

(5) purchase or use of any vehicle owned by a resident of another state and leased to a Minnesota-based private or for-hire carrier for regular use in the transportation of persons or property in interstate commerce provided the vehicle is titled in the state of the owner or secured party, and that state does not impose a sales tax or sales tax on motor vehicles used in interstate commerce;

 

(6) purchase or use of a motor vehicle by a private nonprofit or public educational institution for use as an instructional aid in automotive training programs operated by the institution.  "Automotive training programs" includes motor vehicle body and mechanical repair courses but does not include driver education programs;

 

(7) purchase of a motor vehicle by an ambulance service licensed under section 144E.10 when that vehicle is equipped and specifically intended for emergency response or for providing ambulance service;


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(8) purchase of a motor vehicle by or for a public library, as defined in section 134.001, subdivision 2, as a bookmobile or library delivery vehicle;

 

(9) purchase of a ready-mixed concrete truck;

 

(10) purchase or use of a motor vehicle by a town for use exclusively for road maintenance, including snowplows and dump trucks, but not including automobiles, vans, or pickup trucks;

 

(11) purchase or use of a motor vehicle by a corporation, society, association, foundation, or institution organized and operated exclusively for charitable, religious, or educational purposes, except a public school, university, or library, but only if the vehicle is:

 

(i) a truck, as defined in section 168.002, a bus, as defined in section 168.002, or a passenger automobile, as defined in section 168.002, if the automobile is designed and used for carrying more than nine persons including the driver; and

 

(ii) intended to be used primarily to transport tangible personal property or individuals, other than employees, to whom the organization provides service in performing its charitable, religious, or educational purpose;

 

(12) purchase of a motor vehicle for use by a transit provider exclusively to provide transit service is exempt if the transit provider is either (i) receiving financial assistance or reimbursement under section 174.24 or 473.384, or (ii) operating under section 174.29, 473.388, or 473.405;

 

(13) purchase or use of a motor vehicle by a qualified business, as defined in section 469.310, located in a job opportunity building zone, if the motor vehicle is principally garaged in the job opportunity building zone and is primarily used as part of or in direct support of the person's operations carried on in the job opportunity building zone.  The exemption under this clause applies to sales, if the purchase was made and delivery received during the duration of the job opportunity building zone.  The exemption under this clause also applies to any local sales and use tax;

 

(14) purchase of a leased vehicle by the lessee who was a participant in a lease-to-own program from a charitable organization that is:

 

(i) described in section 501(c)(3) of the Internal Revenue Code; and

 

(ii) licensed as a motor vehicle lessor under section 168.27, subdivision 4; and

 

(15) purchase of a motor vehicle used exclusively as a mobile medical unit for the provision of medical or dental services by a federally qualified health center, as defined under title 19 of the Social Security Act, as amended by Section 4161 of the Omnibus Budget Reconciliation Act of 1990.

 

EFFECTIVE DATE.  This section is effective retroactively for sales and purchases made after December 31, 2017.

 

Sec. 73.  Minnesota Statutes 2018, section 462D.06, subdivision 1, is amended to read:

 

Subdivision 1.  Subtraction.  (a) As provided in section 290.0132, subdivision 25, an account holder is allowed a subtraction from the federal taxable adjusted gross income equal to interest or dividends earned on the first-time home buyer savings account during the taxable year.


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(b) The subtraction under paragraph (a) is allowed each year for the taxable years including and following the taxable year in which the account was established.  No person other than the account holder is allowed a subtraction under this section.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 74.  Minnesota Statutes 2018, section 462D.06, subdivision 2, is amended to read:

 

Subd. 2.  Addition.  (a) As provided in section 290.0131, subdivision 14, an account holder must add to federal taxable adjusted gross income the following amounts:

 

(1) the amount in excess of the total contributions for all taxable years that is withdrawn and used for other than eligible costs, or for a transfer permitted under section 462D.04, subdivision 2; and

 

(2) the amount remaining in the first-time home buyer savings account at the close of the tenth taxable year that exceeds the total contributions to the account for all taxable years.

 

(b) For an account that received a transfer under section 462D.04, subdivision 2, the ten-year period under paragraph (a), clause (2), ends at the close of the earliest taxable year that applies to either account under that clause.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 75.  Minnesota Statutes 2018, section 469.316, subdivision 1, is amended to read:

 

Subdivision 1.  Application.  An individual, estate, or trust operating a trade or business in a job opportunity building zone, and an individual, estate, or trust making a qualifying investment in a qualified business operating in a job opportunity building zone qualifies for the exemptions from taxes imposed under chapter 290, as provided in this section.  The exemptions provided under this section apply only to the extent that the income otherwise would be taxable under chapter 290.  Subtractions under this section from federal adjusted gross income, federal taxable income, alternative minimum taxable income, or any other base subject to tax are limited to the amount that otherwise would be included in the tax base absent the exemption under this section.  This section applies only to taxable years beginning during the duration of the job opportunity building zone.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 76.  SPECIAL PROVISION FOR TAX YEAR 2017.

 

Notwithstanding any law to the contrary or other provision of this article, sections 40202 and 40203 of Public Law 115-123 shall not apply for the purpose of calculating net income under section 290.01, subdivision 6, for taxable years beginning after December 31, 2016, and before January 1, 2018.

 

Sec. 77.  REVISOR INSTRUCTION.

 

The commissioner of revenue must promptly notify the revisor of statutes in writing of the adjusted statutory year amounts for each of the statutory sections that are indexed for inflation under section 270C.22.  The revisor shall publish the updated statutory amounts in the 2019 Supplement of Minnesota Statutes.

 

Sec. 78.  REPEALER.

 

Minnesota Statutes 2018, sections 290.0131, subdivisions 7, 11, 12, and 13; 290.0132, subdivision 8; 290.0133, subdivisions 13 and 14; and 290.10, subdivision 2, are repealed.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.


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ARTICLE 2

INDIVIDUAL INCOME, CORPORATE FRANCHISE,

AND ESTATE TAXES

 

Section 1.  Minnesota Statutes 2018, section 116J.8737, subdivision 1, is amended to read:

 

Subdivision 1.  Definitions.  (a) For the purposes of this section, the following terms have the meanings given.

 

(b) "Qualified small business" means a business that has been certified by the commissioner under subdivision 2.

 

(c) "Qualified investor" means an investor who has been certified by the commissioner under subdivision 3.

 

(d) "Qualified fund" means a pooled angel investment network fund that has been certified by the commissioner under subdivision 4.

 

(e) "Qualified investment" means a cash investment in a qualified small business of a minimum of:

 

(1) $10,000 in a calendar year by a qualified investor; or

 

(2) $7,500 in a calendar year by a qualified investor in qualified greater Minnesota businesses or minority- or women-owned businesses in Minnesota; or

 

(2) (3) $30,000 in a calendar year by a qualified fund.

 

A qualified investment must be made in exchange for common stock, a partnership or membership interest, preferred stock, debt with mandatory conversion to equity, or an equivalent ownership interest as determined by the commissioner.

 

(f) "Family" means a family member within the meaning of the Internal Revenue Code, section 267(c)(4).

 

(g) "Pass-through entity" means a corporation that for the applicable taxable year is treated as an S corporation or a general partnership, limited partnership, limited liability partnership, trust, or limited liability company and which for the applicable taxable year is not taxed as a corporation under chapter 290.

 

(h) "Intern" means a student of an accredited institution of higher education, or a former student who has graduated in the past six months from an accredited institution of higher education, who is employed by a qualified small business in a nonpermanent position for a duration of nine months or less that provides training and experience in the primary business activity of the business.

 

(i) "Liquidation event" means a conversion of qualified investment for cash, cash and other consideration, or any other form of equity or debt interest.

 

(j) "Qualified greater Minnesota business" means a qualified small business that is also certified by the commissioner as a qualified greater Minnesota business under subdivision 2, paragraph (h).

 

(k) "Minority group member" means a United States citizen who is Asian, Pacific Islander, Black, Hispanic, or Native American.

 

(l) "Minority-owned business" means a business for which one or more minority group members:


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(1) own at least 50 percent of the business, or, in the case of a publicly owned business, own at least 51 percent of the stock; and

 

(2) manage the business and control the daily business operations.

 

(m) "Women" means persons of the female gender.

 

(n) "Women-owned business" means a business for which one or more women:

 

(1) own at least 50 percent of the business, or, in the case of a publicly owned business, own at least 51 percent of the stock; and

 

(2) manage the business and control the daily business operations.

 

(o) "Officer" means a person elected or appointed by the board of directors to manage the daily operations of the qualified small business.

 

(p) "Principal" means a person having authority to act on behalf of the qualified small business.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 2.  Minnesota Statutes 2018, section 116J.8737, subdivision 2, is amended to read:

 

Subd. 2.  Certification of qualified small businesses.  (a) Businesses may apply to the commissioner for certification as a qualified small business or qualified greater Minnesota small business for a calendar year.  The application must be in the form and be made under the procedures specified by the commissioner, accompanied by an application fee of $150.  Application fees are deposited in the small business investment tax credit administration account in the special revenue fund.  The application for certification for 2010 must be made available on the department's website by August 1, 2010.  Applications for subsequent years' certification must be made available on the department's website by November 1 of the preceding year.

 

(b) Within 30 days of receiving an application for certification under this subdivision, the commissioner must either certify the business as satisfying the conditions required of a qualified small business or qualified greater Minnesota small business, request additional information from the business, or reject the application for certification.  If the commissioner requests additional information from the business, the commissioner must either certify the business or reject the application within 30 days of receiving the additional information.  If the commissioner neither certifies the business nor rejects the application within 30 days of receiving the original application or within 30 days of receiving the additional information requested, whichever is later, then the application is deemed rejected, and the commissioner must refund the $150 application fee.  A business that applies for certification and is rejected may reapply.

 

(c) To receive certification as a qualified small business, a business must satisfy all of the following conditions:

 

(1) the business has its headquarters in Minnesota;

 

(2) at least:  (i) 51 percent of the business's employees are employed in Minnesota; (ii) 51 percent of the business's total payroll is paid or incurred in the state; and (iii) 51 percent of the total value of all contractual agreements to which the business is a party in connection with its primary business activity is for services performed under contract in Minnesota, unless the business obtains a waiver under paragraph (i);


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(3) the business is engaged in, or is committed to engage in, innovation in Minnesota in one of the following as its primary business activity:

 

(i) using proprietary technology to add value to a product, process, or service in a qualified high-technology field;

 

(ii) researching or developing a proprietary product, process, or service in a qualified high-technology field;

 

(iii) researching or developing a proprietary product, process, or service in the fields of agriculture, tourism, forestry, mining, manufacturing, or transportation; or

 

(iv) researching, developing, or producing a new proprietary technology for use in the fields of agriculture, tourism, forestry, mining, manufacturing, or transportation;

 

(4) other than the activities specifically listed in clause (3), the business is not engaged in real estate development, insurance, banking, lending, lobbying, political consulting, information technology consulting, wholesale or retail trade, leisure, hospitality, transportation, construction, ethanol production from corn, or professional services provided by attorneys, accountants, business consultants, physicians, or health care consultants;

 

(5) the business has fewer than 25 employees;

 

(6) the business must pay its employees annual wages of at least 175 percent of the federal poverty guideline for the year for a family of four and must pay its interns annual wages of at least 175 percent of the federal minimum wage used for federally covered employers, except that this requirement must be reduced proportionately for employees and interns who work less than full-time, and does not apply to an executive, officer, or member of the board of the business, or to any employee who owns, controls, or holds power to vote more than 20 percent of the outstanding securities of the business;

 

(7) the business has (i) not been in operation for more than ten years, or (ii) not been in operation for more than 20 years if the business is engaged in the research, development, or production of medical devices or pharmaceuticals for which United States Food and Drug Administration approval is required for use in the treatment or diagnosis of a disease or condition;

 

(8) the business has not previously received private equity investments of more than $4,000,000;

 

(9) the business is not an entity disqualified under section 80A.50, paragraph (b), clause (3); and

 

(10) the business has not issued securities that are traded on a public exchange.

 

(d) In applying the limit under paragraph (c), clause (5), the employees in all members of the unitary business, as defined in section 290.17, subdivision 4, must be included.

 

(e) In order for a qualified investment in a business to be eligible for tax credits:

 

(1) the business must have applied for and received certification for the calendar year in which the investment was made prior to the date on which the qualified investment was made;

 

(2) the business must not have issued securities that are traded on a public exchange;


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(3) the business must not issue securities that are traded on a public exchange within 180 days after the date on which the qualified investment was made; and

 

(4) the business must not have a liquidation event within 180 days after the date on which the qualified investment was made.

 

(f) The commissioner must maintain a list of qualified small businesses and qualified greater Minnesota businesses certified under this subdivision for the calendar year and make the list accessible to the public on the department's website.

 

(g) For purposes of this subdivision, the following terms have the meanings given:

 

(1) "qualified high-technology field" includes aerospace, agricultural processing, renewable energy, energy efficiency and conservation, environmental engineering, food technology, cellulosic ethanol, information technology, materials science technology, nanotechnology, telecommunications, biotechnology, medical device products, pharmaceuticals, diagnostics, biologicals, chemistry, veterinary science, and similar fields;

 

(2) "proprietary technology" means the technical innovations that are unique and legally owned or licensed by a business and includes, without limitation, those innovations that are patented, patent pending, a subject of trade secrets, or copyrighted; and

 

(3) "greater Minnesota" means the area of Minnesota located outside of the metropolitan area as defined in section 473.121, subdivision 2.

 

(h) To receive certification as a qualified greater Minnesota business, a business must satisfy all of the requirements of paragraph (c) and must satisfy the following conditions:

 

(1) the business has its headquarters in greater Minnesota; and

 

(2) at least:  (i) 51 percent of the business's employees are employed in greater Minnesota; (ii) 51 percent of the business's total payroll is paid or incurred in greater Minnesota; and (iii) 51 percent of the total value of all contractual agreements to which the business is a party in connection with its primary business activity is for services performed under contract in greater Minnesota, unless the business obtains a waiver under paragraph (i).

 

(i) The commissioner must exempt a business from the requirement under paragraph (c), clause (2), item (iii), if the business certifies to the commissioner that the services required under a contract in connection with the primary business activity cannot be performed in Minnesota if the business otherwise qualifies as a qualified small business, or in greater Minnesota if the business otherwise qualifies as a qualified greater Minnesota business.  The business must submit the certification required under this paragraph every six months from the month the exemption was granted.  The exemption allowed under this paragraph must be submitted in a form and manner prescribed by the commissioner.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 3.  Minnesota Statutes 2018, section 116J.8737, subdivision 3, is amended to read:

 

Subd. 3.  Certification of qualified investors.  (a) Investors may apply to the commissioner for certification as a qualified investor for a taxable year.  The application must be in the form and be made under the procedures specified by the commissioner, accompanied by an application fee of $350.  Application fees are deposited in the small business investment tax credit administration account in the special revenue fund.  The application for certification for 2010 must be made available on the department's website by August 1, 2010.  Applications for subsequent years' certification must be made available on the department's website by November 1 of the preceding year.


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(b) Within 30 days of receiving an application for certification under this subdivision, the commissioner must either certify the investor as satisfying the conditions required of a qualified investor, request additional information from the investor, or reject the application for certification.  If the commissioner requests additional information from the investor, the commissioner must either certify the investor or reject the application within 30 days of receiving the additional information.  If the commissioner neither certifies the investor nor rejects the application within 30 days of receiving the original application or within 30 days of receiving the additional information requested, whichever is later, then the application is deemed rejected, and the commissioner must refund the $350 application fee.  An investor who applies for certification and is rejected may reapply.

 

(c) To receive certification, an investor must (1) be a natural person; and (2) certify to the commissioner that the investor will only invest in a transaction that is exempt under section 80A.46, clause (13) or (14), in a security exempt under section 80A.461, or in a security registered under section 80A.50, paragraph (b).

 

(d) In order for a qualified investment in a qualified small business to be eligible for tax credits, a qualified investor who makes the investment must have applied for and received certification for the calendar year prior to making the qualified investment, except in the case of an investor who is not an accredited investor, within the meaning of Regulation D of the Securities and Exchange Commission, Code of Federal Regulations, title 17, section 230.501, paragraph (a), application for certification may be made within 30 days after making the qualified investment.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 4.  Minnesota Statutes 2018, section 116J.8737, subdivision 4, is amended to read:

 

Subd. 4.  Certification of qualified funds.  (a) A pass-through entity may apply to the commissioner for certification as a qualified fund for a calendar year.  The application must be in the form and be made under the procedures specified by the commissioner, accompanied by an application fee of $1,000.  Application fees are deposited in the small business investment tax credit administration account in the special revenue fund.  The application for certification for 2010 of qualified funds must be made available on the department's website by August 1, 2010.  Applications for subsequent years' certification must be made available by November 1 of the preceding year.

 

(b) Within 30 days of receiving an application for certification under this subdivision, the commissioner must either certify the fund as satisfying the conditions required of a qualified fund, request additional information from the fund, or reject the application for certification.  If the commissioner requests additional information from the fund, the commissioner must either certify the fund or reject the application within 30 days of receiving the additional information.  If the commissioner neither certifies the fund nor rejects the application within 30 days of receiving the original application or within 30 days of receiving the additional information requested, whichever is later, then the application is deemed rejected, and the commissioner must refund the $1,000 application fee.  A fund that applies for certification and is rejected may reapply.

 

(c) To receive certification, a fund must:

 

(1) invest or intend to invest in qualified small businesses;

 

(2) be organized as a pass-through entity; and

 

(3) have at least three separate investors, of whom at least three whose investment is made in the certified business and who seek a tax credit allocation satisfy the conditions in subdivision 3, paragraph (c).


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(d) Investments in the fund may consist of equity investments or notes that pay interest or other fixed amounts, or any combination of both.

 

(e) In order for a qualified investment in a qualified small business to be eligible for tax credits, a qualified fund that makes the investment must have applied for and received certification for the calendar year prior to making the qualified investment.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 5.  Minnesota Statutes 2018, section 116J.8737, subdivision 5, is amended to read:

 

Subd. 5.  Credit allowed.  (a) (1) A qualified investor or qualified fund is eligible for a credit equal to 25 percent of the qualified investment in a qualified small business.  Investments made by a pass-through entity qualify for a credit only if the entity is a qualified fund.  The commissioner must not allocate more than $15,000,000 $10,000,000 in credits to qualified investors or qualified funds for taxable years beginning after December 31, 2013, and before January 1, 2017, and must not allocate more than $10,000,000 in credits to qualified investors or qualified funds for taxable years beginning after December 31, 2016, and before January 1, 2018; and (2) for taxable years beginning after December 31, 2014, and before January 1, 2018, and before January 1, 2021.  For each taxable year, 50 percent must be allocated to credits for qualifying investments in qualified greater Minnesota businesses and minority- or women-owned qualified small businesses in Minnesota.  Any portion of a taxable year's credits that is reserved for qualifying investments in greater Minnesota businesses and minority- or women-owned qualified small businesses in Minnesota that is not allocated by September 30 of the taxable year is available for allocation to other credit applications beginning on October 1.  Any portion of a taxable year's credits that is not allocated by the commissioner does not cancel and may be carried forward to subsequent taxable years until all credits have been allocated.

 

(b) The commissioner may not allocate more than a total maximum amount in credits for a taxable year to a qualified investor for the investor's cumulative qualified investments as an individual qualified investor and as an investor in a qualified fund; for married couples filing joint returns the maximum is $250,000, and for all other filers the maximum is $125,000.  The commissioner may not allocate more than a total of $1,000,000 in credits over all taxable years for qualified investments in any one qualified small business.

 

(c) The commissioner may not allocate a credit to a qualified investor either as an individual qualified investor or as an investor in a qualified fund if, at the time the investment is proposed:

 

(1) the investor is an officer or principal of the qualified small business; or

 

(2) the investor, either individually or in combination with one or more members of the investor's family, owns, controls, or holds the power to vote 20 percent or more of the outstanding securities of the qualified small business.

 

A member of the family of an individual disqualified by this paragraph is not eligible for a credit under this section.  For a married couple filing a joint return, the limitations in this paragraph apply collectively to the investor and spouse.  For purposes of determining the ownership interest of an investor under this paragraph, the rules under section 267(c) and 267(e) of the Internal Revenue Code apply.

 

(d) Applications for tax credits for 2010 must be made available on the department's website by September 1, 2010, and the department must begin accepting applications by September 1, 2010.  Applications for subsequent years must be made available by November 1 of the preceding year.


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(e) Qualified investors and qualified funds must apply to the commissioner for tax credits.  Tax credits must be allocated to qualified investors or qualified funds in the order that the tax credit request applications are filed with the department.  The commissioner must approve or reject tax credit request applications within 15 days of receiving the application.  The investment specified in the application must be made within 60 days of the allocation of the credits.  If the investment is not made within 60 days, the credit allocation is canceled and available for reallocation.  A qualified investor or qualified fund that fails to invest as specified in the application, within 60 days of allocation of the credits, must notify the commissioner of the failure to invest within five business days of the expiration of the 60-day investment period.

 

(f) All tax credit request applications filed with the department on the same day must be treated as having been filed contemporaneously.  If two or more qualified investors or qualified funds file tax credit request applications on the same day, and the aggregate amount of credit allocation claims exceeds the aggregate limit of credits under this section or the lesser amount of credits that remain unallocated on that day, then the credits must be allocated among the qualified investors or qualified funds who filed on that day on a pro rata basis with respect to the amounts claimed.  The pro rata allocation for any one qualified investor or qualified fund is the product obtained by multiplying a fraction, the numerator of which is the amount of the credit allocation claim filed on behalf of a qualified investor and the denominator of which is the total of all credit allocation claims filed on behalf of all applicants on that day, by the amount of credits that remain unallocated on that day for the taxable year.

