1.2relating to taxation; corporate franchise, individual income, mining occupation,
1.3sales and use, and cigarette excise taxation; adopting the recommendations
1.4of the governor's 21st century tax commission; modifying tax bases, credits,
1.5and rates; repealing the corporate franchise tax; requiring reports; amending
1.6Minnesota Statutes 2008, sections 289A.18, subdivision 1; 289A.20, subdivision
1.71; 289A.30, subdivision 1; 289A.31, subdivision 1; 289A.38, subdivisions 7, 12;
1.8289A.50, subdivision 1; 289A.60, subdivisions 1, 4; 290.01, subdivisions 19,
1.919a, 19b, 19f, 22, 29, 31; 290.03; 290.04, subdivision 1; 290.06, subdivision 33,
1.10by adding a subdivision; 290.068, subdivisions 1, 3, 4, by adding a subdivision;
1.11290.0922, subdivision 1; 290.095, subdivision 3; 290.17, subdivisions 1, 4;
1.12290.191, subdivision 4; 290.32; 290.36; 297A.61, subdivision 3; 297A.62,
1.13subdivision 1; 297A.67, subdivision 7; 297A.68, subdivisions 2, 5, 10, by
1.14adding a subdivision; 297A.75, subdivision 1; 297F.05, subdivision 1; proposing
1.15coding for new law in Minnesota Statutes, chapters 116J; 270C; 297I; repealing
1.16Minnesota Statutes 2008, sections 289A.08, subdivision 3; 289A.19, subdivision
1.172; 289A.26; 290.01, subdivisions 5, 5a, 6b, 19c, 19d, 19e; 290.014, subdivision
1.185; 290.02; 290.06, subdivisions 1, 24, 27; 290.0921, subdivisions 1, 2, 3, 3a, 4, 6,
1.197, 8; 290.21, subdivisions 1, 4; 290.34, subdivisions 1, 2; 290.371, subdivisions
1.201, 2, 3, 4; 290.432; 297A.67, subdivisions 8, 9, 10, 13, 13a, 14, 16, 17, 18, 19,
1.2121, 27, 29; 297A.70, subdivisions 10, 12; 298.01, subdivisions 3, 3a, 3b, 4,
1.224a, 4b, 4c, 5, 6; 298.17.
1.23BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.24    Section 1. [116J.665] MINNESOTA BUSINESS INVESTMENT COMPANY
1.25CREDIT.
1.26    Subdivision 1. Definitions. (a) For purposes of this section, the following terms
1.27have the meanings given.
1.28(b) "Affiliate" means:
1.29(1) any person who, directly or indirectly, beneficially owns, controls, or holds
1.30power to vote 15 percent or more of the outstanding voting securities or other voting
1.31ownership interest of a Minnesota business investment company or insurance company;
2.1(2) any person, 15 percent or more of whose outstanding voting securities or other
2.2voting ownership interests are directly or indirectly beneficially owned, controlled, or held
2.3with power to vote by a Minnesota business investment company or insurance company.
2.4Notwithstanding this subdivision, an investment by a participating investor in a
2.5Minnesota business investment company pursuant to an allocation of premium tax credits
2.6under this section does not cause that Minnesota business investment company to become
2.7an affiliate of that participating investor.
2.8(c) "Allocation date" means the date on which credits under section 297I.23 are
2.9allocated to the participating investors of a Minnesota business investment company
2.10under this section.
2.11(d) "Designated capital" means an amount of money that:
2.12(1) is invested by a participating investor in a Minnesota business investment
2.13company; and
2.14(2) fully funds the purchase price of either or both participating investor's equity
2.15interest in a Minnesota business investment company or a qualified debt instrument issued
2.16by a Minnesota business investment company.
2.17(e) "Minnesota business investment company" means a partnership, corporation,
2.18trust, or limited liability company, organized on a for-profit basis, that:
2.19(1) has its principal office located or headquartered in Minnesota;
2.20(2) has as its primary business activity the investment of cash in qualified businesses;
2.21and
2.22(3) is certified by the Department of Employment and Economic Development as
2.23meeting the criteria in this section.
2.24(f) "Participating investor" means any insurer as defined in section 60A.02,
2.25subdivision 4, that contributes designated capital pursuant to this section.
2.26(g) "Person" means any natural person or entity, including, but not limited to, a
2.27corporation, general or limited partnership, trust, or limited liability company.
2.28(h)(1) "Qualified business" means a business that is independently owned and
2.29operated and meets all of the following requirements:
2.30(i) it is headquartered in Minnesota, its principal business operations are located in
2.31this state, and at least 60 percent of its employees are located in Minnesota;
2.32(ii) it has not more than 100 employees;
2.33(iii) it is not predominantly engaged in:
2.34(A) professional services provided by accountants, doctors, or lawyers;
2.35(B) banking or lending;
2.36(C) real estate development;
3.1(D) insurance;
3.2(E) oil and gas exploration;
3.3(F) direct gambling activities; or
3.4(G) making loans to or investments in a Minnesota business investment company
3.5or an affiliate; and
3.6(iv) it is not a franchise of and has no financial relationship with a Minnesota business
3.7investment company or any affiliate of a Minnesota business investment company prior to
3.8a Minnesota business investment company's first qualified investment in the business.
3.9(2) A business classified as a qualified business at the time of the first qualified
3.10investment in the business remains classified as a qualified business and may receive
3.11continuing qualified investments from any Minnesota business investment company.
3.12Continuing investments will constitute qualified investments even though the business may
3.13not meet the definition of a qualified business at the time of such continuing investments.
3.14(i) "Qualified debt instrument" means a debt instrument issued by a Minnesota
3.15business investment company which meets all of the following criteria:
3.16(1) it is issued at par value or a premium;
3.17(2) it has an original maturity date of at least four years from the date of issuance,
3.18and a repayment schedule which is not faster than a level principal amortization over
3.19four years; and
3.20(3) it satisfies the rating criteria to qualify as "NAIC1," as determined by the
3.21Securities Valuation Office of the National Association of Insurance Commissioners.
3.22(j) "Qualified distribution" means any distribution or payment not made to a
3.23participating investor or affiliate of a participating investor by a Minnesota business
3.24investment company in connection with the following:
3.25(1) costs and expenses of forming, syndicating, and organizing the Minnesota
3.26business investment company, including fees paid for professional services, and the costs
3.27of financing and insuring the obligations of a Minnesota business investment company;
3.28(2) an annual management fee not to exceed two percent of designated capital on
3.29an annual basis to offset the costs and expenses of managing and operating a Minnesota
3.30business investment company;
3.31(3) reasonable and necessary fees in accordance with industry custom for ongoing
3.32professional services, including, but not limited to, legal and accounting services related to
3.33the operation of a Minnesota business investment company, not including any lobbying or
3.34governmental relations;
3.35(4) any increase or projected increase in federal or state taxes, including penalties
3.36and related interest of the equity owners of a Minnesota business investment company
4.1resulting from the earnings or other tax liability of a Minnesota business investment
4.2company to the extent that the increase is related to the ownership, management, or
4.3operation of a Minnesota business investment company.
4.4(5) Payments of principal and interest to holders of qualified debt instruments issued
4.5by a Minnesota business investment company may be made without any restriction
4.6whatsoever.
4.7(k) "Qualified investment" means the investment of money by a Minnesota
4.8business investment company in a qualified business for the purchase of any debt, debt
4.9participation, equity, or hybrid security of any nature and description whatsoever, including
4.10a debt instrument or security that has the characteristics of debt but which provides for
4.11conversion into equity or equity participation instruments such as options or warrants.
4.12Any repayment of a qualified investment prior to one year from the date of issuance shall
4.13result in the amount of such qualified investment being reduced by 50 percent for purposes
4.14of the cumulative investment requirement set forth in subdivision 8, paragraph (c).
4.15(l) "State premium tax liability" means any liability incurred by an insurance
4.16company under the provisions of chapter 297I or in the case of a repeal or a reduction by
4.17the state of the liability imposed by chapter 297I, any other tax liability imposed upon an
4.18insurance company by the state.
4.19    Subd. 2. Certification. (a) The department must provide a standardized format for
4.20applying for the business investment credit under section 297I.23.
4.21(b) An applicant is required to:
4.22(1) file an application with the department;
4.23(2) pay a nonrefundable application fee of $7,500 at the time of filing the application;
4.24(3) submit as part of its application an audited balance sheet that contains an
4.25unqualified opinion of an independent certified public accountant issued not more than 35
4.26days before the application date that states that the applicant has an equity capitalization
4.27of $500,000 or more in the form of unencumbered cash, marketable securities, or other
4.28liquid assets; and
4.29(4) have at least two principals or persons, at least one of which is primarily located
4.30in Minnesota, employed or engaged to manage the funds who each have a minimum of
4.31five years of money management experience in the venture capital or business industry.
4.32(c) The department may certify partnerships, corporations, trusts, or limited liability
4.33companies, organized on a for-profit basis, which submit an application to be designated
4.34as a Minnesota business investment company if such applicant is located, headquartered,
4.35and licensed or registered to conduct business in Minnesota, has as its primary business
5.1activity the investment of cash in qualified businesses, and meets the other criteria set
5.2forth in this section.
5.3(d) The department must review the organizational documents of each applicant for
5.4certification and the business history of each applicant, determine whether the applicant
5.5has satisfied the requirements of this section, and determine whether the officers and the
5.6board of directors, general partners, trustees, managers, or members are trustworthy and
5.7are thoroughly acquainted with the requirements of this section.
5.8(e) Within 45 days after the receipt of an application, the department must issue the
5.9certification or refuse the certification and communicate in detail to the applicant the
5.10grounds for refusal, including suggestions for the removal of such grounds.
5.11(f) The department must begin accepting applications to become a Minnesota
5.12business investment company as defined under section 297I.23 by August 1, 2009.
5.13    Subd. 3. Requirements. (a) An insurance company or affiliate of an insurance
5.14company must not, directly or indirectly:
5.15(1) beneficially own, whether through rights, options, convertible interest, or
5.16otherwise, 15 percent or more of the voting securities or other voting ownership interest of
5.17a Minnesota business investment company;
5.18(2) manage a Minnesota business investment company; or
5.19(3) control the direction of investments for a Minnesota business investment
5.20company.
5.21(b) A Minnesota business investment company may obtain one or more guaranties,
5.22indemnities, bonds, insurance policies, or other payment undertakings for the benefit
5.23of its participating investors from any entity, except that in no case can more than one
5.24participating investor of a Minnesota business investment company on an aggregate basis
5.25with all affiliates of such participating investor be entitled to provide such guaranties,
5.26indemnities, bonds, insurance policies, or other payment undertakings in favor of the
5.27participating investors of a Minnesota business investment company and its affiliates in
5.28this state.
5.29(c) This subdivision does not preclude a participating investor, insurance company,
5.30or other party from exercising its legal rights and remedies, including, without limitation,
5.31interim management of a Minnesota business investment company, in the event that a
5.32Minnesota business investment company is in default of its statutory obligations or its
5.33contractual obligations to such participating investor, insurance company, or other party, or
5.34from monitoring a Minnesota business investment company to ensure its compliance with
5.35this section or disallowing any investments that have not been approved by the department.
6.1(d) The department may contract with an independent third party to review,
6.2investigate, and certify that the applications comply with the provisions of this section.
6.3    Subd. 4. Aggregate limitations on investment tax credits; allocation. (a)
6.4The aggregate amount of investment tax credits to be allocated to all participating
6.5investors of Minnesota business investment companies under this section shall not exceed
6.6$160,000,000. No Minnesota business investment company, on an aggregate basis with its
6.7affiliates, may file credit allocation claims that exceed $160,000,000.
6.8(b) Credits must be allocated to participating investors in the order that the credit
6.9allocation claims are filed with the department, provided that all credit allocation
6.10claims filed with the department on the same day must be treated as having been filed
6.11contemporaneously. Any credit allocation claims filed with the department prior to the
6.12initial credit allocation claim filing date will be deemed to have been filed on such initial
6.13credit allocation claim filing date. The department will set the initial credit allocation
6.14claim filing date to be not less than 120 days and not greater than 150 days after the
6.15department begins accepting applications for certification.
6.16(c) In the event that two or more Minnesota business investment companies file
6.17credit allocation claims with the department on behalf of their respective participating
6.18investors on the same day, and the aggregate amount of credit allocation claims exceeds
6.19the aggregate limit of investment tax credits under this section or the lesser amount of
6.20credits that remain unallocated on that day, then the credits shall be allocated among the
6.21participating investors who filed on that day on a pro rata basis with respect to the amounts
6.22claimed. The pro rata allocation for any one participating investor is the product obtained
6.23by multiplying a fraction, the numerator of which is the amount of the credit allocation
6.24claim filed on behalf of a participating investor and the denominator of which is the total
6.25of all credit allocation claims filed on behalf of all participating investors on that day, by
6.26the aggregate limit of credits under this section or the lesser amount of credits that remain
6.27unallocated on that day.
6.28(d) Within ten business days after the department receives a credit allocation claim
6.29filed by a Minnesota business investment company on behalf of one or more of its
6.30participating investors, the department must notify the Minnesota business investment
6.31company of the amount of credits allocated to each of the participating investors of that
6.32Minnesota business investment company. In the event a Minnesota business investment
6.33company does not receive an investment of designated capital from each participating
6.34investor required to earn the amount of credits allocated to such participating investor
6.35within ten business days of the Minnesota business investment company's receipt of notice
6.36of allocation, then it shall notify the department on or before the next business day, and
7.1the credits allocated to such participating investor of the Minnesota business investment
7.2company forfeits. The department must then reallocate those forfeited credits among the
7.3participating investors of the other Minnesota business investment companies on a pro
7.4rata basis with respect to the credit allocation claims filed on behalf of the participating
7.5investors. The commissioner is authorized, but not required, to levy a fine of not more than
7.6$50,000 on any participating investor that does not invest the full amount of designated
7.7capital required to fund the credits allocated to it by the department in accordance with the
7.8credit allocation claim filed on its behalf.
7.9(e) No participating investor, on an aggregate basis with its affiliates, may file an
7.10allocation claim for more than 25 percent of the maximum amount of investment tax
7.11credits authorized under this subdivision, regardless of whether such claim is made in
7.12connection with one or more Minnesota business investment companies.
7.13    Subd. 5. Requirements for continuance of certification. (a) To maintain its
7.14certification, a Minnesota business investment company must make qualified investments
7.15as follows:
7.16(1) within two years after the allocation date, a Minnesota business investment
7.17company must invest an amount equal to at least 35 percent of its designated capital in
7.18qualified investments; and
7.19(2) within three years after the allocation date, a Minnesota business investment
7.20company must invest an amount equal to at least 50 percent of its designated capital
7.21in qualified investments.
7.22(b) Prior to making a proposed qualified investment in a specific business, a
7.23Minnesota business investment company must request from the department a written
7.24determination that the proposed investment qualifies as a qualified investment in a qualified
7.25business. The department must notify a Minnesota business investment company within
7.26ten business days from the receipt of a request of its determination and an explanation
7.27of its determination. If the department fails to notify the Minnesota business investment
7.28company of its determination within the ten business day period, the proposed investment
7.29is deemed to be a qualified investment in a qualified business. If the department determines
7.30that the proposed investment does not meet the definition of a qualified investment or
7.31qualified business, or both, the department may nevertheless consider the proposed
7.32investment a qualified investment and, if necessary, the business a qualified business, if the
7.33department determines that the proposed investment furthers state economic development.
7.34(c) All designated capital not invested in qualified investments by a Minnesota
7.35business investment company shall be held or invested in such manner as the Minnesota
7.36business investment company, in its discretion, deems appropriate. Designated capital
8.1and proceeds of designated capital returned to a Minnesota business investment company
8.2after being originally invested in qualified investments may be invested again in qualified
8.3investments and the investment shall count toward the requirements of paragraph (a) with
8.4respect to making investments of designated capital in qualified investments.
8.5(d) If, within four years after its allocation date, a Minnesota business investment
8.6company has not invested at least 60 percent of its designated capital in qualified
8.7investments, neither the Minnesota business investment company nor its affiliates shall
8.8be permitted to receive management fees.
8.9(e) If, within six years after its allocation date, a Minnesota business investment
8.10company has not invested at least 100 percent of its designated capital in qualified
8.11investments, neither the Minnesota business investment company nor its affiliates shall
8.12be permitted to receive management fees.
8.13(f) A Minnesota business investment company may not invest more than 15 percent
8.14of its designated capital in any one qualified business without the specific approval
8.15of the department.
8.16(g) For purposes of calculating the investment percentage thresholds of paragraph
8.17(a), the cumulative amount of all qualified investments made by a Minnesota business
8.18investment company from the allocation date must be considered.
8.19    Subd. 6. Minnesota business investment company reporting requirements.
8.20(a) Each Minnesota business investment company must report the following to the
8.21department:
8.22(1) as soon as practicable after the receipt of designated capital:
8.23(i) the name of each participating investor from which the designated capital was
8.24received, including the participating investor's insurance tax identification number;
8.25(ii) the amount of each participating investor's investment of designated capital; and
8.26(iii) the date on which the designated capital was received;
8.27(2) on an annual basis, on or before January 31 of each year:
8.28(i) the amount of the Minnesota business investment company's remaining
8.29uninvested designated capital at the end of the immediately preceding taxable year;
8.30(ii) whether or not the Minnesota business investment company has invested more
8.31than 15 percent of its total designated capital in any one business;
8.32(iii) all qualified investments that the Minnesota business investment company has
8.33made in the previous taxable year, including the number of employees of each qualified
8.34business in which it has made investments at the time of the investment, and as of
8.35December 1 of the preceding taxable year; and
9.1(iv) for any qualified business where the Minnesota business investment company
9.2no longer has an investment, the Minnesota business investment company must provide
9.3employment figures for that company as of the last day before the investment was
9.4terminated;
9.5(3) other information that the department may reasonably request that helps the
9.6department ascertain the impact of the Minnesota business investment company program
9.7both directly and indirectly on the economy of the state of Minnesota including, but
9.8not limited to, the number of jobs created by qualified businesses that have received
9.9qualified investments;
9.10(4) within 90 days of the close of its fiscal year, annual audited financial statements
9.11of the Minnesota business investment company, which must include the opinion of an
9.12independent certified public accountant; and
9.13(5) an "agreed upon procedures report" or equivalent regarding the operations of the
9.14Minnesota business investment company.
9.15(b) A Minnesota business investment company must pay to the department an
9.16annual, nonrefundable certification fee of $5,000 on or before April 1, or $10,000 if later.
9.17No annual certification fee is required if the payment date for such fee is within six months
9.18of the date a Minnesota business investment company is first certified by the department.
9.19(c) Upon satisfying the requirements of subdivision 5, paragraph (a), clause (2), a
9.20Minnesota business investment company shall provide the notice to the department and
9.21the department shall, within 60 days of receipt of such notice, either confirm that the
9.22Minnesota business investment company has satisfied the requirements of subdivision
9.235, paragraph (a), clause (2), as of such date or provide notice of noncompliance and
9.24an explanation of any existing deficiencies. If the department does not provide such
9.25notification within 60 days, the Minnesota business investment company is deemed to
9.26have met the requirements of subdivision 5, paragraph (a), clause (2).
9.27    Subd. 7. Distributions. A Minnesota business investment company may make
9.28qualified distributions at any time. In order for a Minnesota business investment
9.29company to make a distribution other than a qualified distribution to its equity holders,
9.30the cumulative amount of all qualified investments of the Minnesota business investment
9.31company must equal or exceed 100 percent of its designated capital.
9.32    Subd. 8. Decertification. (a) The department shall conduct an annual review of
9.33each Minnesota business investment company to determine if a Minnesota business
9.34investment company is abiding by the requirements of certification and to ensure that no
9.35investment has been made in violation of this section. The cost of the annual review
10.1must be paid by each Minnesota business investment company according to a reasonable
10.2fee schedule adopted by the department.
10.3(b) Any material violation of this section, including any material misrepresentation
10.4made to the department in connection with the application process, may be grounds for
10.5decertification of a Minnesota business investment company and the disallowance of
10.6credits under section 297I.23, provided that in all instances the department shall provide
10.7notice to the Minnesota business investment company of the grounds of such proposed
10.8decertification and the opportunity to cure the violation before any such decertification
10.9becomes effective.
10.10(c) Once a Minnesota business investment company has invested an amount
10.11cumulatively equal to 100 percent of its designated capital in qualified investments,
10.12provided that the Minnesota business investment company has met all other requirements
10.13under this section as of such date, the Minnesota business investment company shall
10.14no longer be subject to regulation by the department or the reporting requirements
10.15under subdivision 6. Upon receiving certification by a Minnesota business investment
10.16company that it has invested an amount equal to 100 percent of its designated capital, the
10.17department must notify a Minnesota business investment company within 60 days that it
10.18has or has not met the requirements, with a reason for the determination if it has not. If the
10.19department does not provide notification of deregulation within 60 days, the Minnesota
10.20business investment company is deemed to have met the requirements and is no longer
10.21subject to regulation by the department.
10.22(d) The department must send written notice of any decertification proceedings to
10.23the commissioner of revenue and to the address of each participating investor whose
10.24tax credit may be subject to recapture or forfeiture, using the address shown on the last
10.25filing submitted to the department.
10.26    Subd. 9. Registration requirements. All investments by participating investors
10.27for which tax credits are awarded under this section must be registered or specifically
10.28exempt from registration.
10.29    Subd. 10. Reports to governor and legislature. The department must make
10.30an annual report to the governor and the chairs and ranking minority members of the
10.31committees having jurisdiction over taxes and economic development. The report must
10.32include:
10.33(1) the number of Minnesota business investment companies holding designated
10.34capital;
10.35(2) the amount of designated capital invested in each Minnesota business investment
10.36company;
11.1(3) the cumulative amount that each Minnesota business investment company has
11.2invested as of January 1, 2011, and the cumulative total each year thereafter;
11.3(4) the cumulative amount of follow-on capital that the investments of each
11.4Minnesota business investment company have created in terms of capital invested in
11.5qualified businesses at the same time or subsequent to investments made by a Minnesota
11.6business investment company in such businesses by sources other than Minnesota
11.7business investment companies;
11.8(5) the total amount of investment tax credits applied under this section for each year;
11.9(6) the performance of each Minnesota business investment company with regard to
11.10the requirements for continued certification;
11.11(7) the classification of the companies in which each Minnesota business investment
11.12company has invested according to industrial sector and size of company;
11.13(8) the gross number of jobs created by investments made by each Minnesota
11.14business investment company and the number of jobs retained;
11.15(9) the location of the companies in which each Minnesota business investment
11.16company has invested;
11.17(10) those Minnesota business investment companies that have been decertified,
11.18including the reasons for decertification; and
11.19(11) other related information as necessary to evaluate the effect of this section on
11.20economic development.
11.21EFFECTIVE DATE.This section is effective January 1, 2010.

