1.2relating to taxation; making changes to individual income, corporate franchise,
1.3sales and use, tobacco, estate, local, and other taxes; changing provisions of
1.4the small business investment tax credit; creating a clothing sales tax credit;
1.5establishing a technology corporate franchise tax certificate transfer program;
1.6modifying additions, subtractions, and modifications to federal taxable income;
1.7modifying the corporate franchise minimum fee; modifying definition of sale
1.8and purchase and retail sale; expanding the sales tax base; providing exemptions;
1.9modifying taxes on tobacco products; indexing rates on cigarettes; imposing a
1.10floor stocks tax; providing definition for the Minnesota taxable estate; modifying
1.11definition of qualifying property for the estate tax; modifying city aid; modifying
1.12aviation excise taxes; imposing a sports memorabilia gross receipts tax; requiring
1.13reports; appropriating money;amending Minnesota Statutes 2012, sections
1.1416C.03, subdivision 18; 116J.8737, subdivisions 1, 2, 5, 7, 9, 12, by adding
1.15a subdivision; 270C.03, subdivision 1; 270C.56, subdivision 1; 289A.08,
1.16subdivision 3; 289A.38, by adding a subdivision; 290.01, subdivisions 19b, 19c,
1.1719d, 29; 290.06, subdivision 1, by adding a subdivision; 290.068, subdivision
1.181; 290.091, subdivision 2; 290.0921, subdivisions 1, 3; 290.0922, subdivision
1.191; 290.095, subdivision 2; 290.17, subdivision 4; 290.191, subdivision 5;
1.20290.21, subdivision 4; 291.005, subdivision 1; 291.03, subdivisions 1, 8, 9, 10,
1.2111; 296A.09, subdivision 2, by adding a subdivision; 296A.17, subdivision
1.223, by adding a subdivision; 297A.61, subdivisions 3, 4, 10, 17a, 25, 38, 45,
1.23by adding subdivisions; 297A.62, subdivisions 1, 1a; 297A.65; 297A.66,
1.24subdivisions 1, 3, by adding a subdivision; 297A.665; 297A.668, by adding a
1.25subdivision; 297A.67, subdivision 7; 297A.68, subdivisions 2, 5, 10; 297A.70,
1.26subdivisions 2, 4, 5, 13, 14, by adding subdivisions; 297A.75, subdivisions 1, 2,
1.273; 297A.815, subdivision 3; 297A.82, subdivision 4, by adding a subdivision;
1.28297F.01, subdivision 19, by adding subdivisions; 297F.05, subdivisions 1, 3,
1.294, by adding subdivisions; 297F.24, subdivision 1; 297F.25, subdivision 1;
1.30298.01, subdivision 3b; 325F.781, subdivision 1; 360.531; 360.66; 469.190, by
1.31adding a subdivision; 477A.011, subdivisions 30, 34, 42, by adding subdivisions;
1.32477A.013, subdivisions 8, 9, by adding a subdivision; 477A.03, subdivision 2a;
1.33proposing coding for new law in Minnesota Statutes, chapters 116J; 290; 291;
1.34295; 297A; repealing Minnesota Statutes 2012, sections 16A.725; 256.9658;
1.35290.01, subdivision 6b; 290.0921, subdivision 7; 290.171; 290.173; 290.174;
1.36297A.61, subdivision 27; 297A.66, subdivision 4; 297A.67, subdivision 8;
1.37297A.68, subdivisions 9, 22, 35; 477A.011, subdivisions 2a, 19, 29, 31, 32,
1.3833, 36, 39, 40, 41, 42; 477A.013, subdivisions 11, 12; 477A.0133; 477A.0134;
1.39Minnesota Rules, part 8130.0500, subpart 2.
2.1BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:


2.4    Section 1. Minnesota Statutes 2012, section 116J.8737, subdivision 1, is amended to
2.5read:
2.6    Subdivision 1. Definitions. (a) For the purposes of this section, the following terms
2.7have the meanings given.
2.8(b) "Qualified small business" means a business that has been certified by the
2.9commissioner under subdivision 2.
2.10(c) "Qualified investor" means an investor who has been certified by the
2.11commissioner under subdivision 3.
2.12(d) "Qualified fund" means a pooled angel investment network fund that has been
2.13certified by the commissioner under subdivision 4.
2.14(e) "Qualified investment" means a cash investment in a qualified small business
2.15of a minimum of:
2.16(1) $10,000 in a calendar year by a qualified investor; or
2.17(2) $30,000 in a calendar year by a qualified fund.
2.18A qualified investment must be made in exchange for common stock, a partnership
2.19or membership interest, preferred stock, debt with mandatory conversion to equity, or an
2.20equivalent ownership interest as determined by the commissioner.
2.21(f) "Family" means a family member within the meaning of the Internal Revenue
2.22Code, section 267(c)(4).
2.23(g) "Pass-through entity" means a corporation that for the applicable taxable year is
2.24treated as an S corporation or a general partnership, limited partnership, limited liability
2.25partnership, trust, or limited liability company and which for the applicable taxable year is
2.26not taxed as a corporation under chapter 290.
2.27(h) "Intern" means a student of an accredited institution of higher education, or a
2.28former student who has graduated in the past six months from an accredited institution
2.29of higher education, who is employed by a qualified small business in a nonpermanent
2.30position for a duration of nine months or less that provides training and experience in the
2.31primary business activity of the business.
2.32(i) "Qualified greater Minnesota business" means a qualified small business that
2.33is also certified by the commissioner as a qualified greater Minnesota business under
2.34subdivision 2, paragraph (h).
3.1(j) "Liquidation event" means a conversion of qualified investment for cash, cash
3.2and other consideration, or any other form of equity or debt interest.
3.3EFFECTIVE DATE.This section is effective the day following final enactment.

3.4    Sec. 2. Minnesota Statutes 2012, section 116J.8737, subdivision 2, is amended to read:
3.5    Subd. 2. Certification of qualified small businesses. (a) Businesses may apply
3.6to the commissioner for certification as a qualified small business for a calendar year.
3.7In addition, the business' application may request certification as a qualified greater
3.8Minnesota business under paragraph (h). The application must be in the form and
3.9be made under the procedures specified by the commissioner, accompanied by an
3.10application fee of $150. Application fees are deposited in the small business investment
3.11tax credit administration account in the special revenue fund. The application for
3.12certification for 2010 must be made available on the department's Web site by August 1,
3.132010. Applications for subsequent years' certification must be made available on the
3.14department's Web site by November 1 of the preceding year.
3.15(b) Within 30 days of receiving an application for certification under this
3.16subdivision, the commissioner must either certify the business as satisfying the conditions
3.17required of a qualified small business or a qualified greater Minnesota business, request
3.18additional information from the business, or reject the application for certification. If
3.19the commissioner requests additional information from the business, the commissioner
3.20must either certify the business or reject the application within 30 days of receiving the
3.21additional information. If the commissioner neither certifies the business nor rejects
3.22the application within 30 days of receiving the original application or within 30 days of
3.23receiving the additional information requested, whichever is later, then the application is
3.24deemed rejected, and the commissioner must refund the $150 application fee. A business
3.25that applies for certification and is rejected may reapply.
3.26(c) To receive certification as a qualified small business, a business must satisfy
3.27all of the following conditions:
3.28(1) the business has its headquarters in Minnesota;
3.29(2) at least 51 percent of the business's employees are employed in Minnesota, and
3.3051 percent of the business's total payroll is paid or incurred in the state;
3.31(3) the business is engaged in, or is committed to engage in, innovation in Minnesota
3.32in one of the following as its primary business activity:
3.33(i) using proprietary technology to add value to a product, process, or service in a
3.34qualified high-technology field;
4.1(ii) researching or developing a proprietary product, process, or service in a qualified
4.2high-technology field; or
4.3(iii) researching, developing, or producing a new proprietary technology for use in
4.4the fields of agriculture, tourism, forestry, mining, manufacturing, or transportation;
4.5(4) other than the activities specifically listed in clause (3), the business is not
4.6engaged in real estate development, insurance, banking, lending, lobbying, political
4.7consulting, information technology consulting, wholesale or retail trade, leisure,
4.8hospitality, transportation, construction, ethanol production from corn, or professional
4.9services provided by attorneys, accountants, business consultants, physicians, or health
4.10care consultants;
4.11(5) the business has fewer than 25 employees;
4.12(6) the business must pay its employees annual wages of at least 175 percent of the
4.13federal poverty guideline for the year for a family of four and must pay its interns annual
4.14wages of at least 175 percent of the federal minimum wage used for federally covered
4.15employers, except that this requirement must be reduced proportionately for employees
4.16and interns who work less than full-time, and does not apply to an executive, officer, or
4.17member of the board of the business, or to any employee who owns, controls, or holds
4.18power to vote more than 20 percent of the outstanding securities of the business;
4.19(7) the business has not been in operation for more than ten years;
4.20(8) the business has not previously received private equity investments of more
4.21than $4,000,000; and
4.22    (9) the business is not an entity disqualified under section 80A.50, paragraph (b),
4.23clause (3); and
4.24    (10) the business has not issued securities that are traded on a public exchange.
4.25(d) In applying the limit under paragraph (c), clause (5), the employees in all members
4.26of the unitary business, as defined in section 290.17, subdivision 4, must be included.
4.27(e) In order for a qualified investment in a business to be eligible for tax credits, the
4.28business:
4.29(1) the business must have applied for and received certification for the calendar
4.30year in which the investment was made prior to the date on which the qualified investment
4.31was made;
4.32(2) must not have issued securities that are traded on a public exchange;
4.33(3) must not issue securities that are traded on a public exchange within 180 days
4.34after the date on which the qualified investment was made; and
4.35(4) must not have a liquidation event within 180 days after the date on which a
4.36qualified investment was made.
5.1(f) The commissioner must maintain a list of qualified small businesses and qualified
5.2greater Minnesota businesses certified under this subdivision for the calendar year and
5.3make the list accessible to the public on the department's Web site.
5.4(g) For purposes of this subdivision, the following terms have the meanings given:
5.5(1) "qualified high-technology field" includes aerospace, agricultural processing,
5.6renewable energy, energy efficiency and conservation, environmental engineering, food
5.7technology, cellulosic ethanol, information technology, materials science technology,
5.8nanotechnology, telecommunications, biotechnology, medical device products,
5.9pharmaceuticals, diagnostics, biologicals, chemistry, veterinary science, and similar
5.10fields; and
5.11(2) "proprietary technology" means the technical innovations that are unique and
5.12legally owned or licensed by a business and includes, without limitation, those innovations
5.13that are patented, patent pending, a subject of trade secrets, or copyrighted.; and
5.14(3) "greater Minnesota" means the area of Minnesota located outside of the
5.15metropolitan area as defined in section 473.121, subdivision 2.
5.16(h) To receive certification as a qualified greater Minnesota business, a business must
5.17satisfy all of the requirements of paragraph (c) and must satisfy the following conditions:
5.18(1) the business has its headquarters in greater Minnesota; and
5.19(2) at least 51 percent of the business's employees are employed in greater Minnesota,
5.20and 51 percent of the business's total payroll is paid or incurred in greater Minnesota.
5.21EFFECTIVE DATE.This section is effective the day following final enactment.