 

(g) A qualified investor or qualified fund, or a qualified small business acting on their behalf, must notify the commissioner when an investment for which credits were allocated has been made, and the taxable year in which the investment was made.  A qualified fund must also provide the commissioner with a statement indicating the amount invested by each investor in the qualified fund based on each investor's share of the assets of the qualified fund at the time of the qualified investment.  After receiving notification that the investment was made, the commissioner must issue credit certificates for the taxable year in which the investment was made to the qualified investor or, for an investment made by a qualified fund, to each qualified investor who is an investor in the fund.  The certificate must state that the credit is subject to revocation if the qualified investor or qualified fund does not hold the investment in the qualified small business for at least three years, consisting of the calendar year in which the investment was made and the two following years.  The three-year holding period does not apply if:

 

(1) the investment by the qualified investor or qualified fund becomes worthless before the end of the three-year period;

 

(2) 80 percent or more of the assets of the qualified small business is sold before the end of the three-year period;

 

(3) the qualified small business is sold before the end of the three-year period;

 

(4) the qualified small business's common stock begins trading on a public exchange before the end of the three‑year period; or

 

(5) the qualified investor dies before the end of the three-year period.

 

(h) The commissioner must notify the commissioner of revenue of credit certificates issued under this section.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 6.  Minnesota Statutes 2018, section 116J.8737, subdivision 6, is amended to read:

 

Subd. 6.  Annual reports.  (a) By February 1 of each year each qualified small business that received an investment that qualified for a credit, and each qualified investor and qualified fund that made an investment that qualified for a credit, must submit an annual report to the commissioner and pay a filing fee of $100 as required


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under this subdivision.  Each qualified investor and qualified fund must submit reports for three years following each year in which it made an investment that qualified for a credit, and each qualified small business must submit reports for five years following the year in which it received an investment qualifying for a credit.  Reports must be made in the form required by the commissioner.  All filing fees collected are deposited in the small business investment tax credit administration account in the special revenue fund.

 

(b) A report from a qualified small business must certify that the business satisfies the following requirements:

 

(1) the business has its headquarters in Minnesota;

 

(2) at least 51 percent of the business's employees are employed in Minnesota, and 51 percent of the business's total payroll is paid or incurred in the state;

 

(3) that the business is engaged in, or is committed to engage in, innovation in Minnesota as defined under subdivision 2; and

 

(4) that the business meets the payroll requirements in subdivision 2, paragraph (c), clause (6).

 

(c) Reports from qualified investors must certify that the investor remains invested in the qualified small business as required by subdivision 5, paragraph (g).

 

(d) Reports from qualified funds must certify that the fund remains invested in the qualified small business as required by subdivision 5, paragraph (g).

 

(e) A qualified small business that ceases all operations and becomes insolvent must file a final annual report in the form required by the commissioner documenting its insolvency.  In following years the business is exempt from the annual reporting requirement, the report filing fee, and the fine for failure to file a report.

 

(f) A qualified small business, qualified investor, or qualified fund that fails to file an annual report by February 1 as required under this subdivision is subject to a $500 $100 fine.

 

(g) A qualified investor or qualified fund that fails to file an annual report by April 1 may, at the commissioner's discretion, have any credit allocated and certified to the investor or fund revoked and such credit must be repaid by the investor.

 

(h) A qualified business that fails to file an annual report by April 1 may, at the commissioner's discretion, be subject to the credit repayment provisions in subdivision 7, paragraph (b).

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 7.  Minnesota Statutes 2018, section 116J.8737, subdivision 12, is amended to read:

 

Subd. 12.  Sunset.  This section expires for taxable years beginning after December 31, 2017 2020, except that reporting requirements under subdivision 6 and revocation of credits under subdivision 7 remain in effect through 2019 2022 for qualified investors and qualified funds, and through 2021 2024 for qualified small businesses, reporting requirements under subdivision 9 remain in effect through 2022 2020, and the appropriation in subdivision 11 remains in effect through 2021 2024.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.


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Sec. 8.  Minnesota Statutes 2018, section 270C.13, subdivision 2, is amended to read:

 

Subd. 2.  Bill analyses.  At the request of the chair or ranking minority member of the house of representatives Tax Committee or the senate Committee on Taxes and Tax Laws, the commissioner shall prepare an incidence impact analysis of a bill or a proposal to change the tax system which increases, decreases, or redistributes taxes by more than $20,000,000.  To the extent data is available on the changes in the distribution of the tax burden that are affected by the bill or proposal, the analysis shall report on the incidence effects that would result if the bill were enacted.  The report may present information using systemwide measures, such as Suits or other similar indexes, by income classes, taxpayer characteristics, or other relevant categories.  The report may include analyses of the effect of the bill or proposal on representative taxpayers.  The analysis must include a statement of the incidence assumptions that were used in computing the burdens.  For purposes of this subdivision, "ranking minority member" means the ranking minority member from the largest minority party in the body.

 

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

 

Sec. 9.  Minnesota Statutes 2018, section 289A.10, subdivision 1, is amended to read:

 

Subdivision 1.  Return required.  (a) In the case of a decedent who has an interest in property with a situs in Minnesota, the personal representative must submit a Minnesota estate tax return to the commissioner, on a form prescribed by the commissioner, if:

 

(1) a federal estate tax return is required to be filed; or

 

(2) the sum of the federal gross estate and federal adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue Code, made within three years of the date of the decedent's death exceeds $1,200,000 for estates of decedents dying in 2014; $1,400,000 for estates of decedents dying in 2015; $1,600,000 for estates of decedents dying in 2016; $2,100,000 for estates of decedents dying in 2017; $2,400,000 for estates of decedents dying in 2018; and $2,700,000 for estates of decedents dying in 2019; and $3,000,000 for estates of decedents dying in 2020 and thereafter.

 

(b) The return must contain a computation of the Minnesota estate tax due.  The return must be signed by the personal representative.

 

EFFECTIVE DATE.  This section is effective retroactively for estates of decedents dying in 2019 and thereafter.

 

Sec. 10.  Minnesota Statutes 2018, section 290.01, subdivision 4a, is amended to read:

 

Subd. 4a.  Financial institution.  (a) "Financial institution" means:

 

(1) any corporation or other business entity registered (i) under state law as a bank holding company; (ii) under the federal Bank Holding Company Act of 1956, as amended; or (iii) as a savings and loan holding company under the federal National Housing Act, as amended;

 

(2) a national bank organized and existing as a national bank association pursuant to the provisions of United States Code, title 12, chapter 2;

 

(3) a savings association or federal savings bank as defined in United States Code, title 12, section 1813(b)(1);

 

(4) any bank or thrift institution incorporated or organized under the laws of any state;


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(5) any corporation organized under United States Code, title 12, sections 611 to 631;

 

(6) any agency or branch of a foreign depository as defined under United States Code, title 12, section 3101;

 

(7) any corporation or other business entity that is more than 50 percent owned, directly or indirectly, by any person or business entity described in clauses (1) to (6), other than an insurance company taxable under chapter 297I;

 

(8) a corporation or other business entity that derives more than 50 percent of its total gross income for financial accounting purposes from finance leases.  For the purposes of this clause, "gross income" means the average from the current tax year and immediately preceding two years and excludes gross income from incidental or occasional transactions.  For purposes of this clause, "finance lease" means any lease transaction that is the functional equivalent of an extension of credit and that transfers substantially all the benefits and risks incident to the ownership of property, including any direct financing lease or leverage lease that meets the criteria of Financial Accounting Standards Board Statement No. 13, accounting for leases, or any other lease that is accounted for as financing by a lessor under generally accepted accounting principles; or

 

(9) any other person or business entity, other than an insurance company taxable under chapter 297I, that derives more than 50 percent of its gross income from activities that an entity described in clauses (2) to (6) or (8) is authorized to transact.  For the purposes of this clause, gross income does not include income from nonrecurring, extraordinary items.

 

(b) The commissioner is authorized to exclude any person from the application of paragraph (a), clause (9), if the person proves by clear and convincing evidence that the person's income-producing activity is not in substantial competition with any person described in paragraph (a), clauses (2) to (6) or (8).

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2016.

 

Sec. 11.  Minnesota Statutes 2018, section 290.01, is amended by adding a subdivision to read:

 

Subd. 5c.  Disqualified captive insurance company.  (a) "Captive insurance company" means a company that:

 

(1) is licensed as a captive insurance company under the laws of any state or foreign country; or

 

(2) derives less than 50 percent of its total premiums for the taxable year from sources outside of the unitary business, as that term is used in section 290.17.

 

(b) A captive insurance company is a "disqualified captive insurance company" if the company:

 

(1) pays less than 0.5 percent of its total premiums for the taxable year in tax under chapter 297I or a comparable tax of another state; or

 

(2) receives less than 50 percent of its gross receipts for the taxable year from premiums.

 

(c) For purposes of this subdivision, "premiums" means amounts paid for arrangements that constitute insurance for federal income tax purposes, but excludes return premiums, premiums for reinsurance assumed from other insurance companies, and any other premiums that are or would be exempt from taxation under section 297I.05 as a result of their type or character, if the insurance was for business in Minnesota.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2016.


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Sec. 12.  Minnesota Statutes 2018, section 290.0132, subdivision 26, is amended to read:

 

Subd. 26.  Social Security benefits.  (a) A portion of taxable Social Security benefits is allowed as a subtraction.  The subtraction equals the lesser of taxable Social Security benefits or a maximum subtraction subject to the limits under paragraphs (b), (c), and (d).

 

(b) For married taxpayers filing a joint return and surviving spouses, the maximum subtraction equals $4,500 $6,000.  The maximum subtraction is reduced by 20 percent of provisional income over $77,000 $74,000.  In no case is the subtraction less than zero.

 

(c) For single or head-of-household taxpayers, the maximum subtraction equals $3,500 $4,500.  The maximum subtraction is reduced by 20 percent of provisional income over $60,200 $58,700.  In no case is the subtraction less than zero.

 

(d) For married taxpayers filing separate returns, the maximum subtraction equals $2,250 $3,000.  The maximum subtraction is reduced by 20 percent of provisional income over $38,500 $37,000.  In no case is the subtraction less than zero.

 

(e) For purposes of this subdivision, "provisional income" means modified adjusted gross income as defined in section 86(b)(2) of the Internal Revenue Code, plus one-half of the taxable Social Security benefits received during the taxable year, and "Social Security benefits" has the meaning given in section 86(d)(1) of the Internal Revenue Code.

 

(f) The commissioner shall adjust the maximum subtraction and threshold amounts in paragraphs (b) to (d) by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) of the Internal Revenue Code the word "2016" shall be substituted for the word "1992."  For 2018, the commissioner shall then determine the percentage change from the 12 months ending on August 31, 2016, to the 12 months ending on August 31, 2017, and in each subsequent year, from the 12 months ending on August 31, 2016, to the 12 months ending on August 31 of the year preceding the taxable year.  The determination of the commissioner pursuant to this subdivision must not be considered a rule and is not subject to the Administrative Procedure Act contained in chapter 14, including section 14.386 as provided in section 270C.22.  The statutory year is taxable year 2019.  The maximum subtraction and threshold amounts as adjusted must be rounded to the nearest $10 amount.  If the amount ends in $5, the amount is rounded up to the nearest $10 amount.

 

EFFECTIVE DATE.  (a) The amendments to paragraphs (b), (c), and (d) are effective for taxable years beginning after December 31, 2018.

 

(b) The amendments to paragraphs (a) and (e) are effective retroactively for taxable years beginning after December 31, 2017.

 

(c) The amendments to paragraph (f) are effective for adjustments beginning with taxable years beginning after December 31, 2019.

 

Sec. 13.  Minnesota Statutes 2018, section 290.0132, is amended by adding a subdivision to read:

 

Subd. 27.  Disallowed section 280E expenses; medical cannabis manufacturers.  The amount of expenses of a medical cannabis manufacturer, as defined under section 152.22, subdivision 7, related to the business of medical cannabis under sections 152.21 to 152.37, and not allowed for federal income tax purposes under section 280E of the Internal Revenue Code is a subtraction.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.


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Sec. 14.  Minnesota Statutes 2018, section 290.0134, is amended by adding a subdivision to read:

 

Subd. 17.  Disallowed section 280E expenses; medical cannabis manufacturers.  The amount of expenses of a medical cannabis manufacturer, as defined under section 152.22, subdivision 7, related to the business of medical cannabis under sections 152.21 to 152.37, and not allowed for federal income tax purposes under section 280E of the Internal Revenue Code is a subtraction.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 15.  Minnesota Statutes 2018, section 290.05, subdivision 1, is amended to read:

 

Subdivision 1.  Exempt entities.  The following corporations, individuals, estates, trusts, and organizations shall be exempted from taxation under this chapter, provided that every such person or corporation claiming exemption under this chapter, in whole or in part, must establish to the satisfaction of the commissioner the taxable status of any income or activity:

 

(a) corporations, individuals, estates, and trusts engaged in the business of mining or producing iron ore and mining, producing, or refining other ores, metals, and minerals, the mining, production, or refining of which is subject to the occupation tax imposed by section 298.01; but if any such corporation, individual, estate, or trust engages in any other business or activity or has income from any property not used in such business it shall be subject to this tax computed on the net income from such property or such other business or activity.  Royalty shall not be considered as income from the business of mining or producing iron ore within the meaning of this section;

 

(b) the United States of America, the state of Minnesota or any political subdivision of either agencies or instrumentalities, whether engaged in the discharge of governmental or proprietary functions; and

 

(c) any insurance company, as defined in section 290.17, subdivision 4, paragraph (j), but including any insurance company licensed and domiciled in another state that grants, on a reciprocal basis, exemption from retaliatory taxes other than a disqualified captive insurance company.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2016.

 

Sec. 16.  [290.055] ADDITIONAL TAX ON CAPITAL GAIN INCOME.

 

Subdivision 1.  Definitions.  (a) For purposes of this section, the following terms have the meanings given.

 

(b) "Net capital gain" has the meaning given in section 1222 of the Internal Revenue Code.

 

(c) "Preferential rate income" means the lesser of:

 

(1) a taxpayer's adjusted net capital gain, as defined in section 1(h)(3) of the Internal Revenue Code, but excluding a capital gain resulting from the sale of property classified as 2a property under section 273.13, subdivision 23; or

 

(2) the taxpayer's federal taxable income, as defined in section 63 of the Internal Revenue Code.

 

Subd. 2.  Tax imposed; capital gains.  In addition to the taxes imposed under sections 289A.08, subdivision 7, 290.03, and 290.091, an individual, trust, or estate is liable for a tax equal to three percent of preferential rate income in excess of $500,000.


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Subd. 3.  Nonresidents.  (a) For an individual who is not a resident for the entire taxable year, the tax under subdivision 2 is imposed in an amount equal to:  (1) the amount calculated under subdivision 2 for the full year and for all preferential rate income; multiplied by (2) the Minnesota percentage determined under paragraph (b).

 

(b) "Minnesota percentage" equals:

 

(1) the sum of the following amounts for the taxable year:

 

(i) net capital gain from the sale of real property located in Minnesota and tangible personal property with a situs in Minnesota on the date of the sale; plus

 

(ii) adjusted net capital gain, other than gain included under item (i), received during a period when the taxpayer was domiciled in Minnesota; divided by

 

(2) the total amount of preferential rate income for the taxable year.

 

Subd. 4.  Credits for taxes paid to another state.  For purposes of computing the credit for taxes paid to another state under section 290.06, subdivision 22, if the net long-term capital gain qualified for an exclusion, deduction, or exemption, in whole or part, from taxation under the other state's tax, the tax under this section used to calculate the credit must be reduced by three percent of the dollar amount of the exclusion, deduction, or exemption amount that applies under the other state's tax.

 

EFFECTIVE DATE.  This section is effective for preferential rate income recognized in taxable years beginning after December 31, 2018.

 

Sec. 17.  Minnesota Statutes 2018, section 290.06, subdivision 2c, is amended to read:

 

Subd. 2c.  Schedules of rates for individuals, estates, and trusts.  (a) The income taxes imposed by this chapter upon married individuals filing joint returns and surviving spouses as defined in section 2(a) of the Internal Revenue Code must be computed by applying to their taxable net income the following schedule of rates:

 

(1) On the first $35,480 $40,240, 5.35 percent;

 

(2) On all over $35,480 $40,240, but not over $140,960 $150,900, 7.05 percent;

 

(3) On all over $140,960 $150,900, but not over $250,000 $273,150, 7.85 percent;

 

(4) On all over $250,000 $273,150, 9.85 percent.

 

Married individuals filing separate returns, estates, and trusts must compute their income tax by applying the above rates to their taxable income, except that the income brackets will be one-half of the above amounts after the adjustment required in subdivision 2d.

 

(b) The income taxes imposed by this chapter upon unmarried individuals must be computed by applying to taxable net income the following schedule of rates:

 

(1) On the first $24,270 $27,520, 5.35 percent;

 

(2) On all over $24,270 $27,520, but not over $79,730 $84,990, 7.05 percent;

 

(3) On all over $79,730 $84,990, but not over $150,000 $163,890, 7.85 percent;


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(4) On all over $150,000 $163,890, 9.85 percent.

 

(c) The income taxes imposed by this chapter upon unmarried individuals qualifying as a head of household as defined in section 2(b) of the Internal Revenue Code must be computed by applying to taxable net income the following schedule of rates:

 

(1) On the first $29,880 $33,880, 5.35 percent;

 

(2) On all over $29,880 $33,880, but not over $120,070 $128,580, 7.05 percent;

 

(3) On all over $120,070 $128,580, but not over $200,000 $218,520, 7.85 percent;

 

(4) On all over $200,000 $218,520, 9.85 percent.

 

(d) In lieu of a tax computed according to the rates set forth in this subdivision, the tax of any individual taxpayer whose taxable net income for the taxable year is less than an amount determined by the commissioner must be computed in accordance with tables prepared and issued by the commissioner of revenue based on income brackets of not more than $100.  The amount of tax for each bracket shall be computed at the rates set forth in this subdivision, provided that the commissioner may disregard a fractional part of a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.

 

(e) An individual who is not a Minnesota resident for the entire year must compute the individual's Minnesota income tax as provided in this subdivision.  After the application of the nonrefundable credits provided in this chapter, the tax liability must then be multiplied by a fraction in which:

 

(1) the numerator is the individual's Minnesota source federal adjusted gross income as defined in section 62 of the Internal Revenue Code and increased by the additions required under section 290.0131, subdivisions 2 and, 6, 8 to 11 10, and 16, and reduced by the Minnesota assignable portion of the subtraction for United States government interest under section 290.0132, subdivision 2, and the subtractions under section 290.0132, subdivisions 9, 10, 14, 15, 17, and 18, and 27, after applying the allocation and assignability provisions of section 290.081, clause (a), or 290.17; and

 

(2) the denominator is the individual's federal adjusted gross income as defined in section 62 of the Internal Revenue Code, increased by the amounts specified in section 290.0131, subdivisions 2 and, 6 to 11, 8 to 10, and 16, and reduced by the amounts specified in section 290.0132, subdivisions 2, 9, 10, 14, 15, 17, and 18, and 27.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 18.  Minnesota Statutes 2018, section 290.0671, subdivision 1, is amended to read:

 

Subdivision 1.  Credit allowed.  (a) An individual who is a resident of Minnesota is allowed a credit against the tax imposed by this chapter equal to a percentage of earned income.  To receive a credit, a taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code, except that:

 

(1) a taxpayer with no qualifying children who has attained the age of 21, but not attained age 65 before the close of the taxable year and is otherwise eligible for a credit under section 32 of the Internal Revenue Code may also receive a credit.; and

 

(2) a taxpayer who is otherwise eligible for a credit under section 32 of the Internal Revenue Code remains eligible for the credit even if the taxpayer's earned income or adjusted gross income exceeds the income limitation under section 32 of the Internal Revenue Code.


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(b) For individuals with no qualifying children, the credit equals 2.10 3.9 percent of the first $6,180 $7,150 of earned income.  The credit is reduced by 2.01 2.0 percent of earned income or adjusted gross income, whichever is greater, in excess of $8,130 the phase-out threshold, but in no case is the credit less than zero.

 

(c) For individuals with one qualifying child, the credit equals 9.35 9.5 percent of the first $11,120 $12,350 of earned income.  The credit is reduced by 6.02 6.0 percent of earned income or adjusted gross income, whichever is greater, in excess of $21,190 the phase-out threshold, but in no case is the credit less than zero.

 

(d) For individuals with two or more qualifying children, the credit equals 11 12 percent of the first $18,240 $18,450 of earned income.  The credit is reduced by 10.82 10.5 percent of earned income or adjusted gross income, whichever is greater, in excess of $25,130 the phase-out threshold, but in no case is the credit less than zero.

 

(e) For individuals with three or more qualifying children, the credit equals 12.5 percent of the first $20,000 of earned income.  The credit is reduced by 10.5 percent of earned income or adjusted gross income, whichever is greater, in excess of the phase-out threshold, but in no case is the credit less than zero.

 

(f) For a part-year resident, the credit must be allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

 

(f) (g) For a person who was a resident for the entire tax year and has earned income not subject to tax under this chapter, including income excluded under section 290.0132, subdivision 10, the credit must be allocated based on the ratio of federal adjusted gross income reduced by the earned income not subject to tax under this chapter over federal adjusted gross income.  For purposes of this paragraph, the following clauses are not considered "earned income not subject to tax under this chapter":

 

(1) the subtractions for military pay under section 290.0132, subdivisions 11 and 12;

 

(2) the exclusion of combat pay under section 112 of the Internal Revenue Code; and

 

(3) income derived from an Indian reservation by an enrolled member of the reservation while living on the reservation.

 

(g) For tax years beginning after December 31, 2013, the $8,130 in paragraph (b), the $21,190 in paragraph (c), and the $25,130 in paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by $5,000 for married taxpayers filing joint returns.  For tax years beginning after December 31, 2013, the commissioner shall annually adjust the $5,000 by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B), the word "2008" shall be substituted for the word "1992."  For 2014, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2008, to the 12 months ending on August 31, 2013, and in each subsequent year, from the 12 months ending on August 31, 2008, to the 12 months ending on August 31 of the year preceding the taxable year.  The earned income thresholds as adjusted for inflation must be rounded to the nearest $10.  If the amount ends in $5, the amount is rounded up to the nearest $10.  The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.