11.22    Sec. 2. [116J.8737] JOB GROWTH INVESTMENT TAX CREDIT.
11.23    Subdivision 1. Definitions. (a) For the purposes of this section, the following terms
11.24have the meanings given.
11.25(b) "Qualifying small business" means a business that:
11.26(1) is engaged in, or is committed to engage in, biotechnology, technology,
11.27manufacturing, agriculture, processing or assembling products, conducting research and
11.28development, or developing a new product or business process;
11.29(2) is not engaged in real estate development, insurance, banking, lobbying, political
11.30consulting, wholesale or retail trade, leisure, hospitality, construction, or professional
11.31services provided by attorneys, accountants, business consultants, physicians, or health
11.32care consultants;
11.33(3) has its headquarters in Minnesota;
11.34(4) employs at least 51 percent of the business's employees in Minnesota;
11.35(5) has less than 100 employees;
12.1(6) has less than $2,000,000 in annual gross sales receipts for the previous year;
12.2(7) is not a subsidiary or an affiliate of a business which employs more than 100
12.3employees or has total gross sales receipts for the previous year of more than $2,000,000,
12.4computed by aggregating all of the employees and gross sales receipts of the business
12.5entities affiliated with the business;
12.6(8) has not previously received more than $2,000,000 in private equity investments;
12.7(9) has not previously received more than $500,000 in investments that have
12.8qualified for and received tax credits under this section; and
12.9(10) for a business with five or more employees, measured on a full-time equivalent
12.10basis:
12.11(i) provides wages and benefits to at least 75 percent of its employees in excess of
12.12the first five employees, equal to or greater than 175 percent of the federal poverty level
12.13for a family of four; and
12.14(ii) provides wages and benefits to its employees in excess of the first five employees,
12.15equal to or greater than 110 percent of the federal poverty level for a family of four.
12.16(c) "Qualifying green job small business" means a business that satisfies all of the
12.17requirements of paragraph (b), except clause (1), and is predominantly engaged in one
12.18or more of the following industry sectors:
12.19(1) green products: businesses related to the manufacture of products used by
12.20the building, transport, consumer products, and industrial products sectors, that reduce
12.21environmental impact and increase the efficiency of the use of resources such as energy,
12.22water, and materials;
12.23(2) renewable energy: businesses related to the production of energy from natural
12.24resources such as solar, wind, hydropower, geothermal, biomass (including but not limited
12.25to animal waste and crop waste), and biofuels (including but not limited to ethanol and
12.26biodiesel), as well as from waste heat recovery and from the use of biomass for energy
12.27production including cogeneration;
12.28(3) green services: businesses that provide services that help other businesses or
12.29consumers utilize green products and technologies, build energy infrastructure, recycle,
12.30and manage waste; or
12.31(4) environmental conservation: businesses related to the conservation of energy,
12.32air, water, and land, including air emissions control, environmental monitoring and
12.33compliance, water conservation, wastewater treatment, land management (including but
12.34not limited to prairie), natural pesticides, aquaculture, and organic farming.
12.35(d) "Regional investment fund" means a pooled investment fund that:
12.36(1) invests in qualifying small businesses;
13.1(2) invests in qualifying green job small businesses;
13.2(3) is organized as a limited liability company or other pass-through entity; and
13.3(4) has no fewer than five separate investors, each of whom is a qualified taxpayer, as
13.4defined in paragraph (e), and owns no more than 20 percent of the outstanding ownership
13.5interests in the fund.
13.6For purposes of determining the number of investors and the ownership interests of
13.7an investor under this clause, the ownership interests of an investor include those of the
13.8investor's spouse, children, or siblings, and any corporation, limited liability company,
13.9partnership, or trust in which the investor has a controlling equity interest or in which the
13.10investor exercises management control.
13.11(e) "Qualified taxpayer" means:
13.12(1) an accredited investor, within the meaning of Regulation D of the Securities and
13.13Exchange Commission, Code of Federal Regulations, title 17, section 230.501(a), whether
13.14part of a pass-through entity or not, who:
13.15(i) does not own, control, or hold power to vote 20 percent or more of the outstanding
13.16securities of the qualifying small business or the qualifying green job small business in
13.17which the eligible investment is proposed; or
13.18(ii) does not receive more than 50 percent of the gross annual income from the
13.19qualifying small business or the qualifying green job small business in which the eligible
13.20investment is proposed.
13.21(2) A member of the immediate family of a taxpayer disqualified by this subdivision
13.22is not eligible for a credit under this section. For purposes of this subdivision, "immediate
13.23family" means the taxpayer's spouse, parent, sibling, or child, or the spouse of any person
13.24listed in this clause.
13.25    Subd. 2. Credit allowed; holding period; limitations; and carryover. (a) A
13.26qualified taxpayer is allowed a credit against the tax imposed under chapter 290 for
13.27investments made in a qualified regional investment fund, a qualifying small business,
13.28or a qualifying green job small business. The credit equals 30 percent of the qualified
13.29taxpayer's investment in the business, but not to exceed the lesser of:
13.30(1) the liability for tax under chapter 290, including the applicable alternative
13.31minimum tax, but excluding the minimum fee under section 290.0922, and:
13.32(2)(i) the amount of the certificate provided to the taxpayer under subdivision
13.334, paragraph (c); or
13.34(ii) the amount of the certificate provided to the qualified individual investor under
13.35subdivision 6, paragraph (d).
14.1(b) No taxpayer may receive more than $100,000 in provisional credits under this
14.2section in any one year.
14.3(c) A qualified taxpayer must claim the credit in the third tax year after which the
14.4investment in the qualified regional investment fund, the qualifying small business, or the
14.5qualifying green job small business was made. The credit is allowed only for investments
14.6made in:
14.7(1) a qualified regional investment fund that remains invested for at least three
14.8years and that are made after the fund has been certified by the commissioner under
14.9subdivision 4;
14.10(2) a qualifying small business that remains invested for at least three years and that
14.11are made after the qualified individual investor has been certified by the commissioner
14.12under subdivision 6; or
14.13(3) a qualifying green job small business that remains invested for at least three
14.14years and that are made after the qualified individual investor has been certified by the
14.15commissioner under subdivision 6.
14.16(d) The three-year investment holding period required by paragraph (c) does not
14.17apply if:
14.18(1) the investment by the qualified regional investment fund or the qualified
14.19individual investor becomes worthless before the end of the three-year period; or
14.20(2) the qualifying small business or qualifying green job small business is sold
14.21before the end of the three-year period.
14.22(e) If the amount of the credit under this subdivision for any taxable year exceeds
14.23the limitations under paragraph (a), the excess is a credit carryover to each of the ten
14.24succeeding taxable years. The entire amount of the excess unused credit for the taxable
14.25year must be carried first to the earliest of the taxable years to which the credit may be
14.26carried. The amount of the unused credit that may be added under this paragraph may not
14.27exceed the taxpayer's liability for tax less the credit for the taxable year.
14.28    Subd. 3. Qualified regional investment fund; requirements. (a) To be certified as
14.29a qualified regional investment fund for the purposes of this section, a regional investment
14.30fund must:
14.31(1) have a minimum of two-thirds of the regional investment fund's members,
14.32shareholders, or partners be residents of the region that is the focus of the fund;
14.33(2) allocate at least 60 percent of the funds it invests to qualifying small businesses
14.34or to qualifying green job small businesses within its region of focus; and
14.35(3) allocate at least 50 percent of the funds it invests to qualifying green job small
14.36businesses.
15.1(b) The allocations in paragraph (a), clauses (2) and (3), need not be exclusive.
15.2(c) Investments from other qualified regional investment funds into the qualifying
15.3small businesses or qualifying green job small businesses that are the recipients of the
15.4qualified regional investment fund's investment shall count toward the allocations in
15.5paragraph (a), clauses (2) and (3).
15.6(d) Investments in the fund may consist of equity investments or notes that pay
15.7interest or other fixed amounts, or any combination of both, as the fund's governing body
15.8determines appropriate.
15.9    Subd. 4. Certification of funds. (a) Regional investment funds may apply to the
15.10commissioner for certification as a qualified regional investment fund. The application
15.11must be in the form and be made under the procedures specified by the commissioner,
15.12accompanied by an application fee of $1,250. Fees are appropriated to the commissioner
15.13for personnel and administrative expenses related to administering the program.
15.14(b) The commissioner may certify up to 20 regional investment funds per year.
15.15Certifications shall be awarded in the order of the qualifying applications received, subject
15.16to the following limitations:
15.17(1) the commissioner may certify no more than three regional investment funds per
15.18year that seek business investment opportunities that may qualify for and receive tax
15.19credits under this section in more than 15 Minnesota counties; and
15.20(2) the commissioner may certify no more than five regional investment funds
15.21per year that seek business investment opportunities that may qualify for and receive
15.22tax credits under this section in the metropolitan area, as defined in section 473.121,
15.23subdivision 2.
15.24(c) The commissioner shall provide provisional credit certificates to investors in a
15.25qualified regional fund to credits under this section, in proportion to the investment of
15.26the investor in the fund and upon a showing by the fund of an investment in a qualifying
15.27small business or qualifying green job small business, of no more than $500,000 per fund
15.28per year. The commissioner may not issue a total of more than $15,000,000 per year in
15.29provisional credit certificates to fund investors.
15.30(d) The commissioner shall provide a final credit certificate to investors in the fund
15.31upon a showing by the fund that the holding requirements of subdivision 2, paragraph (b),
15.32have been met and that the investors in the fund are otherwise eligible for the credit.
15.33    Subd. 5. Fund requirements. The commissioner shall enter into an agreement
15.34with each of the qualified regional investment funds certified under subdivision 4. Each
15.35agreement must include a provision requiring the qualified regional investment fund to
15.36annually report on the employment figures and wages and benefits paid by the businesses
16.1in which investments are made and a provision stating the specific manner in which
16.2the qualified regional investment fund will comply or is complying with the allocation
16.3requirements under subdivision 3, paragraph (a), clauses (2) and (3).
16.4    Subd. 6. Certification of individual investors. (a) Qualified taxpayers may apply
16.5to the commissioner of employment and economic development for certification as a
16.6qualified individual investor. The application must be in the form and be made under the
16.7procedures specified by the commissioner, accompanied by an application fee of $250.
16.8Fees are appropriated to the commissioner for personnel and administrative expenses
16.9related to administering the program.
16.10(b) The commissioner may certify up to 40 qualified individual investors per year.
16.11Certifications shall be awarded in the order of qualifying applications received, however
16.12the commissioner may certify no more than ten qualified individual investors per year that
16.13seek business investment opportunities that may qualify for and receive tax credits under
16.14this section in the metropolitan area, as defined in section 473.121, subdivision 2.
16.15(c) The commissioner shall provide provisional credit certificates to qualified
16.16individual investors, upon a showing by the qualified individual investor of investments of
16.17at least $25,000 in qualifying small businesses or qualifying green job small businesses.
16.18At least one-half of the investments made by the investor must be in qualifying green job
16.19businesses. The commissioner may not issue more than $100,000 in provisional credit
16.20certificates per qualified individual investor per year. The commissioner may not issue
16.21a total of more than $1,000,000 per year in provisional credit certificates to qualified
16.22individual investors in fiscal years 2010, 2011, 2012, and 2013.
16.23(d) The commissioner shall provide a final credit certificate to the qualified individual
16.24investor upon a showing by the investor that the holding requirements of subdivision 2,
16.25paragraph (c), have been met and that the investor is otherwise eligible for the credit.
16.26    Subd. 7. Qualified individual investor requirements. The commissioner shall
16.27enter into an agreement with each qualified individual investor certified under subdivision
16.286. Each agreement must include a provision requiring the qualified individual investor to
16.29annually report on the employment figures and wages and benefits paid by the businesses
16.30in which investments are made and a provision stating the specific manner in which the
16.31qualified individual investor will comply or is complying with the allocation requirements
16.32under subdivision 6, paragraph (c).
16.33    Subd. 8. Rulemaking. The commissioner's actions in establishing procedures and
16.34requirements and in making determinations and certifications to administer this section are
16.35not a rule for purposes of chapter 14, are not subject to the Administrative Procedure Act
16.36contained in chapter 14, and are not subject to section 14.386.
17.1EFFECTIVE DATE.This section is effective January 1, 2010, for taxable years
17.2beginning after December 31, 2009, and only applies to investments made after the
17.3qualified regional investment fund or qualified individual investor has been certified by
17.4the commissioner of economic development.