5.22    Sec. 3. Minnesota Statutes 2012, section 116J.8737, subdivision 5, is amended to read:
5.23    Subd. 5. Credit allowed. (a) A qualified investor or qualified fund is eligible for a
5.24credit equal to 25 percent of the qualified investment in a qualified small business.
5.25 Investments made by a pass-through entity qualify for a credit only if the entity is a
5.26qualified fund. The commissioner must not allocate more than $11,000,000 in credits to
5.27qualified investors or qualified funds for taxable years beginning after December 31, 2009,
5.28and before January 1, 2011, and must not allocate more than $12,000,000 in credits per
5.29year for taxable years beginning after December 31, 2010, and before January 1, 2015
5.30 2013, or more than $17,000,000 in credits per year for taxable years beginning after
5.31December 31, 2012, and before January 1, 2016. Any portion of a taxable year's credits
5.32that is not allocated by the commissioner does not cancel and may be carried forward to
5.33subsequent taxable years until all credits have been allocated.
6.1(b) The commissioner may not allocate more than a total maximum amount in credits
6.2for a taxable year to a qualified investor for the investor's cumulative qualified investments
6.3as an individual qualified investor and as an investor in a qualified fund; for married
6.4couples filing joint returns the maximum is $250,000, and for all other filers the maximum
6.5is $125,000. The commissioner may not allocate more than a total of $1,000,000 in credits
6.6over all taxable years for qualified investments in any one qualified small business.
6.7(c) The commissioner may not allocate a credit to a qualified investor either as an
6.8individual qualified investor or as an investor in a qualified fund if the investor receives
6.9more than 50 percent of the investor's gross annual income from the qualified small
6.10business in which the qualified investment is proposed. A member of the family of an
6.11individual disqualified by this paragraph is not eligible for a credit under this section. For
6.12a married couple filing a joint return, the limitations in this paragraph apply collectively
6.13to the investor and spouse. For purposes of determining the ownership interest of an
6.14investor under this paragraph, the rules under section 267(c) and 267(e) of the Internal
6.15Revenue Code apply.
6.16(d) Applications for tax credits for 2010 must be made available on the department's
6.17Web site by September 1, 2010, and the department must begin accepting applications
6.18by September 1, 2010. Applications for subsequent years must be made available by
6.19November 1 of the preceding year.
6.20(e) Qualified investors and qualified funds must apply to the commissioner for tax
6.21credits. Tax credits must be allocated to qualified investors or qualified funds in the order
6.22that the tax credit request applications are filed with the department. The commissioner
6.23must approve or reject tax credit request applications within 15 days of receiving the
6.24application. The investment specified in the application must be made within 60 days of
6.25the allocation of the credits. If the investment is not made within 60 days, the credit
6.26allocation is canceled and available for reallocation. A qualified investor or qualified fund
6.27that fails to invest as specified in the application, within 60 days of allocation of the
6.28credits, must notify the commissioner of the failure to invest within five business days of
6.29the expiration of the 60-day investment period.
6.30(f) All tax credit request applications filed with the department on the same day must
6.31be treated as having been filed contemporaneously. If two or more qualified investors or
6.32qualified funds file tax credit request applications on the same day, and the aggregate
6.33amount of credit allocation claims exceeds the aggregate limit of credits under this section
6.34or the lesser amount of credits that remain unallocated on that day, then the credits must
6.35be allocated among the qualified investors or qualified funds who filed on that day on a
6.36pro rata basis with respect to the amounts claimed. The pro rata allocation for any one
7.1qualified investor or qualified fund is the product obtained by multiplying a fraction,
7.2the numerator of which is the amount of the credit allocation claim filed on behalf of
7.3a qualified investor and the denominator of which is the total of all credit allocation
7.4claims filed on behalf of all applicants on that day, by the amount of credits that remain
7.5unallocated on that day for the taxable year.
7.6(g) A qualified investor or qualified fund, or a qualified small business acting on their
7.7behalf, must notify the commissioner when an investment for which credits were allocated
7.8has been made, and the taxable year in which the investment was made. A qualified fund
7.9must also provide the commissioner with a statement indicating the amount invested by
7.10each investor in the qualified fund based on each investor's share of the assets of the
7.11qualified fund at the time of the qualified investment. After receiving notification that the
7.12investment was made, the commissioner must issue credit certificates for the taxable year
7.13in which the investment was made to the qualified investor or, for an investment made by
7.14a qualified fund, to each qualified investor who is an investor in the fund. The certificate
7.15must state that the credit is subject to revocation if the qualified investor or qualified
7.16fund does not hold the investment in the qualified small business for at least three years,
7.17consisting of the calendar year in which the investment was made and the two following
7.18years. The three-year holding period does not apply if:
7.19(1) the investment by the qualified investor or qualified fund becomes worthless
7.20before the end of the three-year period;
7.21(2) 80 percent or more of the assets of the qualified small business is sold before
7.22the end of the three-year period;
7.23(3) the qualified small business is sold before the end of the three-year period; or
7.24(4) the qualified small business's common stock begins trading on a public exchange
7.25before the end of the three-year period.
7.26(h) The commissioner must notify the commissioner of revenue of credit certificates
7.27issued under this section.
7.28EFFECTIVE DATE.This section is effective the day following final enactment for
7.29taxable years beginning after December 31, 2012.

7.30    Sec. 4. Minnesota Statutes 2012, section 116J.8737, is amended by adding a
7.31subdivision to read:
7.32    Subd. 5a. Promotion of credit in greater Minnesota. (a) By July 1, 2013, the
7.33commissioner shall develop a plan to increase awareness of and use of the credit for
7.34investments in greater Minnesota businesses with a target goal that a minimum of 30
7.35percent of the credit will be awarded for those investments during the second half
8.1of calendar year 2013 and for each full calendar year thereafter. Beginning with the
8.2legislative report due on March 15, 2014, under subdivision 9, the commissioner shall
8.3report on its plan under this subdivision and the results achieved.
8.4(b) If the target goal of 30 percent under paragraph (a) is not achieved for the
8.5six-month period ending on December 31, 2013, the credit percentage under subdivision
8.65, paragraph (a), is increased to 40 percent for a qualified investment made after December
8.731, 2013, in a greater Minnesota business. This paragraph does not apply and the credit
8.8percentage for all qualified investments is the rate provided under subdivision 5 for any
8.9calendar year beginning after a calendar year for which the commissioner determines the
8.1030 percent target has been satisfied. The commissioner shall timely post notification of
8.11changes in the credit rate under this paragraph on the department's Web site.
8.12EFFECTIVE DATE.This section is effective the day following final enactment.

8.13    Sec. 5. Minnesota Statutes 2012, section 116J.8737, subdivision 7, is amended to read:
8.14    Subd. 7. Revocation of credits. (a) If the commissioner determines that a
8.15qualified investor or qualified fund did not meet the three-year holding period required in
8.16subdivision 5, paragraph (g), any credit allocated and certified to the investor or fund is
8.17revoked and must be repaid by the investor.
8.18(b) If the commissioner determines that a business did not meet the employment
8.19and payroll requirements in subdivision 2, paragraph (c), clause (2), or paragraph (h), as
8.20applicable, in any of the five calendar years following the year in which an investment in the
8.21business that qualified for a tax credit under this section was made, the business must repay
8.22the following percentage of the credits allowed for qualified investments in the business:

8.23	Year following the year in which		Percentage of credit required
8.24	the investment was made:		to be repaid:
8.25		First	100%
8.26		Second	80%
8.27		Third	60%
8.28		Fourth	40%
8.29		Fifth	20%
8.30		Sixth and later	0

8.31(c) The commissioner must notify the commissioner of revenue of every credit
8.32revoked and subject to full or partial repayment under this section.
8.33(d) For the repayment of credits allowed under this section and section 290.0692,
8.34a qualified small business, qualified investor, or investor in a qualified fund must file an
8.35amended return with the commissioner of revenue and pay any amounts required to be
8.36repaid within 30 days after becoming subject to repayment under this section.
9.1EFFECTIVE DATE.This section is effective the day following final enactment.

9.2    Sec. 6. Minnesota Statutes 2012, section 116J.8737, subdivision 9, is amended to read:
9.3    Subd. 9. Report to legislature. Beginning in 2011, the commissioner must
9.4annually report by March 15 to the chairs and ranking minority members of the legislative
9.5committees having jurisdiction over taxes and economic development in the senate and
9.6the house of representatives, in compliance with sections 3.195 and 3.197, on the tax
9.7credits issued under this section. The report must include:
9.8(1) the number and amount of the credits issued;
9.9(2) the recipients of the credits;
9.10(3) for each qualified small business, its location, line of business, and if it received
9.11an investment resulting in certification of tax credits;
9.12(4) the total amount of investment in each qualified small business resulting in
9.13certification of tax credits;
9.14(5) for each qualified small business that received investments resulting in tax
9.15credits, the total amount of additional investment that did not qualify for the tax credit;
9.16(6) the number and amount of credits revoked under subdivision 7;
9.17(7) the number and amount of credits that are no longer subject to the three-year
9.18holding period because of the exceptions under subdivision 5, paragraph (g), clauses
9.19(1) to (4); and
9.20(8) the number of qualified small businesses that are women or minority-owned; and
9.21(9) any other information relevant to evaluating the effect of these credits.
9.22EFFECTIVE DATE.This section is effective the day following final enactment.

9.23    Sec. 7. Minnesota Statutes 2012, section 116J.8737, subdivision 12, is amended to read:
9.24    Subd. 12. Sunset. This section expires for taxable years beginning after December
9.2531, 2014 2015, except that reporting requirements under subdivision 6 and revocation
9.26of credits under subdivision 7 remain in effect through 2016 2017 for qualified
9.27investors and qualified funds, and through 2018 2019 for qualified small businesses,
9.28reporting requirements under subdivision 9 remain in effect through 2019 2020, and the
9.29appropriation in subdivision 11 remains in effect through 2018 2019.
9.30EFFECTIVE DATE.This section is effective the day following final enactment.

9.31    Sec. 8. [290.0683] CLOTHING SALES TAX CREDIT.
10.1    Subdivision 1. Definitions. (a) For purposes of this section, the following terms
10.2have the meanings given.
10.3(b) "Income" has the meaning given in section 290.067, subdivision 2a.
10.4(c) "Dependent" has the meaning given in section 152 of the Internal Revenue Code.
10.5    Subd. 2. Credit allowed. A taxpayer is allowed a refundable credit against the tax
10.6imposed under this chapter. The credit is equal to $60 for a married couple filing a joint
10.7return, and $30 for all other filers, plus $30 for the first dependent claimed on the return,
10.8$15 for each of the second and third dependents claimed on the return, $10 for the fourth
10.9dependent claimed on the return, and $5 for each subsequent dependent.
10.10    Subd. 3. Limitations. The credit allowed in this section is reduced by $10 for every
10.11$1,000 of income in excess of 200 percent of the federal poverty guidelines.
10.12    Subd. 4. Appropriation. An amount sufficient to pay the refunds required by this
10.13section is appropriated to the commissioner from the general fund.
10.14EFFECTIVE DATE.This section is effective for taxable years beginning after
10.15December 31, 2012.

10.16    Sec. 9. CLOTHING SALES TAX CREDIT; TAX YEAR 2013.
10.17For tax year 2013 only, the credit calculated under Minnesota Statutes, section
10.18290.0683, is the credit under Minnesota Statutes, section 290.0683, subdivision 2, after
10.19limitations imposed under Minnesota Statutes, section 290.0683, subdivision 3, multiplied
10.20by one-half.
10.21EFFECTIVE DATE.This section is effective for taxable years beginning after
10.22December 31, 2012.