 

(h) For the purposes of this section, the phase-out threshold equals:

 

(1) $14,570 for married taxpayers filing joint returns with no qualifying children;

 

(2) $8,730 for all other taxpayers with no qualifying children;

 

(3) $28,610 for married taxpayers filing joint returns with one qualifying child;


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(4) $22,770 for all other taxpayers with one qualifying child;

 

(5) $32,840 for married taxpayers filing joint returns with two qualifying children;

 

(6) $27,000 for all other taxpayers with two qualifying children;

 

(7) $32,840 for married taxpayers filing joint returns with three or more qualifying children; and

 

(8) $27,000 for all other taxpayers with three or more qualifying children.

 

(i) The commissioner shall construct tables showing the amount of the credit at various income levels and make them available to taxpayers.  The tables shall follow the schedule contained in this subdivision, except that the commissioner may graduate the transition between income brackets.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 19.  Minnesota Statutes 2018, section 290.0677, subdivision 1a, is amended to read:

 

Subd. 1a.  Credit allowed; past military service.  (a) A qualified individual is allowed a credit against the tax imposed under this chapter for past military service.  The credit equals $750.  The credit allowed under this subdivision is reduced by ten percent of adjusted gross income in excess of $30,000 $50,000, but in no case is the credit less than zero.

 

(b) For a nonresident or a part-year resident, the credit under this subdivision must be allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 20.  Minnesota Statutes 2018, section 290.0682, subdivision 1, is amended to read:

 

Subdivision 1.  Definitions.  (a) For purposes of this section, the following terms have the meanings given.

 

(b) "Adjusted gross income" means federal adjusted gross income as defined in section 62 of the Internal Revenue Code.

 

(c) "Earned income" has the meaning given in section 32(c) of the Internal Revenue Code section 290.0675, subdivision 1, paragraph (b).

 

(d) "Eligible individual" means a resident individual with one or more qualified education loans related to an undergraduate or graduate degree program at a postsecondary educational institution.

 

(e) "Eligible loan payments" means the amount the eligible individual paid during the taxable year in principal and interest on qualified education loans.

 

(f) "Postsecondary educational institution" means a public or nonprofit postsecondary institution eligible for state student aid under section 136A.103 or, if the institution is not located in this state, a public or nonprofit postsecondary institution participating in the federal Pell Grant program under title IV of the Higher Education Act of 1965, Public Law 89-329, as amended.

 

(g) "Qualified education loan" has the meaning given in section 221 of the Internal Revenue Code, but is limited to indebtedness incurred on behalf of the eligible individual.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.


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Sec. 21.  Minnesota Statutes 2018, section 290.0682, subdivision 2, is amended to read:

 

Subd. 2.  Credit allowed.  (a) An eligible individual is allowed a credit against the tax due under this chapter.

 

(b) The credit for an eligible individual equals the least of:

 

(1) eligible loan payments minus ten percent of an amount equal to adjusted gross income in excess of $10,000, but in no case less than zero;

 

(2) the earned income for the taxable year of the eligible individual, if any;

 

(3) the sum of:

 

(i) the interest portion of eligible loan payments made during the taxable year; and

 

(ii) ten percent of the original loan amount of all qualified education loans of the eligible individual; or

 

(4) $500.

 

(c) For a part-year resident, the credit must be allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

 

(d) In the case of a married couple, each spouse is eligible for the credit in this section.  For the purposes of paragraph (b), for married couples filing joint returns, each spouse's adjusted gross income equals the spouse's percentage share of the couple's earned income, multiplied by the couple's adjusted gross income.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 22.  Minnesota Statutes 2018, section 290.0684, subdivision 2, is amended to read:

 

Subd. 2.  Credit allowed.  (a) An individual who is a resident of Minnesota is allowed a credit against the tax imposed by this chapter.  The credit is not allowed to an individual who is eligible to be claimed as a dependent, as defined in sections 151 and 152 of the Internal Revenue Code.  The credit may not exceed the liability for tax under this chapter.

 

(b) The amount of the credit allowed equals 50 percent of contributions for the taxable year.  The maximum credit is $500, subject to the phaseout in paragraphs (c) and (d).  In no case is the credit less than zero.

 

(c) For individual filers, the maximum credit is reduced by two percent of adjusted gross income in excess of $75,000.

 

(d) For married couples filing a joint return, the maximum credit is phased out as follows:

 

(1) for married couples with adjusted gross income in excess of $75,000, but not more than $100,000 $135,000, the maximum credit is reduced by one percent of adjusted gross income in excess of $75,000 until the maximum credit amount equals $250; and

 

(2) for married couples with adjusted gross income in excess of $100,000, but not more than $135,000, the maximum credit is $250; and


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(3) (2) for married couples with adjusted gross income in excess of $135,000, the maximum credit is $250, reduced by one percent of adjusted gross income in excess of $135,000.

 

(e) The income thresholds in paragraphs (c) and (d) used to calculate the maximum credit must be adjusted for inflation.  The commissioner shall adjust the income thresholds by the percentage determined under the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) the word "2016" is substituted for the word "1992."  For 2018, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2016, to the 12 months ending on August 31, 2017, and in each subsequent year, from the 12 months ending on August 31, 2016, to the 12 months ending on August 31 of the year preceding the taxable year.  The income thresholds as adjusted for inflation must be rounded to the nearest $10 amount.  If the amount ends in $5, the amount is rounded up to the nearest $10 amount.  The determination of the commissioner under this subdivision is not subject to chapter 14, including section 14.386.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2019.

 

Sec. 23.  Minnesota Statutes 2018, section 290.0685, subdivision 1, is amended to read:

 

Subdivision 1.  Credit allowed.  (a) An eligible individual is allowed a credit against the tax imposed by this chapter equal to $2,000 for each birth for which a certificate of birth resulting in stillbirth has been issued under section 144.2151 stillbirth.  The credit under this section is allowed only in the taxable year in which the stillbirth occurred and if the child would have been a dependent of the taxpayer as defined in section 152 of the Internal Revenue Code.

 

(b) For a nonresident or part-year resident, the credit must be allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2015.

 

Sec. 24.  Minnesota Statutes 2018, section 290.0685, is amended by adding a subdivision to read:

 

Subd. 1a.  Definitions.  (a) For purposes of this section, the following terms have the meanings given, unless the context clearly indicates otherwise.

 

(b) "Certificate of birth" means the printed certificate of birth resulting in stillbirth issued by the commissioner of health under section 144.2151 or for a birth occurring in another state or country a similar certificate issued under that state's or country's law.

 

(c) "Eligible individual" means an individual who is:

 

(1)(i) a resident; or

 

(ii) the nonresident spouse of a resident who is a member of armed forces of the United States or the United Nations; and

 

(2)(i) the individual listed first as a parent on the certificate of birth; or

 

(ii) the individual who gave birth resulting in stillbirth for a birth outside of this state for which no certificate of birth was issued.

 

(d) "Stillbirth" means a birth for which a fetal death report would be required under section 144.222, subdivision 1, if the birth occurred in this state.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2015.


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Sec. 25.  Minnesota Statutes 2018, section 290.0921, subdivision 3, is amended to read:

 

Subd. 3.  Alternative minimum taxable income.  "Alternative minimum taxable income" is Minnesota net income as defined in section 290.01, subdivision 19, and includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e), (f), and (h) of the Internal Revenue Code.  If a corporation files a separate company Minnesota tax return, the minimum tax must be computed on a separate company basis.  If a corporation is part of a tax group filing a unitary return, the minimum tax must be computed on a unitary basis.  The following adjustments must be made.

 

(1) The portion of the depreciation deduction allowed for federal income tax purposes under section 168(k) of the Internal Revenue Code that is required as an addition under section 290.0133, subdivision 11, is disallowed in determining alternative minimum taxable income.

 

(2) The subtraction for depreciation allowed under section 290.0134, subdivision 13, is allowed as a depreciation deduction in determining alternative minimum taxable income.

 

(3) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d) of the Internal Revenue Code does not apply.

 

(4) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal Revenue Code does not apply.

 

(5) The tax preference for depletion under section 57(a)(1) of the Internal Revenue Code does not apply.

 

(6) The tax preference for tax exempt interest under section 57(a)(5) of the Internal Revenue Code does not apply.

 

(7) The tax preference for charitable contributions of appreciated property under section 57(a)(6) of the Internal Revenue Code does not apply.

 

(8) For purposes of calculating the adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable income" as it is used in section 56(g) of the Internal Revenue Code, means alternative minimum taxable income as defined in this subdivision, determined without regard to the adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.

 

(9) For purposes of determining the amount of adjusted current earnings under section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section 56(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend gross-up subtracted as provided in section 290.0134, subdivision 2, or (ii) the amount of refunds of income, excise, or franchise taxes subtracted as provided in section 290.0134, subdivision 8.

 

(10) Alternative minimum taxable income excludes the income from operating in a job opportunity building zone as provided under section 469.317.

 

Items of tax preference must not be reduced below zero as a result of the modifications in this subdivision.

 

(11) The subtraction for disallowed section 280E expenses under section 290.0134, subdivision 17, is allowed as a deduction in determining alternative minimum taxable income.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.


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Sec. 26.  Minnesota Statutes 2018, section 290.17, subdivision 4, is amended to read:

 

Subd. 4.  Unitary business principle.  (a) If a trade or business conducted wholly within this state or partly within and partly without this state is part of a unitary business, the entire income of the unitary business is subject to apportionment pursuant to section 290.191.  Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary business is considered to be derived from any particular source and none may be allocated to a particular place except as provided by the applicable apportionment formula.  The provisions of this subdivision do not apply to business income subject to subdivision 5, income of an insurance company, or income of an investment company determined under section 290.36.

 

(b) The term "unitary business" means business activities or operations which result in a flow of value between them.  The term may be applied within a single legal entity or between multiple entities and without regard to whether each entity is a sole proprietorship, a corporation, a partnership or a trust.

 

(c) Unity is presumed whenever there is unity of ownership, operation, and use, evidenced by centralized management or executive force, centralized purchasing, advertising, accounting, or other controlled interaction, but the absence of these centralized activities will not necessarily evidence a nonunitary business.  Unity is also presumed when business activities or operations are of mutual benefit, dependent upon or contributory to one another, either individually or as a group.

 

(d) Where a business operation conducted in Minnesota is owned by a business entity that carries on business activity outside the state different in kind from that conducted within this state, and the other business is conducted entirely outside the state, it is presumed that the two business operations are unitary in nature, interrelated, connected, and interdependent unless it can be shown to the contrary.

 

(e) Unity of ownership does not exist when two or more corporations are involved unless more than 50 percent of the voting stock of each corporation is directly or indirectly owned by a common owner or by common owners, either corporate or noncorporate, or by one or more of the member corporations of the group.  For this purpose, the term "voting stock" shall include membership interests of mutual insurance holding companies formed under section 66A.40.

 

(f) The net income and apportionment factors under section 290.191 or 290.20 of foreign corporations and other foreign entities, but excluding a disqualified captive insurance company, which are part of a unitary business shall not be included in the net income or the apportionment factors of the unitary business; except that the income and apportionment factors of a foreign entity, other than an entity treated as a C corporation for federal income tax purposes, that are included in the federal taxable income, as defined in section 63 of the Internal Revenue Code as amended through the date named in section 290.01, subdivision 19, of a domestic corporation, domestic entity, or individual must be included in determining net income and the factors to be used in the apportionment of net income pursuant to section 290.191 or 290.20.  A foreign corporation or other foreign entity which is not included on a combined report and which is required to file a return under this chapter shall file on a separate return basis.

 

(g) For purposes of determining the net income of a unitary business and the factors to be used in the apportionment of net income pursuant to section 290.191 or 290.20, there must be included only the income and apportionment factors of domestic corporations or other domestic entities that are determined to be part of the unitary business pursuant to this subdivision, notwithstanding that foreign corporations or other foreign entities might be included in the unitary business; except that the income and apportionment factors of a foreign entity, other than an entity treated as a C corporation for federal income tax purposes, that is included in the federal taxable income, as defined in section 63 of the Internal Revenue Code as amended through the date named in section 290.01, subdivision 19, of a domestic corporation, domestic entity, or individual must be included in determining net income and the factors to be used in the apportionment of net income pursuant to section 290.191 or 290.20.


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(h) Each corporation or other entity, except a sole proprietorship, that is part of a unitary business must file combined reports as the commissioner determines.  On the reports, all intercompany transactions between entities included pursuant to paragraph (g) must be eliminated and the entire net income of the unitary business determined in accordance with this subdivision is apportioned among the entities by using each entity's Minnesota factors for apportionment purposes in the numerators of the apportionment formula and the total factors for apportionment purposes of all entities included pursuant to paragraph (g) in the denominators of the apportionment formula.  Except as otherwise provided by paragraph (f), all sales of the unitary business made within this state pursuant to section 290.191 or 290.20 must be included on the combined report of a corporation or other entity that is a member of the unitary business and is subject to the jurisdiction of this state to impose tax under this chapter.

 

(i) If a corporation has been divested from a unitary business and is included in a combined report for a fractional part of the common accounting period of the combined report:

 

(1) its income includable in the combined report is its income incurred for that part of the year determined by proration or separate accounting; and

 

(2) its sales, property, and payroll included in the apportionment formula must be prorated or accounted for separately.

 

(j) For purposes of this subdivision, "insurance company" means an insurance company, as defined in section 290.01, subdivision 5b, that is:

 

(1) licensed to engage in the business of insurance in Minnesota pursuant to chapter 60A; or

 

(2) domiciled and licensed to engage in the business of insurance in another state or country that imposes retaliatory taxes, fines, deposits, penalties, licenses, or fees and that does not grant, on a reciprocal basis, exemption from such retaliatory taxes to insurance companies or their agents domiciled in Minnesota.

 

(k) For purposes of this subdivision, "retaliatory taxes" means taxes imposed on insurance companies organized in another state or country that result from the fact that an insurance company organized in the taxing jurisdiction and doing business in the other jurisdiction is subject to taxes, fines, deposits, penalties, licenses, or fees in an amount exceeding that imposed by the taxing jurisdiction upon an insurance company organized in the other state or country and doing business to the same extent in the taxing jurisdiction not a disqualified captive insurance company.

 

EFFECTIVE DATE.  This section is effective retroactively for taxable years beginning after December 31, 2016.

 

Sec. 27.  Minnesota Statutes 2018, section 290.191, subdivision 5, is amended to read:

 

Subd. 5.  Determination of sales factor.  For purposes of this section, the following rules apply in determining the sales factor.

 

(a) The sales factor includes all sales, gross earnings, or receipts received in the ordinary course of the business, except that the following types of income are not included in the sales factor:

 

(1) interest;

 

(2) dividends;

 

(3) sales of capital assets as defined in section 1221 of the Internal Revenue Code;


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(4) sales of property used in the trade or business, except sales of leased property of a type which is regularly sold as well as leased; and

 

(5) sales of debt instruments as defined in section 1275(a)(1) of the Internal Revenue Code or sales of stock.

 

(b) Sales of tangible personal property are made within this state if the property is received by a purchaser at a point within this state, regardless of the f.o.b. point, other conditions of the sale, or the ultimate destination of the property.

 

(c) Tangible personal property delivered to a common or contract carrier or foreign vessel for delivery to a purchaser in another state or nation is a sale in that state or nation, regardless of f.o.b. point or other conditions of the sale.

 

(d) Notwithstanding paragraphs (b) and (c), when intoxicating liquor, wine, fermented malt beverages, cigarettes, or tobacco products are sold to a purchaser who is licensed by a state or political subdivision to resell this property only within the state of ultimate destination, the sale is made in that state.

 

(e) Sales made by or through a corporation that is qualified as a domestic international sales corporation under section 992 of the Internal Revenue Code are not considered to have been made within this state.

 

(f) Sales, rents, royalties, and other income in connection with real property is attributed to the state in which the property is located.

 

(g) Receipts from the lease or rental of tangible personal property, including finance leases and true leases, must be attributed to this state if the property is located in this state and to other states if the property is not located in this state.  Receipts from the lease or rental of moving property including, but not limited to, motor vehicles, rolling stock, aircraft, vessels, or mobile equipment are included in the numerator of the receipts factor to the extent that the property is used in this state.  The extent of the use of moving property is determined as follows:

 

(1) A motor vehicle is used wholly in the state in which it is registered.

 

(2) The extent that rolling stock is used in this state is determined by multiplying the receipts from the lease or rental of the rolling stock by a fraction, the numerator of which is the miles traveled within this state by the leased or rented rolling stock and the denominator of which is the total miles traveled by the leased or rented rolling stock.

 

(3) The extent that an aircraft is used in this state is determined by multiplying the receipts from the lease or rental of the aircraft by a fraction, the numerator of which is the number of landings of the aircraft in this state and the denominator of which is the total number of landings of the aircraft.

 

(4) The extent that a vessel, mobile equipment, or other mobile property is used in the state is determined by multiplying the receipts from the lease or rental of the property by a fraction, the numerator of which is the number of days during the taxable year the property was in this state and the denominator of which is the total days in the taxable year.

 

(h) Royalties and other income received for the use of or for the privilege of using intangible property, including patents, know-how, formulas, designs, processes, patterns, copyrights, trade names, service names, franchises, licenses, contracts, customer lists, or similar items, must be attributed to the state in which the property is used by the purchaser.  If the property is used in more than one state, the royalties or other income must be apportioned to this state pro rata according to the portion of use in this state.  If the portion of use in this state cannot be determined,


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the royalties or other income must be excluded from both the numerator and the denominator.  Intangible property is used in this state if the purchaser uses the intangible property or the rights therein in the regular course of its business operations in this state, regardless of the location of the purchaser's customers.

 

(i) Sales of intangible property are made within the state in which the property is used by the purchaser.  If the property is used in more than one state, the sales must be apportioned to this state pro rata according to the portion of use in this state.  If the portion of use in this state cannot be determined, the sale must be excluded from both the numerator and the denominator of the sales factor.  Intangible property is used in this state if the purchaser used the intangible property in the regular course of its business operations in this state.

 

(j) Receipts from the performance of services must be attributed to the state where the services are received.  For the purposes of this section, receipts from the performance of services provided to a corporation, partnership, or trust may only be attributed to a state where it has a fixed place of doing business.  If the state where the services are received is not readily determinable or is a state where the corporation, partnership, or trust receiving the service does not have a fixed place of doing business, the services shall be deemed to be received at the location of the office of the customer from which the services were ordered in the regular course of the customer's trade or business.  If the ordering office cannot be determined, the services shall be deemed to be received at the office of the customer to which the services are billed.

 

(k) For the purposes of this subdivision and subdivision 6, paragraph (l), receipts from management, distribution, or administrative services performed by a person or corporation or trust for a fund of a person or corporation or trust regulated under United States Code, title 15, sections 80a-1 through 80a-64 chapter 2D, subchapter I, must be attributed to the state where the shareholder of the fund resides.  Under this paragraph, receipts for services attributed to shareholders are determined on the basis of the ratio of:  (1) the average of the outstanding shares in the fund owned by shareholders residing within Minnesota at the beginning and end of each year; and (2) the average of the total number of outstanding shares in the fund at the beginning and end of each year.  Residence of the shareholder, in the case of an individual, is determined by the mailing address furnished by the shareholder to the fund.  Residence of the shareholder, when the shares are held by an insurance company as a depositor for the insurance company policyholders, is the mailing address of the policyholders.  In the case of an insurance company holding the shares as a depositor for the insurance company policyholders, if the mailing address of the policyholders cannot be determined by the taxpayer, the receipts must be excluded from both the numerator and denominator.  Residence of other shareholders is the mailing address of the shareholder.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.

 

Sec. 28.  Minnesota Statutes 2018, section 290.21, subdivision 4, is amended to read:

 

Subd. 4.  Dividends received from another corporation.  (a)(1) Eighty percent of dividends received by a corporation during the taxable year from another corporation, in which the recipient owns 20 percent or more of the stock, by vote and value, not including stock described in section 1504(a)(4) of the Internal Revenue Code when the corporate stock with respect to which dividends are paid does not constitute the stock in trade of the taxpayer or would not be included in the inventory of the taxpayer, or does not constitute property held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business, or when the trade or business of the taxpayer does not consist principally of the holding of the stocks and the collection of the income and gains therefrom; and

 

(2)(i) the remaining 20 percent of dividends if the dividends received are the stock in an affiliated company transferred in an overall plan of reorganization and the dividend is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as amended through December 31, 1989;


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(ii) the remaining 20 percent of dividends if the dividends are received from a corporation which is subject to tax under section 290.36 and which is a member of an affiliated group of corporations as defined by the Internal Revenue Code and the dividend is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as amended through December 31, 1989, or is deducted under an election under section 243(b) of the Internal Revenue Code; or

 

(iii) the remaining 20 percent of the dividends if the dividends are received from a property and casualty insurer as defined under section 60A.60, subdivision 8, which is a member of an affiliated group of corporations as defined by the Internal Revenue Code and either:  (A) the dividend is eliminated in consolidation under Treasury Regulation 1.1502-14(a), as amended through December 31, 1989; or (B) the dividend is deducted under an election under section 243(b) of the Internal Revenue Code.

 

(b) Seventy percent of dividends received by a corporation during the taxable year from another corporation in which the recipient owns less than 20 percent of the stock, by vote or value, not including stock described in section 1504(a)(4) of the Internal Revenue Code when the corporate stock with respect to which dividends are paid does not constitute the stock in trade of the taxpayer, or does not constitute property held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business, or when the trade or business of the taxpayer does not consist principally of the holding of the stocks and the collection of income and gain therefrom.

 

(c) The dividend deduction provided in this subdivision shall be allowed only with respect to dividends that are included in a corporation's Minnesota taxable net income for the taxable year.

