1.1.................... moves to amend H.F. No. 1914 as follows:
1.2Delete the H1914A12 and H1914A13 amendments
1.3Page 3, delete sections 1 to 3, and insert:

1.4    "Section 1. Minnesota Statutes 2010, section 289A.08, subdivision 3, is amended to
1.5read:
1.6    Subd. 3. Corporations. (a) A corporation that is subject to the state's jurisdiction to
1.7tax under section 290.014, subdivision 5, must file a return~~, except that a foreign operating~~
1.8~~corporation as defined in section~~ ~~290.01, subdivision 6b, is not required to file a return~~.
1.9(b) Members of a unitary business that are required to file a combined report on one
1.10return must designate a member of the unitary business to be responsible for tax matters,
1.11including the filing of returns, the payment of taxes, additions to tax, penalties, interest,
1.12or any other payment, and for the receipt of refunds of taxes or interest paid in excess of
1.13taxes lawfully due. The designated member must be a member of the unitary business that
1.14is filing the single combined report and either:
1.15(1) a corporation that is subject to the taxes imposed by chapter 290; or
1.16(2) a corporation that is not subject to the taxes imposed by chapter 290:
1.17(i) Such corporation consents by filing the return as a designated member under this
1.18clause to remit taxes, penalties, interest, or additions to tax due from the members of the
1.19unitary business subject to tax, and receive refunds or other payments on behalf of other
1.20members of the unitary business. The member designated under this clause is a "taxpayer"
1.21for the purposes of this chapter and chapter 270C, and is liable for any liability imposed
1.22on the unitary business under this chapter and chapter 290.
1.23(ii) If the state does not otherwise have the jurisdiction to tax the member designated
1.24under this clause, consenting to be the designated member does not create the jurisdiction
1.25to impose tax on the designated member, other than as described in item (i).
1.26(iii) The member designated under this clause must apply for a business tax account
1.27identification number.
2.1(c) The commissioner shall adopt rules for the filing of one return on behalf of the
2.2members of an affiliated group of corporations that are required to file a combined report.
2.3All members of an affiliated group that are required to file a combined report must file one
2.4return on behalf of the members of the group under rules adopted by the commissioner.
2.5(d) If a corporation claims on a return that it has paid tax in excess of the amount of
2.6taxes lawfully due, that corporation must include on that return information necessary for
2.7payment of the tax in excess of the amount lawfully due by electronic means.
2.8EFFECTIVE DATE.This section is effective for returns filed for taxable years
2.9beginning after December 31, 2011.

2.10    Sec. 2. Minnesota Statutes 2010, section 290.01, subdivision 5, is amended to read:
2.11    Subd. 5. Domestic corporation. The term "domestic" when applied to a corporation
2.12means a corporation:
2.13(1) created or organized in the United States, or under the laws of the United States
2.14or of any state, the District of Columbia, or any political subdivision of any of the
2.15foregoing but not including the Commonwealth of Puerto Rico, or any possession of
2.16the United States;
2.17(2) which qualifies as a DISC, as defined in section 992(a) of the Internal Revenue
2.18Code; or
2.19(3) which qualifies as a FSC, as defined in section 922 of the Internal Revenue Code.;
2.20    (4) which is incorporated in a tax haven;
2.21    (5) which is engaged in activity in a tax haven sufficient for the tax haven to impose
2.22a net income tax under United States constitutional standards and section 290.015, and
2.23which reports that 20 percent or more of its income is attributable to business in the tax
2.24haven; or
2.25    (6) which has the average of its property, payroll, and sales factors, as defined under
2.26section 290.191, within the 50 states of the United States and the District of Columbia, of
2.2720 percent or more.
2.28EFFECTIVE DATE.This section is effective for returns filed for taxable years
2.29beginning after December 31, 2011.

2.30    Sec. 3. Minnesota Statutes 2010, section 290.01, is amended by adding a subdivision
2.31to read:
2.32    Subd. 5c. Tax haven. (a) "Tax haven" means the following foreign jurisdictions,
2.33unless the listing of the jurisdiction does not apply under paragraph (b):
3.1(1) Andorra;
3.2(2) Anguilla;
3.3(3) Antigua and Barbuda;
3.4(4) Aruba;
3.5(5) Bahamas;
3.6(6) Bahrain;
3.7(7) Belize;
3.8(8) British Virgin Islands;
3.9(9) Cayman Islands;
3.10(10) Cook Islands;
3.11(11) Costa Rica;
3.12(12) Dominica;
3.13(13) Gibraltar;
3.14(14) Grenada;
3.15(15) Guernsey-Sark-Alderney;
3.16(16) Jersey;
3.17(17) Jordan;
3.18(18) Lebanon;
3.19(19) Liberia;
3.20(20) Liechtenstein;
3.21(21) Maldives;
3.22(22) Marshall Islands;
3.23(23) Monaco;
3.24(24) Montserrat;
3.25(25) Nauru;
3.26(26) Netherlands Antilles;
3.27(27) Niue;
3.28(28) Panama;
3.29(29) St. Kitts and Nevis;
3.30(30) St. Lucia;
3.31(31) St. Vincent and Grenadines;
3.32(32) Tonga;
3.33(33) Turks and Caicos; and
3.34(34) Vanuatu.
3.35(b) A foreign jurisdiction's listing under paragraph (a) does not apply to the first
3.36taxable year after the United States enters into a tax treaty or other agreement with the
4.1foreign jurisdiction that provides for prompt, obligatory, and automatic exchange of
4.2information with the United States government relevant to enforcing the provisions of
4.3federal tax laws and the treaty or other agreement was in effect for the taxable year.