10.25    Section 1. [116J.8738] TECHNOLOGY CORPORATE FRANCHISE TAX
10.26CERTIFICATE TRANSFER PROGRAM.
10.27    Subdivision 1. Program established. The commissioner shall establish a corporate
10.28franchise tax benefit certificate transfer program to allow new or expanding emerging
10.29technology and biotechnology companies in this state with unused net operating loss
10.30carryovers under section 290.095 to surrender those tax benefits for use by other corporate
10.31franchise taxpayers in this state. The tax benefits may be used on the corporate franchise
10.32tax returns to be filed by those taxpayers in exchange for private financial assistance to
10.33be provided by the corporate franchise taxpayer that is the recipient of the tax benefit
11.1certificate to assist in the funding of costs incurred by the new or expanding emerging
11.2technology and biotechnology company.
11.3    Subd. 2. Definitions. (a) For purposes of this section, the following terms have the
11.4meanings given, unless the context clearly requires otherwise.
11.5(b) "Biotechnology" means the continually expanding body of fundamental
11.6knowledge about the functioning of biological systems from the macro level to the
11.7molecular and subatomic levels, as well as novel products, services, technologies, and
11.8subtechnologies developed as a result of insights gained from research advances that add
11.9to that body of fundamental knowledge.
11.10(c) "Biotechnology company" means an emerging corporation that:
11.11(1) has its headquarters or base of operations in this state;
11.12(2) owns, has filed for, or has a valid license to use protected, proprietary intellectual
11.13property; and
11.14(3) is engaged in the research, development, production, or provision of
11.15biotechnology for the purpose of developing or providing products or processes
11.16for specific commercial or public purposes, including, but not limited to, medical,
11.17pharmaceutical, nutritional, and other health-related purposes; agricultural purposes; and
11.18environmental purposes.
11.19(d) "Full-time employee" means a person employed by a new or expanding emerging
11.20technology or biotechnology company for consideration for at least 35 hours per week, or
11.21who renders any other standard of service generally accepted by custom or practice as
11.22full-time employment and whose wages are subject to withholding as provided in section
11.23290.92, or who is a partner of a new or expanding emerging technology or biotechnology
11.24company who works for the partnership for at least 35 hours per week, or who renders
11.25any other standard of service generally accepted by custom or practice as full-time
11.26employment, and whose distributive share of income, gain, loss, or deduction, or whose
11.27guaranteed payments, or any combination thereof, is subject to the payment of estimated
11.28taxes, as provided in section 289A.25. To qualify as a full-time employee, an employee
11.29must also receive from the new or expanding emerging technology or biotechnology
11.30company, group health benefits under a health plan as defined under section 62A.011,
11.31subdivision 3, or under a self-insured employee welfare benefit plan as defined in United
11.32States Code, title 29, section 1002. Full-time employee excludes any person who works as
11.33an independent contractor or on a consulting basis for the new or expanding emerging
11.34technology or biotechnology company.
11.35(e) "New or expanding" means a technology or biotechnology company that:
12.1(1) on June 30 of the year in which the corporation files an application for surrender
12.2of unused but otherwise allowable tax benefits under this section and on the date of the
12.3exchange of the corporate franchise tax benefit certificate, has fewer than 250 employees
12.4in the United States;
12.5(2) on June 30 of the year in which the corporation files the application, has at least
12.6one full-time employee working in this state if the company has been incorporated for less
12.7than three years, has at least five full-time employees working in this state if the company
12.8has been incorporated for more than three years but less than five years, and has at least
12.9ten full-time employees working in this state if the company has been incorporated for
12.10more than five years; and
12.11(3) on the date of the exchange of the corporate franchise tax benefit certificate, the
12.12corporation has the number of full-time employees in this state required by clause (2).
12.13(f) "Technology company" means an emerging corporation that:
12.14(1) has its headquarters or base of operations in this state;
12.15(2) owns, has filed for, or has a valid license to use protected, proprietary intellectual
12.16property; and
12.17(3) employs some combination of the following: highly educated or trained
12.18managers and workers, or both, employed in this state who use sophisticated scientific
12.19research service or production equipment, processes, or knowledge to discover, develop,
12.20test, transfer, or manufacture a product or service.
12.21    Subd. 3. Allocation of tax benefits; annual limit. (a) The commissioner, in
12.22cooperation with the commissioner of revenue, shall review and approve applications by
12.23new or expanding emerging technology and biotechnology companies in this state with
12.24unused but otherwise allowable net operating loss carryovers under section 290.095, to
12.25surrender those tax benefits in exchange for private financial assistance to be made by the
12.26corporate franchise taxpayer that is the recipient of the corporate franchise tax benefit
12.27certificate in an amount equal to at least 75 percent of the amount of the surrendered tax
12.28benefit. The amount of the surrendered tax benefit is the amount of the net operating loss
12.29carryover apportioned to Minnesota under the provisions of section 290.095, subdivision
12.303, paragraph (c), for the taxable year in which the benefit is transferred and subsequently
12.31multiplied by the corporate franchise tax rate under section 290.06, subdivision 1.
12.32(b) The commissioner must approve the transfer of no more than $15,000,000 of
12.33tax benefits in each fiscal year. If the total amount of transferable tax benefits requested
12.34to be surrendered by approved applicants exceeds $15,000,000 for a fiscal year, the
12.35commissioner, in cooperation with the commissioner of revenue, must not approve the
13.1transfer of more than $15,000,000 for that fiscal year and shall allocate the transfer of tax
13.2benefits by approved corporations using the following method:
13.3(1) an eligible applicant with $250,000 or less of transferable tax benefits is
13.4authorized to surrender the entire amount of its transferable tax benefits;
13.5(2) an eligible applicant with more than $250,000 of transferable tax benefits is
13.6authorized to surrender a minimum of $250,000 of its transferable tax benefits; and
13.7(3) an eligible applicant with more than $250,000 of transferable tax benefits is
13.8authorized to surrender additional transferable tax benefits determined by multiplying
13.9the applicant's transferable tax benefits less the minimum transferable tax benefits that
13.10corporation is authorized to surrender under clause (2) by a fraction, the numerator of
13.11which is the total amount of transferable tax benefits that the commissioner is authorized
13.12to approve less the total amount of transferable tax benefits approved under clauses (1)
13.13and (2) and the denominator of which is the total amount of transferable tax benefits
13.14requested to be surrendered by all eligible applicants less the total amount of transferable
13.15tax benefits approved under clauses (1) and (2).
13.16(c) If the total amount of transferable tax benefits that would be authorized using the
13.17method under paragraph (b) exceeds $15,000,000 for a fiscal year, then the commissioner,
13.18in cooperation with the commissioner of revenue, shall limit the total amount of tax
13.19benefits authorized to be transferred to $15,000,000 by applying the above method on an
13.20apportioned basis.
13.21    Subd. 4. Qualifying tax benefits and corporations. For purposes of this section,
13.22transferable tax benefits include an eligible applicant's unused but otherwise allowable
13.23carryover of net operating losses apportioned to Minnesota under the provisions of section
13.24290.095, subdivision 3, paragraph (c), and subsequently multiplied by the corporation
13.25franchise tax rate under section 290.06, subdivision 1. An eligible applicant's transferable
13.26tax benefits are limited to net operating losses that the applicant requests to surrender in its
13.27application to the authority and must not, in total, exceed the maximum amount of tax
13.28benefits that the applicant is eligible to surrender. No application for a corporate franchise
13.29tax benefit transfer certificate must be approved in which the new or expanding emerging
13.30technology or biotechnology company:
13.31(1) has demonstrated positive net operating income in any of the two previous full
13.32years of ongoing operations as determined on its financial statements issued according to
13.33generally accepted accounting standards endorsed by the Financial Accounting Standards
13.34Board; or
13.35(2) is directly or indirectly at least 50 percent owned or controlled by another
13.36corporation that has demonstrated positive net operating income in any of the two previous
14.1full years of ongoing operations as determined on its financial statements issued according
14.2to generally accepted accounting standards endorsed by the Financial Accounting
14.3Standards Board or is part of a consolidated group of affiliated corporations, as filed for
14.4federal income tax purposes, that in the aggregate has demonstrated positive net operating
14.5income in any of the two previous full years of ongoing operations as determined on
14.6its combined financial statements issued according to generally accepted accounting
14.7standards endorsed by the Financial Accounting Standards Board.
14.8The maximum lifetime value of surrendered tax benefits that a corporation is permitted to
14.9surrender under the program is $4,000,000.
14.10    Subd. 5. Recapture of tax benefits. The commissioner, in consultation with the
14.11commissioner of revenue, shall establish rules for the recapture of all, or a portion of,
14.12the amount of a grant of a corporate franchise tax benefit certificate from the new or
14.13expanding emerging technology or biotechnology company having surrendered tax
14.14benefits under this section if the taxpayer fails to use the private financial assistance
14.15received for the surrender of tax benefits as required by this section or fails to maintain a
14.16headquarters or a base of operation in this state during the five years following receipt
14.17of the private financial assistance; except if the failure to maintain a headquarters or a
14.18base of operation in this state is due to the liquidation of the new or expanding emerging
14.19technology or biotechnology company.
14.20    Subd. 6. Approval of acquisition of tax benefits; purposes; required agreement.
14.21(a) The commissioner, in cooperation with the commissioner of revenue, shall review and
14.22approve applications by taxpayers under the corporate franchise tax in chapter 290 to
14.23acquire surrendered tax benefits approved under subdivision 3, which must be issued in
14.24the form of corporate franchise tax benefit transfer certificates, in exchange for private
14.25financial assistance to be made by the taxpayer in an amount equal to at least 75 percent
14.26of the amount of the surrendered tax benefit of a new or expanding biotechnology
14.27company. The commissioner must not issue a corporate franchise tax benefit transfer
14.28certificate, unless the applicant certifies that as of the date of the exchange of the corporate
14.29franchise tax benefit certificate it is operating as a new or expanding emerging technology
14.30or biotechnology company and has no current intention to cease operating as a new or
14.31expanding emerging technology or biotechnology company.
14.32(b) The private financial assistance shall assist in funding expenses incurred
14.33in connection with the operation of the new or expanding emerging technology or
14.34biotechnology company in this state, including, but not limited to, the expenses of fixed
14.35assets, such as the construction and acquisition and development of real estate, materials,
14.36start-up, tenant fit-out, working capital, salaries, research and development expenditures,
15.1and any other expenses determined by the commissioner to be necessary to carry out
15.2emerging technology or biotechnology company operations in this state.
15.3(c) The commissioner shall require a corporate franchise taxpayer that acquires
15.4a corporate franchise tax benefit certificate to enter into a written agreement with the
15.5new or expanding emerging technology or biotechnology company concerning the terms
15.6and conditions of the private financial assistance made in exchange for the certificate.
15.7The written agreement may contain terms concerning the maintenance by the new or
15.8expanding emerging technology or biotechnology company of a headquarters or a base
15.9of operation in this state.
15.10EFFECTIVE DATE.This section is effective the day following final enactment
15.11and applies to taxable years beginning after December 31, 2012.

15.12    Sec. 2. Minnesota Statutes 2012, section 289A.08, subdivision 3, is amended to read:
15.13    Subd. 3. Corporations. (a) A corporation that is subject to the state's jurisdiction to
15.14tax under section 290.014, subdivision 5, must file a return, except that a foreign operating
15.15corporation as defined in section 290.01, subdivision 6b, is not required to file a return.
15.16(b) Members of a unitary business that are required to file a combined report on one
15.17return must designate a member of the unitary business to be responsible for tax matters,
15.18including the filing of returns, the payment of taxes, additions to tax, penalties, interest,
15.19or any other payment, and for the receipt of refunds of taxes or interest paid in excess of
15.20taxes lawfully due. The designated member must be a member of the unitary business that
15.21is filing the single combined report and either:
15.22(1) a corporation that is subject to the taxes imposed by chapter 290; or
15.23(2) a corporation that is not subject to the taxes imposed by chapter 290:
15.24(i) Such corporation consents by filing the return as a designated member under this
15.25clause to remit taxes, penalties, interest, or additions to tax due from the members of the
15.26unitary business subject to tax, and receive refunds or other payments on behalf of other
15.27members of the unitary business. The member designated under this clause is a "taxpayer"
15.28for the purposes of this chapter and chapter 270C, and is liable for any liability imposed
15.29on the unitary business under this chapter and chapter 290.
15.30(ii) If the state does not otherwise have the jurisdiction to tax the member designated
15.31under this clause, consenting to be the designated member does not create the jurisdiction
15.32to impose tax on the designated member, other than as described in item (i).
15.33(iii) The member designated under this clause must apply for a business tax account
15.34identification number.
16.1(c) The commissioner shall adopt rules for the filing of one return on behalf of the
16.2members of an affiliated group of corporations that are required to file a combined report.
16.3All members of an affiliated group that are required to file a combined report must file one
16.4return on behalf of the members of the group under rules adopted by the commissioner.
16.5(d) If a corporation claims on a return that it has paid tax in excess of the amount of
16.6taxes lawfully due, that corporation must include on that return information necessary for
16.7payment of the tax in excess of the amount lawfully due by electronic means.
16.8EFFECTIVE DATE.This section is effective for taxable years beginning after
16.9December 31, 2012.