 

The dividend deduction provided in this subdivision does not apply to a dividend from a corporation which, for the taxable year of the corporation in which the distribution is made or for the next preceding taxable year of the corporation, is a corporation exempt from tax under section 501 of the Internal Revenue Code.

 

The dividend deduction provided in this subdivision does not apply to a dividend received from a real estate investment trust as defined in section 856 of the Internal Revenue Code.

 

The dividend deduction provided in this subdivision applies to the amount of regulated investment company dividends only to the extent determined under section 854(b) of the Internal Revenue Code.

 

The dividend deduction provided in this subdivision shall not be allowed with respect to any dividend for which a deduction is not allowed under the provisions of section 246(c) or 246A of the Internal Revenue Code.

 

(d) If dividends received by a corporation that does not have nexus with Minnesota under the provisions of Public Law 86-272 are included as income on the return of an affiliated corporation permitted or required to file a combined report under section 290.17, subdivision 4, or 290.34, subdivision 2, then for purposes of this subdivision the determination as to whether the trade or business of the corporation consists principally of the holding of stocks and the collection of income and gains therefrom shall be made with reference to the trade or business of the affiliated corporation having a nexus with Minnesota.

 

(e) The deduction provided by this subdivision does not apply if the dividends are paid by a FSC as defined in section 922 of the Internal Revenue Code.

 

(f) If one or more of the members of the unitary group whose income is included on the combined report received a dividend, the deduction under this subdivision for each member of the unitary business required to file a return under this chapter is the product of:  (1) 100 percent of the dividends received by members of the group; (2) the percentage allowed pursuant to paragraph (a) or (b); and (3) the percentage of the taxpayer's business income apportionable to this state for the taxable year under section 290.191 or 290.20.

 

EFFECTIVE DATE.  This section is effective for taxable years beginning after December 31, 2018.


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Sec. 29.  Minnesota Statutes 2018, section 291.016, subdivision 3, is amended to read:

 

Subd. 3.  Subtraction.  (a) For estates of decedents dying after December 31, 2016, A subtraction is allowed in computing the Minnesota taxable estate, equal to the sum of:

 

(1) the exclusion amount for the year of death under paragraph (b); and

 

(2) the lesser of:

 

(i) the value of qualified small business property under section 291.03, subdivision 9, and the value of qualified farm property under section 291.03, subdivision 10; or

 

(ii) $5,000,000 minus the exclusion amount for the year of death under paragraph (b).

 

(b) The following exclusion amounts apply for the year of death:

 

(1) $2,100,000 for decedents dying in 2017;

 

(2) (1) $2,400,000 for estates of decedents dying in 2018; and

 

(3) $2,700,000 for decedents dying in 2019; and

 

(4) $3,000,000 for decedents dying in 2020 (2) $2,700,000 for estates of decedents dying in 2019 and thereafter.

 

(c) The subtraction under this subdivision must not reduce the Minnesota taxable estate to less than zero.

 

EFFECTIVE DATE.  This section is effective retroactively for estates of decedents dying in 2019 and thereafter.

 

Sec. 30.  APPLICATION OF SMALL BUSINESS INVESTMENT TAX CREDIT FOR TAXABLE YEAR 2019.

 

Applications for (1) certification as a qualified small business, qualified investor, or qualified fund under Minnesota Statutes, section 116J.8737, subdivisions 2, 3, and 4, and (2) the credit under Minnesota Statutes, section 116J.8737, subdivision 5, for taxable year 2019 must be made available on the Department of Employment and Economic Development's website by September 1, 2019.  The provisions of Minnesota Statutes, section 116J.8737, generally apply to the taxable year 2019 extension of the credit in sections 1 to 7.

 

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

 

Sec. 31.  STATE HISTORIC STRUCTURE REHABILITATION TAX CREDIT; SPECIAL PROVISION FOR MINNESOTA MUSEUM OF AMERICAN ART.

 

Notwithstanding Minnesota Statutes, section 290.0681, or any law or rule to the contrary, the rehabilitation of the Minnesota Museum of American Art Center for Creativity facilities, as described in Laws 2017, First Special Session chapter 8, article 1, section 20, subdivision 21, qualifies for the credit under Minnesota Statutes, section 290.0681, if the project is consistent with the historic character of the certified structure as determined under section 47 of the Internal Revenue Code.  The State Historic Preservation Office of the Department of Administration must issue the credit certificate for the project to the Minnesota Museum of American Art or its assignee.


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Sec. 32.  TAX EXPENDITURE STATEMENT OF INTENT.

 

(a) In accordance with the requirements in Minnesota Statutes, section 3.192, the purpose and goals for the tax expenditures in this article and article 1 are listed in this section.

 

(b) The purpose and goal of the tax expenditures in article 1, section 51, and article 2, sections 13, 14, and 25, is to provide equitable state tax treatment between medical cannabis manufacturers that are not allowed to deduct their business expenses under the Internal Revenue Code and manufacturers of other goods who may deduct these expenses. 

 

(c) The purpose of the tax expenditure under article 2, sections 1 to 7 and 30, is to encourage investment in innovative small businesses in Minnesota.  The goal is to increase the number of these businesses in the state, the number of people employed by these businesses in the state, the productivity of these businesses, or the sales of these businesses.

 

ARTICLE 3

SALES AND USE TAXES

 

Section 1.  Minnesota Statutes 2018, section 38.27, is amended by adding a subdivision to read:

 

Subd. 4.  Use of a portion of county fair revenues.  A county agricultural society must annually determine the amount of sales tax savings attributable to section 297A.70, subdivision 21.  If the county agricultural society owns its own fairgrounds, it must use the amount equal to the sales tax savings to maintain, improve, or expand society owned buildings and facilities on the fairgrounds; otherwise it must transfer this amount to the owner of the fairgrounds.  An owner that receives a transfer of money under this subdivision must use the transferred amount to maintain, improve, and expand entity owned buildings and facilities on the county fairgrounds.

 

EFFECTIVE DATE.  This section is effective July 1, 2019.

 

Sec. 2.  Minnesota Statutes 2018, section 289A.11, is amended by adding a subdivision to read:

 

Subd. 4.  Marketplace provider information report.  (a) A marketplace provider required to collect and remit sales and use taxes under section 297A.66 shall file an information report for each calendar quarter containing the information regarding the sales it facilitates for each retailer as required by this section.  The report is due on the 30th day following the last day of the most recently completed calendar quarter.  The commissioner shall prescribe the content, format, and manner of the information report pursuant to section 270C.03.  The report must include each retailer's:

 

(1) name, address, and federal employer identification number (FEIN);

 

(2) total gross receipts for the period;

 

(3) total taxable sales for the period;

 

(4) total state sales tax collected and remitted for the period; and

 

(5) itemized total of each local sales tax collected and remitted for the period.

 

(b) No payment of tax is required to be remitted with the quarterly information report.  A marketplace provider that fails to file this information report is subject to the penalty imposed under section 289A.60, subdivision 29.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.


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Sec. 3.  Minnesota Statutes 2018, section 289A.60, subdivision 29, is amended to read:

 

Subd. 29.  Penalty for failure to file report liquor sales.  In the case of a failure to file an informational report required by section 289A.11, subdivision 4, or 297A.8155, with the commissioner on or before the date dates prescribed, the person failing to file the report shall pay a penalty of $500 for each failure.  If a failure to file a report is intentional, the penalty shall be $1,000 for each failure.

 

EFFECTIVE DATE.  This section is effective for reports first due for sales and purchases made after June 30, 2019.

 

Sec. 4.  Minnesota Statutes 2018, section 297A.66, subdivision 1, is amended to read:

 

Subdivision 1.  Definitions.  (a) To the extent allowed by the United States Constitution and the laws of the United States, the terms "retailer maintaining a place of business in this state," and "marketplace provider maintaining a place of business in this state," or a similar term, means terms mean a retailer or marketplace provider:

 

(1) having or maintaining within this state, directly or by a subsidiary or an affiliate, an office, place of distribution, sales, storage, or sample room or place, warehouse, or other place of business, including the employment of a resident of this state who works from a home office in this state; or

 

(2) having a representative, including, but not limited to, an affiliate, agent, salesperson, canvasser, marketplace provider, solicitor, or other third party operating in this state under the authority of the retailer or marketplace provider, or its subsidiary, for any purpose, including the repairing, selling, delivering, installing, facilitating sales, processing sales, or soliciting of orders for the retailer's or a retailer's goods or services, or the leasing of tangible personal property located in this state, whether the place of business or agent, representative, affiliate, salesperson, canvasser, or solicitor is located in the state permanently or temporarily, or whether or not the retailer or marketplace provider, subsidiary, or affiliate is authorized to do business in this state.  A retailer is represented by a marketplace provider in this state if the retailer makes sales in this state facilitated by a marketplace provider that maintains a place of business in this state.

 

(b) "Destination of a sale" means the location to which the retailer makes delivery of the property sold, or causes the property to be delivered, to the purchaser of the property, or to the agent or designee of the purchaser.  The delivery may be made by any means, including the United States Postal Service or a for-hire carrier.

 

(c) (b) To the extent allowed by the United States Constitution and the laws of the United States, the terms "retailer not maintaining a place of business in this state," and "marketplace provider not maintaining a place of business in this state," or similar terms mean a retailer or marketplace provider making or facilitating retail sales from outside this state to a destination within this state and not maintaining a place of business in this state as provided in paragraph (a) that engages in the regular or systematic soliciting of sales from potential customers in this state by:

 

(1) distribution, by mail or otherwise, of catalogs, periodicals, advertising flyers, or other written solicitations of business to customers in this state;

 

(2) advertisements on billboards or other outdoor advertising in this state;

 

(3) advertisements in newspapers published in this state;

 

(4) advertisements in trade journals or other periodicals the circulation of which is primarily within this state;


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(5) advertisements in a Minnesota edition of a national or regional publication or a limited regional edition in which this state is included as part of a broader regional or national publication that are not placed in other geographically defined editions of the same issue of the same publication;

 

(6) advertisements in regional or national publications in an edition that is not by its contents geographically targeted to Minnesota but is sold over the counter in Minnesota or by subscription to Minnesota residents;

 

(7) advertisements broadcast on a radio or television station located in Minnesota; or

 

(8) any other solicitation by telephone, computer database, cable, optic, microwave, or any other communication system, including but not limited to a website accessible from within Minnesota.

 

The location of independent vendors that provide products or services to a retailer or marketplace provider in connection with a retailer or marketplace provider's solicitation of customers within this state, including such products and services as creation of copy, printing, distribution, and recording is not considered in determining whether the retailer or marketplace provider is required to collect tax.  Paragraph (b) must be construed without regard to the state from which distribution of the materials originated or in which they were prepared.

 

(c) "Regular or systematic soliciting of sales from potential customers in this state" means the retailer not maintaining a place of business in this state or marketplace provider not maintaining a place of business in this state is engaged in any of the solicitations listed in paragraph (b), and:

 

(1) makes or facilitates 200 or more retail sales from outside this state to destinations in this state during the prior 12-month period; or

 

(2) makes or facilitates retail sales totaling more than $100,000 from outside this state to destinations in this state during the prior 12-month period.

 

(d) "Marketplace provider" means any person who facilitates a retail sale by a retailer by:

 

(1) listing or advertising for sale by the retailer in any forum, tangible personal property, services, or digital goods that are subject to tax under this chapter; and

 

(2) either directly or indirectly through agreements or arrangements with third parties collecting payment from the customer and transmitting that payment to the retailer regardless of whether the marketplace provider receives compensation or other consideration in exchange for its services.

 

(d) "Total taxable retail sales" means the gross receipts from the sale of all tangible goods, services, and digital goods subject to sales and use tax under this chapter.

 

(e) "Destination of a sale" means the location to which the retailer makes delivery of the property sold, or causes the property to be delivered, to the purchaser of the property, or to the agent or designee of the purchaser.  The delivery may be made by any means, including the United States Postal Service or a for-hire carrier. 

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after September 30, 2019.

 

Sec. 5.  Minnesota Statutes 2018, section 297A.66, subdivision 2, is amended to read:

 

Subd. 2.  Retailer maintaining place of business in this state Collection and remittance requirements for retailers and marketplace providers.  (a) Except as provided in paragraph (b) (d), a retailer maintaining a place of business in this state and a retailer not maintaining a place of business in this state who makes retail sales in


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Minnesota or to a destination in Minnesota shall collect sales and use taxes and remit them to the commissioner under section 297A.77 for all retail sales other than those facilitated by a marketplace provider maintaining a place of business in this state or a marketplace provider not maintaining a place of business in this state that is required to collect and remit sales and use taxes under paragraph (b).

 

(b) A retailer with total taxable retail sales to customers in this state of less than $10,000 in the 12-month period ending on the last day of the most recently completed calendar quarter is not required to collect and remit sales tax if it is determined to be a retailer maintaining a place of business in the state solely because it made sales through one or more marketplace providers.  The provisions of this paragraph do not apply to a retailer that is or was registered to collect sales and use tax in this state.  Except as provided in paragraph (d), a marketplace provider maintaining a place of business in this state and a marketplace provider not maintaining a place of business in this state who facilitates retail sales in Minnesota or to a destination in Minnesota shall collect sales and use taxes and remit them to the commissioner under section 297A.77 unless:

 

(1) the retailer provides a copy of the retailer's registration to collect sales and use taxes in this state to the marketplace provider; and

 

(2) the marketplace provider and retailer agree that the retailer will collect and remit the sales and use taxes on marketplace sales facilitated by the marketplace provider.

 

(c) Nothing in paragraph (b) shall be construed to interfere with the ability of a marketplace provider and a retailer to enter into an agreement regarding fulfillment of the requirements of this chapter.

 

(d) A retailer not maintaining a place of business in this state and a marketplace provider not maintaining a place of business in this state shall:

 

(1) begin collecting and remitting sales and use taxes to the commissioner on the first day of a calendar month occurring no later than 60 days after the retailer or marketplace provider engages in regular or systematic soliciting of sales from potential customers in this state; and

 

(2) continue to collect and remit sales and use taxes to the commissioner until at least the last day of the 12th calendar month following the calendar month in which the retailer or marketplace provider began collecting and remitting sales and use taxes under clause (1).

 

(e) A retailer not maintaining a place of business in this state and a marketplace provider not maintaining a place of business in this state may cease collecting and remitting sales and use taxes to the commissioner after the period in paragraph (d), clause (2), if the retailer or marketplace provider no longer engages in regular or systematic soliciting of sales from potential customers in this state.

 

(f) A retailer or marketplace provider may cease collecting and remitting sales and use taxes under paragraph (e) only after notifying the commissioner that the retailer or marketplace provider is no longer engaged in the regular or systematic soliciting of sales from potential customers in this state.  The commissioner shall prescribe the content, format, and manner of the notification pursuant to section 270C.30.  If a retailer or marketplace provider subsequently engages in regular or systematic soliciting of sales from potential customers in this state, the retailer shall again comply with the requirements of paragraph (d).

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after September 30, 2019.


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Sec. 6.  Minnesota Statutes 2018, section 297A.66, subdivision 3, is amended to read:

 

Subd. 3.  Retailer not maintaining place of business in this state Marketplace provider liability.  (a) To the extent allowed by the United States Constitution and in accordance with the terms and conditions of federal remote seller law, a retailer making retail sales from outside this state to a destination within this state and not maintaining a place of business in this state shall collect sales and use taxes and remit them to the commissioner under section 297A.77.

 

(b) To the extent allowed by the United States Constitution and the laws of the United States, a retailer making retail sales from outside this state to a destination within this state and not maintaining a place of business in this state shall collect sales and use taxes and remit them to the commissioner under section 297A.77, if the retailer engages in the regular or systematic soliciting of sales from potential customers in this state by:

 

(1) distribution, by mail or otherwise, of catalogs, periodicals, advertising flyers, or other written solicitations of business to customers in this state;

 

(2) display of advertisements on billboards or other outdoor advertising in this state;

 

(3) advertisements in newspapers published in this state;

 

(4) advertisements in trade journals or other periodicals the circulation of which is primarily within this state;

 

(5) advertisements in a Minnesota edition of a national or regional publication or a limited regional edition in which this state is included as part of a broader regional or national publication which are not placed in other geographically defined editions of the same issue of the same publication;

 

(6) advertisements in regional or national publications in an edition which is not by its contents geographically targeted to Minnesota but which is sold over the counter in Minnesota or by subscription to Minnesota residents;

 

(7) advertisements broadcast on a radio or television station located in Minnesota; or

 

(8) any other solicitation by telegraphy, telephone, computer database, cable, optic, microwave, or other communication system.

 

This paragraph must be construed without regard to the state from which distribution of the materials originated or in which they were prepared.

 

(c) The location within or without this state of independent vendors that provide products or services to the retailer in connection with its solicitation of customers within this state, including such products and services as creation of copy, printing, distribution, and recording, is not considered in determining whether the retailer is required to collect tax.

 

(d) A retailer not maintaining a place of business in this state is presumed, subject to rebuttal, to be engaged in regular solicitation within this state if it engages in any of the activities in paragraph (b) and:

 

(1) makes 100 or more retail sales from outside this state to destinations in this state during a period of 12 consecutive months; or

 

(2) makes ten or more retail sales totaling more than $100,000 from outside this state to destinations in this state during a period of 12 consecutive months.


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(a) A marketplace provider is subject to audit on the retail sales it facilitates if it is required to collect sales and use taxes and remit them to the commissioner under subdivision 2, paragraphs (b) and (c).

 

(b) A marketplace provider is not liable for failing to file, collect, and remit sales and use taxes to the commissioner if the marketplace provider demonstrates that the error was due to incorrect or insufficient information given to the marketplace provider by the retailer.  This paragraph does not apply if the marketplace provider and the marketplace retailer are related as defined in subdivision 4, paragraph (b).

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after September 30, 2019.

 

Sec. 7.  Minnesota Statutes 2018, section 297A.67, subdivision 28, is amended to read:

 

Subd. 28.  Ambulance accessories, supplies, parts, and equipment.  The following sales to or use by an ambulance service licensed under section 144E.10 or a medical response unit or specialized medical response unit registered under section 144E.275 are exempt:

 

(1) supplies and equipment used to provide medical care; and

 

(2) repair and replacement parts for ambulances and vehicles equipped and specifically intended for emergency response; and

 

(3) all accessories, equipment, and supplies used directly in equipping and supplying or resupplying an ambulance or first responder vehicle.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.

 

Sec. 8.  Minnesota Statutes 2018, section 297A.67, is amended by adding a subdivision to read:

 

Subd. 37.  Certain herbicides.  (a) Purchases of herbicides authorized for use pursuant to an invasive aquatic plant management permit as defined under section 103G.615 are exempt if purchased by:

 

(1) a lakeshore property owner;

 

(2) an association of lakeshore property owners organized under chapter 317A; or

 

(3) a contractor hired by a lakeshore owner or association to provide invasive aquatic plant management under the permit.

 

(b) For purposes of this subdivision, "herbicides" means a substance or mixture of substances intended for use as a plant regulator, defoliant, or desiccant that are:

 

(1) labeled for use in water;

 

(2) registered for use in this state by the Department of Agriculture under section 18B.26; and

 

(3) listed as one of the herbicides proposed for use on the invasive aquatic plant management permit.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.


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Sec. 9.  Minnesota Statutes 2018, section 297A.68, subdivision 29, is amended to read:

 

Subd. 29.  Prizes.  (a) Tangible personal property that will be given as prizes to players in games of skill or chance is exempt if:

 

(1) the games are conducted at events such as community festivals, fairs, and carnivals and if the events last less than six days.; or

 

(2) the property is awarded as prizes in connection with lawful gambling as defined in section 349.12.

 

(b) This exemption does not apply to property awarded as prizes in connection with lawful gambling as defined in section 349.12 or the State Lottery.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.

 

Sec. 10.  Minnesota Statutes 2018, section 297A.68, is amended by adding a subdivision to read:

 

Subd. 30a.  Films.  (a) Tangible personal property primarily used or consumed in the preproduction, production, or postproduction of a film is exempt.  Any such film, regardless of the medium in which it is transferred, is exempt.  "Preproduction" and "production" include but are not limited to all activities related to the preparation for shooting and the shooting of the film, including film processing.  For purposes of this subdivision, "film" has the meaning given in section 116U.26 except that it excludes television commercials.  Equipment rented for preproduction and production activities is exempt.  "Postproduction" includes but is not limited to all activities related to the finishing and duplication of a film.  This exemption does not apply to tangible personal property used primarily in administration, general management, or marketing.  Machinery and equipment purchased for use in producing such films and fuel, electricity, gas, or steam used for space heating or lighting are not exempt under this subdivision.

 

(b) The exemption under this subdivision is effective for sales and purchases made after June 30, 2019, and before June 30, 2021.

 

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

 

Sec. 11.  Minnesota Statutes 2018, section 297A.68, subdivision 42, is amended to read:

 

Subd. 42.  Qualified data centers.  (a) Purchases of enterprise information technology equipment and computer software are exempt from tax as follows:

 

(1) purchases of enterprise information technology equipment and computer software, and replacements or upgrades to the equipment, for use in a qualified data center, or a qualified refurbished data center, are exempt,;

 

(2) purchases of prewritten computer software, and replacements or upgrades to the software, for use by or in a qualified data center or a qualified refurbished data center are exempt as follows:

 

(i) for purchases prior to July 1, 2019, software that is loaded at the data center and either operates, maintains, or monitors the enterprise information technology equipment exempt under clause (1), or manages, manipulates, analyzes, collects, stores, processes, distributes, or allows access to large amounts of data, or any other similar functions related to the data, at the qualified data center or qualified refurbished data center, is exempt.  This exemption does not apply to software that is distributed to users outside of the facility;


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(ii) for purchases after June 30, 2019, all software that is loaded at the data center is exempt, including software that is distributed to users outside of the facility, but the refund provided in clause (3) is limited to 50 percent of the tax paid on the software; and

 

(iii) purchases of software exempt under this clause include licenses to use the software and maintenance agreements for the software, except that computer software maintenance agreements are exempt for purchases made after June 30, 2013.; and

 

(3) the tax on purchases exempt under this paragraph must be imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and then refunded after June 30, 2013, in the manner provided under clause (2), item (ii), and in section 297A.75.  This exemption includes enterprise information technology equipment and computer software purchased to replace or upgrade enterprise information technology equipment and computer software in a qualified data center, or a qualified refurbished data center.