17.5    Sec. 3. [270C.132] BIENNIAL BENEFITS RECEIVED BY BUSINESS REPORT.
17.6The commissioner shall report to the legislature by February 1 of each
17.7even-numbered year an estimate of the amount of taxes paid by businesses to and the
17.8amount of benefits received by businesses from Minnesota state and local governments.
17.9For purposes of this report, "business taxes" has the meaning used by the commissioner in
17.10preparing the tax incidence study required under section 270C.13. The report may include
17.11detail that shows the variation in the ratio by industry sector and analysis of benefits using
17.12a varying set of assumptions regarding the extent to which businesses benefit from or
17.13consume government services in their operations.

17.14    Sec. 4. Minnesota Statutes 2008, section 289A.18, subdivision 1, is amended to read:
17.15    Subdivision 1. Individual income, fiduciary income, corporate franchise, and
17.16entertainment taxes; partnership and S corporation returns; information returns;
17.17mining company returns. The returns required to be made under sections 289A.08 and
17.18289A.12 must be filed at the following times:
17.19    (1) returns made on the basis of the calendar year must be filed on April 15 following
17.20the close of the calendar year, except that returns of corporations must be filed on March
17.2115 following the close of the calendar year;
17.22    (2) returns made on the basis of the fiscal year must be filed on the 15th day of the
17.23fourth month following the close of the fiscal year, except that returns of corporations
17.24must be filed on the 15th day of the third month following the close of the fiscal year;
17.25    (3) returns for a fractional part of a year must be filed on the 15th day of the fourth
17.26month following the end of the month in which falls the last day of the period for which
17.27the return is made, except that the returns of corporations must be filed on the 15th day of
17.28the third month following the end of the tax year; or, in the case of a corporation which is
17.29a member of a unitary group, the return of the corporation must be filed on the 15th day of
17.30the third month following the end of the tax year of the unitary group in which falls the
17.31last day of the period for which the return is made;
17.32    (4) in the case of a final return of a decedent for a fractional part of a year, the return
17.33must be filed on the 15th day of the fourth month following the close of the 12-month
17.34period that began with the first day of that fractional part of a year;
18.1    (5) in the case of the return of a cooperative association, returns must be filed on or
18.2before the 15th day of the ninth month following the close of the taxable year;
18.3    (6) if a corporation has been divested from a unitary group and files a return for
18.4a fractional part of a year in which it was a member of a unitary business that files a
18.5combined report under section 290.17, subdivision 4, the divested corporation's return
18.6must be filed on the 15th day of the third month following the close of the common
18.7accounting period that includes the fractional year;
18.8    (7) returns of entertainment entities must be filed on April 15 following the close of
18.9the calendar year;
18.10    (8) (7) returns required to be filed under section 289A.08, subdivision 4, must be
18.11filed on the 15th day of the fifth month following the close of the taxable year;
18.12    (9) returns of mining companies must be filed on May 1 following the close of the
18.13calendar year; and
18.14    (10) (8) returns required to be filed with the commissioner under section 289A.12,
18.15subdivision 2 or 4 to 10, must be filed within 30 days after being demanded by the
18.16commissioner.
18.17EFFECTIVE DATE.This section is effective for taxable years beginning after
18.18December 31, 2009.

18.19    Sec. 5. Minnesota Statutes 2008, section 289A.20, subdivision 1, is amended to read:
18.20    Subdivision 1. Individual income, fiduciary income, mining company, corporate
18.21franchise, and entertainment taxes. (a) Individual income, and fiduciary, mining
18.22company, and corporate franchise taxes must be paid to the commissioner on or before the
18.23date the return must be filed under section 289A.18, subdivision 1, or the extended due
18.24date as provided in section 289A.19, unless an earlier date for payment is provided.
18.25Notwithstanding any other law, a taxpayer whose unpaid liability for income or
18.26corporate franchise taxes, as reflected upon the return, is $1 or less need not pay the tax.
18.27(b) Entertainment taxes must be paid on or before the date the return must be filed
18.28under section 289A.18, subdivision 1.
18.29(c) If a fiduciary administers 100 or more trusts, fiduciary income taxes for all trusts
18.30administered by the fiduciary must be paid by electronic means.
18.31EFFECTIVE DATE.This section is effective for taxable years beginning after
18.32December 31, 2009.

18.33    Sec. 6. Minnesota Statutes 2008, section 289A.30, subdivision 1, is amended to read:
19.1    Subdivision 1. Fiduciary income, corporate franchise tax. Where good cause
19.2exists, the commissioner may extend the time for payment of the amount determined as a
19.3fiduciary income tax or corporate franchise tax by the taxpayer, or an amount determined
19.4as a deficiency, for a period of not more than six months from the date prescribed for
19.5the payment of the tax.
19.6EFFECTIVE DATE.This section is effective for taxable years beginning after
19.7December 31, 2009.

19.8    Sec. 7. Minnesota Statutes 2008, section 289A.31, subdivision 1, is amended to read:
19.9    Subdivision 1. Individual income, fiduciary income, mining company, corporate
19.10franchise, and entertainment taxes. (a) Individual income, and fiduciary income, mining
19.11company, and corporate franchise taxes, and interest and penalties, must be paid by the
19.12taxpayer upon whom the tax is imposed, except in the following cases:
19.13(1) The tax due from a decedent for that part of the taxable year in which the
19.14decedent died during which the decedent was alive and the taxes, interest, and penalty
19.15due for the prior years must be paid by the decedent's personal representative, if any.
19.16If there is no personal representative, the taxes, interest, and penalty must be paid by
19.17the transferees, as defined in section 270C.58, subdivision 3, to the extent they receive
19.18property from the decedent;
19.19(2) The tax due from an infant or other incompetent person must be paid by the
19.20person's guardian or other person authorized or permitted by law to act for the person;
19.21(3) The tax due from the estate of a decedent must be paid by the estate's personal
19.22representative;
19.23(4) The tax due from a trust, including those within the definition of a corporation, as
19.24defined in section 290.01, subdivision 4, must be paid by a trustee; and
19.25(5) The tax due from a taxpayer whose business or property is in charge of a
19.26receiver, trustee in bankruptcy, assignee, or other conservator, must be paid by the
19.27person in charge of the business or property so far as the tax is due to the income from
19.28the business or property.
19.29(b) Entertainment taxes are the joint and several liability of the entertainer and the
19.30entertainment entity. The payor is liable to the state for the payment of the tax required to
19.31be deducted and withheld under section 290.9201, subdivision 7, and is not liable to the
19.32entertainer for the amount of the payment.
19.33(c) The tax imposed under section 290.0922 on partnerships is the joint and several
19.34liability of the partnership and the general partners.
20.1EFFECTIVE DATE.This section is effective for taxable years beginning after
20.2December 31, 2009.

20.3    Sec. 8. Minnesota Statutes 2008, section 289A.38, subdivision 7, is amended to read:
20.4    Subd. 7. Federal tax changes. If the amount of income, items of tax preference,
20.5deductions, or credits for any year of a taxpayer as reported to the Internal Revenue
20.6Service is changed or corrected by the commissioner of Internal Revenue or other officer
20.7of the United States or other competent authority, or where a renegotiation of a contract or
20.8subcontract with the United States results in a change in income, items of tax preference,
20.9deductions, credits, or withholding tax, or, in the case of estate tax, where there are
20.10adjustments to the taxable estate, the taxpayer shall report the change or correction or
20.11renegotiation results in writing to the commissioner. The report must be submitted within
20.12180 days after the final determination and must be in the form of either an amended
20.13Minnesota estate, withholding tax, corporate franchise tax, or income tax return conceding
20.14the accuracy of the federal determination or a letter detailing how the federal determination
20.15is incorrect or does not change the Minnesota tax. An amended Minnesota income tax
20.16return must be accompanied by an amended property tax refund return, if necessary. A
20.17taxpayer filing an amended federal tax return must also file a copy of the amended return
20.18with the commissioner of revenue within 180 days after filing the amended return.
20.19EFFECTIVE DATE.This section is effective for taxable years beginning after
20.20December 31, 2009.

20.21    Sec. 9. Minnesota Statutes 2008, section 289A.38, subdivision 12, is amended to read:
20.22    Subd. 12. Request for early audit for individual income, and fiduciary income,
20.23mining company, and corporate franchise taxes. (a) Tax must be assessed within
20.2418 months after written request for an assessment has been made in the case of income
20.25received (1) during the lifetime of a decedent, (2) by the decedent's estate during the
20.26period of administration, or (3) by a trustee of a terminating trust or other fiduciary
20.27who, because of custody of assets, would be liable for the payment of tax under section
20.28270C.58, subdivision 2 , or (4) by a mining company or a corporation. A proceeding in
20.29court for the collection of the tax must begin within two years after written request for the
20.30assessment (filed after the return is made and in the form the commissioner prescribes) by
20.31the personal representative or other fiduciary representing the estate of the decedent, or
20.32by the trustee of a terminating trust or other fiduciary who, because of custody of assets,
20.33would be liable for the payment of tax under section 270C.58, subdivision 2, or by the
20.34corporation. Except as provided in section 289A.42, subdivision 1, an assessment must
21.1not be made after the expiration of 3-1/2 years after the return was filed, and an action
21.2must not be brought after the expiration of four years after the return was filed.
21.3(b) Paragraph (a) only applies in the case of a mining company or a corporation if:
21.4(1) the written request notifies the commissioner that the corporation contemplates
21.5dissolution at or before the expiration of the 18-month period;
21.6(2) the dissolution is begun in good faith before the expiration of the 18-month
21.7period; and
21.8(3) the dissolution is completed within the 18-month period.
21.9EFFECTIVE DATE.This section is effective for taxable years beginning after
21.10December 31, 2009.

21.11    Sec. 10. Minnesota Statutes 2008, section 289A.50, subdivision 1, is amended to read:
21.12    Subdivision 1. General right to refund. (a) Subject to the requirements of this
21.13section and section 289A.40, a taxpayer who has paid a tax in excess of the taxes lawfully
21.14due and who files a written claim for refund will be refunded or credited the overpayment
21.15of the tax determined by the commissioner to be erroneously paid.
21.16(b) The claim must specify the name of the taxpayer, the date when and the period
21.17for which the tax was paid, the kind of tax paid, the amount of the tax that the taxpayer
21.18claims was erroneously paid, the grounds on which a refund is claimed, and other
21.19information relative to the payment and in the form required by the commissioner. An
21.20income tax, or estate tax, or corporate franchise tax return, or amended return claiming an
21.21overpayment constitutes a claim for refund.
21.22(c) When, in the course of an examination, and within the time for requesting a
21.23refund, the commissioner determines that there has been an overpayment of tax, the
21.24commissioner shall refund or credit the overpayment to the taxpayer and no demand
21.25is necessary. If the overpayment exceeds $1, the amount of the overpayment must
21.26be refunded to the taxpayer. If the amount of the overpayment is less than $1, the
21.27commissioner is not required to refund. In these situations, the commissioner does not
21.28have to make written findings or serve notice by mail to the taxpayer.
21.29(d) If the amount allowable as a credit for withholding, estimated taxes, or dependent
21.30care exceeds the tax against which the credit is allowable, the amount of the excess is
21.31considered an overpayment. The refund allowed by section 290.06, subdivision 23, is also
21.32considered an overpayment. The requirements of section 270C.33 do not apply to the
21.33refunding of such an overpayment shown on the original return filed by a taxpayer.
21.34(e) If the entertainment tax withheld at the source exceeds by $1 or more the taxes,
21.35penalties, and interest reported in the return of the entertainment entity or imposed by
22.1section 290.9201, the excess must be refunded to the entertainment entity. If the excess is
22.2less than $1, the commissioner need not refund that amount.
22.3(f) If the surety deposit required for a construction contract exceeds the liability of
22.4the out-of-state contractor, the commissioner shall refund the difference to the contractor.
22.5(g) An action of the commissioner in refunding the amount of the overpayment does
22.6not constitute a determination of the correctness of the return of the taxpayer.
22.7(h) There is appropriated from the general fund to the commissioner of revenue the
22.8amount necessary to pay refunds allowed under this section.
22.9EFFECTIVE DATE.This section is effective for taxable years beginning after
22.10December 31, 2009.