16.10    Sec. 3. Minnesota Statutes 2012, section 290.01, subdivision 19b, is amended to read:
16.11    Subd. 19b. Subtractions from federal taxable income. For individuals, estates,
16.12and trusts, there shall be subtracted from federal taxable income:
16.13    (1) net interest income on obligations of any authority, commission, or
16.14instrumentality of the United States to the extent includable in taxable income for federal
16.15income tax purposes but exempt from state income tax under the laws of the United States;
16.16    (2) if included in federal taxable income, the amount of any overpayment of income
16.17tax to Minnesota or to any other state, for any previous taxable year, whether the amount
16.18is received as a refund or as a credit to another taxable year's income tax liability;
16.19    (3) the amount paid to others, less the amount used to claim the credit allowed under
16.20section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
16.21to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
16.22transportation of each qualifying child in attending an elementary or secondary school
16.23situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
16.24resident of this state may legally fulfill the state's compulsory attendance laws, which
16.25is not operated for profit, and which adheres to the provisions of the Civil Rights Act
16.26of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
16.27tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
16.28"textbooks" includes books and other instructional materials and equipment purchased
16.29or leased for use in elementary and secondary schools in teaching only those subjects
16.30legally and commonly taught in public elementary and secondary schools in this state.
16.31Equipment expenses qualifying for deduction includes expenses as defined and limited in
16.32section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
16.33books and materials used in the teaching of religious tenets, doctrines, or worship, the
16.34purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
16.35or materials for, or transportation to, extracurricular activities including sporting events,
17.1musical or dramatic events, speech activities, driver's education, or similar programs. No
17.2deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
17.3the qualifying child's vehicle to provide such transportation for a qualifying child. For
17.4purposes of the subtraction provided by this clause, "qualifying child" has the meaning
17.5given in section 32(c)(3) of the Internal Revenue Code;
17.6    (4) income as provided under section 290.0802;
17.7    (5) to the extent included in federal adjusted gross income, income realized on
17.8disposition of property exempt from tax under section 290.491;
17.9    (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
17.10of the Internal Revenue Code in determining federal taxable income by an individual
17.11who does not itemize deductions for federal income tax purposes for the taxable year, an
17.12amount equal to 50 percent of the excess of charitable contributions over $500 allowable
17.13as a deduction for the taxable year under section 170(a) of the Internal Revenue Code,
17.14under the provisions of Public Law 109-1 and Public Law 111-126;
17.15    (7) for individuals who are allowed a federal foreign tax credit for taxes that do not
17.16qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
17.17of subnational foreign taxes for the taxable year, but not to exceed the total subnational
17.18foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
17.19"federal foreign tax credit" means the credit allowed under section 27 of the Internal
17.20Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
17.21under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
17.22the extent they exceed the federal foreign tax credit;
17.23    (8) in each of the five tax years immediately following the tax year in which an
17.24addition is required under subdivision 19a, clause (7), or 19c, clause (15) (14), in the case
17.25of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
17.26delayed depreciation. For purposes of this clause, "delayed depreciation" means the amount
17.27of the addition made by the taxpayer under subdivision 19a, clause (7), or subdivision 19c,
17.28clause (15) (14), in the case of a shareholder of an S corporation, minus the positive value
17.29of any net operating loss under section 172 of the Internal Revenue Code generated for the
17.30tax year of the addition. The resulting delayed depreciation cannot be less than zero;
17.31    (9) job opportunity building zone income as provided under section 469.316;
17.32    (10) to the extent included in federal taxable income, the amount of compensation
17.33paid to members of the Minnesota National Guard or other reserve components of the
17.34United States military for active service, excluding compensation for services performed
17.35under the Active Guard Reserve (AGR) program. For purposes of this clause, "active
17.36service" means (i) state active service as defined in section 190.05, subdivision 5a, clause
18.1(1); or (ii) federally funded state active service as defined in section 190.05, subdivision
18.25b , but "active service" excludes service performed in accordance with section 190.08,
18.3subdivision 3 ;
18.4    (11) to the extent included in federal taxable income, the amount of compensation
18.5paid to Minnesota residents who are members of the armed forces of the United States
18.6or United Nations for active duty performed under United States Code, title 10; or the
18.7authority of the United Nations;
18.8    (12) an amount, not to exceed $10,000, equal to qualified expenses related to a
18.9qualified donor's donation, while living, of one or more of the qualified donor's organs
18.10to another person for human organ transplantation. For purposes of this clause, "organ"
18.11means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
18.12"human organ transplantation" means the medical procedure by which transfer of a human
18.13organ is made from the body of one person to the body of another person; "qualified
18.14expenses" means unreimbursed expenses for both the individual and the qualified donor
18.15for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
18.16may be subtracted under this clause only once; and "qualified donor" means the individual
18.17or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
18.18individual may claim the subtraction in this clause for each instance of organ donation for
18.19transplantation during the taxable year in which the qualified expenses occur;
18.20    (13) in each of the five tax years immediately following the tax year in which an
18.21addition is required under subdivision 19a, clause (8), or 19c, clause (16) (15), in the case
18.22of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth of
18.23the addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16)
18.24 (15), in the case of a shareholder of a corporation that is an S corporation, minus the
18.25positive value of any net operating loss under section 172 of the Internal Revenue Code
18.26generated for the tax year of the addition. If the net operating loss exceeds the addition for
18.27the tax year, a subtraction is not allowed under this clause;
18.28    (14) to the extent included in the federal taxable income of a nonresident of
18.29Minnesota, compensation paid to a service member as defined in United States Code, title
18.3010, section 101(a)(5), for military service as defined in the Servicemembers Civil Relief
18.31Act, Public Law 108-189, section 101(2);
18.32    (15) to the extent included in federal taxable income, the amount of national service
18.33educational awards received from the National Service Trust under United States Code,
18.34title 42, sections 12601 to 12604, for service in an approved Americorps National Service
18.35program;
19.1(16) to the extent included in federal taxable income, discharge of indebtedness
19.2income resulting from reacquisition of business indebtedness included in federal taxable
19.3income under section 108(i) of the Internal Revenue Code. This subtraction applies only
19.4to the extent that the income was included in net income in a prior year as a result of the
19.5addition under section 290.01, subdivision 19a, clause (16); and
19.6(17) the amount of the net operating loss allowed under section 290.095, subdivision
19.711 , paragraph (c); and
19.8(18) in the year that the expenditures are made for railroad track maintenance, as
19.9defined in section 45G(d) of the Internal Revenue Code, in the case of a shareholder of a
19.10corporation that is an S corporation or a partner in a partnership, an amount equal to the
19.11credit awarded pursuant to section 45G(a) of the Internal Revenue Code. The subtraction
19.12shall be reduced to an amount equal to the percentage of the shareholder's or partner's
19.13share of the net income of the S corporation or partnership.
19.14EFFECTIVE DATE.This section is effective for taxable years beginning after
19.15December 31, 2012.

19.16    Sec. 4. Minnesota Statutes 2012, section 290.01, subdivision 19c, is amended to read:
19.17    Subd. 19c. Corporations; additions to federal taxable income. For corporations,
19.18there shall be added to federal taxable income:
19.19    (1) the amount of any deduction taken for federal income tax purposes for income,
19.20excise, or franchise taxes based on net income or related minimum taxes, including but not
19.21limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
19.22another state, a political subdivision of another state, the District of Columbia, or any
19.23foreign country or possession of the United States;
19.24    (2) interest not subject to federal tax upon obligations of: the United States, its
19.25possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
19.26state, any of its political or governmental subdivisions, any of its municipalities, or any
19.27of its governmental agencies or instrumentalities; the District of Columbia; or Indian
19.28tribal governments;
19.29    (3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
19.30Revenue Code;
19.31    (4) the amount of any net operating loss deduction taken for federal income tax
19.32purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
19.33deduction under section 810 of the Internal Revenue Code;
19.34    (5) the amount of any special deductions taken for federal income tax purposes
19.35under sections 241 to 247 and 965 of the Internal Revenue Code;
20.1    (6) losses from the business of mining, as defined in section 290.05, subdivision 1,
20.2clause (a), that are not subject to Minnesota income tax;
20.3    (7) the amount of any capital losses deducted for federal income tax purposes under
20.4sections 1211 and 1212 of the Internal Revenue Code;
20.5    (8) the exempt foreign trade income of a foreign sales corporation under sections
20.6921(a) and 291 of the Internal Revenue Code;
20.7    (9) the amount of percentage depletion deducted under sections 611 through 614 and
20.8291 of the Internal Revenue Code;
20.9    (10) for certified pollution control facilities placed in service in a taxable year
20.10beginning before December 31, 1986, and for which amortization deductions were elected
20.11under section 169 of the Internal Revenue Code of 1954, as amended through December
20.1231, 1985, the amount of the amortization deduction allowed in computing federal taxable
20.13income for those facilities;
20.14    (11) the amount of any deemed dividend from a foreign operating corporation
20.15determined pursuant to section 290.17, subdivision 4, paragraph (g). The deemed dividend
20.16shall be reduced by the amount of the addition to income required by clauses (20), (21),
20.17(22), and (23);
20.18    (12) (11) the amount of a partner's pro rata share of net income which does not flow
20.19through to the partner because the partnership elected to pay the tax on the income under
20.20section 6242(a)(2) of the Internal Revenue Code;
20.21    (13) (12) the amount of net income excluded under section 114 of the Internal
20.22Revenue Code;
20.23    (14) (13) any increase in subpart F income, as defined in section 952(a) of the
20.24Internal Revenue Code, for the taxable year when subpart F income is calculated without
20.25regard to the provisions of Division C, title III, section 303(b) of Public Law 110-343;
20.26    (15) (14) 80 percent of the depreciation deduction allowed under section
20.27168(k)(1)(A) and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if
20.28the taxpayer has an activity that in the taxable year generates a deduction for depreciation
20.29under section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable
20.30year that the taxpayer is not allowed to claim for the taxable year, "the depreciation
20.31allowed under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess
20.32of the depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A)
20.33over the amount of the loss from the activity that is not allowed in the taxable year. In
20.34succeeding taxable years when the losses not allowed in the taxable year are allowed, the
20.35depreciation under section 168(k)(1)(A) and (k)(4)(A) is allowed;
21.1    (16) (15) 80 percent of the amount by which the deduction allowed by section 179 of
21.2the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
21.3Revenue Code of 1986, as amended through December 31, 2003;
21.4    (17) (16) to the extent deducted in computing federal taxable income, the amount of
21.5the deduction allowable under section 199 of the Internal Revenue Code;
21.6    (18) (17) for taxable years beginning before January 1, 2013, the exclusion allowed
21.7under section 139A of the Internal Revenue Code for federal subsidies for prescription
21.8drug plans;
21.9    (19) (18) the amount of expenses disallowed under section 290.10, subdivision 2;
21.10    (20) an amount equal to the interest and intangible expenses, losses, and costs paid,
21.11accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit
21.12of a corporation that is a member of the taxpayer's unitary business group that qualifies
21.13as a foreign operating corporation. For purposes of this clause, intangible expenses and
21.14costs include:
21.15    (i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
21.16use, maintenance or management, ownership, sale, exchange, or any other disposition of
21.17intangible property;
21.18    (ii) losses incurred, directly or indirectly, from factoring transactions or discounting
21.19transactions;
21.20    (iii) royalty, patent, technical, and copyright fees;
21.21    (iv) licensing fees; and
21.22    (v) other similar expenses and costs.
21.23For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
21.24applications, trade names, trademarks, service marks, copyrights, mask works, trade
21.25secrets, and similar types of intangible assets.
21.26This clause does not apply to any item of interest or intangible expenses or costs paid,
21.27accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect
21.28to such item of income to the extent that the income to the foreign operating corporation
21.29is income from sources without the United States as defined in subtitle A, chapter 1,
21.30subchapter N, part 1, of the Internal Revenue Code;
21.31    (21) except as already included in the taxpayer's taxable income pursuant to clause
21.32(20), any interest income and income generated from intangible property received or
21.33accrued by a foreign operating corporation that is a member of the taxpayer's unitary
21.34group. For purposes of this clause, income generated from intangible property includes:
21.35    (i) income related to the direct or indirect acquisition, use, maintenance or
21.36management, ownership, sale, exchange, or any other disposition of intangible property;
22.1    (ii) income from factoring transactions or discounting transactions;
22.2    (iii) royalty, patent, technical, and copyright fees;
22.3    (iv) licensing fees; and
22.4    (v) other similar income.
22.5For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
22.6applications, trade names, trademarks, service marks, copyrights, mask works, trade
22.7secrets, and similar types of intangible assets.
22.8This clause does not apply to any item of interest or intangible income received or accrued
22.9by a foreign operating corporation with respect to such item of income to the extent that
22.10the income is income from sources without the United States as defined in subtitle A,
22.11chapter 1, subchapter N, part 1, of the Internal Revenue Code;
22.12    (22) the dividends attributable to the income of a foreign operating corporation that
22.13is a member of the taxpayer's unitary group in an amount that is equal to the dividends
22.14paid deduction of a real estate investment trust under section 561(a) of the Internal
22.15Revenue Code for amounts paid or accrued by the real estate investment trust to the
22.16foreign operating corporation;
22.17    (23) the income of a foreign operating corporation that is a member of the taxpayer's
22.18unitary group in an amount that is equal to gains derived from the sale of real or personal
22.19property located in the United States;
22.20    (24) (19) for taxable years beginning before January 1, 2010, the additional amount
22.21allowed as a deduction for donation of computer technology and equipment under section
22.22170(e)(6) of the Internal Revenue Code, to the extent deducted from taxable income; and
22.23(25) (20) discharge of indebtedness income resulting from reacquisition of business
22.24indebtedness and deferred under section 108(i) of the Internal Revenue Code.
22.25EFFECTIVE DATE.This section is effective for taxable years beginning after
22.26December 31, 2012.