 

(b) Electricity used or consumed in the operation of a qualified data center or qualified refurbished data center is exempt.

 

(c) For purposes of this subdivision, "qualified data center" means a facility in Minnesota:

 

(1) that is comprised of one or more buildings that consist in the aggregate of at least 25,000 square feet, and that are located on a single parcel or on contiguous parcels, where the total cost of construction or refurbishment, investment in enterprise information technology equipment, and computer software is at least $30,000,000 within a 48-month period.  The 48-month period begins no sooner than July 1, 2012, except that costs for computer software maintenance agreements purchased before July 1, 2013, are not included in determining if the $30,000,000 threshold has been met;

 

(2) that is constructed or substantially refurbished after June 30, 2012, where "substantially refurbished" means that at least 25,000 square feet have been rebuilt or modified, including:

 

(i) installation of enterprise information technology equipment; environmental control, computer software, and energy efficiency improvements; and

 

(ii) building improvements; and

 

(3) that is used to house enterprise information technology equipment, where the facility has the following characteristics:

 

(i) uninterruptible power supplies, generator backup power, or both;

 

(ii) sophisticated fire suppression and prevention systems; and

 

(iii) enhanced security.  A facility will be considered to have enhanced security if it has restricted access to the facility to selected personnel; permanent security guards; video camera surveillance; an electronic system requiring pass codes, keycards, or biometric scans, such as hand scans and retinal or fingerprint recognition; or similar security features.

 

In determining whether the facility has the required square footage, the square footage of the following spaces shall be included if the spaces support the operation of enterprise information technology equipment:  office space, meeting space, and mechanical and other support facilities.  For purposes of meeting investment and square footage


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criteria in this subdivision paragraph, "computer software" includes, but is not limited to, software utilized or loaded at a qualified data center or qualified refurbished data center, including maintenance, licensing, means both software that is exempt under paragraph (a), clause (2), and software customization.

 

(d) For purposes of this subdivision, a "qualified refurbished data center" means an existing facility that qualifies as a data center under paragraph (c), clauses (2) and (3), but that is comprised of one or more buildings that consist in the aggregate of at least 25,000 square feet, and that are located on a single parcel or contiguous parcels, where the total cost of construction or refurbishment, investment in enterprise information technology equipment, and computer software is at least $50,000,000 within a 24-month period.

 

(e) For purposes of this subdivision, "enterprise information technology equipment" means computers and equipment supporting computing, networking, or data storage, including servers and routers.  It includes, but is not limited to:  cooling systems, cooling towers, and other temperature control infrastructure; power infrastructure for transformation, distribution, or management of electricity used for the maintenance and operation of a qualified data center or qualified refurbished data center, including but not limited to exterior dedicated business-owned substations, backup power generation systems, battery systems, and related infrastructure; and racking systems, cabling, and trays, which are necessary for the maintenance and operation of the qualified data center or qualified refurbished data center.

 

(f) A qualified data center or qualified refurbished data center may claim the following:

 

(1) the exemptions in this subdivision provided under paragraphs (a), clause (1), and (b), for purchases made either within 20 years of the date of its first purchase qualifying for the exemption exemptions under paragraph (a), or by June 30, 2042, whichever is earlier.;

 

(2) where the first purchase qualifying for the exemptions under paragraph (a) was made between July 1, 2012, and June 30, 2014, the exemption provided under paragraph (a), clause (2), item (i), for those purchases of software made within a period starting on the date of the first purchase qualifying for the exemption under paragraph (a) and ending with the last purchase made prior to July 1, 2019;

 

(3) where the first purchase qualifying for the exemptions under paragraph (a) was made after June 30, 2019, the exemption provided under paragraph (a), clause (2), item (ii), for purchases of software made within five years of the date of its first purchase qualifying for the exemption under paragraph (a), or by June 30, 2042, whichever is earlier;

 

(4) where the first purchase qualifying for the exemptions under paragraph (a) was made between July 1, 2014, and June 30, 2019, the exemption provided under paragraph (a), clause (2), item (i), for purchases of software made prior to July 1, 2019, and the exemption provided under paragraph (a), clause (2), item (ii), for purchases of software made after June 30, 2019, for purchases made within five years of the first purchase qualifying for the exemptions under paragraph (a); and

 

(5) notwithstanding clauses (2) to (4), and paragraph (a), clause (2), a qualified data center or qualified refurbished data center may claim the exemption for purchases of software under paragraph (a), clause (2), during only one exemption period, as described in either clause (2), (3), or (4), per data center location.  If the commissioner of employment and economic development subsequently certifies the data center as newly meeting the requirements under paragraph (c) or (d) at the same data center location, a data center that previously qualified for the exemption on purchases of software under paragraph (a), clause (2), as either a qualified data center or a qualified refurbished data center for the relevant period described in clause (2), (3), or (4), is not eligible for the exemption on purchases of software under the subsequent certification.

 

(g) The purpose of this exemption is to create jobs in the construction and data center industries.


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(h) This subdivision is effective for sales and purchases made before July 1, 2042, as limited by paragraph (f).

 

(i) The commissioner of employment and economic development must certify to the commissioner of revenue, in a format approved by the commissioner of revenue, when a qualified data center has met the requirements under paragraph (c) or a qualified refurbished data center has met the requirements under paragraph (d).  The certification must provide the following information regarding each qualified data center or qualified refurbished data center:

 

(1) the total square footage amount;

 

(2) the total amount of construction or refurbishment costs and the total amount of qualifying investments in enterprise information technology equipment and computer software; and

 

(3) the beginning and ending of the applicable period under either paragraph (c) or (d) in which the qualifying expenditures and purchases under clause (2) were made, but in no case shall the period begin before July 1, 2012;

 

(j) Any refund for sales tax paid on qualifying purchases under this subdivision must not be issued unless the commissioner of revenue has received the certification required under paragraph (i) either from the commissioner of employment and economic development or the qualified data center or qualified refurbished data center claiming the refund; and

 

(k) The commissioner of employment and economic development must annually notify the commissioner of revenue of the qualified data centers that are projected to meet the requirements under paragraph (c) and the qualified refurbished data centers that are projected to meet the requirements under paragraph (d) in each of the next four years.  The notification must provide the information required under paragraph (i), clauses (1) to (3), for each qualified data center or qualified refurbished data center.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019; except that paragraph (a), clause (2), item (i), and those portions of paragraph (f) relating to the exemption provided under paragraph (a), clause (2), item (i), are effective retroactively to the first purchase qualifying for the exemptions under paragraph (a) made after June 30, 2012, for sales and purchases of software made prior to July 1, 2019.

 

Sec. 12.  Minnesota Statutes 2018, section 297A.70, is amended by adding a subdivision to read:

 

Subd. 3a.  Certain purchases from state fire safety account.  Purchases made by the commissioner of public safety under section 299F.012, subdivision 1, with revenues from the fire safety account established in section 297I.06, subdivision 3, are exempt if the items purchased ultimately will be provided to an organized fire department, fire protection district, fire-related regional response team, or fire company regularly charged with the responsibility of providing fire protection services to the state, a substate region, or a political subdivision.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.

 

Sec. 13.  Minnesota Statutes 2018, section 297A.70, is amended by adding a subdivision to read:

 

Subd. 3b.  Purchases by volunteer fire departments.  Sales to and purchases by a volunteer fire department are exempt if:  (1) the good or service would be exempt when purchased by a local government under subdivision 2; and (2) the volunteer fire department is an independent nonprofit association that is exempt from federal income tax under section 501(c)(3) or 501(c)(4) of the Internal Revenue Code.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.


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Sec. 14.  Minnesota Statutes 2018, section 297A.70, subdivision 10, is amended to read:

 

Subd. 10.  Nonprofit tickets or admissions.  (a) Tickets or admissions to an event are exempt if all the gross receipts are recorded as such, in accordance with generally accepted accounting principles, on the books of one or more organizations whose primary mission is to provide an opportunity for citizens of the state to participate in the creation, performance, or appreciation of the arts, and provided that each organization is:

 

(1) an organization described in section 501(c)(3) of the Internal Revenue Code in which voluntary contributions make up at least five percent of the organization's annual revenue in its most recently completed 12-month fiscal year, or in the current year if the organization has not completed a 12-month fiscal year;

 

(2) a municipal board that promotes cultural and arts activities; or

 

(3) the University of Minnesota, a state college and university, or a private nonprofit college or university provided that the event is held at a facility owned by the educational institution holding the event.

 

The exemption only applies if the entire proceeds, after reasonable expenses, are used solely to provide opportunities for citizens of the state to participate in the creation, performance, or appreciation of the arts.

 

(b) Tickets or admissions to the premises of the Minnesota Zoological Garden are exempt, provided that the exemption under this paragraph does not apply to tickets or admissions to performances or events held on the premises unless the performance or event is sponsored and conducted exclusively by the Minnesota Zoological Board or employees of the Minnesota Zoological Garden.

 

(c) Tickets or admissions to a performance or event on the premises of a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code are exempt if:

 

(1) the nonprofit organization was established to preserve Minnesota's rural agricultural heritage and focuses on educating the public about rural history and how farms in Minnesota helped to provide food for the nation and the world;

 

(2) the premises of the nonprofit organization is at least 115 acres;

 

(3) the performance or event is sponsored and conducted exclusively by volunteers, employees of the nonprofit organization, or members of the board of directors of the nonprofit organization; and

 

(4) the performance or event is consistent with the nonprofit organization's purposes under section 501(c)(3) of the Internal Revenue Code.

 

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

 

Sec. 15.  Minnesota Statutes 2018, section 297A.70, subdivision 20, is amended to read:

 

Subd. 20.  Ice arenas and rinks.  Sales to organizations that exist primarily for the purpose of owning or operating ice arenas or rinks that are (1) part of either the Duluth Heritage Sports Center or the David M. Thaler Sports Center; and (2) are used for youth and high school programs, are exempt if the organization is a private, nonprofit corporation exempt from federal income taxation under section 501(c)(3) of the Internal Revenue Code.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.


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Sec. 16.  Minnesota Statutes 2018, section 297A.70, is amended by adding a subdivision to read:

 

Subd. 21.  County agricultural society sales at county fairs.  Sales by a county agricultural society during a regularly scheduled county fair are exempt.  For purposes of this subdivision, sales include admissions to and parking at the county fairgrounds, admissions to separately ticketed events run by the county agricultural society, and concessions and other sales made by employees or volunteers of the county agricultural society on the county fairgrounds.  This exemption does not apply to sales or events by a county agricultural society held at a time other than at the time of the regularly scheduled county fair, or events not held on the county fairgrounds.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.

 

Sec. 17.  Minnesota Statutes 2018, section 297A.70, is amended by adding a subdivision to read:

 

Subd. 22.  Nonprofit conservation clubs.  Sales to nonprofit conservation clubs are exempt.  For purposes of this subdivision, a "nonprofit conservation club" means an organization exempt under section 501(c)(3) of the Internal Revenue Code that provides instruction, training, and facilities for shooting handguns or rifles.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.

 

Sec. 18.  Minnesota Statutes 2018, section 297A.70, is amended by adding a subdivision to read:

 

Subd. 23.  Nonprofit arena board.  Sales to an organization that exists primarily for the purpose of owning or operating facilities that are part of the Lake of the Woods International Arena are exempt if the organization is a private, nonprofit corporation exempt from federal income taxation under section 501(c)(3) of the Internal Revenue Code.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.

 

Sec. 19.  Minnesota Statutes 2018, section 297A.70, is amended by adding a subdivision to read:

 

Subd. 24.  Prepared food used by certain nonprofits.  Sales of prepared food to a nonprofit organization that, as part of its charitable mission, is sponsoring and managing the provision of meals and other food through the federal Child and Adult Care Food Program or the federal Summer Food Service Program to unaffiliated centers and sites are exempt from sales tax.  Only prepared food purchased from a caterer or other business under a contract with the nonprofit and used directly in the Child and Adult Care Food Program or the federal Summer Food Service Program qualifies for this exemption.  Prepared food purchased by the nonprofit for other purposes remains taxable.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.

 

Sec. 20.  Minnesota Statutes 2018, section 297A.71, subdivision 50, is amended to read:

 

Subd. 50.  Properties destroyed by fire.  (a) Building materials and supplies used in, and equipment incorporated into, the construction or replacement of real property that is located in Melrose affected by the fire on September 8, 2016, are exempt.

 

(b) For sales and purchases made for the periods of (1) after September 30, 2016, and before July 1, 2017, and (2) after December 31, 2018, and before July 1, 2019, the tax must be imposed and collected as if the rate under section 297A.62, subdivision 1, applied and then refunded in the manner provided in section 297A.75.

 

EFFECTIVE DATE.  This section is effective retroactively for sales and purchases made after December 31, 2018.


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Sec. 21.  Minnesota Statutes 2018, section 297A.71, is amended by adding a subdivision to read:

 

Subd. 51.  Lake of the Woods International Arena construction.  (a) Materials and supplies used or consumed in, and equipment incorporated into, the construction or improvement of the Lake of the Woods International Arena are exempt.

 

(b) The tax on purchases exempt under this subdivision must be imposed and collected as if the rate under section 297A.62, subdivision 1, applied and then refunded in the manner provided in section 297A.75.

 

(c) The exemption under this subdivision is effective for purchases made after March 30, 2018, and before April 1, 2020.

 

EFFECTIVE DATE; APPLICATION.  This section is effective the day following final enactment and applies retroactively from March 30, 2018.

 

Sec. 22.  Minnesota Statutes 2018, section 297A.71, is amended by adding a subdivision to read:

 

Subd. 52.  Properties destroyed by fire.  (a) Building materials and supplies used or consumed in, and equipment incorporated into, the construction or replacement of real property affected by, and capital equipment to replace equipment destroyed in, the fire on March 11, 2018, in the city of Mazeppa are exempt.

 

(b) The tax must be imposed and collected as if the rate under section 297A.62, subdivision 1, applied and then refunded in the manner provided in section 297A.75.

 

(c) For purposes of this subdivision, "capital equipment" includes durable equipment used in a restaurant for food storage, preparation, and serving.

 

(d) The exemption under this subdivision applies to sales and purchases made after March 11, 2018, and before January 1, 2022. 

 

EFFECTIVE DATE; APPLICATION.  This section is effective the day following final enactment and applies retroactively from March 11, 2018.

 

Sec. 23.  Minnesota Statutes 2018, section 297A.71, is amended by adding a subdivision to read:

 

Subd. 53.  Former Duluth Central High School.  (a) Materials and supplies used in and equipment incorporated into a private redevelopment project on the site of the former Duluth Central High School are exempt, provided the resulting development is subject to property taxes.

 

(b) The tax must be imposed and collected as if the rate under section 297A.62, subdivision 1, applied and then refunded in the manner provided in section 297A.75.  The commissioner must not pay more than $1,000,000 in refunds for purchases exempt under this subdivision.  Refunds must be processed and issued in the order that complete and accurate applications are received by the commissioner.

 

(c) The exemption under this subdivision applies for sales and purchases made after June 30, 2019, and before January 1, 2021.

 

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


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Sec. 24.  Minnesota Statutes 2018, section 297A.71, is amended by adding a subdivision to read:

 

Subd. 54.  Construction; certain local government facilities.  (a) Materials and supplies used in and equipment incorporated into the construction, reconstruction, upgrade, expansion, or remodeling of the following local government owned facilities are exempt:

 

(1) a new fire station, which includes firefighting, emergency management, public safety training, and other public safety facilities in the city of Monticello if materials, supplies, and equipment are purchased after January 31, 2019, and before January 1, 2022;

 

(2) a new fire station, which includes firefighting and public safety training facilities and public safety facilities, in the city of Inver Grove Heights if materials, supplies, and equipment are purchased after June 30, 2018, and before January 1, 2021;

 

(3) a fire station and police station, including access roads, lighting, sidewalks, and utility components, on or adjacent to the property on which the fire station or police station are located that are necessary for safe access to and use of those buildings, in the city of Minnetonka if materials, supplies, and equipment are purchased after May 23, 2019, and before January 1, 2021;

 

(4) the school building in Independent School District No. 414, Minneota, if materials, supplies, and equipment are purchased after January 1, 2018, and before January 1, 2021;

 

(5) a fire station in the city of Mendota Heights, if materials, supplies, and equipment are purchased after December 31, 2018, and before January 1, 2021;

 

(6) an interpretive center, including access roads, lighting, sidewalks, and utility components, on or adjacent to the property on which the interpretive center is located that are necessary for safe access to and use of the buildings, owned and operated by the city of St. Louis Park if materials, supplies, and equipment are purchased after April 1, 2019, and before January 1, 2021; and

 

(7) a Dakota County law enforcement collaboration center, also known as the Safety and Mental Health Alternative Response Training (SMART) Center, if materials, supplies, and equipment are purchased after June 30, 2019, and before July 1, 2021.

 

(b) The tax must be imposed and collected as if the rate under section 297A.62, subdivision 1, applied and then refunded in the manner provided in section 297A.75.

 

(c) The total refund for the project listed in paragraph (a), clause (3), must not exceed $850,000.

 

EFFECTIVE DATE.  This section is effective the day following final enactment and applies retroactively to sales and purchases made during the time periods listed for each project in paragraph (a).

 

Sec. 25.  Minnesota Statutes 2018, section 297A.71, is amended by adding a subdivision to read:

 

Subd. 55.  Nonprofit snowmobile clubs.  Building materials and supplies used by a nonprofit snowmobile club to construct, reconstruct, or maintain or improve state or grant-in-aid snowmobile trails are exempt.  A nonprofit snowmobile club is eligible for the exemption under this subdivision if it received, in the current year or in the previous three-year period, a state grant-in-aid grant administered by the Department of Natural Resources by applying for the grant with a local unit of government sponsor.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.


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Sec. 26.  Minnesota Statutes 2018, section 297A.75, subdivision 1, is amended to read:

 

Subdivision 1.  Tax collected.  The tax on the gross receipts from the sale of the following exempt items must be imposed and collected as if the sale were taxable and the rate under section 297A.62, subdivision 1, applied.  The exempt items include:

 

(1) building materials for an agricultural processing facility exempt under section 297A.71, subdivision 13;

 

(2) building materials for mineral production facilities exempt under section 297A.71, subdivision 14;

 

(3) building materials for correctional facilities under section 297A.71, subdivision 3;

 

(4) building materials used in a residence for disabled veterans exempt under section 297A.71, subdivision 11;

 

(5) elevators and building materials exempt under section 297A.71, subdivision 12;

 

(6) materials and supplies for qualified low-income housing under section 297A.71, subdivision 23;

 

(7) materials, supplies, and equipment for municipal electric utility facilities under section 297A.71, subdivision 35;

 

(8) equipment and materials used for the generation, transmission, and distribution of electrical energy and an aerial camera package exempt under section 297A.68, subdivision 37;

 

(9) commuter rail vehicle and repair parts under section 297A.70, subdivision 3, paragraph (a), clause (10);

 

(10) materials, supplies, and equipment for construction or improvement of projects and facilities under section 297A.71, subdivision 40;

 

(11) materials, supplies, and equipment for construction, improvement, or expansion of:

 

(i) an aerospace defense manufacturing facility exempt under Minnesota Statutes 2014, section 297A.71, subdivision 42;

 

(ii) a biopharmaceutical manufacturing facility exempt under section 297A.71, subdivision 45;

 

(iii) a research and development facility exempt under Minnesota Statutes 2014, section 297A.71, subdivision 46; and

 

(iv) an industrial measurement manufacturing and controls facility exempt under Minnesota Statutes 2014, section 297A.71, subdivision 47;

 

(12) enterprise information technology equipment and computer software for use in a qualified data center exempt under section 297A.68, subdivision 42;

 

(13) materials, supplies, and equipment for qualifying capital projects under section 297A.71, subdivision 44, paragraph (a), clause (1), and paragraph (b);

 

(14) items purchased for use in providing critical access dental services exempt under section 297A.70, subdivision 7, paragraph (c);


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(15) items and services purchased under a business subsidy agreement for use or consumption primarily in greater Minnesota exempt under section 297A.68, subdivision 44;

 

(16) building materials, equipment, and supplies for constructing or replacing real property exempt under section 297A.71, subdivision subdivisions 49; 50, paragraph (b); 51; 52; and 53; and

 

(17) building materials, equipment, and supplies for constructing or replacing real property exempt under section 297A.71, subdivision 50, paragraph (b).  qualifying capital projects under section 297A.71, subdivision 54.

 

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

 

Sec. 27.  Minnesota Statutes 2018, section 297A.75, subdivision 2, is amended to read:

 

Subd. 2.  Refund; eligible persons.  Upon application on forms prescribed by the commissioner, a refund equal to the tax paid on the gross receipts of the exempt items, except as otherwise provided in section 297A.68, subdivision 42, must be paid to the applicant.  Only the following persons may apply for the refund:

 

(1) for subdivision 1, clauses (1), (2), and (14), the applicant must be the purchaser;

 

(2) for subdivision 1, clause (3), the applicant must be the governmental subdivision;

 

(3) for subdivision 1, clause (4), the applicant must be the recipient of the benefits provided in United States Code, title 38, chapter 21;

 

(4) for subdivision 1, clause (5), the applicant must be the owner of the homestead property;

 

(5) for subdivision 1, clause (6), the owner of the qualified low-income housing project;

 

(6) for subdivision 1, clause (7), the applicant must be a municipal electric utility or a joint venture of municipal electric utilities;

 

(7) for subdivision 1, clauses (8), (11), (12), and (15), the owner of the qualifying business;

 

(8) for subdivision 1, clauses (9), (10), and (13), and (17), the applicant must be the governmental entity that owns or contracts for the project or facility; and

 

(9) for subdivision 1, clause (16), the applicant must be the owner or developer of the building or project; and.