22.11    Sec. 11. Minnesota Statutes 2008, section 289A.60, subdivision 1, is amended to read:
22.12    Subdivision 1. Penalty for failure to pay tax. (a) If a corporate franchise, fiduciary
22.13income, mining company, estate, partnership, S corporation, or nonresident entertainer
22.14tax is not paid within the time specified for payment, a penalty of six percent is added to
22.15the unpaid tax, except that if a corporation or mining company meets the requirements of
22.16section 289A.19, subdivision 2, the penalty is not imposed.
22.17(b) For the taxes listed in paragraph (a), in addition to the penalty in that paragraph,
22.18whether imposed or not, if a return or amended return is filed after the due date, without
22.19regard to extensions, and any tax reported as remaining due is not remitted with the return
22.20or amended return, a penalty of five percent of the tax not paid is added to the tax. If the
22.21commissioner issues an order assessing additional tax for a tax listed in paragraph (a),
22.22and the tax is not paid within 60 days after the mailing of the order or, if appealed, within
22.2360 days after final resolution of the appeal, a penalty of five percent of the unpaid tax
22.24is added to the tax.
22.25(c) If an individual income tax is not paid within the time specified for payment, a
22.26penalty of four percent is added to the unpaid tax. There is a presumption of reasonable
22.27cause for the late payment if the individual: (i) pays by the due date of the return at
22.28least 90 percent of the amount of tax, after credits other than withholding and estimated
22.29payments, shown owing on the return; (ii) files the return within six months after the due
22.30date; and (iii) pays the remaining balance of the reported tax when the return is filed.
22.31(d) If the commissioner issues an order assessing additional individual income tax,
22.32and the tax is not paid within 60 days after the mailing of the order or, if appealed, within
22.3360 days after final resolution of the appeal, a penalty of four percent of the unpaid tax
22.34is added to the tax.
23.1(e) If a withholding or sales or use tax is not paid within the time specified for
23.2payment, a penalty must be added to the amount required to be shown as tax. The penalty
23.3is five percent of the tax not paid on or before the date specified for payment of the tax
23.4if the failure is for not more than 30 days, with an additional penalty of five percent of
23.5the amount of tax remaining unpaid during each additional 30 days or fraction of 30 days
23.6during which the failure continues, not exceeding 15 percent in the aggregate.
23.7EFFECTIVE DATE.This section is effective for taxable years beginning after
23.8December 31, 2009.

23.9    Sec. 12. Minnesota Statutes 2008, section 289A.60, subdivision 4, is amended to read:
23.10    Subd. 4. Substantial understatement of liability; penalty. (a) The commissioner
23.11of revenue shall impose a penalty for substantial understatement of any tax payable to the
23.12commissioner, except a tax imposed under chapter 297A.
23.13(b) There must be added to the tax an amount equal to 20 percent of the amount of any
23.14underpayment attributable to the understatement. There is a substantial understatement of
23.15tax for the period if the amount of the understatement for the period exceeds the greater of:
23.16(1) ten percent of the tax required to be shown on the return for the period; or
23.17(2)(i) $10,000 in the case of a mining company or a corporation, other than an S
23.18corporation as defined in section 290.9725, when the tax is imposed by chapter 290 or
23.19section 298.01 or 298.015, or
23.20(ii) $5,000 in the case of any other taxpayer, and in the case of a mining company or
23.21a corporation any tax not imposed by chapter 290 or section 298.01 or 298.015.
23.22(c) For a corporation, other than an S corporation, there is also a substantial
23.23understatement of tax for any taxable year if the amount of the understatement for the
23.24taxable year exceeds the lesser of:
23.25(1) ten percent of the tax required to be shown on the return for the taxable year
23.26(or, if greater, $10,000); or
23.27(2) $10,000,000.
23.28(d) The term "understatement" means the excess of the amount of the tax required
23.29to be shown on the return for the period, over the amount of the tax imposed that is
23.30shown on the return. The excess must be determined without regard to items to which
23.31subdivision 27 applies. The amount of the understatement shall be reduced by that part of
23.32the understatement that is attributable to the tax treatment of any item by the taxpayer if
23.33(1) there is or was substantial authority for the treatment, or (2)(i) any item with respect to
23.34which the relevant facts affecting the item's tax treatment are adequately disclosed in the
23.35return or in a statement attached to the return and (ii) there is a reasonable basis for the tax
24.1treatment of the item. The exception for substantial authority under clause (1) does not
24.2apply to positions listed by the Secretary of the Treasury under section 6662(d)(3) of the
24.3Internal Revenue Code. A corporation does not have a reasonable basis for its tax treatment
24.4of an item attributable to a multiple-party financing transaction if the treatment does not
24.5clearly reflect the income of the corporation within the meaning of section 6662(d)(2)(B)
24.6of the Internal Revenue Code. The special rules in cases involving tax shelters provided in
24.7section 6662(d)(2)(C) of the Internal Revenue Code shall apply and shall apply to a tax
24.8shelter the principal purpose of which is the avoidance or evasion of state taxes.
24.9(e) (d) The commissioner may abate all or any part of the addition to the tax
24.10provided by this section on a showing by the taxpayer that there was reasonable cause for
24.11the understatement, or part of it, and that the taxpayer acted in good faith. The additional
24.12tax and penalty shall bear interest at the rate specified in section 270C.40 from the time
24.13the tax should have been paid until paid.
24.14EFFECTIVE DATE.This section is effective for taxable years beginning after
24.15December 31, 2009.

24.16    Sec. 13. Minnesota Statutes 2008, section 290.01, subdivision 19, is amended to read:
24.17    Subd. 19. Net income. The term "net income" means the federal taxable income,
24.18as defined in section 63 of the Internal Revenue Code of 1986, as amended through the
24.19date named in this subdivision, incorporating the federal effective dates of changes to the
24.20Internal Revenue Code and any elections made by the taxpayer in accordance with the
24.21Internal Revenue Code in determining federal taxable income for federal income tax
24.22purposes, and with the modifications provided in subdivisions 19a to 19f.
24.23    In the case of a regulated investment company or a fund thereof, as defined in section
24.24851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
24.25company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
24.26except that:
24.27    (1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
24.28Revenue Code does not apply;
24.29    (2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal
24.30Revenue Code must be applied by allowing a deduction for capital gain dividends and
24.31exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal
24.32Revenue Code; and
24.33    (3) the deduction for dividends paid must also be applied in the amount of any
24.34undistributed capital gains which the regulated investment company elects to have treated
24.35as provided in section 852(b)(3)(D) of the Internal Revenue Code.
25.1    The net income of a real estate investment trust as defined and limited by section
25.2856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
25.3taxable income as defined in section 857(b)(2) of the Internal Revenue Code.
25.4    The net income of a designated settlement fund as defined in section 468B(d) of
25.5the Internal Revenue Code means the gross income as defined in section 468B(b) of the
25.6Internal Revenue Code.
25.7    The Internal Revenue Code of 1986, as amended through February 13, 2008, shall
25.8be in effect for taxable years beginning after December 31, 1996, except section 179 of the
25.9Internal Revenue Code, as amended through February 17, 2009, applies.
25.10    Except as otherwise provided, references to the Internal Revenue Code in
25.11subdivisions 19 to 19f mean the code in effect for purposes of determining net income for
25.12the applicable year.
25.13EFFECTIVE DATE.This section is effective for taxable years beginning after
25.14December 31, 2009.

25.15    Sec. 14. Minnesota Statutes 2008, section 290.01, subdivision 19a, is amended to read:
25.16    Subd. 19a. Additions to federal taxable income. For individuals, estates, and
25.17trusts, there shall be added to federal taxable income:
25.18    (1)(i) interest income on obligations of any state other than Minnesota or a political
25.19or governmental subdivision, municipality, or governmental agency or instrumentality
25.20of any state other than Minnesota exempt from federal income taxes under the Internal
25.21Revenue Code or any other federal statute; and
25.22    (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
25.23Code, except the portion of the exempt-interest dividends derived from interest income
25.24on obligations of the state of Minnesota or its political or governmental subdivisions,
25.25municipalities, governmental agencies or instrumentalities, but only if the portion of the
25.26exempt-interest dividends from such Minnesota sources paid to all shareholders represents
25.2795 percent or more of the exempt-interest dividends that are paid by the regulated
25.28investment company as defined in section 851(a) of the Internal Revenue Code, or the
25.29fund of the regulated investment company as defined in section 851(g) of the Internal
25.30Revenue Code, making the payment; and
25.31    (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
25.32government described in section 7871(c) of the Internal Revenue Code shall be treated as
25.33interest income on obligations of the state in which the tribe is located;
25.34    (2) the amount of income or sales and use taxes paid or accrued within the taxable
25.35year under this chapter and the amount of taxes based on net income paid or sales and use
26.1taxes paid to any other state or to any province or territory of Canada, to the extent allowed
26.2as a deduction under section 63(d) of the Internal Revenue Code, but the addition may not
26.3be more than the amount by which the itemized deductions as allowed under section 63(d)
26.4of the Internal Revenue Code exceeds the amount of the standard deduction as defined
26.5in section 63(c) of the Internal Revenue Code. For the purpose of this paragraph, the
26.6disallowance of itemized deductions under section 68 of the Internal Revenue Code of
26.71986, income or sales and use tax is the last itemized deduction disallowed;
26.8    (3) the capital gain amount of a lump-sum distribution to which the special tax under
26.9section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
26.10    (4) the amount of income taxes paid or accrued within the taxable year under this
26.11chapter and taxes based on net income paid to any other state or any province or territory
26.12of Canada, to the extent allowed as a deduction in determining federal adjusted gross
26.13income. For the purpose of this paragraph, income taxes do not include the taxes imposed
26.14by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
26.15    (5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
26.16other than expenses or interest used in computing net interest income for the subtraction
26.17allowed under subdivision 19b, clause (1);
26.18    (6) the amount of a partner's pro rata share of net income which does not flow
26.19through to the partner because the partnership elected to pay the tax on the income under
26.20section 6242(a)(2) of the Internal Revenue Code;
26.21    (7) 80 percent of the depreciation deduction allowed under section 168(k) of the
26.22Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
26.23in the taxable year generates a deduction for depreciation under section 168(k) and the
26.24activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
26.25the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
26.26limited to excess of the depreciation claimed by the activity under section 168(k) over the
26.27amount of the loss from the activity that is not allowed in the taxable year. In succeeding
26.28taxable years when the losses not allowed in the taxable year are allowed, the depreciation
26.29under section 168(k) is allowed;
26.30    (8) for taxable years beginning before January 1, 2010, 80 percent of the amount by
26.31which the deduction allowed by section 179 of the Internal Revenue Code exceeds the
26.32deduction allowable by section 179 of the Internal Revenue Code of 1986, as amended
26.33through December 31, 2003;
26.34    (9) to the extent deducted in computing federal taxable income, the amount of the
26.35deduction allowable under section 199 of the Internal Revenue Code;
27.1    (10) the exclusion allowed under section 139A of the Internal Revenue Code for
27.2federal subsidies for prescription drug plans;
27.3(11) the amount of expenses disallowed under section 290.10, subdivision 2;
27.4    (12) for taxable years beginning after December 31, 2006, and before January 1,
27.52008, the amount deducted for qualified tuition and related expenses under section 222 of
27.6the Internal Revenue Code, to the extent deducted from gross income; and
27.7    (13) for taxable years beginning after December 31, 2006, and before January 1,
27.82008, the amount deducted for certain expenses of elementary and secondary school
27.9teachers under section 62(a)(2)(D) of the Internal Revenue Code, to the extent deducted
27.10from gross income.
27.11EFFECTIVE DATE.This section is effective for taxable years beginning after
27.12December 31, 2009.

27.13    Sec. 15. Minnesota Statutes 2008, section 290.01, subdivision 19b, is amended to read:
27.14    Subd. 19b. Subtractions from federal taxable income. For individuals, estates,
27.15and trusts, there shall be subtracted from federal taxable income:
27.16    (1) net interest income on obligations of any authority, commission, or
27.17instrumentality of the United States to the extent includable in taxable income for federal
27.18income tax purposes but exempt from state income tax under the laws of the United States;
27.19    (2) if included in federal taxable income, the amount of any overpayment of income
27.20tax to Minnesota or to any other state, for any previous taxable year, whether the amount
27.21is received as a refund or as a credit to another taxable year's income tax liability;
27.22    (3) the amount paid to others, less the amount used to claim the credit allowed under
27.23section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
27.24to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
27.25transportation of each qualifying child in attending an elementary or secondary school
27.26situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
27.27resident of this state may legally fulfill the state's compulsory attendance laws, which
27.28is not operated for profit, and which adheres to the provisions of the Civil Rights Act
27.29of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
27.30tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
27.31"textbooks" includes books and other instructional materials and equipment purchased
27.32or leased for use in elementary and secondary schools in teaching only those subjects
27.33legally and commonly taught in public elementary and secondary schools in this state.
27.34Equipment expenses qualifying for deduction includes expenses as defined and limited in
27.35section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
28.1books and materials used in the teaching of religious tenets, doctrines, or worship, the
28.2purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
28.3or materials for, or transportation to, extracurricular activities including sporting events,
28.4musical or dramatic events, speech activities, driver's education, or similar programs. For
28.5purposes of the subtraction provided by this clause, "qualifying child" has the meaning
28.6given in section 32(c)(3) of the Internal Revenue Code;
28.7    (4) income as provided under section 290.0802;
28.8    (5) to the extent included in federal adjusted gross income, income realized on
28.9disposition of property exempt from tax under section 290.491;
28.10    (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
28.11of the Internal Revenue Code in determining federal taxable income by an individual
28.12who does not itemize deductions for federal income tax purposes for the taxable year, an
28.13amount equal to 50 percent of the excess of charitable contributions over $500 allowable
28.14as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and
28.15under the provisions of Public Law 109-1;
28.16    (7) for taxable years beginning before January 1, 2008, the amount of the federal
28.17small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
28.18which is included in gross income under section 87 of the Internal Revenue Code;
28.19    (8) for individuals who are allowed a federal foreign tax credit for taxes that do not
28.20qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
28.21of subnational foreign taxes for the taxable year, but not to exceed the total subnational
28.22foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
28.23"federal foreign tax credit" means the credit allowed under section 27 of the Internal
28.24Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
28.25under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
28.26the extent they exceed the federal foreign tax credit;
28.27    (9) in each of the five tax years immediately following the tax year in which an
28.28addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
28.29of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
28.30of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
28.31the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
28.32subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the
28.33positive value of any net operating loss under section 172 of the Internal Revenue Code
28.34generated for the tax year of the addition. The resulting delayed depreciation cannot be
28.35less than zero;
28.36    (10) job opportunity building zone income as provided under section 469.316;
29.1    (11) to the extent included in federal taxable income, the amount of compensation
29.2paid to members of the Minnesota National Guard or other reserve components of the
29.3United States military for active service performed in Minnesota, excluding compensation
29.4for services performed under the Active Guard Reserve (AGR) program. For purposes of
29.5this clause, "active service" means (i) state active service as defined in section 190.05,
29.6subdivision 5a , clause (1); (ii) federally funded state active service as defined in section
29.7190.05, subdivision 5b ; or (iii) federal active service as defined in section 190.05,
29.8subdivision 5c , but "active service" excludes service performed in accordance with section
29.9190.08, subdivision 3 ;
29.10    (12) to the extent included in federal taxable income, the amount of compensation
29.11paid to Minnesota residents who are members of the armed forces of the United States or
29.12United Nations for active duty performed outside Minnesota under United States Code,
29.13title 10, section 101(d); United States Code, title 32, section 101(12); or the authority of
29.14the United Nations;
29.15    (13) an amount, not to exceed $10,000, equal to qualified expenses related to a
29.16qualified donor's donation, while living, of one or more of the qualified donor's organs
29.17to another person for human organ transplantation. For purposes of this clause, "organ"
29.18means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
29.19"human organ transplantation" means the medical procedure by which transfer of a human
29.20organ is made from the body of one person to the body of another person; "qualified
29.21expenses" means unreimbursed expenses for both the individual and the qualified donor
29.22for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
29.23may be subtracted under this clause only once; and "qualified donor" means the individual
29.24or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
29.25individual may claim the subtraction in this clause for each instance of organ donation for
29.26transplantation during the taxable year in which the qualified expenses occur;
29.27    (14) in each of the five tax years immediately following the tax year in which an
29.28addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
29.29shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
29.30addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
29.31case of a shareholder of a corporation that is an S corporation, minus the positive value of
29.32any net operating loss under section 172 of the Internal Revenue Code generated for the
29.33tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
29.34subtraction is not allowed under this clause;
30.1    (15) to the extent included in federal taxable income, compensation paid to a service
30.2member as defined in United States Code, title 10, section 101(a)(5), for military service
30.3as defined in the Servicemembers Civil Relief Act, Public Law 108-189, section 101(2);
30.4    (16) international economic development zone income as provided under section
30.5469.325 ; and
30.6    (17) to the extent included in federal taxable income, the amount of national service
30.7educational awards received from the National Service Trust under United States Code,
30.8title 42, sections 12601 to 12604, for service in an approved Americorps National Service
30.9program; and
30.10(18) an amount not to exceed 20 percent of the excess of (i) income derived from a
30.11trade or business in which the taxpayer materially participates, as defined in section 469(h)
30.12of the Internal Revenue Code, distributed by a partnership or S corporation to the taxpayer
30.13less (ii) any losses, other than passive losses as defined in section 469 of the Internal
30.14Revenue Code, claimed by the partner or shareholder, provided that the subtraction under
30.15this clause may be claimed only if the entity distributing the income has employees and
30.16tangible property located in this state.
30.17EFFECTIVE DATE.This section is effective for taxable years beginning after
30.18December 31, 2009.