4.4EFFECTIVE DATE.This section is effective for returns filed for taxable years
4.5beginning after December 31, 2011.

4.6    Sec. 4. Minnesota Statutes 2011 Supplement, section 290.01, subdivision 19a, is
4.7amended to read:
4.8    Subd. 19a. Additions to federal taxable income. For individuals, estates, and
4.9trusts, there shall be added to federal taxable income:
4.10    (1)(i) interest income on obligations of any state other than Minnesota or a political
4.11or governmental subdivision, municipality, or governmental agency or instrumentality
4.12of any state other than Minnesota exempt from federal income taxes under the Internal
4.13Revenue Code or any other federal statute; and
4.14    (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
4.15Code, except:
4.16(A) the portion of the exempt-interest dividends exempt from state taxation under
4.17the laws of the United States; and
4.18(B) the portion of the exempt-interest dividends derived from interest income
4.19on obligations of the state of Minnesota or its political or governmental subdivisions,
4.20municipalities, governmental agencies or instrumentalities, but only if the portion of the
4.21exempt-interest dividends from such Minnesota sources paid to all shareholders represents
4.2295 percent or more of the exempt-interest dividends, including any dividends exempt
4.23under subitem (A), that are paid by the regulated investment company as defined in section
4.24851(a) of the Internal Revenue Code, or the fund of the regulated investment company as
4.25defined in section 851(g) of the Internal Revenue Code, making the payment; and
4.26    (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
4.27government described in section 7871(c) of the Internal Revenue Code shall be treated as
4.28interest income on obligations of the state in which the tribe is located;
4.29    (2) the amount of income, sales and use, motor vehicle sales, or excise taxes paid or
4.30accrued within the taxable year under this chapter and the amount of taxes based on net
4.31income paid, sales and use, motor vehicle sales, or excise taxes paid to any other state
4.32or to any province or territory of Canada, to the extent allowed as a deduction under
4.33section 63(d) of the Internal Revenue Code, but the addition may not be more than the
4.34amount by which the itemized deductions as allowed under section 63(d) of the Internal
4.35Revenue Code exceeds the amount of the standard deduction as defined in section 63(c) of
5.1the Internal Revenue Code, disregarding the amounts allowed under sections 63(c)(1)(C)
5.2and 63(c)(1)(E) of the Internal Revenue Code, minus any addition that would have been
5.3required under clause (21) if the taxpayer had claimed the standard deduction, and plus
5.4any subtraction allowed under subdivision 19b, clauses (19) and (20). For the purpose of
5.5this paragraph, the disallowance of itemized deductions under section 68 of the Internal
5.6Revenue Code of 1986, income, sales and use, motor vehicle sales, or excise taxes are
5.7the last itemized deductions disallowed;
5.8    (3) the capital gain amount of a lump-sum distribution to which the special tax under
5.9section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
5.10    (4) the amount of income taxes paid or accrued within the taxable year under this
5.11chapter and taxes based on net income paid to any other state or any province or territory
5.12of Canada, to the extent allowed as a deduction in determining federal adjusted gross
5.13income. For the purpose of this paragraph, income taxes do not include the taxes imposed
5.14by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
5.15    (5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
5.16other than expenses or interest used in computing net interest income for the subtraction
5.17allowed under subdivision 19b, clause (1);
5.18    (6) the amount of a partner's pro rata share of net income which does not flow
5.19through to the partner because the partnership elected to pay the tax on the income under
5.20section 6242(a)(2) of the Internal Revenue Code;
5.21    (7) 80 percent of the depreciation deduction allowed under section 168(k) of the
5.22Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
5.23in the taxable year generates a deduction for depreciation under section 168(k) and the
5.24activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
5.25the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
5.26limited to excess of the depreciation claimed by the activity under section 168(k) over the
5.27amount of the loss from the activity that is not allowed in the taxable year. In succeeding
5.28taxable years when the losses not allowed in the taxable year are allowed, the depreciation
5.29under section 168(k) is allowed;
5.30    (8) 80 percent of the amount by which the deduction allowed by section 179 of the
5.31Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
5.32Revenue Code of 1986, as amended through December 31, 2003;
5.33    (9) to the extent deducted in computing federal taxable income, the amount of the
5.34deduction allowable under section 199 of the Internal Revenue Code;
6.1    (10) for taxable years beginning before January 1, 2013, the exclusion allowed
6.2under section 139A of the Internal Revenue Code for federal subsidies for prescription
6.3drug plans;
6.4(11) the amount of expenses disallowed under section 290.10, subdivision 2;
6.5    (12) for taxable years beginning before January 1, 2010, the amount deducted for
6.6qualified tuition and related expenses under section 222 of the Internal Revenue Code, to
6.7the extent deducted from gross income;
6.8    (13) for taxable years beginning before January 1, 2010, the amount deducted for
6.9certain expenses of elementary and secondary school teachers under section 62(a)(2)(D)
6.10of the Internal Revenue Code, to the extent deducted from gross income;
6.11(14) the additional standard deduction for property taxes payable that is allowable
6.12under section 63(c)(1)(C) of the Internal Revenue Code;
6.13(15) the additional standard deduction for qualified motor vehicle sales taxes
6.14allowable under section 63(c)(1)(E) of the Internal Revenue Code;
6.15(16) discharge of indebtedness income resulting from reacquisition of business