 

(10) for subdivision 1, clause (17), the applicant must be the owner or developer of the building or project.

 

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

 

Sec. 28.  Minnesota Statutes 2018, section 297A.83, subdivision 1, is amended to read:

 

Subdivision 1.  Persons applying.  (a) A retailer person required to collect and remit sales taxes under section 297A.66 shall file with the commissioner an application for a permit.

 

(b) A retailer making retail sales from outside this state to a destination within this state who is not required to obtain a permit under paragraph (a) may nevertheless voluntarily file an application for a permit.


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(c) The commissioner may require any person or class of persons obligated to file a use tax return under section 289A.11, subdivision 3, to file an application for a permit.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2019.

 

Sec. 29.  Laws 2017, First Special Session chapter 1, article 3, section 26, the effective date, is amended to read:

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after June 30, 2017, and before July 1, 2027.

 

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

 

Sec. 30.  Laws 2017, First Special Session chapter 1, article 3, section 32, the effective date, is amended to read:

 

EFFECTIVE DATE.  Paragraph (a) is effective retroactively for sales and purchases made after September 30, 2016, and before January 1, 2019 2023.  Paragraph (b) is effective for sales and purchases made (1) after September 30, 2016, and before July 1, 2017; and (2) after December 31, 2018, and before July 1, 2019.

 

EFFECTIVE DATE.  This section is effective retroactively from January 1, 2019.

 

Sec. 31.  MUNICIPALLY OWNED WATER TREATMENT FACILITY; CITY OF ELKO NEW MARKET.

 

Subdivision 1.  Exemption.  Materials and supplies used in and equipment incorporated into a water treatment facility owned and operated by the city of Elko New Market are exempt from taxation under Minnesota Statutes, chapter 297A, regardless of whether the materials and supplies are purchased by the city or a contractor, subcontractor, or builder.  All purchases for this facility must have been made after June 1, 2014, and before June 1, 2016.

 

Subd. 2.  Refund.  The tax on purchases exempt under subdivision 1 must be imposed and collected as if the rate under Minnesota Statutes, section 297A.62, applied, and then refunded in the manner provided in Minnesota Statutes, section 297A.75.  The applicant must be the city of Elko New Market.  If sales tax has been paid on sales and purchases exempt under this section prior to the effective date of this section, the city of Elko New Market may apply directly to the commissioner of revenue for a refund.  The application must be in the form and manner required by the commissioner and provide sufficient information so the commissioner can verify the amount paid.  If the tax was paid by a contractor, subcontractor, or builder, the contractor, subcontractor, or builder must furnish to the refund applicant a statement including the cost of the exempt items and the taxes paid on the items.  Interest must be paid on the refund at the rate in Minnesota Statutes, section 270C.405, from 90 days after the refund claim is filed with the commissioner.

 

Subd. 3.  Appropriation.  The amount required to make the refunds under this section is appropriated to the commissioner of revenue.

 

EFFECTIVE DATE.  This section is effective retroactively for purchases made after June 1, 2014, and before June 1, 2016.

 

Sec. 32.  TAX EXPENDITURES; STATEMENTS OF INTENT.

 

(a) In accordance with the requirements in Minnesota Statutes, section 3.192, the purpose and goals for the tax expenditures in this article are listed in this section.


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(b) The purpose of the exemption in section 8 is to level the playing field for costs between local governments and private entities of managing invasive species in lakes.  The goal is an increase in the number of lakes where invasive species are being controlled.

 

(c) The purpose of the exemption in section 9 is to decrease costs faced by charitable gambling organizations.  The goal is to increase their revenue spent on charitable activities.

 

(d) The purpose of the exemption in section 10 is to decrease costs of film production in the state.  The goal is to increase the number of film productions in the state.

 

(e) The purpose of the exemption in section 12 is to level the playing field between the state and local governments when purchasing firefighting equipment.  The goal is to allow the state to purchase more equipment for local governments.

 

(f) The purpose of the exemptions in sections 7 and 13 is to reduce costs of providing local public services in these communities.  The goal is to decrease the growth in local property taxes and service fees in these communities.

 

(g) The purpose of the exemption in section 14 is to reduce the cost of providing education on the state's farming history.  The goal is to decrease the public cost of access to this facility.

 

(h) The purpose of the exemption in section 15 is to decrease maintenance costs for the ice arena.  The goal is to increase local recreation opportunities and reduce local participation costs.

 

(i) The purpose of the exemption in section 16 is to help county agricultural societies maintain county fairgrounds.  The goal is to increase spending on fairground maintenance and capital improvements.

 

(j) The purpose of the exemption in section 17 is to help nonprofit conservation clubs provide increased training and facilities for youth.  The goal is to increase youth training on gun safety and encourage responsible gun ownership and use.

 

(k) The purpose of the exemptions in sections 18 and 21 is to decrease construction and maintenance costs for a new ice arena.  The goal is to increase local recreation opportunities, reduce local participation costs, and increase tourism into the area.

 

(l) The purpose of the exemption in section 19 is to equalize the costs for programs that prepare food on site versus having food prepared off site.  The goal is to increase the number of after-school and summer youth meals and snacks served.

 

(m) The purpose of the exemptions in sections 20 and 22 is to encourage rebuilding in the damaged area of each city.  The goal is to have these properties returned to the tax rolls at the same or greater value.

 

(n) The purpose of the exemption in section 23 is to encourage redevelopment of the school site and increase the city property tax base.  The goal is to have private development on the site.

 

(o) The purpose of the exemption in sections 24 and 31 is to reduce the cost of providing local public services in these communities.  The goal is to decrease the growth in local property taxes and service fees in these communities.

 

(p) The purpose of the exemption in section 25 is to decrease the cost for trail maintenance by nonprofit snowmobile clubs.  The goal is to increase miles of trails maintained.


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(q) The purpose of eliminating the sunset on the exemption in section 29 is to stabilize and allow for long-term planning for the participation scholarships offered by the Minnesota State High School League.  The goal is to maintain or increase participation in extracurricular activities by low-income students.

 

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

 

Sec. 33.  REPEALER.

 

Minnesota Statutes 2018, section 297A.66, subdivision 4b, is repealed.

 

EFFECTIVE DATE.  This section is effective for sales and purchases made after September 30, 2019.

 

ARTICLE 4

SPECIAL TAXES

 

Section 1.  Minnesota Statutes 2018, section 295.75, subdivision 4, is amended to read:

 

Subd. 4.  Tax collection required.  A liquor retailer with nexus in Minnesota or a direct ship winery as defined in section 340A.550, who is not subject to tax under subdivision 2, is required to collect the tax imposed under subdivision 3 from the purchaser of the liquor and give the purchaser a receipt for the tax paid.  The tax collected must be remitted to the commissioner in the same manner prescribed for the taxes imposed under chapter 297A.

 

EFFECTIVE DATE.  This section is effective for sales and purchases occurring on or after July 1, 2019, provided that Minnesota Statutes, section 340A.550, relating to the licensing of direct ship wineries is enacted and effective July 1, 2019.

 

Sec. 2.  Minnesota Statutes 2018, section 296A.03, subdivision 3, is amended to read:

 

Subd. 3.  Form of application; license fee.  An application for a distributor's license shall be made in the form and manner prescribed by the commissioner and must be accompanied by an initial fee of $25.  Once licensed, a distributor must remit a $25 fee annually to maintain the license.

 

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

 

Sec. 3.  Minnesota Statutes 2018, section 296A.13, is amended to read:

 

296A.13 PERSONAL LIABILITY FOR TAX.

 

Liability for payment of taxes under this chapter includes a responsible person or entity described in the personal liability provisions of section 270C.56., except "person" includes but is not limited to directors and officers of corporations, governors, managers, or members of a member-managed limited liability company, or partners of partnerships who, either individually or jointly with others, have the control, supervision, or responsibility of filing returns and making payment of the amount of tax imposed by this chapter.

 

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

 

Sec. 4.  Minnesota Statutes 2018, section 297A.83, subdivision 1, is amended to read:

 

Subdivision 1.  Persons applying.  (a) A retailer required to collect and remit sales taxes under section 297A.66 or a direct ship winery as defined in section 340A.550 shall file with the commissioner an application for a permit under this section.


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(b) A retailer making retail sales from outside this state to a destination within this state who is not required to obtain a permit under paragraph (a) may nevertheless voluntarily file an application for a permit.

 

(c) The commissioner may require any person or class of persons obligated to file a use tax return under section 289A.11, subdivision 3, to file an application for a permit.

 

EFFECTIVE DATE.  This section is effective for permits applied for after June 30, 2019, provided that Minnesota Statutes, section 340A.550, relating to the licensing of direct ship wineries is enacted and effective July 1, 2019.

 

Sec. 5.  Minnesota Statutes 2018, section 297F.01, subdivision 19, is amended to read:

 

Subd. 19.  Tobacco products.  (a) "Tobacco products" means any product containing, made, or derived from tobacco that is intended for human consumption, whether chewed, smoked, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by any other means, or any component, part, or accessory of a tobacco product, including, but not limited to, cigars; cheroots; stogies; periques; granulated, plug cut, crimp cut, ready rubbed, and other smoking tobacco; snuff; snuff flour; cavendish; plug and twist tobacco; fine-cut and other chewing tobacco; shorts; refuse scraps, clippings, cuttings and sweepings of tobacco, and other kinds and forms of tobacco; but does not include cigarettes as defined in this section.  Tobacco products includes nicotine solution products.  Tobacco products excludes any tobacco product that has been approved by the United States Food and Drug Administration for sale as a tobacco cessation product, as a tobacco dependence product, or for other medical purposes, and is being marketed and sold solely for such an approved purpose.

 

(b) Except for the imposition of tax under section 297F.05, subdivisions 3 and 4, tobacco products includes a premium cigar, as defined in subdivision 13a.

 

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

 

Sec. 6.  Minnesota Statutes 2018, section 297F.01, is amended by adding a subdivision to read:

 

Subd. 22b.  Nicotine solution products.  (a) "Nicotine solution products" means any cartridge, bottle, or other package that contains nicotine made or derived from tobacco, that is in a solution that is consumed, or meant to be consumed, through the use of a heating element, power source, electronic circuit, or other electronic, chemical, or mechanical means that produces vapor or aerosol.  This paragraph expires December 31, 2019.

 

(b) Beginning January 1, 2020, "nicotine solution products" means any cartridge, bottle, or other package that contains nicotine, including nicotine made or derived from tobacco or sources other than tobacco, that is in a solution that is consumed, or meant to be consumed, through the use of a heating element, power source, electronic circuit, or other electronic, chemical, or mechanical means that produces vapor or aerosol.

 

(c) Nicotine solution products includes any electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or similar product or device, and any batteries, heating elements, or other components, parts, or accessories sold with and meant to be used in the consumption of a solution containing nicotine.

 

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

 

Sec. 7.  Minnesota Statutes 2018, section 297F.01, subdivision 23, is amended to read:

 

Subd. 23.  Wholesale sales price.  (a) "Wholesale sales price" means the price at which a distributor purchases a tobacco product.


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(b) When a distributor sells a cartridge, bottle, or other package of a solution containing nicotine that is part of a kit that also includes a product, device, component, part, or accessory described in subdivision 22b:

 

(1) the wholesale sales price is the price at which the distributor purchases the kit; except that

 

(2) if the distributor also separately sells the same package of solution containing nicotine that is sold with the kit and can isolate the cost of the package of solution containing nicotine, then the wholesale sales price includes only the price at which the distributor separately purchases the package of the solution containing nicotine and any taxes, charges, and costs listed in paragraph (c).

 

(c) Wholesale sales price includes the applicable federal excise tax, freight charges, or packaging costs, regardless of whether they were included in the purchase price.

 

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

 

Sec. 8.  Minnesota Statutes 2018, section 297F.05, is amended by adding a subdivision to read:

 

Subd. 1b.  Annual indexing.  (a) Each year the commissioner shall adjust the tax rates under subdivision 1, including any adjustment made in prior years under this subdivision, by multiplying the mill rates for the current calendar year by an adjustment factor and rounding the result to the nearest mill.  The adjustment factor equals the in-lieu sales tax rate that applies to the following calendar year divided by the in-lieu sales tax rate for the current calendar year.  For purposes of this subdivision, "in-lieu sales tax rate" means the tax rate established under section 297F.25, subdivision 1.  For purposes of the calculations under this subdivision to be made in any year in which an increase in the federal or state excise tax on cigarettes is implemented, the commissioner shall exclude from the calculated average price for the current year an amount equal to any increase in the state or federal excise tax rate.

 

(b) The commissioner shall publish the resulting rate by November 1 and the rate applies to sales made on or after January 1 of the following year.

 

(c) The determination of the commissioner under this subdivision is not a rule and is not subject to the Administrative Procedure Act in chapter 14, including section 14.386.

 

EFFECTIVE DATE.  This section is effective the day following final enactment and applies beginning with rates calculated for calendar year 2020.

 

Sec. 9.  Minnesota Statutes 2018, section 297F.08, subdivision 8, is amended to read:

 

Subd. 8.  Sale of stamps.  The commissioner may sell stamps on a credit basis under conditions prescribed by the commissioner.  The commissioner shall sell the stamps at a price which includes the tax after giving effect to the discount provided in subdivision 7.  The commissioner shall recover the actual costs of the stamps from the distributor.  The commissioner shall annually establish the maximum amount of stamps that may be purchased each month.

 

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

 

Sec. 10.  Minnesota Statutes 2018, section 297F.08, subdivision 9, is amended to read:

 

Subd. 9.  Tax stamping machines.  The commissioner shall require any person licensed as a distributor to stamp packages with a tax stamping machine, approved by the commissioner, which shall be provided by the distributor.  The commissioner shall also supervise and check the operation of the machines and shall provide for the payment of


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the tax on any package so stamped, subject to the discount provided in subdivision 7.  If the commissioner finds that a stamping machine is not affixing a legible stamp on the package, the commissioner may order the distributor to immediately cease the stamping process until the machine is functioning properly.

 

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

 

Sec. 11.  Minnesota Statutes 2018, section 297G.07, subdivision 1, is amended to read:

 

Subdivision 1.  Exemptions.  The following are not subject to the excise tax:

 

(1) Sales by a manufacturer, brewer, or wholesaler for shipment outside the state in interstate commerce.

 

(2) Alcoholic beverages sold or transferred between Minnesota wholesalers.

 

(3) Sales to common carriers engaged in interstate transportation of passengers, except as provided in this chapter.

 

(4) Malt beverages served by a brewery for on-premise consumption at no charge, or distributed to brewery employees for on-premise consumption under a labor contract.

 

(5) Shipments of wine to Minnesota residents under section 340A.417.

 

(6) Fruit juices naturally fermented or beer naturally brewed in the home for family use and not sold or offered for sale.

 

(7) (6) Sales of wine for sacramental purposes under section 340A.316.

 

(8) (7) Alcoholic beverages sold to authorized manufacturers of food products or pharmaceutical firms.  The alcoholic beverage must be used exclusively in the manufacture of food products or medicines.  For purposes of this clause, "manufacturer" means a person who manufactures food products intended for sale to wholesalers or retailers for ultimate sale to the consumer.

 

(9) (8) Liqueur-filled candy.

 

(10) (9) Sales to a federal agency, that the state of Minnesota is prohibited from taxing under the Constitution or laws of the United States or under the Constitution of Minnesota.

 

(11) (10) Sales to Indian tribes as defined in section 297G.08.

 

(12) (11) Shipments of intoxicating liquor from foreign countries to diplomatic personnel of foreign countries assigned to service in this state.

 

(13) (12) Shipments of bulk distilled spirits or bulk wine to farm wineries licensed under section 340A.315 for input to the final product.

 

EFFECTIVE DATE.  This section is effective July 1, 2019, provided that Minnesota Statutes, section 340A.550, relating to the licensing of direct ship wineries is enacted and effective July 1, 2019.

 

Sec. 12.  Minnesota Statutes 2018, section 297H.02, subdivision 2, is amended to read:

 

Subd. 2.  Rates.  The rate of tax under this section is 9.75 11 percent.

 

EFFECTIVE DATE.  This section is effective July 1, 2019.


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Sec. 13.  Minnesota Statutes 2018, section 297H.03, subdivision 2, is amended to read:

 

Subd. 2.  Rate.  The rate of the tax under this section is 17 19 percent.

 

EFFECTIVE DATE.  This section is effective July 1, 2019.

 

Sec. 14.  Minnesota Statutes 2018, section 297H.04, subdivision 2, is amended to read:

 

Subd. 2.  Rate.  (a) Commercial generators that generate nonmixed municipal solid waste shall pay a solid waste management tax of 60 67.5 cents per noncompacted cubic yard of periodic waste collection capacity purchased by the generator, based on the size of the container for the nonmixed municipal solid waste, the actual volume, or the weight-to-volume conversion schedule in paragraph (c).  However, the tax must be calculated by the waste management service provider using the same method for calculating the waste management service fee so that both are calculated according to container capacity, actual volume, or weight.

 

(b) Notwithstanding section 297H.02, a residential generator that generates nonmixed municipal solid waste shall pay a solid waste management tax in the same manner as provided in paragraph (a).

 

(c) The weight-to-volume conversion schedule for:

 

(1) construction debris as defined in section 115A.03, subdivision 7, is equal to 60 67.5 cents per cubic yard.  The commissioner of revenue, after consultation with the commissioner of the Pollution Control Agency, shall determine and may publish by notice a conversion schedule for construction debris;

 

(2) industrial waste as defined in section 115A.03, subdivision 13a, is equal to 60 67.5 cents per cubic yard.  The commissioner of revenue after consultation with the commissioner of the Pollution Control Agency, shall determine, and may publish by notice, a conversion schedule for various industrial wastes; and

 

(3) infectious waste as defined in section 116.76, subdivision 12, and pathological waste as defined in section 116.76, subdivision 14, is 150 pounds equals one cubic yard, or 60 67.5 cents per 150 pounds.

 

EFFECTIVE DATE.  This section is effective July 1, 2019.

 

Sec. 15.  Minnesota Statutes 2018, section 297H.05, is amended to read:

 

297H.05 SELF-HAULERS.

 

(a) A self-hauler of mixed municipal solid waste shall pay the tax to the operator of the waste management facility to which the waste is delivered at the rate imposed under section 297H.03, based on the sales price of the waste management services.

 

(b) A self-hauler of nonmixed municipal solid waste shall pay the tax to the operator of the waste management facility to which the waste is delivered at the rate imposed under section 297H.04.

 

(c) The tax imposed on the self-hauler of nonmixed municipal solid waste may be based either on the capacity of the container, the actual volume, or the weight-to-volume conversion schedule in paragraph (d).  However, the tax must be calculated by the operator using the same method for calculating the tipping fee so that both are calculated according to container capacity, actual volume, or weight.

 

(d) The weight-to-volume conversion schedule for:


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(1) construction debris as defined in section 115A.03, subdivision 7, is one ton equals 3.33 cubic yards, or $2 $2.25 per ton;

 

(2) industrial waste as defined in section 115A.03, subdivision 13a, is equal to 60 67.5 cents per cubic yard.  The commissioner of revenue, after consultation with the commissioner of the Pollution Control Agency, shall determine, and may publish by notice, a conversion schedule for various industrial wastes; and

 

(3) infectious waste as defined in section 116.76, subdivision 12, and pathological waste as defined in section 116.76, subdivision 14, is 150 pounds equals one cubic yard, or 60 67.5 cents per 150 pounds.

 

(e) For mixed municipal solid waste the tax is imposed upon the difference between the market price and the tip fee at a processing or disposal facility if the tip fee is less than the market price and the political subdivision subsidizes the cost of service at the facility.  The political subdivision is liable for the tax.

 

EFFECTIVE DATE.  This section is effective July 1, 2019.

 

Sec. 16.  Minnesota Statutes 2018, section 297H.13, subdivision 2, is amended to read:

 

Subd. 2.  Allocation of revenues.  (a) $33,760,000, or 70 percent, whichever is greater, of the amounts remitted under this chapter must be credited to the environmental fund established in section 16A.531, subdivision 1.

 

(b) Notwithstanding paragraph (a), 30 percent of the following combined amounts are dedicated to the account established under section 297H.131:

 

(1) an amount equal to 1.25 percentage points of the tax imposed under section 297H.02, subdivision 2, on taxpayers located in counties that contain a soil and water conservation district;

 

(2) an amount equal to two percentage points of the tax imposed under section 297H.03, subdivision 2, on taxpayers located in counties that contain a soil and water conservation district;

 

(3) an amount equal to 7.5 cents per cubic yard or per 150 pounds, as applicable, of the tax imposed by sections 297H.04, subdivision 2, and 297H.05, paragraph (d), clauses (2) and (3), on taxpayers located in counties that contain a soil and water conservation district; and

 

(4) an amount equal to 25 cents per ton of the tax imposed by section 297H.05, paragraph (d), clause (1), on taxpayers located in counties that contain a soil and water conservation district.

 

(b) (c) The remainder must be deposited into the general fund.

 

EFFECTIVE DATE.  This section is effective July 1, 2019.

 

Sec. 17.  [297H.131] SOIL AND WATER CONSERVATION DISTRICT ACCOUNT.

 

Subdivision 1.  Establishment; appropriation.  (a) A soil and water conservation district account is established in the special revenue fund.  An amount equal to the amount allocated under section 297H.13, subdivision 2, paragraph (b), clauses (1) to (4), must be deposited in this fund annually.

 

(b) Money in the account, including interest, is appropriated to the commissioner of revenue annually.

 

Subd. 2.  Distribution.  (a) The commissioner of revenue must distribute money in this account to the Board of Water and Soil Resources for the operation of soil and water conservation districts.