22.27    Sec. 5. Minnesota Statutes 2012, section 290.01, subdivision 19d, is amended to read:
22.28    Subd. 19d. Corporations; modifications decreasing federal taxable income. For
22.29corporations, there shall be subtracted from federal taxable income after the increases
22.30provided in subdivision 19c:
22.31    (1) the amount of foreign dividend gross-up added to gross income for federal
22.32income tax purposes under section 78 of the Internal Revenue Code;
22.33    (2) the amount of salary expense not allowed for federal income tax purposes due to
22.34claiming the work opportunity credit under section 51 of the Internal Revenue Code;
23.1    (3) any dividend (not including any distribution in liquidation) paid within the
23.2taxable year by a national or state bank to the United States, or to any instrumentality of
23.3the United States exempt from federal income taxes, on the preferred stock of the bank
23.4owned by the United States or the instrumentality;
23.5    (4) amounts disallowed for intangible drilling costs due to differences between
23.6this chapter and the Internal Revenue Code in taxable years beginning before January
23.71, 1987, as follows:
23.8    (i) to the extent the disallowed costs are represented by physical property, an amount
23.9equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
23.10subdivision 7 , subject to the modifications contained in subdivision 19e; and
23.11    (ii) to the extent the disallowed costs are not represented by physical property, an
23.12amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
23.13290.09, subdivision 8 ;
23.14    (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
23.15Internal Revenue Code, except that:
23.16    (i) for capital losses incurred in taxable years beginning after December 31, 1986,
23.17capital loss carrybacks shall not be allowed;
23.18    (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
23.19a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
23.20allowed;
23.21    (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
23.22capital loss carryback to each of the three taxable years preceding the loss year, subject to
23.23the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
23.24    (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
23.25a capital loss carryover to each of the five taxable years succeeding the loss year to the
23.26extent such loss was not used in a prior taxable year and subject to the provisions of
23.27Minnesota Statutes 1986, section 290.16, shall be allowed;
23.28    (6) an amount for interest and expenses relating to income not taxable for federal
23.29income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
23.30expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
23.31291 of the Internal Revenue Code in computing federal taxable income;
23.32    (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
23.33which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
23.34reasonable allowance for depletion based on actual cost. In the case of leases the deduction
23.35must be apportioned between the lessor and lessee in accordance with rules prescribed
23.36by the commissioner. In the case of property held in trust, the allowable deduction must
24.1be apportioned between the income beneficiaries and the trustee in accordance with the
24.2pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
24.3of the trust's income allocable to each;
24.4    (8) for certified pollution control facilities placed in service in a taxable year
24.5beginning before December 31, 1986, and for which amortization deductions were elected
24.6under section 169 of the Internal Revenue Code of 1954, as amended through December
24.731, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
24.81986, section 290.09, subdivision 7;
24.9    (9) amounts included in federal taxable income that are due to refunds of income,
24.10excise, or franchise taxes based on net income or related minimum taxes paid by the
24.11corporation to Minnesota, another state, a political subdivision of another state, the
24.12District of Columbia, or a foreign country or possession of the United States to the extent
24.13that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
24.14clause (1), in a prior taxable year;
24.15    (10) 80 percent of royalties, fees, or other like income accrued or received from a
24.16foreign operating corporation or a foreign corporation which is part of the same unitary
24.17business as the receiving corporation, unless the income resulting from such payments or
24.18accruals is income from sources within the United States as defined in subtitle A, chapter
24.191, subchapter N, part 1, of the Internal Revenue Code;
24.20    (11) (10) income or gains from the business of mining as defined in section 290.05,
24.21subdivision 1 , clause (a), that are not subject to Minnesota franchise tax;
24.22    (12) (11) the amount of disability access expenditures in the taxable year which are not
24.23allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
24.24    (13) (12) the amount of qualified research expenses not allowed for federal income
24.25tax purposes under section 280C(c) of the Internal Revenue Code, but only to the extent
24.26that the amount exceeds the amount of the credit allowed under section 290.068;
24.27    (14) (13) the amount of salary expenses not allowed for federal income tax purposes
24.28due to claiming the Indian employment credit under section 45A(a) of the Internal
24.29Revenue Code;
24.30    (15) (14) for a corporation whose foreign sales corporation, as defined in section
24.31922 of the Internal Revenue Code, constituted a foreign operating corporation during any
24.32taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
24.33claiming the deduction under section 290.21, subdivision 4, for income received from
24.34the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of
24.35income excluded under section 114 of the Internal Revenue Code, provided the income is
24.36not income of a foreign operating company;
25.1    (16) (15) any decrease in subpart F income, as defined in section 952(a) of the
25.2Internal Revenue Code, for the taxable year when subpart F income is calculated without
25.3regard to the provisions of Division C, title III, section 303(b) of Public Law 110-343;
25.4    (17) (16) in each of the five tax years immediately following the tax year in which an
25.5addition is required under subdivision 19c, clause (15) (14), an amount equal to one-fifth
25.6of the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
25.7amount of the addition made by the taxpayer under subdivision 19c, clause (15) (14). The
25.8resulting delayed depreciation cannot be less than zero;
25.9    (18) (17) in each of the five tax years immediately following the tax year in which an
25.10addition is required under subdivision 19c, clause (16) (15), an amount equal to one-fifth
25.11of the amount of the addition; and
25.12(19) (18) to the extent included in federal taxable income, discharge of indebtedness
25.13income resulting from reacquisition of business indebtedness included in federal taxable
25.14income under section 108(i) of the Internal Revenue Code. This subtraction applies only
25.15to the extent that the income was included in net income in a prior year as a result of the
25.16addition under section 290.01, subdivision 19c, clause (25) (20); and
25.17(19) in the year that the expenditures are made for railroad track maintenance, as
25.18defined in section 45G(d) of the Internal Revenue Code, an amount equal to the credit
25.19awarded pursuant to section 45G(a) of the Internal Revenue Code.
25.20EFFECTIVE DATE.This section is effective for taxable years beginning after
25.21December 31, 2012.

25.22    Sec. 6. Minnesota Statutes 2012, section 290.01, subdivision 29, is amended to read:
25.23    Subd. 29. Taxable income. The term "taxable income" means:
25.24(1) for individuals, estates, and trusts, the same as taxable net income;
25.25(2) for corporations, the taxable net income less
25.26(i) the net operating loss deduction under section 290.095, excluding any amount
25.27surrendered under section 116J.8738;
25.28(ii) the dividends received deduction under section 290.21, subdivision 4;
25.29(iii) the exemption for operating in a job opportunity building zone under section
25.30469.317 ; and
25.31(iv) the exemption for operating in a biotechnology and health sciences industry
25.32zone under section 469.337.
25.33EFFECTIVE DATE.This section is effective for taxable years beginning after
25.34December 31, 2012.

26.1    Sec. 7. Minnesota Statutes 2012, section 290.06, subdivision 1, is amended to read:
26.2    Subdivision 1. Computation, corporations. The franchise tax imposed upon
26.3corporations shall be computed by applying to their taxable income the rate of 9.8 9.0
26.4percent.
26.5EFFECTIVE DATE.This section is effective for taxable years beginning after
26.6December 31, 2012.

26.7    Sec. 8. Minnesota Statutes 2012, section 290.06, is amended by adding a subdivision
26.8to read:
26.9    Subd. 36. Credit; technology corporate franchise tax certificate transfer.
26.10A taxpayer may take a credit against the tax imposed under subdivision 1 or section
26.11290.0921 equal to the amount of the transferable tax benefits certified to the taxpayer for
26.12the taxable year by the commissioner of employment and economic development under
26.13section 116J.8738. The credit can be used against the tax liability of any member of the
26.14unitary business that is included in the combined return that is filed by the taxpayer.
26.15EFFECTIVE DATE.This section is effective for taxable years beginning after
26.16December 31, 2012.

26.17    Sec. 9. Minnesota Statutes 2012, section 290.068, subdivision 1, is amended to read:
26.18    Subdivision 1. Credit allowed. A corporation, partners in a partnership, or
26.19shareholders in a corporation treated as an "S" corporation under section 290.9725 are
26.20allowed a credit against the tax computed under this chapter for the taxable year equal to:
26.21    (a) ten percent of the first $2,000,000 of the excess (if any) of
26.22    (1) the qualified research expenses for the taxable year, over
26.23    (2) the base amount; and
26.24    (b) 2.5 4.5 percent on all of such excess expenses over $2,000,000.
26.25EFFECTIVE DATE.This section is effective for taxable years beginning after
26.26December 31, 2012.

26.27    Sec. 10. Minnesota Statutes 2012, section 290.091, subdivision 2, is amended to read:
26.28    Subd. 2. Definitions. For purposes of the tax imposed by this section, the following
26.29terms have the meanings given:
26.30    (a) "Alternative minimum taxable income" means the sum of the following for
26.31the taxable year:
27.1    (1) the taxpayer's federal alternative minimum taxable income as defined in section
27.255(b)(2) of the Internal Revenue Code;
27.3    (2) the taxpayer's itemized deductions allowed in computing federal alternative
27.4minimum taxable income, but excluding:
27.5    (i) the charitable contribution deduction under section 170 of the Internal Revenue
27.6Code;
27.7    (ii) the medical expense deduction;
27.8    (iii) the casualty, theft, and disaster loss deduction; and
27.9    (iv) the impairment-related work expenses of a disabled person;
27.10    (3) for depletion allowances computed under section 613A(c) of the Internal
27.11Revenue Code, with respect to each property (as defined in section 614 of the Internal
27.12Revenue Code), to the extent not included in federal alternative minimum taxable income,
27.13the excess of the deduction for depletion allowable under section 611 of the Internal
27.14Revenue Code for the taxable year over the adjusted basis of the property at the end of the
27.15taxable year (determined without regard to the depletion deduction for the taxable year);
27.16    (4) to the extent not included in federal alternative minimum taxable income, the
27.17amount of the tax preference for intangible drilling cost under section 57(a)(2) of the
27.18Internal Revenue Code determined without regard to subparagraph (E);
27.19    (5) to the extent not included in federal alternative minimum taxable income, the
27.20amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and
27.21    (6) the amount of addition required by section 290.01, subdivision 19a, clauses (7)
27.22to (9), (12), (13), and (16) to (18);
27.23    less the sum of the amounts determined under the following:
27.24    (1) interest income as defined in section 290.01, subdivision 19b, clause (1);
27.25    (2) an overpayment of state income tax as provided by section 290.01, subdivision
27.2619b , clause (2), to the extent included in federal alternative minimum taxable income;
27.27    (3) the amount of investment interest paid or accrued within the taxable year on
27.28indebtedness to the extent that the amount does not exceed net investment income, as
27.29defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include
27.30amounts deducted in computing federal adjusted gross income;
27.31    (4) amounts subtracted from federal taxable income as provided by section 290.01,
27.32subdivision 19b , clauses (6), (8) to (14), and (16), and (18); and
27.33(5) the amount of the net operating loss allowed under section 290.095, subdivision
27.3411 , paragraph (c).
27.35    In the case of an estate or trust, alternative minimum taxable income must be
27.36computed as provided in section 59(c) of the Internal Revenue Code.
28.1    (b) "Investment interest" means investment interest as defined in section 163(d)(3)
28.2of the Internal Revenue Code.
28.3    (c) "Net minimum tax" means the minimum tax imposed by this section.
28.4    (d) "Regular tax" means the tax that would be imposed under this chapter (without
28.5regard to this section and section 290.032), reduced by the sum of the nonrefundable
28.6credits allowed under this chapter.
28.7    (e) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable
28.8income after subtracting the exemption amount determined under subdivision 3.
28.9EFFECTIVE DATE.This section is effective for taxable years beginning after
28.10December 31, 2012.