6.16indebtedness and deferred under section 108(i) of the Internal Revenue Code;
6.17(17) the amount of unemployment compensation exempt from tax under section
6.1885(c) of the Internal Revenue Code;
6.19(18) changes to federal taxable income attributable to a net operating loss that the
6.20taxpayer elected to carry back for more than two years for federal purposes but for which
6.21the losses can be carried back for only two years under section 290.095, subdivision
6.2211, paragraph (c);
6.23(19) to the extent included in the computation of federal taxable income in taxable
6.24years beginning after December 31, 2010, the amount of disallowed itemized deductions,
6.25but the amount of disallowed itemized deductions plus the addition required under clause
6.26(2) may not be more than the amount by which the itemized deductions as allowed under
6.27section 63(d) of the Internal Revenue Code exceeds the amount of the standard deduction
6.28as defined in section 63(c) of the Internal Revenue Code, disregarding the amounts
6.29allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code, and
6.30reduced by any addition that would have been required under clause (21) if the taxpayer
6.31had claimed the standard deduction:
6.32(i) the amount of disallowed itemized deductions is equal to the lesser of:
6.33(A) three percent of the excess of the taxpayer's federal adjusted gross income
6.34over the applicable amount; or
6.35(B) 80 percent of the amount of the itemized deductions otherwise allowable to the
6.36taxpayer under the Internal Revenue Code for the taxable year;
7.1(ii) the term "applicable amount" means $100,000, or $50,000 in the case of a
7.2married individual filing a separate return. Each dollar amount shall be increased by
7.3an amount equal to:
7.4(A) such dollar amount, multiplied by
7.5(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
7.6Revenue Code for the calendar year in which the taxable year begins, by substituting
7.7"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof;
7.8(iii) the term "itemized deductions" does not include:
7.9(A) the deduction for medical expenses under section 213 of the Internal Revenue
7.10Code;
7.11(B) any deduction for investment interest as defined in section 163(d) of the Internal
7.12Revenue Code; and
7.13(C) the deduction under section 165(a) of the Internal Revenue Code for casualty or
7.14theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue
7.15Code or for losses described in section 165(d) of the Internal Revenue Code;
7.16(20) to the extent included in federal taxable income in taxable years beginning after
7.17December 31, 2010, the amount of disallowed personal exemptions for taxpayers with
7.18federal adjusted gross income over the threshold amount:
7.19(i) the disallowed personal exemption amount is equal to the dollar amount of the
7.20personal exemptions claimed by the taxpayer in the computation of federal taxable income
7.21multiplied by the applicable percentage;
7.22(ii) "applicable percentage" means two percentage points for each $2,500 (or
7.23fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable
7.24year exceeds the threshold amount. In the case of a married individual filing a separate
7.25return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In
7.26no event shall the applicable percentage exceed 100 percent;
7.27(iii) the term "threshold amount" means:
7.28(A) $150,000 in the case of a joint return or a surviving spouse;
7.29(B) $125,000 in the case of a head of a household;
7.30(C) $100,000 in the case of an individual who is not married and who is not a
7.31surviving spouse or head of a household; and
7.32(D) $75,000 in the case of a married individual filing a separate return; and
7.33(iv) the thresholds shall be increased by an amount equal to:
7.34(A) such dollar amount, multiplied by
8.1(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
8.2Revenue Code for the calendar year in which the taxable year begins, by substituting
8.3"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; and
8.4(21) to the extent deducted in the computation of federal taxable income, for
8.5taxable years beginning after December 31, 2010, and before January 1, ~~2013~~ 2012, of
8.6the difference between the standard deduction allowed under section 63(c) of the Internal
8.7Revenue Code and the standard deduction allowed for 2011 ~~and 2012~~ under the Internal
8.8Revenue Code as amended through December 1, 2010.
8.9EFFECTIVE DATE.This section is effective for taxable years beginning after
8.10December 31, 2011.

8.11    Sec. 5. Minnesota Statutes 2011 Supplement, section 290.01, subdivision 19b, is
8.12amended to read:
8.13    Subd. 19b. Subtractions from federal taxable income. For individuals, estates,
8.14and trusts, there shall be subtracted from federal taxable income:
8.15    (1) net interest income on obligations of any authority, commission, or
8.16instrumentality of the United States to the extent includable in taxable income for federal
8.17income tax purposes but exempt from state income tax under the laws of the United States;
8.18    (2) if included in federal taxable income, the amount of any overpayment of income
8.19tax to Minnesota or to any other state, for any previous taxable year, whether the amount
8.20is received as a refund or as a credit to another taxable year's income tax liability;
8.21    (3) the amount paid to others, less the amount used to claim the credit allowed under
8.22section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
8.23to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
8.24transportation of each qualifying child in attending an elementary or secondary school
8.25situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
8.26resident of this state may legally fulfill the state's compulsory attendance laws, which
8.27is not operated for profit, and which adheres to the provisions of the Civil Rights Act
8.28of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
8.29tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
8.30"textbooks" includes books and other instructional materials and equipment purchased
8.31or leased for use in elementary and secondary schools in teaching only those subjects
8.32legally and commonly taught in public elementary and secondary schools in this state.