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(b) If a county does not contain a soil and water conservation district, then the Board of Water and Soil Resources must appropriate money directly to the county to provide soil and water conservation services.

 

Sec. 18.  REPEALER.

 

Minnesota Statutes 2018, sections 296A.03, subdivision 5; 296A.04, subdivision 2; 296A.05, subdivision 2; and 297F.08, subdivision 5, and Minnesota Rules, part 8125.0410, subpart 1, are repealed.

 

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

 

ARTICLE 5

PROPERTY TAXES

 

Section 1.  Minnesota Statutes 2018, section 138.053, is amended to read:

 

138.053 COUNTY HISTORICAL SOCIETY; TAX LEVY; CITIES OR TOWNS.

 

The governing body of any home rule charter or statutory city or town may annually appropriate from its general fund an amount not to exceed 0.02418 percent of estimated market value, derived from ad valorem taxes on property or other revenues, to be paid to the historical society of its respective city, town, or county to be used for the promotion of historical work and to aid in defraying the expenses of carrying on the historical work in the city, town, or county.  No city or town may appropriate any funds for the benefit of any historical society unless the society is affiliated with and approved by the Minnesota Historical Society.

 

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

 

Sec. 2.  Minnesota Statutes 2018, section 162.145, subdivision 3, is amended to read:

 

Subd. 3.  Administration.  (a) Subject to funds made available by law, the commissioner shall allocate all funds as provided in subdivision 4 and shall notify, by June 1, certify to the commissioner of revenue the amounts to be paid.

 

(b) Following notification certification from the commissioner of transportation, the commissioner of revenue shall distribute the specified funds to cities in the same manner as local government aid under chapter 477A.  An appropriation to the commissioner of transportation under this section is available to the commissioner of revenue for the purposes specified in this paragraph.

 

(c) Notwithstanding other law to the contrary, in order to receive distributions under this section, a city must conform to the standards in section 477A.017, subdivision 2.  A city that receives funds under this section must make and preserve records necessary to show that the funds are spent in compliance with subdivision 4.

 

EFFECTIVE DATE.  This section is effective for aids payable in 2019 and thereafter.

 

Sec. 3.  Minnesota Statutes 2018, section 197.603, subdivision 2, is amended to read:

 

Subd. 2.  Records; data privacy.  Pursuant to chapter 13 the county veterans service officer is the responsible authority with respect to all records in the officer's custody.  The data on clients' applications for assistance is private data on individuals, as defined in section 13.02, subdivision 12.  The county veterans service officer may disclose to the county assessor private data necessary to determine a client's eligibility for the disabled veteran's homestead market value exclusion under section 273.13, subdivision 34.

 

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


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Sec. 4.  Minnesota Statutes 2018, section 270C.85, subdivision 2, is amended to read:

 

Subd. 2.  Powers and duties.  The commissioner shall have and exercise the following powers and duties in administering the property tax laws.:

 

(a) (1) confer with, advise, and give the necessary instructions and directions to local assessors and local boards of review throughout the state as to their duties under the laws of the state.;

 

(b) (2) direct proceedings, actions, and prosecutions to be instituted to enforce the laws relating to the liability and punishment of public officers and officers and agents of corporations for failure or negligence to comply with the provisions of the property tax laws, and cause complaints to be made against local assessors, members of boards of equalization, members of boards of review, or any other assessing or taxing officer, to the proper authority, for their removal from office for misconduct or negligence of duty.;

 

(c) (3) require county attorneys to assist in the commencement of prosecutions in actions or proceedings for removal, forfeiture, and punishment, for violation of the property tax laws in their respective districts or counties.;

 

(d) (4) require town, city, county, and other public officers to report and certify information, at the parcel level or in the aggregate, as to the assessment and taxation of real and personal property, and such other information as may be needful in the work of the commissioner, in such form as the commissioner may prescribe.  The commissioner shall prescribe the content, format, manner, and time of filing of all required reports and certifications;

 

(e) (5) transmit to the governor, on or before the third Monday in December of each even-numbered year, and to each member of the legislature, on or before November 15 of each even-numbered year, the report of the department for the preceding years, showing all the taxable property subject to the property tax laws and the value of the same, in tabulated form.;

 

(f) (6) inquire into the methods of assessment and taxation and ascertain whether the assessors faithfully discharge their duties.; and

 

(g) (7) assist local assessors in determining the estimated market value of industrial special-use property.  For purposes of this paragraph clause, "industrial special-use property" means property that:

 

(1) (i) is designed and equipped for a particular type of industry;

 

(2) (ii) is not easily adapted to some other use due to the unique nature of the facilities;

 

(3) (iii) has facilities totaling at least 75,000 square feet in size; and

 

(4) (iv) has a total estimated market value of $10,000,000 or greater based on the assessor's preliminary determination.

 

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

 

Sec. 5.  Minnesota Statutes 2018, section 270C.89, subdivision 1, is amended to read:

 

Subdivision 1.  Initial report.  Each county assessor shall file by April 1 with the commissioner a copy of the abstract preliminary assessment information that the commissioner may require under section 270C.85, subdivision 2, clause (4), that will be acted upon by the local and county boards of review.  The abstract must list the real and personal property in the county itemized by assessment districts.  The assessor of each county in the state shall file


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with the commissioner, within ten working days following final action of the local board of review or equalization and within five days following final action of the county board of equalization, any changes made by the local or county board.  The information must be filed in the manner prescribed by the commissioner.

 

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

 

Sec. 6.  Minnesota Statutes 2018, section 270C.89, subdivision 2, is amended to read:

 

Subd. 2.  Final report.  The final abstract of assessments assessment information after adjustments by the State Board of Equalization and inclusion of any omitted property shall be submitted reported to the commissioner on or before September 1 of each calendar year under section 270C.85, subdivision 2, clause (4).  The final abstract must separately report the captured tax capacity of tax increment financing districts under section 469.177, subdivision 2, the areawide net tax capacity contribution values determined under sections 276A.05, subdivision 1, and 473F.07, subdivision 1, and the value subject to the power line credit under section 273.42.

 

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

 

Sec. 7.  Minnesota Statutes 2018, section 270C.91, is amended to read:

 

270C.91 RECORD OF PROCEEDINGS CHANGING NET TAX CAPACITY; DUTIES OF COUNTY AUDITOR.

 

A record of all proceedings of the commissioner affecting any change in the net tax capacity of any property, as revised by the State Board of Equalization, shall be kept by the commissioner and a copy thereof, duly certified, shall be mailed each year to the auditor of each county wherein such property is situated, on or before June 30 or 30 days after submission of the abstract required by section 270C.89, whichever is later.  This record shall specify the amounts or amount, or both, added to or deducted from the net tax capacity of the real property of each of the several towns and cities, and of the real property not in towns or cities, also the percent or amount of both, added to or deducted from the several classes of personal property in each of the towns and cities, and also the amount added to or deducted from the assessment of any person.  The county auditor shall add to or deduct from such tract or lot, or portion thereof, of any real property in the county the required percent or amount, or both, on the net tax capacity thereof as it stood after equalized by the county board, adding in each case a fractional sum of 50 cents or more, and deducting in each case any fractional sum of less than 50 cents, so that no net tax capacity of any separate tract or lot shall contain any fraction of a dollar; and add to, or deduct from, the several classes of personal property in the county the required percent or amount, or both, on the net tax capacity thereof as it stood after equalized by the county board, adding or deducting in manner aforesaid any fractional sum so that no net tax capacity of any separate class of personal property shall contain a fraction of a dollar, and add to or deduct from assessment of any person, as they stood after equalization by the county board, the required amounts to agree with the assessments as returned by the commissioner.

 

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

 

Sec. 8.  Minnesota Statutes 2018, section 272.02, subdivision 49, is amended to read:

 

Subd. 49.  Agricultural historical society property.  Property is exempt from taxation if it is owned by a nonprofit charitable or educational organization that qualifies for exemption under section 501(c)(3) of the Internal Revenue Code and meets the following criteria:

 

(1) the property is primarily used for storing and exhibiting tools, equipment, and artifacts useful in providing an understanding of local or regional agricultural history.  Primary use is determined each year based on the number of days the property is used solely for storage and exhibition purposes;


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(2) the property is limited to a maximum of 20 40 acres per owner per county, but includes the land and any taxable structures, fixtures, and equipment on the land;

 

(3) the property is not used for a revenue-producing activity for more than ten days in each calendar year; and

 

(4) the property is not used for residential purposes on either a temporary or permanent basis.

 

Notwithstanding section 272.025, applications for exemptions under this subdivision filed in assessment year 2019 must be filed with the assessor by July 1, 2019.

 

EFFECTIVE DATE.  This section is effective for assessments beginning in 2019.

 

Sec. 9.  Minnesota Statutes 2018, section 272.02, is amended by adding a subdivision to read:

 

Subd. 102.  Certain property owned by an Indian tribe.  (a) Property is exempt that:

 

(1) is located in a city of the first class with a population of more than 380,000 as of the 2010 federal census;

 

(2) was on January 1, 2016, and is for the current assessment, owned by a federally recognized Indian tribe, or its instrumentality, that is located within the state of Minnesota; and

 

(3) is used exclusively as a pharmacy.

 

(b) Property that qualifies for the exemption under this subdivision is limited to parcels and structures that do not exceed, in the aggregate, 4,000 square feet.  Property acquired for single-family housing, market-rate apartments, agriculture, or forestry does not qualify for this exemption.  The exemption created by this subdivision expires with taxes payable in 2029.

 

EFFECTIVE DATE.  This section is effective beginning with taxes payable in 2020 and thereafter.

 

Sec. 10.  Minnesota Statutes 2018, section 272.02, is amended by adding a subdivision to read:

 

Subd. 103.  Charitable farmland.  Property owned by an organization exempt under subdivision 4, 6, or 58 and used in the production of agricultural products as defined in section 273.13, subdivision 23, is exempt, provided that any proceeds from the sale of the agricultural products are used to support the mission of an organization exempt under subdivision 4, 6, or 58.

 

EFFECTIVE DATE.  This section is effective beginning with property taxes payable in 2020.

 

Sec. 11.  Minnesota Statutes 2018, section 272.115, subdivision 1, is amended to read:

 

Subdivision 1.  Requirement.  Except as otherwise provided in subdivision 5, 6, or 7, whenever any real estate is sold for a consideration in excess of $1,000 $3,000, whether by warranty deed, quitclaim deed, contract for deed or any other method of sale, the grantor, grantee or the legal agent of either shall file a certificate of value with the county auditor in the county in which the property is located when the deed or other document is presented for recording.  Contract for deeds are subject to recording under section 507.235, subdivision 1.  Value shall, in the case of any deed not a gift, be the amount of the full actual consideration thereof, paid or to be paid, including the amount of any lien or liens assumed.  The items and value of personal property transferred with the real property must be listed and deducted from the sale price.  The certificate of value shall include the classification to which the property belongs for the purpose of determining the fair market value of the property, and shall include any proposed change in use of the property known to the person filing the certificate that could change the classification of the property. 


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The certificate shall include financing terms and conditions of the sale which are necessary to determine the actual, present value of the sale price for purposes of the sales ratio study.  If the property is being acquired as part of a like‑kind exchange under section 1031 of the Internal Revenue Code of 1986, as amended through December 31, 2006, that must be indicated on the certificate.  The commissioner of revenue shall promulgate administrative rules specifying the financing terms and conditions which must be included on the certificate.  The certificate of value must include the Social Security number or the federal employer identification number of the grantors and grantees.  However, a married person who is not an owner of record and who is signing a conveyance instrument along with the person's spouse solely to release and convey their marital interest, if any, in the real property being conveyed is not a grantor for the purpose of the preceding sentence.  A statement in the deed that is substantially in the following form is sufficient to allow the county auditor to accept a certificate for filing without the Social Security number of the named spouse:  "(Name) claims no ownership interest in the real property being conveyed and is executing this instrument solely to release and convey a marital interest, if any, in that real property."  The identification numbers of the grantors and grantees are private data on individuals or nonpublic data as defined in section 13.02, subdivisions 9 and 12, but, notwithstanding that section, the private or nonpublic data may be disclosed to the commissioner of revenue for purposes of tax administration.  The information required to be shown on the certificate of value is limited to the information required as of the date of the acknowledgment on the deed or other document to be recorded.

 

EFFECTIVE DATE.  This section is effective for certificates of value filed after December 31, 2019.

 

Sec. 12.  Minnesota Statutes 2018, section 273.061, subdivision 9, is amended to read:

 

Subd. 9.  Additional general duties.  Additional duties of the county assessor shall be are as follows:

 

(1) to make all assessments, based upon the appraised values reported by the local assessors or assistants and the county assessor's own knowledge of the value of the property assessed;

 

(2) to personally view and determine the value of any property which that because of its type or character may be difficult for the local assessor to appraise;

 

(3) to make all changes ordered by the local boards of review, relative to the net tax capacity of the property of any individual, firm or corporation after notice has been given and hearings held as provided by law;

 

(4) to enter all assessments in the assessment books, furnished by the county auditor, with each book and the tabular statements for each book in correct balance;

 

(5) to prepare all assessment cards, charts, maps and any other forms prescribed by the commissioner of revenue;

 

(6) to attend the meeting of the county board of equalization; to investigate and report on any assessment ordered by said board; to enter all changes made by said board in the assessment books and prepare the abstract of assessments for the commissioner of revenue information reported to the commissioner under section 270C.85, subdivision 2, clause (4); to enter all changes made by the State Board of Equalization in the assessment books; to deduct all exemptions authorized by law from each assessment and certify to the county auditor the taxable value of each parcel of land, as described and listed in the assessment books by the county auditor, and the taxable value of the personal property of each person, firm, or corporation assessed;

 

(7) to investigate and make recommendations relative to all applications for the abatement of taxes or applications for the reduction of the net tax capacity of any property; and

 

(8) to perform all other duties relating to the assessment of property for the purpose of taxation which may be required by the commissioner of revenue.

 

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


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Sec. 13.  Minnesota Statutes 2018, section 273.0755, is amended to read:

 

273.0755 TRAINING AND EDUCATION OF PROPERTY TAX PERSONNEL.

 

(a) Beginning with the four-year period starting on July 1, 2000, every person licensed by the state Board of Assessors at the Accredited Minnesota Assessor level or higher, shall successfully complete a weeklong Minnesota laws course sponsored by the Department of Revenue at least once in every four-year period.  An assessor need not attend the course if they successfully pass the test for the course.

 

(b) The commissioner of revenue may require that each county, and each city for which the city assessor performs the duties of county assessor, have (i) (1) a person on the assessor's staff who is certified by the Department of Revenue in sales ratio calculations, (ii) (2) an officer or employee who is certified by the Department of Revenue in tax calculations, and (iii) (3) an officer or employee who is certified by the Department of Revenue in the proper preparation of abstracts of assessment.  The commissioner of revenue may require that each county have an officer or employee who is certified by the Department of Revenue in the proper preparation of abstracts of tax lists information reported to the commissioner under section 270C.85, subdivision 2, clause (4).  Certifications under this paragraph expire after four years.

 

(c) Beginning with the four-year educational licensing period starting on July 1, 2004, every Minnesota assessor licensed by the State Board of Assessors must attend and participate in a seminar that focuses on ethics, professional conduct and the need for standardized assessment practices developed and presented by the commissioner of revenue.  This requirement must be met at least once in every subsequent four-year period.  This requirement applies to all assessors licensed for one year or more in the four-year period.

 

(d) When the commissioner of revenue determines that an individual or board that performs functions related to property tax administration has performed those functions in a manner that is not uniform or equitable, the commissioner may require that the individual or members of the board complete supplemental training.  The commissioner may not require that an individual complete more than 32 hours of supplemental training pursuant to this paragraph.  If the individual is required to complete supplemental training due to that individual's membership on a local or county board of appeal and equalization, the commissioner may not require that the individual complete more than two hours of supplemental training.

 

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

 

Sec. 14.  Minnesota Statutes 2018, section 273.113, subdivision 3, is amended to read:

 

Subd. 3.  Reimbursement for lost revenue.  The county auditor shall certify to the commissioner of revenue, as part of the abstracts of tax lists required to be filed with the commissioner under section 275.29 270C.85, subdivision 2, clause (4), the amount of tax lost to the county from the property tax credit under subdivision 2.  Any prior year adjustments must also be certified in the abstracts of tax lists.  The commissioner of revenue shall review the certifications to determine their accuracy.  The commissioner may make the changes in the certification that are considered necessary or return a certification to the county auditor for corrections.  The commissioner shall reimburse each taxing district, other than school districts, for the taxes lost.  The payments must be made at the time provided in section 473H.10 for payment to taxing jurisdictions in the same proportion that the ad valorem tax is distributed.  Reimbursements to school districts must be made as provided in section 273.1392.  The amount necessary to make the reimbursements under this section is annually appropriated from the general fund to the commissioner of revenue.

 

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


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Sec. 15.  Minnesota Statutes 2018, section 273.119, subdivision 2, is amended to read:

 

Subd. 2.  Reimbursement for lost revenue.  The county may transfer money from the county conservation account created in section 40A.152 to the county revenue fund to reimburse the fund for the cost of the property tax credit.  The county auditor shall certify to the commissioner of revenue, as part of the abstracts of tax lists required to be filed with the commissioner under section 275.29 270C.85, subdivision 2, clause (4), the amount of tax lost to the county from the property tax credit under subdivision 1 and the extent that the tax lost exceeds funds available in the county conservation account.  Any prior year adjustments must also be certified in the abstracts of tax lists.  The commissioner of revenue shall review the certifications to determine their accuracy.  The commissioner may make the changes in the certification that are considered necessary or return a certification to the county auditor for corrections.  The commissioner shall reimburse each taxing district, other than school districts, from the Minnesota conservation fund under section 40A.151 for the taxes lost in excess of the county account.  The payments must be made at the time provided in section 473H.10, subdivision 3, for payment to taxing jurisdictions in the same proportion that the ad valorem tax is distributed.

 

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

 

Sec. 16.  Minnesota Statutes 2018, section 273.1231, subdivision 3, is amended to read:

 

Subd. 3.  Disaster or emergency area.  (a) "Disaster or emergency area" means a geographic area for which:

 

(1)(i) the president of the United States, the secretary of agriculture, or the administrator of the Small Business Administration has determined that a disaster exists pursuant to federal law, or

 

(ii) a local emergency has been declared pursuant to section 12.29; and

 

(2) an application by the local unit of government requesting property tax relief under this section has been received by the governor and approved by the executive council.

 

(b) The executive council must not approve an application unless:

 

(1) a completed disaster survey is included; and

 

(2) within the boundaries of the applicant, (i) the average damage for the buildings that are damaged is at least $5,000, and (ii) either at least 25 taxable buildings were damaged, or the total dollar amount of damage to all taxable buildings equals or exceeds one percent of the total taxable market value of buildings for the applicant as reported to the commissioner of revenue under section 270C.89, subdivision 2 270C.85, subdivision 2, clause (4), for the assessment in the year prior to the year of the damage.

 

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

 

Sec. 17.  Minnesota Statutes 2018, section 273.124, subdivision 3a, is amended to read:

 

Subd. 3a.  Manufactured home park cooperative.  (a) When a manufactured home park is owned by a corporation or association organized under chapter 308A or 308B, and each person who owns a share or shares in the corporation or association is entitled to occupy a lot within the park, the corporation or association may claim homestead treatment for the park.  Each lot must be designated by legal description or number, and each lot is limited to not more than one-half acre of land.

 

(b) The manufactured home park shall be entitled to homestead treatment if all of the following criteria are met:


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(1) the occupant or the cooperative corporation or association is paying the ad valorem property taxes and any special assessments levied against the land and structure either directly, or indirectly through dues to the corporation or association; and

 

(2) the corporation or association organized under chapter 308A or 308B is wholly owned by persons having a right to occupy a lot owned by the corporation or association.

 

(c) A charitable corporation, organized under the laws of Minnesota with no outstanding stock, and granted a ruling by the Internal Revenue Service for 501(c)(3) tax-exempt status, qualifies for homestead treatment with respect to a manufactured home park if its members hold residential participation warrants entitling them to occupy a lot in the manufactured home park.

 

(d) "Homestead treatment" under this subdivision means the classification rate provided for class 4c property classified under section 273.13, subdivision 25, paragraph (d), clause (5), item (ii)., and the homestead market value exclusion under section 273.13, subdivision 35, does not apply and the property taxes assessed against the park shall not be included in the determination of taxes payable for rent paid under section 290A.03.

 

EFFECTIVE DATE.  This section is effective beginning with claims for taxes payable in 2020.

 

Sec. 18.  Minnesota Statutes 2018, section 273.124, subdivision 14, is amended to read:

 

Subd. 14.  Agricultural homesteads; special provisions.  (a) Real estate of less than ten acres that is the homestead of its owner must be classified as class 2a under section 273.13, subdivision 23, paragraph (a), if:

 

(1) the parcel on which the house is located is contiguous on at least two sides to (i) agricultural land, (ii) land owned or administered by the United States Fish and Wildlife Service, or (iii) land administered by the Department of Natural Resources on which in lieu taxes are paid under sections 477A.11 to 477A.14;

 

(2) its owner also owns a noncontiguous parcel of agricultural land that is at least 20 acres;

 

(3) the noncontiguous land is located not farther than four townships or cities, or a combination of townships or cities from the homestead; and

 

(4) the agricultural use value of the noncontiguous land and farm buildings is equal to at least 50 percent of the market value of the house, garage, and one acre of land.

 

Homesteads initially classified as class 2a under the provisions of this paragraph shall remain classified as class 2a, irrespective of subsequent changes in the use of adjoining properties, as long as the homestead remains under the same ownership, the owner owns a noncontiguous parcel of agricultural land that is at least 20 acres, and the agricultural use value qualifies under clause (4).  Homestead classification under this paragraph is limited to property that qualified under this paragraph for the 1998 assessment.