28.11    Sec. 11. Minnesota Statutes 2012, section 290.0921, subdivision 1, is amended to read:
28.12    Subdivision 1. Tax imposed. In addition to the taxes computed under this chapter
28.13without regard to this section, the franchise tax imposed on corporations includes a tax
28.14equal to the excess, if any, for the taxable year of:
28.15(1) 5.8 5.3 percent of Minnesota alternative minimum taxable income; over
28.16(2) the tax imposed under section 290.06, subdivision 1, without regard to this section.
28.17EFFECTIVE DATE.This section is effective for taxable years beginning after
28.18December 31, 2012.

28.19    Sec. 12. Minnesota Statutes 2012, section 290.0921, subdivision 3, is amended to read:
28.20    Subd. 3. Alternative minimum taxable income. "Alternative minimum taxable
28.21income" is Minnesota net income as defined in section 290.01, subdivision 19, and
28.22includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e),
28.23(f), and (h) of the Internal Revenue Code. If a corporation files a separate company
28.24Minnesota tax return, the minimum tax must be computed on a separate company basis.
28.25If a corporation is part of a tax group filing a unitary return, the minimum tax must be
28.26computed on a unitary basis. The following adjustments must be made.
28.27(1) For purposes of the depreciation adjustments under section 56(a)(1) and
28.2856(g)(4)(A) of the Internal Revenue Code, the basis for depreciable property placed in
28.29service in a taxable year beginning before January 1, 1990, is the adjusted basis for federal
28.30income tax purposes, including any modification made in a taxable year under section
28.31290.01, subdivision 19e , or Minnesota Statutes 1986, section 290.09, subdivision 7,
28.32paragraph (c).
29.1For taxable years beginning after December 31, 2000, the amount of any remaining
29.2modification made under section 290.01, subdivision 19e, or Minnesota Statutes 1986,
29.3section 290.09, subdivision 7, paragraph (c), not previously deducted is a depreciation
29.4allowance in the first taxable year after December 31, 2000.
29.5(2) The portion of the depreciation deduction allowed for federal income tax
29.6purposes under section 168(k) of the Internal Revenue Code that is required as an addition
29.7under section 290.01, subdivision 19c, clause (15) (14), is disallowed in determining
29.8alternative minimum taxable income.
29.9(3) The subtraction for depreciation allowed under section 290.01, subdivision
29.1019d , clause (17) (16), is allowed as a depreciation deduction in determining alternative
29.11minimum taxable income.
29.12(4) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d)
29.13of the Internal Revenue Code does not apply.
29.14(5) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal
29.15Revenue Code does not apply.
29.16(6) The special rule for dividends from section 936 companies under section
29.1756(g)(4)(C)(iii) does not apply.
29.18(7) The tax preference for depletion under section 57(a)(1) of the Internal Revenue
29.19Code does not apply.
29.20(8) The tax preference for intangible drilling costs under section 57(a)(2) of the
29.21Internal Revenue Code must be calculated without regard to subparagraph (E) and the
29.22subtraction under section 290.01, subdivision 19d, clause (4).
29.23(9) The tax preference for tax exempt interest under section 57(a)(5) of the Internal
29.24Revenue Code does not apply.
29.25(10) The tax preference for charitable contributions of appreciated property under
29.26section 57(a)(6) of the Internal Revenue Code does not apply.
29.27(11) For purposes of calculating the tax preference for accelerated depreciation or
29.28amortization on certain property placed in service before January 1, 1987, under section
29.2957(a)(7) of the Internal Revenue Code, the deduction allowable for the taxable year is the
29.30deduction allowed under section 290.01, subdivision 19e.
29.31For taxable years beginning after December 31, 2000, the amount of any remaining
29.32modification made under section 290.01, subdivision 19e, not previously deducted is a
29.33depreciation or amortization allowance in the first taxable year after December 31, 2004.
29.34(12) For purposes of calculating the adjustment for adjusted current earnings in
29.35section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable
29.36income" as it is used in section 56(g) of the Internal Revenue Code, means alternative
30.1minimum taxable income as defined in this subdivision, determined without regard to the
30.2adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.
30.3(13) For purposes of determining the amount of adjusted current earnings under
30.4section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section
30.556(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend
30.6gross-up subtracted as provided in section 290.01, subdivision 19d, clause (1), (ii) the
30.7amount of refunds of income, excise, or franchise taxes subtracted as provided in section
30.8290.01, subdivision 19d , clause (9), or (iii) the amount of royalties, fees or other like
30.9income subtracted as provided in section 290.01, subdivision 19d, clause (10).
30.10(14) Alternative minimum taxable income excludes the income from operating in a
30.11job opportunity building zone as provided under section 469.317.
30.12(15) Alternative minimum taxable income excludes the income from operating in a
30.13biotechnology and health sciences industry zone as provided under section 469.337.
30.14Items of tax preference must not be reduced below zero as a result of the
30.15modifications in this subdivision.
30.16EFFECTIVE DATE.This section is effective for taxable years beginning after
30.17December 31, 2012.

30.18    Sec. 13. Minnesota Statutes 2012, section 290.0922, subdivision 1, is amended to read:
30.19    Subdivision 1. Imposition. (a) In addition to the tax imposed by this chapter without
30.20regard to this section, the franchise tax imposed on a corporation required to file under
30.21section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation
30.22under section 290.9725 for the taxable year includes a tax equal to the following amounts:

30.23 30.24	If the sum of the corporation's Minnesota property, payrolls, and sales or receipts is:							the tax equals:
30.25 30.26			less than		$	500,000 930,000		$	0
30.27 30.28		$	500,000 930,000	to	$	999,999 1,869,999		$	100 190
30.29 30.30		$	1,000,000 1,870,000	to	$	4,999,999 9,339,999		$	300 560
30.31 30.32		$	5,000,000 9,340,000	to	$	9,999,999 18,679,999		$	1,000 1,870
30.33 30.34		$	10,000,000 18,680,000	to	$	19,999,999 37,359,999		$	2,000 3,740
30.35 30.36		$	20,000,000 37,360,000	or	more			$	5,000 9,340

30.37(b) A tax is imposed for each taxable year on a corporation required to file a return
30.38under section 289A.12, subdivision 3, that is treated as an "S" corporation under section
31.1290.9725 and on a partnership required to file a return under section 289A.12, subdivision
31.23 , other than a partnership that derives over 80 percent of its income from farming. The
31.3tax imposed under this paragraph is due on or before the due date of the return for the
31.4taxpayer due under section 289A.18, subdivision 1. The commissioner shall prescribe
31.5the return to be used for payment of this tax. The tax under this paragraph is equal to
31.6the following amounts:

31.7 31.8 31.9 31.10	If the sum of the S corporation's or partnership's Minnesota property, payrolls, and sales or receipts is:							the tax equals:
31.11 31.12			less than		$	500,000 930,000		$	0
31.13 31.14		$	500,000 930,000	to	$	999,999 1,869,999		$	100 190
31.15 31.16		$	1,000,000 1,870,000	to	$	4,999,999 9,339,999		$	300 560
31.17 31.18		$	5,000,000 9,340,000	to	$	9,999,999 18,679,999		$	1,000 1,870
31.19 31.20		$	10,000,000 18,680,000	to	$	19,999,999 37,359,999		$	2,000 3,740
31.21 31.22		$	20,000,000 37,360,000	or	more			$	5,000 9,340

31.23(c) The commissioner shall adjust the dollar amounts of both the tax and the property,
31.24payrolls, and sales or receipts thresholds in paragraphs (a) and (b) by the percentage
31.25determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except
31.26that in section 1(f)(3)(B) the year 2012 must be substituted for the year 1992. For 2014,
31.27the commissioner shall determine the percentage change from the 12 months ending on
31.28August 31, 2012, to the 12 months ending on August 31, 2013, and in each subsequent
31.29year, from the 12 months ending on August 31, 2012, to the 12 months ending on August
31.3031 of the year preceding the taxable year. The determination of the commissioner pursuant
31.31to this subdivision is not a rule subject to the Administrative Procedure Act contained in
31.32chapter 14. The tax amounts as adjusted must be rounded to the nearest $10 amount and
31.33the threshold amounts must be adjusted to the nearest $10,000 amount. For tax amounts
31.34that end in $5, the amount is rounded up to the nearest $10 amount and for threshold
31.35amounts that end in $5,000, the amount is rounded up to the nearest $10,000.
31.36EFFECTIVE DATE.This section is effective for taxable years beginning after
31.37December 31, 2012.

31.38    Sec. 14. Minnesota Statutes 2012, section 290.095, subdivision 2, is amended to read:
32.1    Subd. 2. Defined and limited. (a) The term "net operating loss" as used in this
32.2section shall mean a net operating loss as defined in section 172(c) of the Internal Revenue
32.3Code, with the modifications specified in subdivision 4. The deductions provided in
32.4section 290.21 and the modification provided in section 290.01, subdivision 19d, clause
32.5(10), cannot be used in the determination of a net operating loss.
32.6(b) The term "net operating loss deduction" as used in this section means the
32.7aggregate of the net operating loss carryovers to the taxable year, computed in accordance
32.8with subdivision 3. The provisions of section 172(b) of the Internal Revenue Code relating
32.9to the carryback of net operating losses, do not apply.
32.10EFFECTIVE DATE.This section is effective for taxable years beginning after
32.11December 31, 2012.