8.33Equipment expenses qualifying for deduction includes expenses as defined and limited in
8.34section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
8.35books and materials used in the teaching of religious tenets, doctrines, or worship, the
9.1purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
9.2or materials for, or transportation to, extracurricular activities including sporting events,
9.3musical or dramatic events, speech activities, driver's education, or similar programs. No
9.4deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
9.5the qualifying child's vehicle to provide such transportation for a qualifying child. For
9.6purposes of the subtraction provided by this clause, "qualifying child" has the meaning
9.7given in section 32(c)(3) of the Internal Revenue Code;
9.8    (4) income as provided under section 290.0802;
9.9    (5) to the extent included in federal adjusted gross income, income realized on
9.10disposition of property exempt from tax under section 290.491;
9.11    (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
9.12of the Internal Revenue Code in determining federal taxable income by an individual
9.13who does not itemize deductions for federal income tax purposes for the taxable year, an
9.14amount equal to 50 percent of the excess of charitable contributions over $500 allowable
9.15as a deduction for the taxable year under section 170(a) of the Internal Revenue Code,
9.16under the provisions of Public Law 109-1 and Public Law 111-126;
9.17    (7) for individuals who are allowed a federal foreign tax credit for taxes that do not
9.18qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
9.19of subnational foreign taxes for the taxable year, but not to exceed the total subnational
9.20foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
9.21"federal foreign tax credit" means the credit allowed under section 27 of the Internal
9.22Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
9.23under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
9.24the extent they exceed the federal foreign tax credit;
9.25    (8) in each of the five tax years immediately following the tax year in which an
9.26addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
9.27of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
9.28of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
9.29the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
9.30subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the
9.31positive value of any net operating loss under section 172 of the Internal Revenue Code
9.32generated for the tax year of the addition. The resulting delayed depreciation cannot be
9.33less than zero;
9.34    (9) job opportunity building zone income as provided under section 469.316;
9.35    (10) to the extent included in federal taxable income, the amount of compensation
9.36paid to members of the Minnesota National Guard or other reserve components of the
10.1United States military for active service, excluding compensation for services performed
10.2under the Active Guard Reserve (AGR) program. For purposes of this clause, "active
10.3service" means (i) state active service as defined in section 190.05, subdivision 5a, clause
10.4(1); or (ii) federally funded state active service as defined in section 190.05, subdivision
10.55b , but "active service" excludes service performed in accordance with section 190.08,
10.6subdivision 3 ;
10.7    (11) to the extent included in federal taxable income, the amount of compensation
10.8paid to Minnesota residents who are members of the armed forces of the United States
10.9or United Nations for active duty performed under United States Code, title 10; or the
10.10authority of the United Nations;
10.11    (12) an amount, not to exceed $10,000, equal to qualified expenses related to a
10.12qualified donor's donation, while living, of one or more of the qualified donor's organs
10.13to another person for human organ transplantation. For purposes of this clause, "organ"
10.14means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
10.15"human organ transplantation" means the medical procedure by which transfer of a human
10.16organ is made from the body of one person to the body of another person; "qualified
10.17expenses" means unreimbursed expenses for both the individual and the qualified donor
10.18for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
10.19may be subtracted under this clause only once; and "qualified donor" means the individual
10.20or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
10.21individual may claim the subtraction in this clause for each instance of organ donation for
10.22transplantation during the taxable year in which the qualified expenses occur;
10.23    (13) in each of the five tax years immediately following the tax year in which an
10.24addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
10.25shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
10.26addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
10.27case of a shareholder of a corporation that is an S corporation, minus the positive value of
10.28any net operating loss under section 172 of the Internal Revenue Code generated for the
10.29tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
10.30subtraction is not allowed under this clause;
10.31    (14) to the extent included in the federal taxable income of a nonresident of
10.32Minnesota, compensation paid to a service member as defined in United States Code, title
10.3310, section 101(a)(5), for military service as defined in the Servicemembers Civil Relief
10.34Act, Public Law 108-189, section 101(2);
10.35    (15) international economic development zone income as provided under section
10.36469.325 ;
11.1    (16) to the extent included in federal taxable income, the amount of national service
11.2educational awards received from the National Service Trust under United States Code,
11.3title 42, sections 12601 to 12604, for service in an approved Americorps National Service
11.4program;
11.5(17) to the extent included in federal taxable income, discharge of indebtedness
11.6income resulting from reacquisition of business indebtedness included in federal taxable
11.7income under section 108(i) of the Internal Revenue Code. This subtraction applies only
11.8to the extent that the income was included in net income in a prior year as a result of the
11.9addition under section 290.01, subdivision 19a, clause (16); ~~and~~
11.10(18) the amount of the net operating loss allowed under section 290.095, subdivision
11.1111, paragraph (c).;
11.12(19) for taxable years beginning after December 31, 2012, for married couples
11.13filing joint returns who claimed the standard deduction under section 63(c) of the Internal
11.14Revenue Code, an amount equal to the difference between (i) twice the standard deduction
11.15allowed for the taxable year under section 63(c) of the Internal Revenue Code for single
11.16filers and (ii) the standard deduction allowed for the taxable year under section 63(c) of
11.17the Internal Revenue Code for married couples filing joint returns; and
11.18(20) for taxable years beginning after December 31, 2012, for married couples filing
11.19separate returns who claimed the standard deduction under section 63(c) of the Internal
11.20Revenue Code, an amount equal to the difference between (i) the standard deduction
11.21allowed for the taxable year under section 63(c) of the Internal Revenue Code for single
11.22filers and (ii) the standard deduction allowed for the taxable year under section 63(c) of
11.23the Internal Revenue Code for married couples filing separate returns.