30.19    Sec. 16. Minnesota Statutes 2008, section 290.01, subdivision 19f, is amended to read:
30.20    Subd. 19f. Basis modifications affecting gain or loss on disposition of property.
30.21(a) For individuals, estates, and trusts, the basis of property is its adjusted basis for
30.22federal income tax purposes except as set forth in paragraphs (f), (g), and (m). For
30.23corporations, the basis of property is its adjusted basis for federal income tax purposes,
30.24without regard to the time when the property became subject to tax under this chapter or to
30.25whether out-of-state losses or items of tax preference with respect to the property were not
30.26deductible under this chapter, except that the modifications to the basis for federal income
30.27tax purposes set forth in paragraphs (b) to (j) are allowed to corporations, and the resulting
30.28modifications to federal taxable income must be made in the year in which gain or loss
30.29on the sale or other disposition of property is recognized.
30.30(b) The basis of property shall not be reduced to reflect federal investment tax credit.
30.31(c) The basis of property subject to the accelerated cost recovery system under
30.32section 168 of the Internal Revenue Code shall be modified to reflect the modifications in
30.33depreciation with respect to the property provided for in subdivision 19e. For certified
30.34pollution control facilities for which amortization deductions were elected under section
31.1169 of the Internal Revenue Code of 1954, the basis of the property must be increased by
31.2the amount of the amortization deduction not previously allowed under this chapter.
31.3(d) For property acquired before January 1, 1933, the basis for computing a gain is
31.4the fair market value of the property as of that date. The basis for determining a loss is
31.5the cost of the property to the taxpayer less any depreciation, amortization, or depletion,
31.6actually sustained before that date. If the adjusted cost exceeds the fair market value of the
31.7property, then the basis is the adjusted cost regardless of whether there is a gain or loss.
31.8(e) The basis is reduced by the allowance for amortization of bond premium if an
31.9election to amortize was made pursuant to Minnesota Statutes 1986, section 290.09,
31.10subdivision 13 , and the allowance could have been deducted by the taxpayer under this
31.11chapter during the period of the taxpayer's ownership of the property.
31.12(f) For assets placed in service before January 1, 1987, corporations, partnerships,
31.13or individuals engaged in the business of mining ores other than iron ore or taconite
31.14concentrates subject to the occupation tax under chapter 298 must use the occupation
31.15tax basis of property used in that business.
31.16(g) For assets placed in service before January 1, 1990, corporations, partnerships, or
31.17individuals engaged in the business of mining iron ore or taconite concentrates subject
31.18to the occupation tax under chapter 298 must use the occupation tax basis of property
31.19used in that business.
31.20(h) In applying the provisions of sections 301(c)(3)(B), 312(f) and (g), and 316(a)(1)
31.21of the Internal Revenue Code, the dates December 31, 1932, and January 1, 1933, shall be
31.22substituted for February 28, 1913, and March 1, 1913, respectively.
31.23(i) In applying the provisions of section 362(a) and (c) of the Internal Revenue Code,
31.24the date December 31, 1956, shall be substituted for June 22, 1954.
31.25(j) (g) The basis of property shall be increased by the amount of intangible drilling
31.26costs not previously allowed due to differences between this chapter and the Internal
31.27Revenue Code.
31.28(k) The adjusted basis of any corporate partner's interest in a partnership is the same
31.29as the adjusted basis for federal income tax purposes modified as required to reflect the
31.30basis modifications set forth in paragraphs (b) to (j). The adjusted basis of a partnership
31.31in which the partner is an individual, estate, or trust is the same as the adjusted basis for
31.32federal income tax purposes modified as required to reflect the basis modifications set
31.33forth in paragraphs (f) and (g).
31.34(l) (h) The modifications contained in paragraphs (b) to (j) (g) also apply to the basis
31.35of property that is determined by reference to the basis of the same property in the hands
31.36of a different taxpayer or by reference to the basis of different property.
32.1EFFECTIVE DATE.This section is effective for taxable years beginning after
32.2December 31, 2009.

32.3    Sec. 17. Minnesota Statutes 2008, section 290.01, subdivision 22, is amended to read:
32.4    Subd. 22. Taxable net income. For tax years beginning after December 31, 1986,
32.5the term "taxable net income" means:
32.6(1) for resident individuals the same as net income;
32.7(2) for individuals who were not residents of Minnesota for the entire year, the same
32.8as net income except that the tax is imposed only on the Minnesota apportioned share of
32.9that income as determined pursuant to section 290.06, subdivision 2c, paragraph (e);
32.10(3) for all other taxpayers, the part of net income that is allocable to Minnesota by
32.11assignment or apportionment under one or more of sections 290.17, 290.191, 290.20,
32.12and 290.36.
32.13For tax years beginning before January 1, 1987, the term "taxable net income"
32.14means the net income assignable to this state pursuant to sections 290.17 to 290.20. For
32.15corporations, taxable net income is then reduced by the deductions contained in section
32.16290.21.
32.17EFFECTIVE DATE.This section is effective for taxable years beginning after
32.18December 31, 2009.

32.19    Sec. 18. Minnesota Statutes 2008, section 290.01, subdivision 29, is amended to read:
32.20    Subd. 29. Taxable income. The term "taxable income" means:
32.21(1) for individuals, estates, and trusts, the same as taxable net income;.
32.22(2) for corporations, the taxable net income less
32.23(i) the net operating loss deduction under section 290.095;
32.24(ii) the dividends received deduction under section 290.21, subdivision 4;
32.25(iii) the exemption for operating in a job opportunity building zone under section
32.26469.317;
32.27(iv) the exemption for operating in a biotechnology and health sciences industry
32.28zone under section 469.337; and
32.29(v) the exemption for operating in an international economic development zone
32.30under section 469.326.
32.31EFFECTIVE DATE.This section is effective for taxable years beginning after
32.32December 31, 2009.

33.1    Sec. 19. Minnesota Statutes 2008, section 290.01, subdivision 31, is amended to read:
33.2    Subd. 31. Internal Revenue Code. Unless specifically defined otherwise, "Internal
33.3Revenue Code" means the Internal Revenue Code of 1986, as amended through February
33.413, 2008, except section 179 of the Internal Revenue Code, as amended through February
33.517, 2009, applies.
33.6EFFECTIVE DATE.This section is effective for taxable years beginning after
33.7December 31, 2010.

33.8    Sec. 20. Minnesota Statutes 2008, section 290.03, is amended to read:
33.9290.03 INCOME TAX; IMPOSITION, CLASSES OF TAXPAYERS.
33.10An annual tax for each taxable year, computed in the manner and at the rates
33.11hereinafter provided, is hereby imposed upon the taxable income for such year of the
33.12following classes of taxpayers:
33.13(1) Resident and nonresident individuals;
33.14(2) Estates of decedents, dying domiciled within or without this state;
33.15(3) Trusts (except those taxable as corporations) however created by residents or
33.16nonresidents or by domestic or foreign corporations.
33.17EFFECTIVE DATE.This section is effective for taxable years beginning after
33.18December 31, 2009.

33.19    Sec. 21. Minnesota Statutes 2008, section 290.04, subdivision 1, is amended to read:
33.20    Subdivision 1. Accrual. The liability for the tax imposed by section 290.02 shall
33.21arise upon the first day of the taxable year upon which a domestic corporation exercises
33.22any of the privileges specified in section 290.02 or exists as a corporation, or on which
33.23a foreign corporation is possessed of the privilege for the grant to it of the privilege of
33.24transacting or for the actual transaction by it of any local business within this state during
33.25any part of its taxable year, in corporate or organized form. The liability for the tax
33.26imposed by section 290.03 shall arise concurrently with the receipt or accrual of income
33.27during the taxable year. The provisions shall in no way affect the determination of the
33.28amount of such taxes, the time for making returns, and the time for paying such taxes.
33.29EFFECTIVE DATE.This section is effective for taxable years beginning after
33.30December 31, 2009.

33.31    Sec. 22. Minnesota Statutes 2008, section 290.06, subdivision 33, is amended to read:
34.1    Subd. 33. Bovine testing credit. (a) An owner of cattle in Minnesota may take a
34.2credit against the tax due under this chapter for an amount equal to: (1) for corporate
34.3filers, including shareholders of an S corporation under section 290.9725, 25 percent of
34.4the expenses incurred during the taxable year to conduct tuberculosis testing on those
34.5cattle; and (2) for all other filers, one-half the expenses incurred during the taxable year to
34.6conduct tuberculosis testing on those cattle.
34.7    (b) If the amount of credit which the taxpayer is eligible to receive under this
34.8subdivision exceeds the taxpayer's tax liability under this chapter, the commissioner of
34.9revenue shall refund the excess to the taxpayer.
34.10    (c) The amount necessary to pay claims for the refund provided in this subdivision is
34.11appropriated from the general fund to the commissioner of revenue.
34.12    (d) Expenses incurred in a calendar year in which tuberculosis testing of cattle in
34.13Minnesota is not federally required are not allowed in claiming the credit under paragraph
34.14(a).
34.15EFFECTIVE DATE.This section is effective for taxable years beginning after
34.16December 31, 2009.

34.17    Sec. 23. Minnesota Statutes 2008, section 290.06, is amended by adding a subdivision
34.18to read:
34.19    Subd. 36. Job growth investment tax credit. A taxpayer is allowed a credit
34.20as determined under section 116J.8737 against the tax imposed by this chapter.
34.21Notwithstanding the certification eligibility issued by the commissioner of the Department
34.22of Employment and Economic Development under section 116J.8737, the commissioner
34.23may utilize any audit and examination powers under chapter 270C or 289A to the extent
34.24necessary to verify that the taxpayer is eligible for the credit and to assess for the amount
34.25of any improperly claimed credit.
34.26EFFECTIVE DATE.This section is effective July 1, 2009, for taxable years
34.27beginning after December 31, 2008, and only applies to investments made after the
34.28qualified regional investment fund or qualified individual investor has been certified by
34.29the commissioner of employment and economic development.

34.30    Sec. 24. Minnesota Statutes 2008, section 290.068, subdivision 1, is amended to read:
34.31    Subdivision 1. Credit allowed. A corporation, other than a corporation treated as an
34.32"S" corporation under section 290.9725, taxpayer, other than a corporation not treated as an
35.1"S" corporation, is allowed a credit against the portion of the franchise tax computed under
35.2section 290.06, subdivision 1, sections 290.06 and 290.091 for the taxable year equal to:
35.3(a) 5 (1) ten percent of the first $2,000,000 of the excess (if any) of
35.4(1) the qualified research expenses for the taxable year, over
35.5(2) the base amount; and
35.6(b) 2.5 percent on all of such excess expenses over $2,000,000.
35.7EFFECTIVE DATE.This section is effective for taxable years beginning after
35.8December 31, 2009.

35.9    Sec. 25. Minnesota Statutes 2008, section 290.068, subdivision 3, is amended to read:
35.10    Subd. 3. Limitation; carryover Credit refundable. (a)(1) The credit for the
35.11taxable year shall not exceed the liability for tax. "Liability for tax" for purposes of this
35.12section means the tax imposed under section 290.06, subdivision 1, for the taxable year
35.13reduced by the sum of the nonrefundable credits allowed under this chapter.
35.14    (2) In the case of a corporation which is a partner in a partnership, the credit allowed
35.15for the taxable year shall not exceed the lesser of the amount determined under clause (1)
35.16for the taxable year or an amount (separately computed with respect to the corporation's
35.17interest in the trade or business or entity) equal to the amount of tax attributable to that
35.18portion of taxable income which is allocable or apportionable to the corporation's interest
35.19in the trade or business or entity.
35.20    (b) If the amount of the credit determined under this section for any taxable year
35.21exceeds the limitation under clause (a), the liability for tax, the commissioner shall refund
35.22the excess shall be a research credit carryover to each of the 15 succeeding taxable years.
35.23The entire amount of the excess unused credit for the taxable year shall be carried first
35.24to the earliest of the taxable years to which the credit may be carried and then to each
35.25successive year to which the credit may be carried. The amount of the unused credit which
35.26may be added under this clause shall not exceed the taxpayer's liability for tax less the
35.27research credit for the taxable year to the taxpayer.
35.28EFFECTIVE DATE.This section is effective for taxable years beginning after
35.29December 31, 2009.

35.30    Sec. 26. Minnesota Statutes 2008, section 290.068, subdivision 4, is amended to read:
35.31    Subd. 4. Partnerships. In the case of partnerships the credit shall be allocated in
35.32the same manner provided by section sections 41(f)(2) and 41(g) of the Internal Revenue
35.33Code.
36.1EFFECTIVE DATE.This section is effective for taxable years beginning after
36.2December 31, 2009.

36.3    Sec. 27. Minnesota Statutes 2008, section 290.068, is amended by adding a subdivision
36.4to read:
36.5    Subd. 7. Appropriation. An amount sufficient to pay the refunds required by this
36.6section is appropriated to the commissioner from the general fund.
36.7EFFECTIVE DATE.This section is effective for taxable years beginning after
36.8December 31, 2009.

36.9    Sec. 28. Minnesota Statutes 2008, section 290.0922, subdivision 1, is amended to read:
36.10    Subdivision 1. Imposition. (a) In addition to the tax imposed by this chapter without
36.11regard to this section, the franchise tax imposed on a corporation required to file under
36.12section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation
36.13under section 290.9725 for the taxable year includes a tax equal to the following amounts:

36.14 36.15 36.16	If the sum of the corporation's Minnesota property, payrolls, and sales or receipts is:						the tax equals:
36.17			less than	$	500,000		$	0
36.18		$	500,000 to	$	999,999		$	100
36.19		$	1,000,000 to	$	4,999,999		$	300
36.20		$	5,000,000 to	$	9,999,999		$	1,000
36.21 36.22		$	10,000,000 to	$	19,999,999		$	2,000
36.23		$	20,000,000 or more				$	5,000

36.24(b) A tax is imposed for each taxable year on a corporation required to file a return
36.25under section 289A.12, subdivision 3, that is treated as an "S" corporation under section
36.26290.9725 and on a partnership required to file a return under section 289A.12, subdivision
36.273 , other than a partnership that derives over 80 percent of its income from farming. The
36.28tax imposed under this paragraph is due on or before the due date of the return for the
36.29taxpayer due under section 289A.18, subdivision 1. The commissioner shall prescribe
36.30the return to be used for payment of this tax. The tax under this paragraph is equal to
36.31the following amounts:

36.32 36.33 36.34	If the sum of the S corporation's or partnership's Minnesota property, payrolls, and sales or receipts is:							the tax equals:
36.35			less than	$	500,000		$	0
36.36		$	500,000 to	$	999,999		$	100
36.37		$	1,000,000 to	$	4,999,999		$	300
37.1		$	5,000,000 to	$	9,999,999		$	1,000
37.2 37.3		$	10,000,000 to	$	19,999,999		$	2,000
37.4		$	20,000,000 or more				$	5,000

37.5EFFECTIVE DATE.This section is effective for taxable years beginning after
37.6December 31, 2009.