 

(b)(i) Agricultural property shall be classified as the owner's homestead, to the same extent as other agricultural homestead property, if all of the following criteria are met:

 

(1) the agricultural property consists of at least 40 acres including undivided government lots and correctional 40's;

 

(2) the owner, the owner's spouse, or a grandchild, child, sibling, or parent of the owner or of the owner's spouse, is actively farming the agricultural property, either on the person's own behalf as an individual or on behalf of a partnership operating a family farm, family farm corporation, joint family farm venture, or limited liability company of which the person is a partner, shareholder, or member;


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(3) both the owner of the agricultural property and the person who is actively farming the agricultural property under clause (2), are Minnesota residents;

 

(4) neither the owner nor the spouse of the owner claims another agricultural homestead in Minnesota; and

 

(5) neither the owner nor the person actively farming the agricultural property lives farther than four townships or cities, or a combination of four townships or cities, from the agricultural property, except that if the owner or the owner's spouse is required to live in employer-provided housing, the owner or owner's spouse, whichever is actively farming the agricultural property, may live more than four townships or cities, or combination of four townships or cities from the agricultural property.

 

The relationship under this paragraph may be either by blood or marriage.

 

(ii) Agricultural property held by a trustee under a trust is eligible for agricultural homestead classification under this paragraph if the qualifications in clause (i) are met, except that "owner" means the grantor of the trust.

 

(iii) Property containing the residence of an owner who owns qualified property under clause (i) shall be classified as part of the owner's agricultural homestead, if that property is also used for noncommercial storage or drying of agricultural crops.

 

(iv) (iii) As used in this paragraph, "agricultural property" means class 2a property and any class 2b property that is contiguous to and under the same ownership as the class 2a property.

 

(c) Noncontiguous land shall be included as part of a homestead under section 273.13, subdivision 23, paragraph (a), only if the homestead is classified as class 2a and the detached land is located in the same township or city, or not farther than four townships or cities or combination thereof from the homestead.  Any taxpayer of these noncontiguous lands must notify the county assessor that the noncontiguous land is part of the taxpayer's homestead, and, if the homestead is located in another county, the taxpayer must also notify the assessor of the other county.

 

(d) Agricultural land used for purposes of a homestead and actively farmed by a person holding a vested remainder interest in it must be classified as a homestead under section 273.13, subdivision 23, paragraph (a).  If agricultural land is classified class 2a, any other dwellings on the land used for purposes of a homestead by persons holding vested remainder interests who are actively engaged in farming the property, and up to one acre of the land surrounding each homestead and reasonably necessary for the use of the dwelling as a home, must also be assessed class 2a.

 

(e) Agricultural land and buildings that were class 2a homestead property under section 273.13, subdivision 23, paragraph (a), for the 1997 assessment shall remain classified as agricultural homesteads for subsequent assessments if:

 

(1) the property owner abandoned the homestead dwelling located on the agricultural homestead as a result of the April 1997 floods;

 

(2) the property is located in the county of Polk, Clay, Kittson, Marshall, Norman, or Wilkin;

 

(3) the agricultural land and buildings remain under the same ownership for the current assessment year as existed for the 1997 assessment year and continue to be used for agricultural purposes;

 

(4) the dwelling occupied by the owner is located in Minnesota and is within 30 miles of one of the parcels of agricultural land that is owned by the taxpayer; and


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(5) the owner notifies the county assessor that the relocation was due to the 1997 floods, and the owner furnishes the assessor any information deemed necessary by the assessor in verifying the change in dwelling.  Further notifications to the assessor are not required if the property continues to meet all the requirements in this paragraph and any dwellings on the agricultural land remain uninhabited.

 

(f) Agricultural land and buildings that were class 2a homestead property under section 273.13, subdivision 23, paragraph (a), for the 1998 assessment shall remain classified agricultural homesteads for subsequent assessments if:

 

(1) the property owner abandoned the homestead dwelling located on the agricultural homestead as a result of damage caused by a March 29, 1998, tornado;

 

(2) the property is located in the county of Blue Earth, Brown, Cottonwood, LeSueur, Nicollet, Nobles, or Rice;

 

(3) the agricultural land and buildings remain under the same ownership for the current assessment year as existed for the 1998 assessment year;

 

(4) the dwelling occupied by the owner is located in this state and is within 50 miles of one of the parcels of agricultural land that is owned by the taxpayer; and

 

(5) the owner notifies the county assessor that the relocation was due to a March 29, 1998, tornado, and the owner furnishes the assessor any information deemed necessary by the assessor in verifying the change in homestead dwelling.  For taxes payable in 1999, the owner must notify the assessor by December 1, 1998.  Further notifications to the assessor are not required if the property continues to meet all the requirements in this paragraph and any dwellings on the agricultural land remain uninhabited.

 

(g) Agricultural property of a family farm corporation, joint family farm venture, family farm limited liability company, or partnership operating a family farm as described under subdivision 8 shall be classified homestead, to the same extent as other agricultural homestead property, if all of the following criteria are met:

 

(1) the property consists of at least 40 acres including undivided government lots and correctional 40's;

 

(2) a shareholder, member, or partner of that entity is actively farming the agricultural property;

 

(3) that shareholder, member, or partner who is actively farming the agricultural property is a Minnesota resident;

 

(4) neither that shareholder, member, or partner, nor the spouse of that shareholder, member, or partner claims another agricultural homestead in Minnesota; and

 

(5) that shareholder, member, or partner does not live farther than four townships or cities, or a combination of four townships or cities, from the agricultural property.

 

Homestead treatment applies under this paragraph for property leased to a family farm corporation, joint farm venture, limited liability company, or partnership operating a family farm if legal title to the property is in the name of an individual who is a member, shareholder, or partner in the entity.

 

(h) To be eligible for the special agricultural homestead under this subdivision, an initial full application must be submitted to the county assessor where the property is located.  Owners and the persons who are actively farming the property shall be required to complete only a one-page abbreviated version of the application in each subsequent year provided that none of the following items have changed since the initial application:


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(1) the day-to-day operation, administration, and financial risks remain the same;

 

(2) the owners and the persons actively farming the property continue to live within the four townships or city criteria and are Minnesota residents;

 

(3) the same operator of the agricultural property is listed with the Farm Service Agency;

 

(4) a Schedule F or equivalent income tax form was filed for the most recent year;

 

(5) the property's acreage is unchanged; and

 

(6) none of the property's acres have been enrolled in a federal or state farm program since the initial application.

 

The owners and any persons who are actively farming the property must include the appropriate Social Security numbers, and sign and date the application.  If any of the specified information has changed since the full application was filed, the owner must notify the assessor, and must complete a new application to determine if the property continues to qualify for the special agricultural homestead.  The commissioner of revenue shall prepare a standard reapplication form for use by the assessors.

 

(i) Agricultural land and buildings that were class 2a homestead property under section 273.13, subdivision 23, paragraph (a), for the 2007 assessment shall remain classified agricultural homesteads for subsequent assessments if:

 

(1) the property owner abandoned the homestead dwelling located on the agricultural homestead as a result of damage caused by the August 2007 floods;

 

(2) the property is located in the county of Dodge, Fillmore, Houston, Olmsted, Steele, Wabasha, or Winona;

 

(3) the agricultural land and buildings remain under the same ownership for the current assessment year as existed for the 2007 assessment year;

 

(4) the dwelling occupied by the owner is located in this state and is within 50 miles of one of the parcels of agricultural land that is owned by the taxpayer; and

 

(5) the owner notifies the county assessor that the relocation was due to the August 2007 floods, and the owner furnishes the assessor any information deemed necessary by the assessor in verifying the change in homestead dwelling.  For taxes payable in 2009, the owner must notify the assessor by December 1, 2008.  Further notifications to the assessor are not required if the property continues to meet all the requirements in this paragraph and any dwellings on the agricultural land remain uninhabited.

 

(j) Agricultural land and buildings that were class 2a homestead property under section 273.13, subdivision 23, paragraph (a), for the 2008 assessment shall remain classified as agricultural homesteads for subsequent assessments if:

 

(1) the property owner abandoned the homestead dwelling located on the agricultural homestead as a result of the March 2009 floods;

 

(2) the property is located in the county of Marshall;

 

(3) the agricultural land and buildings remain under the same ownership for the current assessment year as existed for the 2008 assessment year and continue to be used for agricultural purposes;


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(4) the dwelling occupied by the owner is located in Minnesota and is within 50 miles of one of the parcels of agricultural land that is owned by the taxpayer; and

 

(5) the owner notifies the county assessor that the relocation was due to the 2009 floods, and the owner furnishes the assessor any information deemed necessary by the assessor in verifying the change in dwelling.  Further notifications to the assessor are not required if the property continues to meet all the requirements in this paragraph and any dwellings on the agricultural land remain uninhabited.

 

EFFECTIVE DATE.  This section is effective beginning for property taxes payable in 2020.

 

Sec. 19.  Minnesota Statutes 2018, section 273.124, subdivision 21, is amended to read:

 

Subd. 21.  Trust property; homestead.  Real or personal property, including agricultural property, held by a trustee under a trust is eligible for classification as homestead property if the property satisfies the requirements of paragraph (a), (b), (c), or (d), or (e).

 

(a) The grantor or surviving spouse of the grantor of the trust occupies and uses the property as a homestead.

 

(b) A relative or surviving relative of the grantor who meets the requirements of subdivision 1, paragraph (c), in the case of residential real estate; or subdivision 1, paragraph (d), in the case of agricultural property, occupies and uses the property as a homestead.

 

(c) A family farm corporation, joint farm venture, limited liability company, or partnership operating a family farm in which the grantor or the grantor's surviving spouse is a shareholder, member, or partner rents the property; and, either (1) a shareholder, member, or partner of the corporation, joint farm venture, limited liability company, or partnership occupies and uses the property as a homestead; or (2) the property is at least 40 acres, including undivided government lots and correctional 40's, and a shareholder, member, or partner of the tenant-entity is actively farming the property on behalf of the corporation, joint farm venture, limited liability company, or partnership.

 

(d) A person who has received homestead classification for property taxes payable in 2000 on the basis of an unqualified legal right under the terms of the trust agreement to occupy the property as that person's homestead and who continues to use the property as a homestead; or, a person who received the homestead classification for taxes payable in 2005 under paragraph (c) who does not qualify under paragraph (c) for taxes payable in 2006 or thereafter but who continues to qualify under paragraph (c) as it existed for taxes payable in 2005.

 

(e) The qualifications under subdivision 14, paragraph (b), clause (i), are met.  For purposes of this paragraph, "owner" means the grantor of the trust or the surviving spouse of the grantor.

 

(f) For purposes of this subdivision, the following terms have the meanings given them:

 

(1) "agricultural property" means the house, garage, other farm buildings and structures, and agricultural land;

 

(2) "agricultural land" has the meaning given in section 273.13, subdivision 23, except that the phrases "owned by same person" or "under the same ownership" as used in that subdivision mean and include contiguous tax parcels owned by:

 

(i) an individual and a trust of which the individual, the individual's spouse, or the individual's deceased spouse is the grantor; or


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(ii) different trusts of which the grantors of each trust are any combination of an individual, the individual's spouse, or the individual's deceased spouse; and

 

For purposes of this subdivision, (3) "grantor" is defined as means the person creating or establishing a testamentary, inter Vivos, revocable or irrevocable trust by written instrument or through the exercise of a power of appointment.

 

(g) Noncontiguous agricultural land is included as part of a homestead under this subdivision, only if the homestead is classified as class 2a, as defined in section 273.13, subdivision 23, and the detached land is located in the same township or city, or not farther than four townships or cities or combination thereof from the homestead.  Any taxpayer of these noncontiguous lands must notify the county assessor that the noncontiguous land is part of the taxpayer's homestead, and, if the homestead is located in another county, the taxpayer must also notify the assessor of the other county.

 

EFFECTIVE DATE.  This section is effective beginning for property taxes payable in 2020.

 

Sec. 20.  Minnesota Statutes 2018, section 273.124, is amended by adding a subdivision to read:

 

Subd. 23.  Fractional homesteads.  In the case of property that is classified as part homestead and part nonhomestead solely because not all the owners occupy or farm the property, not all the owners have qualifying relatives occupying or farming the property, or not all the spouses of owners occupy the property, the portions of property classified as part homestead and part nonhomestead must correspond to the ownership percentages that each owner has in the property, as determined by the land records in the county recorder's office or registrar of titles.  If the ownership percentages of each owner cannot be determined by reference to the land records, the portions of property classified as part homestead and part nonhomestead must correspond to the ownership percentages each owner would have if they each owned an equal share of the property.

 

EFFECTIVE DATE.  This section is effective for assessments beginning in 2019.

 

Sec. 21.  Minnesota Statutes 2018, section 273.1245, subdivision 2, is amended to read:

 

Subd. 2.  Disclosure.  The assessor shall disclose the data described in subdivision 1 to the commissioner of revenue as provided by law.  The assessor shall also disclose all or portions of the data described in subdivision 1 to:

 

(1) the county treasurer solely for the purpose of proceeding under the Revenue Recapture Act to recover personal property taxes owing.; and

 

(2) the county veterans service officer for the purpose of determining a person's eligibility for the disabled veteran's homestead market value exclusion under section 273.13, subdivision 34.

 

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

 

Sec. 22.  [273.129] ELDERLY LIVING FACILITY DEFERRAL.

 

Subdivision 1.  Requirements.  An elderly living facility is eligible for tax deferment under this section if it meets all of the following requirements:

 

(1) the facility is located in a city of the first class with a population of fewer than 110,000;

 

(2) the facility is owned and operated by a nonprofit organization organized under section 501(c)(3) of the Internal Revenue Code;


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(3) construction of the facility was completed between January 1, 1963, and January 1, 1964;

 

(4) the facility has a housing with services license under chapter 144D and a comprehensive home care license under chapter 144A;

 

(5) residents of the facility must be (i) at least 62 years of age, or (ii) disabled; and

 

(6) at least 30 percent of the units in the facility are occupied by persons whose annual income does not exceed 50 percent of the median family income for the area.

 

Subd. 2.  Deferral of taxes.  Property meeting the requirements of subdivision 1 must, upon timely application by the owner in the manner provided in subdivision 3, be treated as exempt property as defined in section 272.02.  However, the assessor must make a separate determination of market value of such property and the tax based upon the appropriate tax rate applicable to such property in the taxing district must be recorded on the property assessment records.

 

Subd. 3.  Application.  Application for the deferment of taxes under this section must be filed by December 1 of the year prior to the year in which the taxes are payable.  Any application filed under this subdivision and granted shall continue in effect for subsequent years until the property no longer qualifies.  The application must be filed with the assessor in the taxing district in which the property is located on the form prescribed by the commissioner of revenue.  Property meeting the application requirements under this subdivision is not subject to the application requirements under section 272.025.

 

Subd. 4.  Payment of taxes.  Property receiving the tax deferment under this section continues to qualify until it is sold, transferred, or no longer qualifies under subdivision 1.  The portion of the property that is sold, transferred, or no longer qualifying under subdivision 1 is subject to taxes in the amount equal to the tax that would have been due on the property had it not been treated as exempt property under subdivision 2.  These taxes must be extended against the property for taxes payable in the current year, plus the four prior years, to the extent that the property has qualified for a tax deferment under this section.  No interest or penalties shall be levied on the taxes due under this subdivision if timely paid.

 

Subd. 5.  Lien.  The taxes imposed by this section are a lien upon the property assessed to the same extent and for the same duration as other taxes imposed on the property in this state.  The tax shall be annually extended by the county auditor and if and when payable shall be collected and distributed in the manner provided by law for the collection and distribution of other property taxes.

 

EFFECTIVE DATE.  This section is effective beginning with property taxes payable in 2020.

 

Sec. 23.  Minnesota Statutes 2018, section 273.13, subdivision 23, is amended to read:

 

Subd. 23.  Class 2.  (a) An agricultural homestead consists of class 2a agricultural land that is homesteaded, along with any class 2b rural vacant land that is contiguous to the class 2a land under the same ownership.  The market value of the house and garage and immediately surrounding one acre of land has the same classification rates as class 1a or 1b property under subdivision 22.  The value of the remaining land including improvements up to the first tier valuation limit of agricultural homestead property has a classification rate of 0.5 percent of market value.  The remaining property over the first tier has a classification rate of one percent of market value.  For purposes of this subdivision, the "first tier valuation limit of agricultural homestead property" and "first tier" means the limit certified under section 273.11, subdivision 23.

 

(b) Class 2a agricultural land consists of parcels of property, or portions thereof, that are agricultural land and buildings.  Class 2a property has a classification rate of one percent of market value, unless it is part of an agricultural homestead under paragraph (a).  Class 2a property must also include any property that would otherwise


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be classified as 2b, but is interspersed with class 2a property, including but not limited to sloughs, wooded wind shelters, acreage abutting ditches, ravines, rock piles, land subject to a setback requirement, and other similar land that is impractical for the assessor to value separately from the rest of the property or that is unlikely to be able to be sold separately from the rest of the property.

 

An assessor may classify the part of a parcel described in this subdivision that is used for agricultural purposes as class 2a and the remainder in the class appropriate to its use.

 

(c) Class 2b rural vacant land consists of parcels of property, or portions thereof, that are unplatted real estate, rural in character and not used for agricultural purposes, including land used for growing trees for timber, lumber, and wood and wood products, that is not improved with a structure.  The presence of a minor, ancillary nonresidential structure as defined by the commissioner of revenue does not disqualify the property from classification under this paragraph.  Any parcel of 20 acres or more improved with a structure that is not a minor, ancillary nonresidential structure must be split-classified, and ten acres must be assigned to the split parcel containing the structure.  Class 2b property has a classification rate of one percent of market value unless it is part of an agricultural homestead under paragraph (a), or qualifies as class 2c under paragraph (d).

 

(d) Class 2c managed forest land consists of no less than 20 and no more than 1,920 acres statewide per taxpayer that is being managed under a forest management plan that meets the requirements of chapter 290C, but is not enrolled in the sustainable forest resource management incentive program.  It has a classification rate of .65 percent, provided that the owner of the property must apply to the assessor in order for the property to initially qualify for the reduced rate and provide the information required by the assessor to verify that the property qualifies for the reduced rate.  If the assessor receives the application and information before May 1 in an assessment year, the property qualifies beginning with that assessment year.  If the assessor receives the application and information after April 30 in an assessment year, the property may not qualify until the next assessment year.  The commissioner of natural resources must concur that the land is qualified.  The commissioner of natural resources shall annually provide county assessors verification information on a timely basis.  The presence of a minor, ancillary nonresidential structure as defined by the commissioner of revenue does not disqualify the property from classification under this paragraph.

 

(e) Agricultural land as used in this section means:

 

(1) contiguous acreage of ten acres or more, used during the preceding year for agricultural purposes; or

 

(2) contiguous acreage used during the preceding year for an intensive livestock or poultry confinement operation, provided that land used only for pasturing or grazing does not qualify under this clause.

 

"Agricultural purposes" as used in this section means the raising, cultivation, drying, or storage of agricultural products for sale, or the storage of machinery or equipment used in support of agricultural production by the same farm entity.  For a property to be classified as agricultural based only on the drying or storage of agricultural products, the products being dried or stored must have been produced by the same farm entity as the entity operating the drying or storage facility.  "Agricultural purposes" also includes (i) enrollment in a local conservation program or the Reinvest in Minnesota program under sections 103F.501 to 103F.535 or the federal Conservation Reserve Program as contained in Public Law 99-198 or a similar state or federal conservation program if the property was classified as agricultural (i) (A) under this subdivision for taxes payable in 2003 because of its enrollment in a qualifying program and the land remains enrolled or (ii) (B) in the year prior to its enrollment, or (ii) use of land, not to exceed three acres, to provide environmental benefits such as buffer strips, old growth forest restoration or retention, or retention ponds to prevent soil erosion.  For purposes of this section, a "local conservation program" means a program administered by a town, statutory or home rule charter city, or county, including a watershed district, water management organization, or soil and water conservation district, in which landowners voluntarily enroll land and receive incentive payments equal to at least $50 per acre in exchange for use or other restrictions


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placed on the land.  In order for property to qualify under the local conservation program provision, a taxpayer must apply to the assessor by February 1 of the assessment year and must submit the information required by the assessor, including but not limited to a copy of the program requirements, the specific agreement between the land owner and the local agency, if applicable, and a map of the conservation area.  Agricultural classification shall not be based upon the market value of any residential structures on the parcel or contiguous parcels under the same ownership.

 

"Contiguous acreage," for purposes of this paragraph, means all of, or a contiguous portion of, a tax parcel as described in section 272.193, or all of, or a contiguous portion of, a set of contiguous tax parcels under that section that are owned by the same person.

 

(f) Agricultural land under this section also includes:

 

(1) contiguous acreage that is less than ten acres in size and exclusively used in the preceding year for raising or cultivating agricultural products; or

 

(2) contiguous acreage that contains a residence and is less than 11 acres in size, if the contiguous acreage exclusive of the house, garage, and surrounding one acre of land was used in the preceding year for one or more of the following three uses:

 

(i) for an intensive grain drying or storage operation, or for intensive machinery or equipment storage activities used to support agricultural activities on other parcels of property operated by the same farming entity;

 

(ii) as a nursery, provided that only those acres used intensively to produce nursery stock are considered agricultural land; or

 

(iii) for intensive market farming; for purposes of this paragraph, "market farming" means the cultivation of one or more fruits or vegetables or production of animal or other agricultural products for sale to local markets by the farmer or an organization with which the farmer is affiliated.

 

"Contiguous acreage," for purposes of this paragraph, means all of a tax parcel as described in section 272.193, or all of a set of contiguous tax parcels under that section that are owned by the same person.

 

(g) Land shall be classified as agricultural even if all or a portion of the agricultural use of that property is the leasing to, or use by another person for agricultural purposes.

 

Classification under this subdivision is not determinative for qualifying under section 273.111.

 

(h) The property classification under this section supersedes, for property tax purposes only, any locally administered agricultural policies or land use restrictions that define minimum or maximum farm acreage.