11.24EFFECTIVE DATE.This section is effective for taxable years beginning after
11.25December 31, 2011.

11.26    Sec. 6. Minnesota Statutes 2011 Supplement, section 290.01, subdivision 19c, is
11.27amended to read:
11.28    Subd. 19c. Corporations; additions to federal taxable income. For corporations,
11.29there shall be added to federal taxable income:
11.30    (1) the amount of any deduction taken for federal income tax purposes for income,
11.31excise, or franchise taxes based on net income or related minimum taxes, including but not
11.32limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
11.33another state, a political subdivision of another state, the District of Columbia, or any
11.34foreign country or possession of the United States;
12.1    (2) interest not subject to federal tax upon obligations of: the United States, its
12.2possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
12.3state, any of its political or governmental subdivisions, any of its municipalities, or any
12.4of its governmental agencies or instrumentalities; the District of Columbia; or Indian
12.5tribal governments;
12.6    (3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
12.7Revenue Code;
12.8    (4) the amount of any net operating loss deduction taken for federal income tax
12.9purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
12.10deduction under section 810 of the Internal Revenue Code;
12.11    (5) the amount of any special deductions taken for federal income tax purposes
12.12under sections 241 to 247 and 965 of the Internal Revenue Code;
12.13    (6) losses from the business of mining, as defined in section 290.05, subdivision 1,
12.14clause (a), that are not subject to Minnesota income tax;
12.15    (7) the amount of any capital losses deducted for federal income tax purposes under
12.16sections 1211 and 1212 of the Internal Revenue Code;
12.17    (8) the exempt foreign trade income of a foreign sales corporation under sections
12.18921(a) and 291 of the Internal Revenue Code;
12.19    (9) the amount of percentage depletion deducted under sections 611 through 614 and
12.20291 of the Internal Revenue Code;
12.21    (10) for certified pollution control facilities placed in service in a taxable year
12.22beginning before December 31, 1986, and for which amortization deductions were elected
12.23under section 169 of the Internal Revenue Code of 1954, as amended through December
12.2431, 1985, the amount of the amortization deduction allowed in computing federal taxable
12.25income for those facilities;
12.26    ~~(11) the amount of any deemed dividend from a foreign operating corporation~~
12.27~~determined pursuant to section~~ ~~290.17, subdivision 4, paragraph (g). The deemed dividend~~
12.28~~shall be reduced by the amount of the addition to income required by clauses (20), (21),~~
12.29~~(22), and (23);~~
12.30    ~~(12)~~ (11) the amount of a partner's pro rata share of net income which does not flow
12.31through to the partner because the partnership elected to pay the tax on the income under
12.32section 6242(a)(2) of the Internal Revenue Code;
12.33    ~~(13)~~ (12) the amount of net income excluded under section 114 of the Internal
12.34Revenue Code;
13.1    ~~(14)~~ (13) any increase in subpart F income, as defined in section 952(a) of the
13.2Internal Revenue Code, for the taxable year when subpart F income is calculated without
13.3regard to the provisions of Division C, title III, section 303(b) of Public Law 110-343;
13.4    ~~(15)~~ (14) 80 percent of the depreciation deduction allowed under section
13.5168(k)(1)(A) and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if
13.6the taxpayer has an activity that in the taxable year generates a deduction for depreciation
13.7under section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable
13.8year that the taxpayer is not allowed to claim for the taxable year, "the depreciation
13.9allowed under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess
13.10of the depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A)
13.11over the amount of the loss from the activity that is not allowed in the taxable year. In
13.12succeeding taxable years when the losses not allowed in the taxable year are allowed, the
13.13depreciation under section 168(k)(1)(A) and (k)(4)(A) is allowed;
13.14    ~~(16)~~ (15) 80 percent of the amount by which the deduction allowed by section 179 of
13.15the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
13.16Revenue Code of 1986, as amended through December 31, 2003;
13.17    ~~(17)~~ (16) to the extent deducted in computing federal taxable income, the amount of
13.18the deduction allowable under section 199 of the Internal Revenue Code;
13.19    ~~(18)~~ (17) for taxable years beginning before January 1, 2013, the exclusion allowed
13.20under section 139A of the Internal Revenue Code for federal subsidies for prescription
13.21drug plans;
13.22    ~~(19)~~ (18) the amount of expenses disallowed under section 290.10, subdivision 2;
13.23    ~~(20) an amount equal to the interest and intangible expenses, losses, and costs paid,~~
13.24~~accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit~~
13.25~~of a corporation that is a member of the taxpayer's unitary business group that qualifies~~
13.26~~as a foreign operating corporation. For purposes of this clause, intangible expenses and~~
13.27~~costs include:~~
13.28    ~~(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,~~
13.29~~use, maintenance or management, ownership, sale, exchange, or any other disposition of~~
13.30~~intangible property;~~
13.31    ~~(ii) losses incurred, directly or indirectly, from factoring transactions or discounting~~
13.32~~transactions;~~
13.33    ~~(iii) royalty, patent, technical, and copyright fees;~~
13.34    ~~(iv) licensing fees; and~~
13.35    ~~(v) other similar expenses and costs.~~
14.1~~For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent~~
14.2~~applications, trade names, trademarks, service marks, copyrights, mask works, trade~~
14.3~~secrets, and similar types of intangible assets.~~
14.4~~This clause does not apply to any item of interest or intangible expenses or costs paid,~~
14.5~~accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect~~
14.6~~to such item of income to the extent that the income to the foreign operating corporation~~
14.7~~is income from sources without the United States as defined in subtitle A, chapter 1,~~
14.8~~subchapter N, part 1, of the Internal Revenue Code;~~
14.9    ~~(21) except as already included in the taxpayer's taxable income pursuant to clause~~