37.7    Sec. 29. Minnesota Statutes 2008, section 290.095, subdivision 3, is amended to read:
37.8    Subd. 3. Carryover. (a) A net operating loss incurred in a taxable year: (i)
37.9beginning after December 31, 1986, shall be a net operating loss carryover to each of the
37.1015 taxable years following the taxable year of such loss; (ii) beginning before January 1,
37.111987, shall be a net operating loss carryover to each of the five taxable years following the
37.12taxable year of such loss subject to the provisions of Minnesota Statutes 1986, section
37.13290.095 ; and (iii) beginning before January 1, 1987, shall be a net operating loss carryback
37.14to each of the three taxable years preceding the loss year subject to the provisions of
37.15Minnesota Statutes 1986, section 290.095.
37.16(b) The entire amount of the net operating loss for any taxable year shall be carried to
37.17the earliest of the taxable years to which such loss may be carried. The portion of such loss
37.18which shall be carried to each of the other taxable years shall be the excess, if any, of the
37.19amount of such loss over the sum of the taxable net income, adjusted by the modifications
37.20specified in subdivision 4, for each of the taxable years to which such loss may be carried.
37.21(c) Where a corporation apportions its income under the provisions of section
37.22290.191, the net operating loss deduction incurred in any taxable year shall be allowed
37.23to the extent of the apportionment ratio of the loss year.
37.24(d) The provisions of sections 381, 382, and 384 of the Internal Revenue Code apply
37.25to carryovers in certain corporate acquisitions and special limitations on net operating loss
37.26carryovers. The limitation amount determined under section 382 shall be applied to net
37.27income, before apportionment, in each post change year to which a loss is carried.
37.28EFFECTIVE DATE.This section is effective for taxable years beginning after
37.29December 31, 2009.

37.30    Sec. 30. Minnesota Statutes 2008, section 290.17, subdivision 1, is amended to read:
37.31    Subdivision 1. Scope of allocation rules. (a) The income of resident individuals
37.32is not subject to allocation outside this state. The allocation rules apply to nonresident
37.33individuals, estates, trusts, nonresident partners of partnerships, and nonresident
37.34shareholders of corporations treated as "S" corporations under section 290.9725, and all
38.1corporations not having such an election in effect. If a partnership or corporation would
38.2not otherwise be subject to the allocation rules, but conducts a trade or business that is part
38.3of a unitary business involving another legal entity that is subject to the allocation rules,
38.4the partnership or corporation is subject to the allocation rules.
38.5(b) Expenses, losses, and other deductions (referred to collectively in this paragraph
38.6as "deductions") must be allocated along with the item or class of gross income to which
38.7they are definitely related for purposes of assignment under this section or apportionment
38.8under section 290.191, 290.20, or 290.36. Deductions definitely related to any item of
38.9gross income assigned under subdivision 2, paragraph (e), are assigned to the taxpayer's
38.10domicile.
38.11(c) In the case of an individual who is a resident for only part of a taxable year,
38.12the individual's income, gains, losses, and deductions from the distributive share of a
38.13partnership, S corporation, trust, or estate are not subject to allocation outside this state
38.14to the extent of the distributive share multiplied by a ratio, the numerator of which is
38.15the number of days the individual was a resident of this state during the tax year of the
38.16partnership, S corporation, trust, or estate, and the denominator of which is the number of
38.17days in the taxable year of the partnership, S corporation, trust, or estate.
38.18EFFECTIVE DATE.This section is effective for taxable years beginning after
38.19December 31, 2009.

38.20    Sec. 31. Minnesota Statutes 2008, section 290.17, subdivision 4, is amended to read:
38.21    Subd. 4. Unitary business principle. (a) If a trade or business conducted wholly
38.22within this state or partly within and partly without this state is part of a unitary business,
38.23the entire income of the unitary business is subject to apportionment pursuant to section
38.24290.191 . Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
38.25business is considered to be derived from any particular source and none may be allocated
38.26to a particular place except as provided by the applicable apportionment formula. The
38.27provisions of this subdivision do not apply to business income subject to subdivision 5,
38.28income of an insurance company, or income of an investment company determined under
38.29section 290.36.
38.30(b) The term "unitary business" means business activities or operations which
38.31result in a flow of value between them. The term may be applied within a single legal
38.32entity or between multiple entities and without regard to whether each entity is a sole
38.33proprietorship, a corporation, a partnership, or a trust.
38.34(c) Unity is presumed whenever there is unity of ownership, operation, and use,
38.35evidenced by centralized management or executive force, centralized purchasing,
39.1advertising, accounting, or other controlled interaction, but the absence of these
39.2centralized activities will not necessarily evidence a nonunitary business. Unity is also
39.3presumed when business activities or operations are of mutual benefit, dependent upon or
39.4contributory to one another, either individually or as a group.
39.5(d) Where a business operation conducted in Minnesota is owned by a business
39.6entity that carries on business activity outside the state different in kind from that
39.7conducted within this state, and the other business is conducted entirely outside the state, it
39.8is presumed that the two business operations are unitary in nature, interrelated, connected,
39.9and interdependent unless it can be shown to the contrary.
39.10(e) Unity of ownership is not deemed to exist when a corporation is involved unless
39.11that corporation is a member of a group of two or more business entities and more than 50
39.12percent of the voting stock of each member of the group is directly or indirectly owned
39.13by a common owner or by common owners, either corporate or noncorporate, or by one
39.14or more of the member corporations of the group. For this purpose, the term "voting
39.15stock" shall include membership interests of mutual insurance holding companies formed
39.16under section 66A.40.
39.17(f) The net income and apportionment factors under section 290.191 or 290.20 of
39.18foreign corporations and other foreign entities which are part of a unitary business shall
39.19not be included in the net income or the apportionment factors of the unitary business.
39.20A foreign corporation or other foreign entity which is required to file a return under this
39.21chapter shall file on a separate return basis. The net income and apportionment factors
39.22under section 290.191 or 290.20 of foreign operating corporations shall not be included in
39.23the net income or the apportionment factors of the unitary business except as provided in
39.24paragraph (g).
39.25(g) The adjusted net income of a foreign operating corporation shall be deemed to
39.26be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
39.27proportion to each shareholder's ownership, with which such corporation is engaged in
39.28a unitary business. Such deemed dividend shall be treated as a dividend under section
39.29290.21, subdivision 4.
39.30Dividends actually paid by a foreign operating corporation to a corporate shareholder
39.31which is a member of the same unitary business as the foreign operating corporation shall
39.32be eliminated from the net income of the unitary business in preparing a combined report
39.33for the unitary business. The adjusted net income of a foreign operating corporation
39.34shall be its net income adjusted as follows:
40.1(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
40.2Rico, or a United States possession or political subdivision of any of the foregoing shall
40.3be a deduction; and
40.4(2) the subtraction from federal taxable income for payments received from foreign
40.5corporations or foreign operating corporations under section 290.01, subdivision 19d,
40.6clause (10), shall not be allowed.
40.7If a foreign operating corporation incurs a net loss, neither income nor deduction
40.8from that corporation shall be included in determining the net income of the unitary
40.9business.
40.10(h) (f) For purposes of determining the net income of a unitary business and the
40.11factors to be used in the apportionment of net income pursuant to section 290.191 or
40.12290.20 , there must be included only the income and apportionment factors of domestic
40.13corporations or other domestic entities other than foreign operating corporations that are
40.14determined to be part of the unitary business pursuant to this subdivision, notwithstanding
40.15that foreign corporations or other foreign entities might be included in the unitary business.
40.16(i) Deductions for expenses, interest, or taxes otherwise allowable under this chapter
40.17that are connected with or allocable against dividends, deemed dividends described
40.18in paragraph (g), or royalties, fees, or other like income described in section 290.01,
40.19subdivision 19d , clause (10), shall not be disallowed.
40.20(j) (g) Each corporation or other entity, except a sole proprietorship, that is part of
40.21a unitary business must file combined reports as the commissioner determines. On the
40.22reports, all intercompany transactions between entities included pursuant to paragraph
40.23(h) (f) must be eliminated and the entire net income of the unitary business determined in
40.24accordance with this subdivision is apportioned among the entities by using each entity's
40.25Minnesota factors for apportionment purposes in the numerators of the apportionment
40.26formula and the total factors for apportionment purposes of all entities included pursuant
40.27to paragraph (h) (f) in the denominators of the apportionment formula.
40.28(k) If a corporation has been divested from a unitary business and is included in a
40.29combined report for a fractional part of the common accounting period of the combined
40.30report:
40.31(1) its income includable in the combined report is its income incurred for that part
40.32of the year determined by proration or separate accounting; and
40.33(2) its sales, property, and payroll included in the apportionment formula must
40.34be prorated or accounted for separately.
40.35EFFECTIVE DATE.This section is effective for taxable years beginning after
40.36December 31, 2009.

41.1    Sec. 32. Minnesota Statutes 2008, section 290.191, subdivision 4, is amended to read:
41.2    Subd. 4. Apportionment formula for certain mail order businesses. If the
41.3business of a corporation, partnership, or proprietorship consists exclusively of the
41.4selling of tangible personal property and services at retail, as defined in section 297A.61,
41.5subdivision 4 , paragraph (a), in response to orders received by United States mail,
41.6telephone, facsimile, or other electronic media, and 99 percent of the taxpayer's property
41.7and payroll is within Minnesota, then the taxpayer may apportion net income to Minnesota
41.8based solely upon the percentage that the sales made within this state in connection
41.9with its trade or business during the tax period are of the total sales wherever made in
41.10connection with the trade or business during the tax period. Property and payroll factors
41.11are disregarded. In determining eligibility for this subdivision:
41.12(1) the sale not in the ordinary course of business of tangible or intangible assets
41.13used in conducting business activities must be disregarded; and
41.14(2) property and payroll at a distribution center outside of Minnesota are disregarded
41.15if the sole activity at the distribution center is the filling of orders, and no solicitation
41.16of orders occurs at the distribution center.
41.17EFFECTIVE DATE.This section is effective for taxable years beginning after
41.18December 31, 2009.

41.19    Sec. 33. Minnesota Statutes 2008, section 290.32, is amended to read:
41.20290.32 TAXES FOR PART OF YEAR, COMPUTATION.
41.21When under this chapter a taxpayer is permitted or required to make a return for a
41.22fractional part of a year, the tax shall be computed in the same manner as if such fractional
41.23part of a year were an entire year, except:
41.24(1) A taxpayer who is permitted to change the basis for reporting income from a
41.25fiscal to a calendar year shall make a separate return for the period between the close of
41.26the taxpayer's last fiscal year and the following December 31st; if the change is from a
41.27calendar to a fiscal year, a separate return shall be made for the period between the close
41.28of the taxpayer's last calendar year and the date designated as the close of the fiscal year;
41.29and if the change is from one fiscal year to another fiscal year, a separate return shall be
41.30made for the period between the close of the former fiscal year and the date designated as
41.31the close of the new fiscal year. The taxable net income, or for corporations the taxable
41.32net income as reduced by the deductions contained in section 290.21, for any such period
41.33shall be put on an annual basis by multiplying the amount thereof by 12 and dividing by
41.34the number of months included in the period for which such separate return is made; and
42.1the tax shall be that part of a tax, computed on the taxable net income put on such annual
42.2basis which the number of months in such period bears to 12 months.
42.3(2) Where any of the enumerated changes in accounting period referred to in clause
42.4(1) involve a 52-53 week fiscal year and any such change results in a short period of less
42.5than seven days, such short period shall be added to and deemed a part of the following
42.6taxable year. If the change results in a short period of seven or more days, but less than
42.7359 days, the taxable net income, or for corporations the taxable net income as reduced
42.8by the deductions contained in section 290.21, for any such period shall be placed on an
42.9annual basis by multiplying such income by 365 and dividing the result by the same
42.10number of days in the short period; and the tax shall be that part of a tax, computed on the
42.11taxable net income placed on such annual basis which the number of days in such short
42.12period bears to 365 days. Where the short period is 359 days or more, the tax shall be
42.13computed in the same manner as if such short period were an entire year.
42.14EFFECTIVE DATE.This section is effective for taxable years beginning after
42.15December 31, 2009.

42.16    Sec. 34. Minnesota Statutes 2008, section 290.36, is amended to read:
42.17290.36 INVESTMENT COMPANIES; REPORT OF NET INCOME;
42.18COMPUTATION OF AMOUNT OF INCOME ALLOCABLE TO STATE.
42.19The taxable net income of investment companies shall be computed as follows:
42.20Each investment company transacting business as such in this state shall report to
42.21the commissioner the net income returned by the company for the taxable year to the
42.22United States under the provisions of the Internal Revenue Code, less the credits provided
42.23therein and subject to the adjustments required by this chapter. The commissioner shall
42.24compute therefrom the taxable net income of the investment company by assigning to this
42.25state that proportion of such net income, less such credits which the aggregate of the gross
42.26payments collected by the company during the taxable year from old and new business
42.27upon investment contracts issued by the company and held by residents of this state, bears
42.28to the total amount of the gross payments collected during such year by the company from
42.29such business upon investment contracts issued by the company and held by persons
42.30residing within the state and elsewhere.
42.31As used in this section, the term "investment company" means any person,
42.32copartnership, or association, or corporation, whether local or foreign, coming within
42.33the purview of section 54.26, and who or which is registered under the Investment
42.34Company Act of 1940 (United States Code, title 15, section 80a-1 and following), as
43.1amended through December 31, 1986, and who or which solicits or receives payments
43.2to be made to itself and which issues therefor, or has issued therefor and has or shall
43.3have outstanding so-called bonds, shares, coupons, certificates of membership, or other
43.4evidences of obligation or agreement or pretended agreement to return to the holders or
43.5owners thereof money or anything of value at some future date; and as to whom the
43.6gross payments received during the taxable year in question upon outstanding investment
43.7contracts, plus interest and dividends earned on investment contracts determined by
43.8prorating the total dividends and interest for the taxable year in question in the same
43.9proportion that certificate reserves as defined by the Investment Company Act of 1940, as
43.10amended through December 31, 1986, is to total assets, shall be at least 50 percent of the
43.11company's gross payments upon investment contracts plus gross income from all other
43.12sources except dividends from subsidiaries for the taxable year in question. The term
43.13"investment contract" shall mean any such so-called bonds, shares, coupons, certificates
43.14of membership, or other evidences of obligation or agreement or pretended agreement
43.15issued by an investment company.
43.16EFFECTIVE DATE.This section is effective for taxable years beginning after
43.17December 31, 2009.