32.12    Sec. 15. Minnesota Statutes 2012, section 290.17, subdivision 4, is amended to read:
32.13    Subd. 4. Unitary business principle. (a) If a trade or business conducted wholly
32.14within this state or partly within and partly without this state is part of a unitary business,
32.15the entire income of the unitary business is subject to apportionment pursuant to section
32.16290.191 . Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
32.17business is considered to be derived from any particular source and none may be allocated
32.18to a particular place except as provided by the applicable apportionment formula. The
32.19provisions of this subdivision do not apply to business income subject to subdivision 5,
32.20income of an insurance company, or income of an investment company determined under
32.21section 290.36.
32.22(b) The term "unitary business" means business activities or operations which
32.23result in a flow of value between them. The term may be applied within a single legal
32.24entity or between multiple entities and without regard to whether each entity is a sole
32.25proprietorship, a corporation, a partnership or a trust.
32.26(c) Unity is presumed whenever there is unity of ownership, operation, and use,
32.27evidenced by centralized management or executive force, centralized purchasing,
32.28advertising, accounting, or other controlled interaction, but the absence of these
32.29centralized activities will not necessarily evidence a nonunitary business. Unity is also
32.30presumed when business activities or operations are of mutual benefit, dependent upon or
32.31contributory to one another, either individually or as a group.
32.32(d) Where a business operation conducted in Minnesota is owned by a business
32.33entity that carries on business activity outside the state different in kind from that
32.34conducted within this state, and the other business is conducted entirely outside the state, it
33.1is presumed that the two business operations are unitary in nature, interrelated, connected,
33.2and interdependent unless it can be shown to the contrary.
33.3(e) Unity of ownership is not deemed to exist when a corporation is involved unless
33.4that corporation is a member of a group of two or more business entities and more than 50
33.5percent of the voting stock of each member of the group is directly or indirectly owned
33.6by a common owner or by common owners, either corporate or noncorporate, or by one
33.7or more of the member corporations of the group. For this purpose, the term "voting
33.8stock" shall include membership interests of mutual insurance holding companies formed
33.9under section 66A.40.
33.10(f) The net income and apportionment factors under section 290.191 or 290.20 of
33.11foreign corporations and other foreign entities which are part of a unitary business shall not
33.12be included in the net income or the apportionment factors of the unitary business; except
33.13that the income and apportionment factors of a foreign corporation, foreign partnership, or
33.14other foreign entity, that are included in the federal taxable income, as defined in section
33.1563 of the Internal Revenue Code as amended through the date named in section 290.01,
33.16subdivision 19, of a domestic corporation, domestic entity, or individual must be included
33.17in determining net income and the factors to be used in the apportionment of net income
33.18pursuant to section 290.191 or 290.20. A foreign corporation or other foreign entity which
33.19is not part of a unitary business and which is required to file a return under this chapter shall
33.20file on a separate return basis. The net income and apportionment factors under section
33.21290.191 or 290.20 of foreign operating corporations shall not be included in the net income
33.22or the apportionment factors of the unitary business except as provided in paragraph (g).
33.23(g) The adjusted net income of a foreign operating corporation shall be deemed to
33.24be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
33.25proportion to each shareholder's ownership, with which such corporation is engaged in
33.26a unitary business. Such deemed dividend shall be treated as a dividend under section
33.27290.21, subdivision 4.
33.28Dividends actually paid by a foreign operating corporation to a corporate shareholder
33.29which is a member of the same unitary business as the foreign operating corporation shall
33.30be eliminated from the net income of the unitary business in preparing a combined report
33.31for the unitary business. The adjusted net income of a foreign operating corporation
33.32shall be its net income adjusted as follows:
33.33(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
33.34Rico, or a United States possession or political subdivision of any of the foregoing shall
33.35be a deduction; and
34.1(2) the subtraction from federal taxable income for payments received from foreign
34.2corporations or foreign operating corporations under section 290.01, subdivision 19d,
34.3clause (10), shall not be allowed.
34.4If a foreign operating corporation incurs a net loss, neither income nor deduction from
34.5that corporation shall be included in determining the net income of the unitary business.
34.6(h) (g) For purposes of determining the net income of a unitary business and the
34.7factors to be used in the apportionment of net income pursuant to section 290.191 or
34.8290.20 , there must be included only the income and apportionment factors of domestic
34.9corporations or other domestic entities other than foreign operating corporations that are
34.10determined to be part of the unitary business pursuant to this subdivision, notwithstanding
34.11that foreign corporations or other foreign entities might be included in the unitary
34.12business; except that the income and apportionment factors of a foreign corporation,
34.13foreign partnership, or other foreign entity, that is included in the federal taxable income,
34.14as defined in section 63 of the Internal Revenue Code as amended through the date
34.15named in section 290.01, subdivision 19, of a domestic corporation, domestic entity, or
34.16individual must be included in determining net income and the factors to be used in the
34.17apportionment of net income pursuant to section 290.191 or 290.20.
34.18(i) Deductions for expenses, interest, or taxes otherwise allowable under this chapter
34.19that are connected with or allocable against dividends, deemed dividends described
34.20in paragraph (g), or royalties, fees, or other like income described in section 290.01,
34.21subdivision 19d , clause (10), shall not be disallowed.
34.22(j) (h) Each corporation or other entity, except a sole proprietorship, that is part of
34.23a unitary business must file combined reports as the commissioner determines. On the
34.24reports, all intercompany transactions between entities included pursuant to paragraph (h)
34.25 (g) must be eliminated and the entire net income of the unitary business determined in
34.26accordance with this subdivision is apportioned among the entities by using each entity's
34.27Minnesota factors for apportionment purposes in the numerators of the apportionment
34.28formula and the total factors for apportionment purposes of all entities included pursuant to
34.29paragraph (h) (g) in the denominators of the apportionment formula. All sales of the unitary
34.30business made within this state pursuant to section 290.191 or 290.20 must be included
34.31on the combined report of a corporation or other entity that is a member of the unitary
34.32business and is subject to the jurisdiction of this state to impose tax under this chapter.
34.33(k) (i) If a corporation has been divested from a unitary business and is included in a
34.34combined report for a fractional part of the common accounting period of the combined
34.35report:
35.1(1) its income includable in the combined report is its income incurred for that part
35.2of the year determined by proration or separate accounting; and
35.3(2) its sales, property, and payroll included in the apportionment formula must
35.4be prorated or accounted for separately.
35.5EFFECTIVE DATE.This section is effective for taxable years beginning after
35.6December 31, 2012.

35.7    Sec. 16. Minnesota Statutes 2012, section 290.191, subdivision 5, is amended to read:
35.8    Subd. 5. Determination of sales factor. For purposes of this section, the following
35.9rules apply in determining the sales factor.
35.10    (a) The sales factor includes all sales, gross earnings, or receipts received in the
35.11ordinary course of the business, except that the following types of income are not included
35.12in the sales factor:
35.13    (1) interest;
35.14    (2) dividends;
35.15    (3) sales of capital assets as defined in section 1221 of the Internal Revenue Code;
35.16    (4) sales of property used in the trade or business, except sales of leased property of
35.17a type which is regularly sold as well as leased; and
35.18    (5) sales of debt instruments as defined in section 1275(a)(1) of the Internal Revenue
35.19Code or sales of stock; and.
35.20    (6) royalties, fees, or other like income of a type which qualify for a subtraction from
35.21federal taxable income under section 290.01, subdivision 19d, clause (10).
35.22    (b) Sales of tangible personal property are made within this state if the property is
35.23received by a purchaser at a point within this state, and the taxpayer is taxable in this state,
35.24regardless of the f.o.b. point, other conditions of the sale, or the ultimate destination
35.25of the property.
35.26    (c) Tangible personal property delivered to a common or contract carrier or foreign
35.27vessel for delivery to a purchaser in another state or nation is a sale in that state or nation,
35.28regardless of f.o.b. point or other conditions of the sale.
35.29    (d) Notwithstanding paragraphs (b) and (c), when intoxicating liquor, wine,
35.30fermented malt beverages, cigarettes, or tobacco products are sold to a purchaser who is
35.31licensed by a state or political subdivision to resell this property only within the state of
35.32ultimate destination, the sale is made in that state.
35.33    (e) Sales made by or through a corporation that is qualified as a domestic
35.34international sales corporation under section 992 of the Internal Revenue Code are not
35.35considered to have been made within this state.
36.1    (f) Sales, rents, royalties, and other income in connection with real property is
36.2attributed to the state in which the property is located.
36.3    (g) Receipts from the lease or rental of tangible personal property, including finance
36.4leases and true leases, must be attributed to this state if the property is located in this
36.5state and to other states if the property is not located in this state. Receipts from the
36.6lease or rental of moving property including, but not limited to, motor vehicles, rolling
36.7stock, aircraft, vessels, or mobile equipment are included in the numerator of the receipts
36.8factor to the extent that the property is used in this state. The extent of the use of moving
36.9property is determined as follows:
36.10    (1) A motor vehicle is used wholly in the state in which it is registered.
36.11    (2) The extent that rolling stock is used in this state is determined by multiplying
36.12the receipts from the lease or rental of the rolling stock by a fraction, the numerator of
36.13which is the miles traveled within this state by the leased or rented rolling stock and the
36.14denominator of which is the total miles traveled by the leased or rented rolling stock.
36.15    (3) The extent that an aircraft is used in this state is determined by multiplying the
36.16receipts from the lease or rental of the aircraft by a fraction, the numerator of which is
36.17the number of landings of the aircraft in this state and the denominator of which is the
36.18total number of landings of the aircraft.
36.19    (4) The extent that a vessel, mobile equipment, or other mobile property is used in
36.20the state is determined by multiplying the receipts from the lease or rental of the property
36.21by a fraction, the numerator of which is the number of days during the taxable year the
36.22property was in this state and the denominator of which is the total days in the taxable year.
36.23    (h) Royalties and other income not described in paragraph (a), clause (6), received
36.24for the use of or for the privilege of using intangible property, including patents,
36.25know-how, formulas, designs, processes, patterns, copyrights, trade names, service names,
36.26franchises, licenses, contracts, customer lists, or similar items, must be attributed to the
36.27state in which the property is used by the purchaser. If the property is used in more
36.28than one state, the royalties or other income must be apportioned to this state pro rata
36.29according to the portion of use in this state. If the portion of use in this state cannot be
36.30determined, the royalties or other income must be excluded from both the numerator
36.31and the denominator. Intangible property is used in this state if the purchaser uses the
36.32intangible property or the rights therein in the regular course of its business operations in
36.33this state, regardless of the location of the purchaser's customers.
36.34    (i) Sales of intangible property are made within the state in which the property is
36.35used by the purchaser. If the property is used in more than one state, the sales must be
36.36apportioned to this state pro rata according to the portion of use in this state. If the
37.1portion of use in this state cannot be determined, the sale must be excluded from both the
37.2numerator and the denominator of the sales factor. Intangible property is used in this
37.3state if the purchaser used the intangible property in the regular course of its business
37.4operations in this state.
37.5    (j) Receipts from the performance of services must be attributed to the state where
37.6the services are received. For the purposes of this section, receipts from the performance
37.7of services provided to a corporation, partnership, or trust may only be attributed to a state
37.8where it has a fixed place of doing business. If the state where the services are received is
37.9not readily determinable or is a state where the corporation, partnership, or trust receiving
37.10the service does not have a fixed place of doing business, the services shall be deemed
37.11to be received at the location of the office of the customer from which the services were
37.12ordered in the regular course of the customer's trade or business. If the ordering office
37.13cannot be determined, the services shall be deemed to be received at the office of the
37.14customer to which the services are billed.
37.15    (k) For the purposes of this subdivision and subdivision 6, paragraph (l), receipts
37.16from management, distribution, or administrative services performed by a corporation
37.17or trust for a fund of a corporation or trust regulated under United States Code, title 15,
37.18sections 80a-1 through 80a-64, must be attributed to the state where the shareholder of
37.19the fund resides. Under this paragraph, receipts for services attributed to shareholders are
37.20determined on the basis of the ratio of: (1) the average of the outstanding shares in the
37.21fund owned by shareholders residing within Minnesota at the beginning and end of each
37.22year; and (2) the average of the total number of outstanding shares in the fund at the
37.23beginning and end of each year. Residence of the shareholder, in the case of an individual,
37.24is determined by the mailing address furnished by the shareholder to the fund. Residence
37.25of the shareholder, when the shares are held by an insurance company as a depositor for
37.26the insurance company policyholders, is the mailing address of the policyholders. In
37.27the case of an insurance company holding the shares as a depositor for the insurance
37.28company policyholders, if the mailing address of the policyholders cannot be determined
37.29by the taxpayer, the receipts must be excluded from both the numerator and denominator.
37.30Residence of other shareholders is the mailing address of the shareholder.
37.31EFFECTIVE DATE.This section is effective for taxable years beginning after
37.32December 31, 2012.