14.10~~(20), any interest income and income generated from intangible property received or~~
14.11~~accrued by a foreign operating corporation that is a member of the taxpayer's unitary~~
14.12~~group. For purposes of this clause, income generated from intangible property includes:~~
14.13    ~~(i) income related to the direct or indirect acquisition, use, maintenance or~~
14.14~~management, ownership, sale, exchange, or any other disposition of intangible property;~~
14.15    ~~(ii) income from factoring transactions or discounting transactions;~~
14.16    ~~(iii) royalty, patent, technical, and copyright fees;~~
14.17    ~~(iv) licensing fees; and~~
14.18    ~~(v) other similar income.~~
14.19~~For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent~~
14.20~~applications, trade names, trademarks, service marks, copyrights, mask works, trade~~
14.21~~secrets, and similar types of intangible assets.~~
14.22~~This clause does not apply to any item of interest or intangible income received or accrued~~
14.23~~by a foreign operating corporation with respect to such item of income to the extent that~~
14.24~~the income is income from sources without the United States as defined in subtitle A,~~
14.25~~chapter 1, subchapter N, part 1, of the Internal Revenue Code;~~
14.26    ~~(22) the dividends attributable to the income of a foreign operating corporation that~~
14.27~~is a member of the taxpayer's unitary group in an amount that is equal to the dividends~~
14.28~~paid deduction of a real estate investment trust under section 561(a) of the Internal~~
14.29~~Revenue Code for amounts paid or accrued by the real estate investment trust to the~~
14.30~~foreign operating corporation;~~
14.31    ~~(23) the income of a foreign operating corporation that is a member of the taxpayer's~~
14.32~~unitary group in an amount that is equal to gains derived from the sale of real or personal~~
14.33~~property located in the United States;~~
14.34    ~~(24)~~ (19) for taxable years beginning before January 1, 2010, the additional amount
14.35allowed as a deduction for donation of computer technology and equipment under section
14.36170(e)(6) of the Internal Revenue Code, to the extent deducted from taxable income; and
15.1~~(25)~~ (20) discharge of indebtedness income resulting from reacquisition of business
15.2indebtedness and deferred under section 108(i) of the Internal Revenue Code.
15.3EFFECTIVE DATE.This section is effective for taxable years beginning after
15.4December 31, 2011.

15.5    Sec. 7. Minnesota Statutes 2010, section 290.01, subdivision 19d, is amended to read:
15.6    Subd. 19d. Corporations; modifications decreasing federal taxable income. For
15.7corporations, there shall be subtracted from federal taxable income after the increases
15.8provided in subdivision 19c:
15.9    (1) the amount of foreign dividend gross-up added to gross income for federal
15.10income tax purposes under section 78 of the Internal Revenue Code;
15.11    (2) the amount of salary expense not allowed for federal income tax purposes due to
15.12claiming the work opportunity credit under section 51 of the Internal Revenue Code;
15.13    (3) any dividend (not including any distribution in liquidation) paid within the
15.14taxable year by a national or state bank to the United States, or to any instrumentality of
15.15the United States exempt from federal income taxes, on the preferred stock of the bank
15.16owned by the United States or the instrumentality;
15.17    (4) amounts disallowed for intangible drilling costs due to differences between
15.18this chapter and the Internal Revenue Code in taxable years beginning before January
15.191, 1987, as follows:
15.20    (i) to the extent the disallowed costs are represented by physical property, an amount
15.21equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
15.22subdivision 7 , subject to the modifications contained in subdivision 19e; and
15.23    (ii) to the extent the disallowed costs are not represented by physical property, an
15.24amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
15.25290.09, subdivision 8 ;
15.26    (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
15.27Internal Revenue Code, except that:
15.28    (i) for capital losses incurred in taxable years beginning after December 31, 1986,
15.29capital loss carrybacks shall not be allowed;
15.30    (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
15.31a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
15.32allowed;
15.33    (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
15.34capital loss carryback to each of the three taxable years preceding the loss year, subject to
15.35the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
16.1    (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
16.2a capital loss carryover to each of the five taxable years succeeding the loss year to the
16.3extent such loss was not used in a prior taxable year and subject to the provisions of
16.4Minnesota Statutes 1986, section 290.16, shall be allowed;
16.5    (6) an amount for interest and expenses relating to income not taxable for federal
16.6income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
16.7expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
16.8291 of the Internal Revenue Code in computing federal taxable income;
16.9    (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
16.10which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
16.11reasonable allowance for depletion based on actual cost. In the case of leases the deduction
16.12must be apportioned between the lessor and lessee in accordance with rules prescribed
16.13by the commissioner. In the case of property held in trust, the allowable deduction must
16.14be apportioned between the income beneficiaries and the trustee in accordance with the
16.15pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
16.16of the trust's income allocable to each;
16.17    (8) for certified pollution control facilities placed in service in a taxable year
16.18beginning before December 31, 1986, and for which amortization deductions were elected
16.19under section 169 of the Internal Revenue Code of 1954, as amended through December
16.2031, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
16.211986, section 290.09, subdivision 7;
16.22    (9) amounts included in federal taxable income that are due to refunds of income,
16.23excise, or franchise taxes based on net income or related minimum taxes paid by the
16.24corporation to Minnesota, another state, a political subdivision of another state, the