43.18    Sec. 35. Minnesota Statutes 2008, section 297A.61, subdivision 3, is amended to read:
43.19    Subd. 3. Sale and purchase. (a) "Sale" and "purchase" include, but are not limited
43.20to, each of the transactions listed in this subdivision.
43.21    (b) Sale and purchase include:
43.22    (1) any transfer of title or possession, or both, of tangible personal property, whether
43.23absolutely or conditionally, for a consideration in money or by exchange or barter; and
43.24    (2) the leasing of or the granting of a license to use or consume, for a consideration
43.25in money or by exchange or barter, tangible personal property, other than a manufactured
43.26home used for residential purposes for a continuous period of 30 days or more.
43.27    (c) Sale and purchase include the production, fabrication, printing, or processing of
43.28tangible personal property for a consideration for consumers who furnish either directly or
43.29indirectly the materials used in the production, fabrication, printing, or processing.
43.30    (d) Sale and purchase include the preparing for a consideration of food.
43.31Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited
43.32to, the following:
43.33    (1) prepared food sold by the retailer;
43.34    (2) soft drinks;
43.35    (3) candy;
44.1    (4) dietary supplements; and
44.2    (5) all food sold through vending machines.
44.3    (e) A sale and a purchase includes the furnishing for a consideration of residential
44.4sewer services, electricity, gas, water, or steam for use or consumption within this state.
44.5    (f) A sale and a purchase includes the transfer for a consideration of prewritten
44.6computer software whether delivered electronically, by load and leave, or otherwise.
44.7    (g) A sale and a purchase includes the furnishing for a consideration of the following
44.8services:
44.9    (1) the privilege of admission to places of amusement, recreational areas, or athletic
44.10events, and the making available of amusement devices, tanning facilities, reducing
44.11salons, steam baths, Turkish baths, health clubs, and spas or athletic facilities;
44.12    (2) lodging and related services by a hotel, rooming house, resort, campground,
44.13motel, or trailer camp, including furnishing the guest of the facility with access to
44.14telecommunication services, and the granting of any similar license to use real property
44.15in a specific facility, other than the renting or leasing of it for a continuous period of
44.1630 days or more under an enforceable written agreement that may not be terminated
44.17without prior notice;
44.18    (3) nonresidential parking services, whether on a contractual, hourly, or other
44.19periodic basis, except for parking at a meter;
44.20    (4) the granting of membership in a club, association, or other organization if:
44.21    (i) the club, association, or other organization makes available for the use of its
44.22members sports and athletic facilities, without regard to whether a separate charge is
44.23assessed for use of the facilities; and
44.24    (ii) use of the sports and athletic facility is not made available to the general public
44.25on the same basis as it is made available to members.
44.26Granting of membership means both onetime initiation fees and periodic membership
44.27dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and
44.28squash courts; basketball and volleyball facilities; running tracks; exercise equipment;
44.29swimming pools; and other similar athletic or sports facilities;
44.30    (5) delivery of aggregate materials by a third party, excluding delivery of aggregate
44.31material used in road construction, and delivery of concrete block by a third party if
44.32the delivery would be subject to the sales tax if provided by the seller of the concrete
44.33block; and
44.34    (6) services as provided in this clause:
44.35    (i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
44.36and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
45.1drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
45.2include services provided by coin operated facilities operated by the customer;
45.3    (ii) motor vehicle washing, waxing, and cleaning services, including services
45.4provided by coin operated facilities operated by the customer, and rustproofing,
45.5undercoating, and towing of motor vehicles;
45.6    (iii) building and residential cleaning, maintenance, and disinfecting services and
45.7pest control and exterminating services;
45.8    (iv) detective, security, burglar, fire alarm, and armored car services; but not
45.9including services performed within the jurisdiction they serve by off-duty licensed peace
45.10officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit
45.11organization for monitoring and electronic surveillance of persons placed on in-home
45.12detention pursuant to court order or under the direction of the Minnesota Department
45.13of Corrections;
45.14    (v) pet grooming services;
45.15    (vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
45.16and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor
45.17plant care; tree, bush, shrub, and stump removal, except when performed as part of a land
45.18clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for
45.19public utility lines. Services performed under a construction contract for the installation of
45.20shrubbery, plants, sod, trees, bushes, and similar items are not taxable;
45.21    (vii) massages, except when provided by a licensed health care facility or
45.22professional or upon written referral from a licensed health care facility or professional for
45.23treatment of illness, injury, or disease; and
45.24    (viii) the furnishing of lodging, board, and care services for animals in kennels and
45.25other similar arrangements, but excluding veterinary and horse boarding services;
45.26(ix) car repair services;
45.27(x) general repair services;
45.28(xi) legal services;
45.29(xii) accounting, financial planning, and brokerage services;
45.30(xiii) tattoos and body piercing;
45.31(xiv) personal grooming and salon services, including, but not limited to, haircuts,
45.32hair styling, and hair dyeing; hair extensions; shaving and waxing; manicures; pedicures;
45.33facials; body wraps; and tanning services; and
45.34(xv) funeral services.
45.35    In applying the provisions of this chapter, the terms "tangible personal property"
45.36and "retail sale" include taxable services listed in clause (6), items (i) to (vi) and (viii),
46.1and the provision of these taxable services, unless specifically provided otherwise.
46.2Services performed by an employee for an employer are not taxable. Services performed
46.3by a partnership or association for another partnership or association are not taxable if
46.4one of the entities owns or controls more than 80 percent of the voting power of the
46.5equity interest in the other entity. Services performed between members of an affiliated
46.6group of corporations are not taxable. For purposes of the preceding sentence, "affiliated
46.7group of corporations" means those entities that would be classified as members of an
46.8affiliated group as defined under United States Code, title 26, section 1504, disregarding
46.9the exclusions in section 1504(b).
46.10    For purposes of clause (5), "road construction" means construction of (1) public
46.11roads, (2) cartways, and (3) private roads in townships located outside of the seven-county
46.12metropolitan area up to the point of the emergency response location sign.
46.13    (h) A sale and a purchase includes the furnishing for a consideration of tangible
46.14personal property or taxable services by the United States or any of its agencies or
46.15instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political
46.16subdivisions.
46.17    (i) A sale and a purchase includes the furnishing for a consideration of
46.18telecommunications services, ancillary services associated with telecommunication
46.19services, cable television services, and direct satellite services, and ring tones.
46.20Telecommunication services include, but are not limited to, the following services,
46.21as defined in section 297A.669: air-to-ground radiotelephone service, mobile
46.22telecommunication service, postpaid calling service, prepaid calling service, prepaid
46.23wireless calling service, and private communication services. The services in this
46.24paragraph are taxed to the extent allowed under federal law.
46.25    (j) A sale and a purchase includes the furnishing for a consideration of installation if
46.26the installation charges would be subject to the sales tax if the installation were provided
46.27by the seller of the item being installed.
46.28    (k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer
46.29to a customer when (1) the vehicle is rented by the customer for a consideration, or (2)
46.30the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section
46.3165B.29, subdivision 1 , clause (1).
46.32EFFECTIVE DATE.This section is effective for sales and purchases made after
46.33December 31, 2009.

46.34    Sec. 36. Minnesota Statutes 2008, section 297A.62, subdivision 1, is amended to read:
47.1    Subdivision 1. Generally. (a) Except as otherwise provided in paragraph (b),
47.2subdivision 3, or in this chapter, a sales tax of 6.5 percent is imposed on the gross receipts
47.3from retail sales as defined in section 297A.61, subdivision 4, made in this state or to a
47.4destination in this state by a person who is required to have or voluntarily obtains a permit
47.5under section 297A.83, subdivision 1.
47.6(b) On or before October 1, 2009, the commissioner shall estimate the rates of tax
47.7that, after applying the provisions of this act, results in no change in the total amount of
47.8general fund revenues and dedicated revenues under the Minnesota Constitution, article
47.9XI, section 15, that the state would receive during fiscal year 2011 and shall publish the
47.10rate in the State Register. The commissioner shall estimate the rate under the Minnesota
47.11Constitution, article XI, section 15, to proportionately adjust for the expansion of the tax
47.12base under this act in compliance with the constitutional provision. Those respective rates
47.13apply instead of the rate under paragraph (a) and the Minnesota Constitution, article XI,
47.14section 15, effective for sales and purchases made after December 31, 2009.
47.15EFFECTIVE DATE.This section is effective the day following final enactment.

47.16    Sec. 37. Minnesota Statutes 2008, section 297A.67, subdivision 7, is amended to read:
47.17    Subd. 7. Drugs; medical devices. (a) Sales of the following drugs and medical
47.18devices for human use are exempt:
47.19    (1) drugs, including excluding over-the-counter drugs;
47.20    (2) single-use finger-pricking devices for the extraction of blood and other single-use
47.21devices and single-use diagnostic agents used in diagnosing, monitoring, or treating
47.22diabetes;
47.23    (3) insulin and medical oxygen for human use, regardless of whether prescribed
47.24or sold over the counter;
47.25    (4) (3) prosthetic devices;
47.26    (5) (4) durable medical equipment for home use only;
47.27    (6) (5) mobility enhancing equipment; and
47.28    (7) prescription corrective eyeglasses; and
47.29    (8) (6) kidney dialysis equipment, including repair and replacement parts.
47.30    (b) For purposes of this subdivision:
47.31    (1) "Drug" means a compound, substance, or preparation, and any component of
47.32a compound, substance, or preparation, other than food and food ingredients, dietary
47.33supplements, or alcoholic beverages that is:
48.1    (i) recognized in the official United States Pharmacopoeia, official Homeopathic
48.2Pharmacopoeia of the United States, or official National Formulary, and supplement
48.3to any of them;
48.4    (ii) intended for use in the diagnosis, cure, mitigation, treatment, or prevention
48.5of disease; or
48.6    (iii) intended to affect the structure or any function of the body.
48.7    (2) "Durable medical equipment" means equipment, including repair and
48.8replacement parts, but not including mobility enhancing equipment, that:
48.9    (i) can withstand repeated use;
48.10    (ii) is primarily and customarily used to serve a medical purpose;
48.11    (iii) generally is not useful to a person in the absence of illness or injury; and
48.12    (iv) is not worn in or on the body.
48.13    For purposes of this clause, "repair and replacement parts" includes all components
48.14or attachments used in conjunction with the durable medical equipment, but does not
48.15include repair and replacement parts which are for single patient use only.
48.16    (3) "Mobility enhancing equipment" means equipment, including repair and
48.17replacement parts, but not including durable medical equipment, that:
48.18    (i) is primarily and customarily used to provide or increase the ability to move from
48.19one place to another and that is appropriate for use either in a home or a motor vehicle;
48.20    (ii) is not generally used by persons with normal mobility; and
48.21    (iii) does not include any motor vehicle or equipment on a motor vehicle normally
48.22provided by a motor vehicle manufacturer.
48.23    (4) "Over-the-counter drug" means a drug that contains a label that identifies the
48.24product as a drug as required by Code of Federal Regulations, title 21, section 201.66. The
48.25label must include a "drug facts" panel or a statement of the active ingredients with a list of
48.26those ingredients contained in the compound, substance, or preparation. Over-the-counter
48.27drugs do not include grooming and hygiene products, regardless of whether they otherwise
48.28meet the definition. "Grooming and hygiene products" are soaps, cleaning solutions,
48.29shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and sunscreens.
48.30    (5) "Prescribed" and "prescription" means a direction in the form of an order,
48.31formula, or recipe issued in any form of oral, written, electronic, or other means of
48.32transmission by a duly licensed health care professional.
48.33    (6) "Prosthetic device" means a replacement, corrective, or supportive device,
48.34including repair and replacement parts, worn on or in the body to:
48.35    (i) artificially replace a missing portion of the body;
48.36    (ii) prevent or correct physical deformity or malfunction; or
49.1    (iii) support a weak or deformed portion of the body.
49.2Prosthetic device does not include corrective eyeglasses.
49.3    (7) "Kidney dialysis equipment" means equipment that:
49.4    (i) is used to remove waste products that build up in the blood when the kidneys are
49.5not able to do so on their own; and
49.6    (ii) can withstand repeated use, including multiple use by a single patient,
49.7notwithstanding the provisions of clause (2).
49.8EFFECTIVE DATE.This section is effective for sales and purchases made after
49.9December 31, 2009.

49.10    Sec. 38. Minnesota Statutes 2008, section 297A.68, subdivision 2, is amended to read:
49.11    Subd. 2. Materials consumed in industrial production. (a) Materials stored, used,
49.12or consumed in industrial production of personal property intended to be sold ultimately at
49.13retail are exempt, whether or not the item so used becomes an ingredient or constituent
49.14part of the property produced. Materials that qualify for this exemption include, but
49.15are not limited to, the following:
49.16(1) chemicals, including chemicals used for cleaning food processing machinery
49.17and equipment;
49.18(2) materials, including chemicals, fuels, and electricity purchased by persons
49.19engaged in industrial production to treat waste generated as a result of the production
49.20process;
49.21(3) fuels, electricity, gas, and steam used or consumed in the production process,
49.22except that electricity, gas, or steam used for space heating, cooling, or lighting is exempt
49.23if (i) it is in excess of the average climate control or lighting for the production area, and
49.24(ii) it is necessary to produce that particular product;
49.25(4) petroleum products and lubricants;
49.26(5) packaging materials, including returnable containers used in packaging food
49.27and beverage products;
49.28(6) accessory tools, equipment, and other items that are separate detachable units
49.29with an ordinary useful life of less than 12 months used in producing a direct effect upon
49.30the product; and
49.31(7) the following materials, tools, and equipment used in metal-casting: crucibles,
49.32thermocouple protection sheaths and tubes, stalk tubes, refractory materials, molten metal
49.33filters and filter boxes, degassing lances, and base blocks.
49.34(b) This exemption does not include:
50.1(1) machinery, equipment, implements, tools, accessories, appliances, contrivances
50.2and furniture and fixtures, except those listed in paragraph (a), clause (6); and
50.3(2) petroleum and special fuels used in producing or generating power for propelling
50.4ready-mixed concrete trucks on the public highways of this state.
50.5(c) Industrial production includes, but is not limited to, research, development,
50.6design or production of any tangible personal property, manufacturing, processing (other
50.7than by restaurants and consumers) of agricultural products (whether vegetable or animal),
50.8commercial fishing, refining, smelting, reducing, brewing, distilling, printing, mining,
50.9quarrying, lumbering, generating electricity, the production of road building materials,
50.10and the research, development, design, or production of computer software. Industrial
50.11production does not include painting, cleaning, repairing or similar processing of property
50.12except as part of the original manufacturing process.
50.13(d) Industrial production does not include:
50.14(1) the furnishing of services listed in section 297A.61, subdivision 3, paragraph (g),
50.15clause (6), items (i) to (vi) and (viii) to (xv); or
50.16(2) the transportation, transmission, or distribution of petroleum, liquefied gas,
50.17natural gas, water, or steam, in, by, or through pipes, lines, tanks, mains, or other means of
50.18transporting those products. For purposes of this paragraph, "transportation, transmission,
50.19or distribution" does not include blending of petroleum or biodiesel fuel as defined
50.20in section 239.77.
50.21EFFECTIVE DATE.This section is effective for sales and purchases made after
50.22December 31, 2009.