16.25District of Columbia, or a foreign country or possession of the United States to the extent
16.26that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
16.27clause (1), in a prior taxable year;
16.28    (10) 80 percent of royalties, fees, or other like income accrued or received from a
16.29foreign operating corporation or a foreign corporation which is part of the same unitary
16.30business as the receiving corporation, unless the income resulting from such payments or
16.31accruals is income from sources within the United States as defined in subtitle A, chapter
16.321, subchapter N, part 1, of the Internal Revenue Code;
16.33    (11) income or gains from the business of mining as defined in section 290.05,
16.34subdivision 1 , clause (a), that are not subject to Minnesota franchise tax;
16.35    (12) the amount of disability access expenditures in the taxable year which are not
16.36allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
17.1    (13) the amount of qualified research expenses not allowed for federal income tax
17.2purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
17.3the amount exceeds the amount of the credit allowed under section 290.068;
17.4    (14) the amount of salary expenses not allowed for federal income tax purposes due
17.5to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
17.6Code;
17.7    (15) for a corporation whose foreign sales corporation, as defined in section 922
17.8of the Internal Revenue Code, constituted a foreign operating corporation during any
17.9taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
17.10claiming the deduction under section 290.21, subdivision 4, for income received from
17.11the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of
17.12income excluded under section 114 of the Internal Revenue Code, provided the income is
17.13not income of a foreign operating company;
17.14    (16) any decrease in subpart F income, as defined in section 952(a) of the Internal
17.15Revenue Code, for the taxable year when subpart F income is calculated without regard to
17.16the provisions of Division C, title III, section 303(b) of Public Law 110-343;
17.17    (17) in each of the five tax years immediately following the tax year in which an
17.18addition is required under subdivision 19c, clause ~~(15)~~ (14), an amount equal to one-fifth
17.19of the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
17.20amount of the addition made by the taxpayer under subdivision 19c, clause ~~(15)~~ (14). The
17.21resulting delayed depreciation cannot be less than zero;
17.22    (18) in each of the five tax years immediately following the tax year in which an
17.23addition is required under subdivision 19c, clause ~~(16)~~ (15), an amount equal to one-fifth
17.24of the amount of the addition; and
17.25(19) to the extent included in federal taxable income, discharge of indebtedness
17.26income resulting from reacquisition of business indebtedness included in federal taxable
17.27income under section 108(i) of the Internal Revenue Code. This subtraction applies only
17.28to the extent that the income was included in net income in a prior year as a result of the
17.29addition under section 290.01, subdivision 19c, clause ~~(25)~~ (20).
17.30EFFECTIVE DATE.This section is effective for taxable years beginning after
17.31December 31, 2011.

17.32    Sec. 8. Minnesota Statutes 2011 Supplement, section 290.0675, subdivision 1, is
17.33amended to read:
17.34    Subdivision 1. Definitions. (a) For purposes of this section the following terms
17.35have the meanings given.
18.1(b) "Earned income" means the sum of the following, to the extent included in
18.2Minnesota taxable income:
18.3(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
18.4(2) income received from a retirement pension, profit-sharing, stock bonus, or
18.5annuity plan; and
18.6(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue
18.7Code.
18.8(c) "Taxable income" means net income as defined in section 290.01, subdivision 19.
18.9(d) "Earned income of lesser-earning spouse" means the earned income of the spouse
18.10with the lesser amount of earned income as defined in paragraph (b) for the taxable year
18.11minus the sum of (i) the amount for one exemption under section 151(d) of the Internal
18.12Revenue Code and (ii) one-half the amount of the standard deduction under section
18.1363(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition required
18.14under section 290.01, subdivision 19a, clause (21), and one-half of the addition that would
18.15have been required under section 290.01, subdivision 19a, clause (21), if the taxpayer
18.16had claimed the standard deduction, and plus one-half of any subtraction allowed under
18.17section 290.01, subdivision 19b, clause (19).
18.18EFFECTIVE DATE.This section is effective for taxable years beginning after
18.19December 31, 2011.

18.20    Sec. 9. Minnesota Statutes 2010, section 290.17, subdivision 4, is amended to read:
18.21    Subd. 4. Unitary business principle. (a) If a trade or business conducted wholly
18.22within this state or partly within and partly without this state is part of a unitary business,
18.23the entire income of the unitary business is subject to apportionment pursuant to section
18.24290.191 . Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
18.25business is considered to be derived from any particular source and none may be allocated
18.26to a particular place except as provided by the applicable apportionment formula. The
18.27provisions of this subdivision do not apply to business income subject to subdivision 5,
18.28income of an insurance company, or income of an investment company determined under
18.29section 290.36.
18.30(b) The term "unitary business" means business activities or operations which
18.31result in a flow of value between them. The term may be applied within a single legal
18.32entity or between multiple entities and without regard to whether each entity is a sole
18.33proprietorship, a corporation, a partnership or a trust.
18.34(c) Unity is presumed whenever there is unity of ownership, operation, and use,
18.35evidenced by centralized management or executive force, centralized purchasing,
19.1advertising, accounting, or other controlled interaction, but the absence of these
19.2centralized activities will not necessarily evidence a nonunitary business. Unity is also
19.3presumed when business activities or operations are of mutual benefit, dependent upon or
19.4contributory to one another, either individually or as a group.