50.23    Sec. 39. Minnesota Statutes 2008, section 297A.68, subdivision 5, is amended to read:
50.24    Subd. 5. Capital equipment. (a) Capital equipment is exempt. For purchases
50.25made prior to January 1, 2010, the tax must be imposed and collected as if the rate under
50.26section 297A.62, subdivision 1, applied, and then refunded in the manner provided
50.27in section 297A.75.
50.28"Capital equipment" means machinery and equipment purchased or leased, and used
50.29in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining,
50.30or refining tangible personal property to be sold ultimately at retail if the machinery
50.31and equipment are essential to the integrated production process of manufacturing,
50.32fabricating, mining, or refining. Capital equipment also includes machinery and
50.33equipment used primarily to electronically transmit results retrieved by a customer of an
50.34online computerized data retrieval system. Capital equipment also includes machinery
51.1and equipment used primarily to produce taxable services, as defined in section 297A.61,
51.2subdivision 3, paragraph (g), clause (6).
51.3(b) Capital equipment includes, but is not limited to:
51.4(1) machinery and equipment used to operate, control, or regulate the production
51.5equipment;
51.6(2) machinery and equipment used for research and development, design, quality
51.7control, and testing activities;
51.8(3) environmental control devices that are used to maintain conditions such as
51.9temperature, humidity, light, or air pressure when those conditions are essential to and are
51.10part of the production process;
51.11(4) materials and supplies used to construct and install machinery or equipment;
51.12(5) repair and replacement parts, including accessories, whether purchased as spare
51.13parts, repair parts, or as upgrades or modifications to machinery or equipment;
51.14(6) materials used for foundations that support machinery or equipment;
51.15(7) materials used to construct and install special purpose buildings used in the
51.16production process;
51.17(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed
51.18as part of the delivery process regardless if mounted on a chassis, repair parts for
51.19ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and
51.20(9) machinery or equipment used for research, development, design, or production
51.21of computer software.
51.22(c) Capital equipment does not include the following:
51.23(1) motor vehicles taxed under chapter 297B;
51.24(2) machinery or equipment used to receive or store raw materials;
51.25(3) building materials, except for materials included in paragraph (b), clauses (6)
51.26and (7);
51.27(4) machinery or equipment used for nonproduction purposes, including, but not
51.28limited to, the following: plant security, fire prevention, first aid, and hospital stations;
51.29support operations or administration; pollution control; and plant cleaning, disposal of
51.30scrap and waste, plant communications, space heating, cooling, lighting, or safety;
51.31(5) farm machinery and aquaculture production equipment as defined by section
51.32297A.61, subdivisions 12 and 13 ;
51.33(6) machinery or equipment purchased and installed by a contractor as part of an
51.34improvement to real property;
51.35(7) machinery and equipment used by restaurants in the furnishing, preparing, or
51.36serving of prepared foods as defined in section 297A.61, subdivision 31;
52.1(8) machinery and equipment used to furnish the services listed in section 297A.61,
52.2subdivision 3 , paragraph (g), clause (6), items (i) to (vi) and (viii);
52.3(9) machinery or equipment used in the transportation, transmission, or distribution
52.4of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines,
52.5tanks, mains, or other means of transporting those products. This clause does not apply to
52.6machinery or equipment used to blend petroleum or biodiesel fuel as defined in section
52.7239.77 ; or
52.8(10) any other item that is not essential to the integrated process of manufacturing,
52.9fabricating, mining, or refining.
52.10(d) For purposes of this subdivision:
52.11(1) "Equipment" means independent devices or tools separate from machinery but
52.12essential to an integrated production process, including computers and computer software,
52.13used in operating, controlling, or regulating machinery and equipment; and any subunit or
52.14assembly comprising a component of any machinery or accessory or attachment parts of
52.15machinery, such as tools, dies, jigs, patterns, and molds.
52.16(2) "Fabricating" means to make, build, create, produce, or assemble components or
52.17property to work in a new or different manner.
52.18(3) "Integrated production process" means a process or series of operations through
52.19which tangible personal property is manufactured, fabricated, mined, or refined. For
52.20purposes of this clause, (i) manufacturing begins with the removal of raw materials
52.21from inventory and ends when the last process prior to loading for shipment has been
52.22completed; (ii) fabricating begins with the removal from storage or inventory of the
52.23property to be assembled, processed, altered, or modified and ends with the creation
52.24or production of the new or changed product; (iii) mining begins with the removal of
52.25overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
52.26ends when the last process before stockpiling is completed; and (iv) refining begins with
52.27the removal from inventory or storage of a natural resource and ends with the conversion
52.28of the item to its completed form.
52.29(4) "Machinery" means mechanical, electronic, or electrical devices, including
52.30computers and computer software, that are purchased or constructed to be used for the
52.31activities set forth in paragraph (a), beginning with the removal of raw materials from
52.32inventory through completion of the product, including packaging of the product.
52.33(5) "Machinery and equipment used for pollution control" means machinery and
52.34equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
52.35described in paragraph (a).
53.1(6) "Manufacturing" means an operation or series of operations where raw materials
53.2are changed in form, composition, or condition by machinery and equipment and which
53.3results in the production of a new article of tangible personal property. For purposes of
53.4this subdivision, "manufacturing" includes the generation of electricity or steam to be
53.5sold at retail.
53.6(7) "Mining" means the extraction of minerals, ores, stone, or peat.
53.7(8) "Online data retrieval system" means a system whose cumulation of information
53.8is equally available and accessible to all its customers.
53.9(9) "Primarily" means machinery and equipment used 50 percent or more of the time
53.10in an activity described in paragraph (a).
53.11(10) "Refining" means the process of converting a natural resource to an intermediate
53.12or finished product, including the treatment of water to be sold at retail.
53.13(11) This subdivision does not apply to telecommunications equipment as
53.14provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit
53.15for telecommunications services.
53.16EFFECTIVE DATE.This section is effective for sales and purchases made after
53.17December 31, 2009.

53.18    Sec. 40. Minnesota Statutes 2008, section 297A.68, subdivision 10, is amended to read:
53.19    Subd. 10. Publications; publication materials. Tangible personal property that
53.20is used or consumed in producing any publication regularly issued at average intervals
53.21not exceeding three months is exempt, and any such publication is exempt. "Publication"
53.22includes, but is not limited to, a qualified newspaper as defined by section 331A.02,
53.23together with any supplements or enclosures. "Publication" does not include magazines
53.24and periodicals sold over the counter. Tangible personal property that is used or consumed
53.25in producing a publication does not include machinery, equipment, implements, tools,
53.26accessories, appliances, contrivances, furniture, and fixtures used in the publication, or
53.27fuel, electricity, gas, or steam used for space heating or lighting.
53.28Advertising contained in a publication is a nontaxable service and is exempt.
53.29Persons who publish or sell newspapers are engaging in a nontaxable service with
53.30respect to gross receipts realized from such news-gathering or news-publishing activities,
53.31including the sale of advertising.
53.32EFFECTIVE DATE.This section is effective for sales and purchases made after
53.33December 31, 2009.

54.1    Sec. 41. Minnesota Statutes 2008, section 297A.68, is amended by adding a
54.2subdivision to read:
54.3    Subd. 42. Taxable services used in a trade or business. Purchases of taxable
54.4services, as defined in section 297A.61, subdivision 3, paragraph (g), clause (6), items
54.5(ix) to (xii), by a business are exempt if the purchase qualifies as an ordinary and
54.6necessary business expense that is deductible under the Internal Revenue Code or must be
54.7capitalized and that may be deducted under depreciation or amortization rules under the
54.8Internal Revenue Code.
54.9EFFECTIVE DATE.This section is effective for sales and purchases made after
54.10December 31, 2009.

54.11    Sec. 42. Minnesota Statutes 2008, section 297A.75, subdivision 1, is amended to read:
54.12    Subdivision 1. Tax collected. The tax on the gross receipts from the sale of the
54.13following exempt items must be imposed and collected as if the sale were taxable and the
54.14rate under section 297A.62, subdivision 1, applied. The exempt items include:
54.15    (1) capital equipment exempt under section 297A.68, subdivision 5, and purchased
54.16prior to January 1, 2010;
54.17    (2) building materials for an agricultural processing facility exempt under section
54.18297A.71, subdivision 13 ;
54.19    (3) building materials for mineral production facilities exempt under section
54.20297A.71, subdivision 14 ;
54.21    (4) building materials for correctional facilities under section 297A.71, subdivision
54.223 ;
54.23    (5) building materials used in a residence for disabled veterans exempt under section
54.24297A.71, subdivision 11 ;
54.25    (6) elevators and building materials exempt under section 297A.71, subdivision 12;
54.26    (7) building materials for the Long Lake Conservation Center exempt under section
54.27297A.71, subdivision 17 ;
54.28    (8) materials, supplies, fixtures, furnishings, and equipment for a county law
54.29enforcement and family service center under section 297A.71, subdivision 26;
54.30    (9) materials and supplies for qualified low-income housing under section 297A.71,
54.31subdivision 23 ;
54.32    (10) materials, supplies, and equipment for municipal electric utility facilities under
54.33section 297A.71, subdivision 35;
55.1    (11) equipment and materials used for the generation, transmission, and distribution
55.2of electrical energy and an aerial camera package exempt under section 297A.68,
55.3subdivision 37;
55.4    (12) tangible personal property and taxable services and construction materials,
55.5supplies, and equipment exempt under section 297A.68, subdivision 41;
55.6    (13) commuter rail vehicle and repair parts under section 297A.70, subdivision
55.73, clause (11); and
55.8    (14) materials, supplies, and equipment for construction or improvement of projects
55.9and facilities under section 297A.71, subdivision 40.
55.10EFFECTIVE DATE.This section is effective the day following final enactment.

55.11    Sec. 43. Minnesota Statutes 2008, section 297F.05, subdivision 1, is amended to read:
55.12    Subdivision 1. Rates; cigarettes. A tax is imposed upon the sale of cigarettes in
55.13this state, upon having cigarettes in possession in this state with intent to sell, upon any
55.14person engaged in business as a distributor, and upon the use or storage by consumers, at
55.15the following rates:
55.16(1) on cigarettes weighing not more than three pounds per thousand, 24 74 mills on
55.17each such cigarette; and
55.18(2) on cigarettes weighing more than three pounds per thousand, 48 148 mills on
55.19each such cigarette.
55.20EFFECTIVE DATE.This section is effective January 1, 2010.

55.21    Sec. 44. [297I.23] MINNESOTA BUSINESS INVESTMENT COMPANY
55.22CREDIT.
55.23(a) A participating investor as defined under section 116J.665, subdivision 1,
55.24is allowed a credit against the tax imposed in this chapter equal to 80 percent of the
55.25participating investor's investment of designated capital in a Minnesota business
55.26investment company. Beginning January 1, 2010, a participating investor may claim
55.27the credit as follows:
55.28(1) in tax year 2010, an amount equal to 20 percent of the participating investor's
55.29investment of designated capital;
55.30(2) in tax year 2011, an amount equal to 20 percent of the participating investor's
55.31investment of designated capital;
55.32(3) in tax year 2012, an amount equal to 20 percent of the participating investor's
55.33investment of designated capital; and
56.1(4) in tax year 2013, an amount equal to 20 percent of the participating investor's
56.2investment of designated capital.
56.3(b) The credit for any taxable year must not exceed the liability for tax under this
56.4chapter for the taxable year. If the amount of the credit determined under this section
56.5for any taxable year exceeds the liability for tax under this chapter, the excess is an
56.6investment tax credit carryover to future taxable years without limitation. Credits may be
56.7used in connection with both final payments and prepayments of a participating investor's
56.8state premium tax liability.
56.9(c) A participating investor claiming a credit under this section is not required to pay
56.10any additional retaliatory tax levied as a result of claiming the credit.
56.11(d) A participating investor is not required to reduce the amount of tax pursuant to
56.12the state premium tax liability included by the participating investor in connection with
56.13ratemaking for any insurance contract written in this state because of a reduction in the
56.14participating investor's tax liability based on the tax credit allowed under this section.
56.15(e) If the taxes paid by a participating investor with respect to its state premium
56.16tax liability constitute a credit against any other tax that is imposed by this state, the
56.17participating investor's credit against the other tax shall not be reduced by virtue of the
56.18reduction in the participating investor's tax liability based on the tax credit allowed
56.19under this section.
56.20(f) Final decertification of a Minnesota business investment company under section
56.21116J.665 may result in the disallowance and the recapture of the credit allowed under this
56.22section. The amount to be disallowed and recaptured must be assessed as follows:
56.23(1) decertification of a Minnesota business investment company within two years of
56.24its allocation date and prior to meeting the requirements of section 116J.665, subdivision
56.255, paragraph (a), clause (1), shall result in the disallowance of all of the credits allowed
56.26under this section;
56.27(2) decertification of a Minnesota business investment company that has already met
56.28the requirements of section 116J.665, subdivision 5, paragraph (a), clause (1), shall not
56.29cause the disallowance of any credits allowed under this section nor the recapture of any
56.30portion of the credits that was previously taken.
56.31(g) A participating investor must not transfer, agree to transfer, sell, or agree to
56.32sell the credit under this section until 180 days from the date on which the participating
56.33investor invested designated capital. After 180 days from the date of investment, a
56.34participating investor, or subsequent transferee, may transfer credits based upon rules
56.35adopted by the department to facilitate such transfers. Any transfer or sale of the credits
56.36does not affect the time schedule for claiming the credit. Any tax credits recaptured
57.1under this section remain the liability of the participating investor that actually applied
57.2the credit towards its tax liability.
57.3EFFECTIVE DATE.This section is effective for taxable years beginning after
57.4December 31, 2009.

57.5    Sec. 45. FLOOR STOCKS TAX.
57.6    Subdivision 1. Cigarettes. (a) A floor stocks cigarette sales tax is imposed on every
57.7person engaged in the business in this state as a distributor, retailer, subjobber, vendor,
57.8manufacturer, or manufacturer's representative of cigarettes, on the stamped cigarettes and
57.9unaffixed stamps in the person's possession or under the person's control at 12:01 a.m. on
57.10January 1, 2010. The tax is imposed at the rate of $1 per pack of 20 cigarettes. For packs
57.11of cigarettes with other than 20 cigarettes, the tax shall be adjusted proportionally.
57.12(b) Each distributor, by February 15, 2010, shall file a return with the commissioner,
57.13in the form the commissioner prescribes, showing the stamped cigarettes and unaffixed
57.14stamps on hand at 12:01 a.m. on January 1, 2010, and the amount of tax due on the
57.15cigarettes and unaffixed stamps. The tax imposed by this section is due and payable by
57.16February 1, 2010, and after that date bears interest at the rate of one percent per month.
57.17(c) Each retailer, subjobber, vendor, manufacturer, or manufacturer's representative,
57.18by February 15, 2010, shall file a return with the commissioner, in the form the
57.19commissioner prescribes, showing the cigarettes on hand at 12:01 a.m. on January 1,
57.202010, and the amount of tax due on the cigarettes. The tax imposed by this section
57.21is due and payable by February 1, 2010, and after that date bears interest at the rate of
57.22one percent per month.
57.23    Subd. 2. Audit and enforcement. The tax imposed by this section is subject to
57.24the audit, assessment, penalty, and collection provisions applicable to the taxes imposed
57.25under Minnesota Statutes, chapter 297F. The commissioner may require a distributor to
57.26receive and maintain copies of floor stocks tax returns filed by all persons requesting
57.27a credit for returned cigarettes.
57.28    Subd. 3. Deposit of revenues. The revenue from the tax imposed under this
57.29section shall be deposited by the commissioner in the state treasury and credited to the
57.30general fund.
57.31EFFECTIVE DATE.This section is effective the day following final enactment.

57.32    Sec. 46. ADJUSTMENT OF CIGARETTE SALES TAX.
58.1Notwithstanding the provisions of Minnesota Statutes, section 297F.25, the
58.2commissioner of revenue shall adjust the cigarette sales tax rate under Minnesota Statutes,
58.3section 297F.25, effective January 1, 2010, to reflect the estimated effect on the average
58.4weighted retail price of cigarettes of the imposition of the increased cigarette taxes under
58.5section 43.
58.6EFFECTIVE DATE.This section is effective the day following final enactment.

58.7    Sec. 47. REPEALER.
58.8Minnesota Statutes 2008, sections 289A.08, subdivision 3; 289A.19, subdivision
58.92; 289A.26; 290.01, subdivisions 5, 5a, 6b, 19c, 19d, and 19e; 290.014, subdivision 5;
58.10290.02; 290.06, subdivisions 1, 24, and 27; 290.0921, subdivisions 1, 2, 3, 3a, 4, 6, 7, and
58.118; 290.21, subdivisions 1 and 4; 290.34, subdivisions 1 and 2; 290.371, subdivisions 1,
58.122, 3, and 4; 290.432; 297A.67, subdivisions 8, 9, 10, 13, 13a, 14, 16, 17, 18, 19, 21, 27,
58.13and 29; 297A.70, subdivisions 10 and 12; 298.01, subdivisions 3, 3a, 3b, 4, 4a, 4b, 4c, 5,
58.14and 6; and 298.17, are repealed.
58.15EFFECTIVE DATE.The provisions of this section relating to income, corporate
58.16franchise, and mining taxation are effective for taxable years beginning after December
58.1731, 2009. The provisions of this section relating to sales and use taxation are effective
58.18for sales and purchases made after December 31, 2009.