19.5(d) Where a business operation conducted in Minnesota is owned by a business
19.6entity that carries on business activity outside the state different in kind from that
19.7conducted within this state, and the other business is conducted entirely outside the state, it
19.8is presumed that the two business operations are unitary in nature, interrelated, connected,
19.9and interdependent unless it can be shown to the contrary.
19.10(e) Unity of ownership is not deemed to exist when a corporation is involved unless
19.11that corporation is a member of a group of two or more business entities and more than 50
19.12percent of the voting stock of each member of the group is directly or indirectly owned
19.13by a common owner or by common owners, either corporate or noncorporate, or by one
19.14or more of the member corporations of the group. For this purpose, the term "voting
19.15stock" shall include membership interests of mutual insurance holding companies formed
19.16under section 66A.40.
19.17(f) The net income and apportionment factors under section 290.191 or 290.20 of
19.18foreign corporations and other foreign entities which are part of a unitary business shall
19.19not be included in the net income or the apportionment factors of the unitary business.
19.20A foreign corporation or other foreign entity which is required to file a return under this
19.21chapter shall file on a separate return basis. ~~The net income and apportionment factors~~
19.22~~under section~~ ~~290.191~~ or ~~290.20~~ ~~of foreign operating corporations shall not be included in~~
19.23~~the net income or the apportionment factors of the unitary business except as provided in~~
19.24~~paragraph (g).~~ The provisions of this paragraph are not severable from the provisions of
19.25section 290.01, subdivision 5, clauses (4) to (6); if any of those provisions are found to be
19.26unconstitutional, the provisions of this paragraph are void for the respective taxable years.
19.27~~(g) The adjusted net income of a foreign operating corporation shall be deemed to~~
19.28~~be paid as a dividend on the last day of its taxable year to each shareholder thereof, in~~
19.29~~proportion to each shareholder's ownership, with which such corporation is engaged in~~
19.30~~a unitary business. Such deemed dividend shall be treated as a dividend under section~~
19.31~~290.21, subdivision 4~~.
19.32~~Dividends actually paid by a foreign operating corporation to a corporate shareholder~~
19.33~~which is a member of the same unitary business as the foreign operating corporation shall~~
19.34~~be eliminated from the net income of the unitary business in preparing a combined report~~
19.35~~for the unitary business. The adjusted net income of a foreign operating corporation~~
19.36~~shall be its net income adjusted as follows:~~
20.1~~(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto~~
20.2~~Rico, or a United States possession or political subdivision of any of the foregoing shall~~
20.3~~be a deduction; and~~
20.4~~(2) the subtraction from federal taxable income for payments received from foreign~~
20.5~~corporations or foreign operating corporations under section~~ ~~290.01, subdivision 19d~~,
20.6~~clause (10), shall not be allowed.~~
20.7~~If a foreign operating corporation incurs a net loss, neither income nor deduction~~
20.8~~from that corporation shall be included in determining the net income of the unitary~~
20.9~~business.~~
20.10~~(h)~~ (g) For purposes of determining the net income of a unitary business and the
20.11factors to be used in the apportionment of net income pursuant to section 290.191 or
20.12290.20 , there must be included only the income and apportionment factors of domestic
20.13corporations or other domestic entities ~~other than foreign operating corporations~~ that are
20.14determined to be part of the unitary business pursuant to this subdivision, notwithstanding
20.15that foreign corporations or other foreign entities might be included in the unitary business.
20.16~~(i)~~ (h) Deductions for expenses, interest, or taxes otherwise allowable under
20.17this chapter that are connected with or allocable against dividends~~, deemed dividends~~
20.18~~described in paragraph (g),~~ or royalties, fees, or other like income described in section
20.19290.01, subdivision 19d , clause (10), shall not be disallowed.
20.20~~(j)~~ (i) Each corporation or other entity, except a sole proprietorship, that is part of
20.21a unitary business must file combined reports as the commissioner determines. On the
20.22reports, all intercompany transactions between entities included pursuant to paragraph
20.23~~(h)~~ (g) must be eliminated and the entire net income of the unitary business determined in
20.24accordance with this subdivision is apportioned among the entities by using each entity's
20.25Minnesota factors for apportionment purposes in the numerators of the apportionment
20.26formula and the total factors for apportionment purposes of all entities included pursuant
20.27to paragraph ~~(h)~~ (g) in the denominators of the apportionment formula. All sales of the
20.28unitary business made within Minnesota pursuant to section 290.191 or 290.20 must be
20.29included on the separate combined report of a corporation that is a member of the unitary
20.30business and is subject to the jurisdiction of this state to impose tax under this chapter.
20.31~~(k)~~ (j) If a corporation has been divested from a unitary business and is included in a
20.32combined report for a fractional part of the common accounting period of the combined
20.33report:
20.34(1) its income includable in the combined report is its income incurred for that part
20.35of the year determined by proration or separate accounting; and
21.1(2) its sales, property, and payroll included in the apportionment formula must
21.2be prorated or accounted for separately.
21.3EFFECTIVE DATE.This section is effective for returns filed for taxable years
21.4beginning after December 31, 2011."
21.5Page, 5, after line 11, insert:

21.6    "Sec. 12. REPEALER.
21.7Minnesota Statutes 2010, sections 290.01, subdivision 6b; and 290.0921, subdivision
21.87, are repealed.
21.9EFFECTIVE DATE.This section is effective for returns filed for taxable years
21.10beginning after December 31, 2011."
21.11Renumber the sections in sequence and correct the internal references
21.12Amend the title accordingly