37.33    Sec. 17. Minnesota Statutes 2012, section 290.21, subdivision 4, is amended to read:
37.34    Subd. 4. Dividends received from another corporation. (a)(1) Eighty percent
37.35of dividends received by a corporation during the taxable year from another corporation,
38.1in which the recipient owns 20 percent or more of the stock, by vote and value, not
38.2including stock described in section 1504(a)(4) of the Internal Revenue Code when the
38.3corporate stock with respect to which dividends are paid does not constitute the stock in
38.4trade of the taxpayer or would not be included in the inventory of the taxpayer, or does not
38.5constitute property held by the taxpayer primarily for sale to customers in the ordinary
38.6course of the taxpayer's trade or business, or when the trade or business of the taxpayer
38.7does not consist principally of the holding of the stocks and the collection of the income
38.8and gains therefrom; and
38.9    (2)(i) the remaining 20 percent of dividends if the dividends received are the stock in
38.10an affiliated company transferred in an overall plan of reorganization and the dividend
38.11is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as
38.12amended through December 31, 1989;
38.13    (ii) the remaining 20 percent of dividends if the dividends are received from a
38.14corporation which is subject to tax under section 290.36 and which is a member of an
38.15affiliated group of corporations as defined by the Internal Revenue Code and the dividend
38.16is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as
38.17amended through December 31, 1989, or is deducted under an election under section
38.18243(b) of the Internal Revenue Code; or
38.19    (iii) the remaining 20 percent of the dividends if the dividends are received from a
38.20property and casualty insurer as defined under section 60A.60, subdivision 8, which is a
38.21member of an affiliated group of corporations as defined by the Internal Revenue Code
38.22and either: (A) the dividend is eliminated in consolidation under Treasury Regulation
38.231.1502-14(a), as amended through December 31, 1989; or (B) the dividend is deducted
38.24under an election under section 243(b) of the Internal Revenue Code.
38.25    (b) Seventy percent of dividends received by a corporation during the taxable year
38.26from another corporation in which the recipient owns less than 20 percent of the stock,
38.27by vote or value, not including stock described in section 1504(a)(4) of the Internal
38.28Revenue Code when the corporate stock with respect to which dividends are paid does not
38.29constitute the stock in trade of the taxpayer, or does not constitute property held by the
38.30taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or
38.31business, or when the trade or business of the taxpayer does not consist principally of the
38.32holding of the stocks and the collection of income and gain therefrom.
38.33    (c) The dividend deduction provided in this subdivision shall be allowed only with
38.34respect to dividends that are included in a corporation's Minnesota taxable net income
38.35for the taxable year.
39.1    The dividend deduction provided in this subdivision does not apply to a dividend
39.2from a corporation which, for the taxable year of the corporation in which the distribution
39.3is made or for the next preceding taxable year of the corporation, is a corporation exempt
39.4from tax under section 501 of the Internal Revenue Code.
39.5The dividend deduction provided in this subdivision does not apply to a dividend
39.6received from a real estate investment trust as defined in section 856 of the Internal
39.7Revenue Code.
39.8    The dividend deduction provided in this subdivision applies to the amount of
39.9regulated investment company dividends only to the extent determined under section
39.10854(b) of the Internal Revenue Code.
39.11    The dividend deduction provided in this subdivision shall not be allowed with
39.12respect to any dividend for which a deduction is not allowed under the provisions of
39.13section 246(c) of the Internal Revenue Code.
39.14    (d) If dividends received by a corporation that does not have nexus with Minnesota
39.15under the provisions of Public Law 86-272 are included as income on the return of
39.16an affiliated corporation permitted or required to file a combined report under section
39.17290.17, subdivision 4 , or 290.34, subdivision 2, then for purposes of this subdivision the
39.18determination as to whether the trade or business of the corporation consists principally
39.19of the holding of stocks and the collection of income and gains therefrom shall be made
39.20with reference to the trade or business of the affiliated corporation having a nexus with
39.21Minnesota.
39.22    (e) The deduction provided by this subdivision does not apply if the dividends are
39.23paid by a FSC as defined in section 922 of the Internal Revenue Code.
39.24    (f) If one or more of the members of the unitary group whose income is included on
39.25the combined report received a dividend, the deduction under this subdivision for each
39.26member of the unitary business required to file a return under this chapter is the product
39.27of: (1) 100 percent of the dividends received by members of the group; (2) the percentage
39.28allowed pursuant to paragraph (a) or (b); and (3) the percentage of the taxpayer's business
39.29income apportionable to this state for the taxable year under section 290.191 or 290.20.
39.30EFFECTIVE DATE.This section is effective for taxable years beginning after
39.31December 31, 2012.

39.32    Sec. 18. Minnesota Statutes 2012, section 298.01, subdivision 3b, is amended to read:
39.33    Subd. 3b. Deductions. (a) For purposes of determining taxable income under
39.34subdivision 3, the deductions from gross income include only those expenses necessary
39.35to convert raw ores to marketable quality. Such expenses include costs associated with
40.1refinement but do not include expenses such as transportation, stockpiling, marketing, or
40.2marine insurance that are incurred after marketable ores are produced, unless the expenses
40.3are included in gross income. The allowable deductions from a mine or plant that mines
40.4and produces more than one mineral, metal, or energy resource must be determined
40.5separately for the purposes of computing the deduction in section 290.01, subdivision 19c,
40.6clause (9). These deductions may be combined on one occupation tax return to arrive at
40.7the deduction from gross income for all production.
40.8(b) The provisions of section 290.01, subdivisions 19c, clauses (6) and (9), and 19d,
40.9clauses (7) and (11) (10), are not used to determine taxable income.
40.10EFFECTIVE DATE.This section is effective for taxable years beginning after
40.11December 31, 2012.

40.12    Sec. 19. REPEALER.
40.13Minnesota Statutes 2012, sections 290.01, subdivision 6b; and 290.0921, subdivision
40.147, are repealed.
40.15EFFECTIVE DATE.This section is effective for taxable years beginning after
40.16December 31, 2012.


40.19    Section 1. Minnesota Statutes 2012, section 16C.03, subdivision 18, is amended to read:
40.20    Subd. 18. Contracts with foreign vendors. (a) The commissioner and other
40.21agencies to which this section applies and the legislative branch of government shall,
40.22subject to paragraph (d), cancel a contract for goods or services from a vendor or an
40.23affiliate of a vendor or suspend or debar a vendor or an affiliate of a vendor from future
40.24contracts upon notification from the commissioner of revenue that the vendor or an
40.25affiliate of the vendor has not registered to collect the sales and use tax imposed under
40.26chapter 297A on its sales in Minnesota or to a destination in Minnesota. This subdivision
40.27shall not apply to state colleges and universities, the courts, and any agency in the judicial
40.28branch of government. For purposes of this subdivision, the term "affiliate" means any
40.29person or entity that is controlled by, or is under common control of, a vendor through
40.30stock ownership or other affiliation.
40.31    (b) Beginning January 1, 2006, Each vendor or affiliate of a vendor selling goods or
40.32services, subject to tax under chapter 297A, to an agency or the legislature must register
40.33with the commissioner of revenue as provided in section 297A.83, and comply with all legal
41.1requirements imposed on a person maintaining a place of business in this state, including
41.2the requirement to collect and remit sales and use tax on all taxable sales to customers in
41.3the state, and provide its Minnesota sales and use tax business identification number, upon
41.4request, to show that the vendor is registered to collect Minnesota sales or use tax.
41.5    (c) The commissioner of revenue shall periodically provide to the commissioner
41.6and the legislative branch a list of vendors who have not registered to collect Minnesota
41.7sales and use tax and who are subject to being suspended or debarred as vendors or having
41.8their contracts canceled.
41.9    (d) The provisions of this subdivision may be waived by the commissioner or the
41.10legislative branch when the vendor is the single source of such goods or services, in the
41.11event of an emergency, or when it is in the best interests of the state as determined by the
41.12commissioner in consultation with the commissioner of revenue. Such consultation is not
41.13a disclosure violation under chapter 270B.

41.14    Sec. 2. Minnesota Statutes 2012, section 297A.61, subdivision 3, is amended to read:
41.15    Subd. 3. Sale and purchase. (a) "Sale" and "purchase" include, but are not limited
41.16to, each of the transactions listed in this subdivision.
41.17    (b) Sale and purchase include:
41.18    (1) any transfer of title or possession, or both, of tangible personal property, whether
41.19absolutely or conditionally, for a consideration in money or by exchange or barter; and
41.20    (2) the leasing of or the granting of a license to use or consume, for a consideration
41.21in money or by exchange or barter, tangible personal property, other than a manufactured
41.22home used for residential purposes for a continuous period of 30 days or more.
41.23    (c) Sale and purchase include the production, fabrication, printing, or processing of
41.24tangible personal property for a consideration for consumers who furnish either directly or
41.25indirectly the materials used in the production, fabrication, printing, or processing.
41.26    (d) Sale and purchase include the preparing for a consideration of food.
41.27Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited
41.28to, the following:
41.29    (1) prepared food sold by the retailer;
41.30    (2) soft drinks;
41.31    (3) candy;
41.32    (4) dietary supplements; and
41.33    (5) all food sold through vending machines.
41.34    (e) A sale and a purchase includes the furnishing for a consideration of electricity,
41.35gas, water, or steam for use or consumption within this state.
42.1    (f) A sale and a purchase includes:
42.2    (1) the transfer for a consideration of prewritten computer software whether
42.3delivered electronically, by load and leave, or otherwise.; and
42.4    (2) the receipt of custom computer software whether delivered electronically, by
42.5load and leave, or otherwise.
42.6    (g) A sale and a purchase includes the furnishing for a consideration of the following
42.7services:
42.8    (1) the privilege of admission to places of amusement, exhibitions, recreational
42.9areas, or professional athletic events, including the rental of box seats and suites at
42.10professional athletic events, and the making available of amusement devices, tanning
42.11facilities, reducing salons, steam baths, Turkish baths, health clubs, and spas or athletic
42.12facilities. The term "exhibitions" includes, but is not limited to, trade shows, boat shows,
42.13home shows, garden shows, and other similar events;
42.14    (2) lodging and related services by a hotel, rooming house, resort, campground,
42.15motel, or trailer camp, including furnishing the guest of the facility with access to
42.16telecommunication services, and the granting of any similar license to use real property in
42.17a specific facility, other than the renting or leasing of it for a continuous period of 30 days
42.18or more under an enforceable written agreement that may not be terminated without prior
42.19notice and including accommodations intermediary services provided in connection with
42.20other services provided under this clause;
42.21    (3) nonresidential parking services, whether on a contractual, hourly, or other
42.22periodic basis, except for parking at a meter;
42.23    (4) the granting of membership in a club, association, or other organization if:
42.24    (i) the club, association, or other organization makes available for the use of its
42.25members sports and athletic facilities, without regard to whether a separate charge is
42.26assessed for use of the facilities; and
42.27    (ii) use of the sports and athletic facility is not made available to the general public
42.28on the same basis as it is made available to members.
42.29Granting of membership means both onetime initiation fees and periodic membership
42.30dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and
42.31squash courts; basketball and volleyball facilities; running tracks; exercise equipment;
42.32swimming pools; and other similar athletic or sports facilities;
42.33    (5) delivery of aggregate materials by a third party, excluding delivery of aggregate
42.34material used in road construction; and delivery of concrete block by a third party if the
42.35delivery would be subject to the sales tax if provided by the seller of the concrete block.
42.36For purposes of this clause, "road construction" means construction of:
43.1    (i) public roads;
43.2    (ii) cartways; and
43.3    (iii) private roads in townships located outside of the seven-county metropolitan area
43.4up to the point of the emergency response location sign; and
43.5    (6) services as provided in this clause:
43.6    (i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
43.7and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
43.8drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
43.9include services provided by coin operated facilities operated by the customer;
43.10    (ii) motor vehicle washing, waxing, and cleaning services, including services
43.11provided by coin operated facilities operated by the customer, and rustproofing,
43.12undercoating, and towing of motor vehicles;
43.13    (iii) building and residential cleaning, maintenance, and disinfecting services and
43.14pest control and exterminating services;
43.15    (iv) detective, security, burglar, fire alarm, and armored car services; but not including
43.16services performed within the jurisdiction they serve by off-duty licensed peace officers as
43.17defined in section 626.84, subdivision 1, or services provided by a nonprofit organization
43.18for monitoring and electronic surveillance of persons placed on in-home detention
43.19pursuant to court order or under the direction of the Minnesota Department of Corrections;
43.20    (v) pet grooming services;
43.21    (vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
43.22and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor
43.23plant care; tree, bush, shrub, and stump removal, except when performed as part of a land
43.24clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for
43.25public utility lines. Services performed under a construction contract for the installation of
43.26shrubbery, plants, sod, trees, bushes, and similar items are not taxable;
43.27    (vii) massages, except when provided by a licensed health care facility or
43.28professional or upon written referral from a licensed health care facility or professional for
43.29treatment of illness, injury, or disease; and
43.30    (viii) the furnishing of lodging, board, and care services for animals in kennels and
43.31other similar arrangements, but excluding veterinary and horse boarding services.
43.32    In applying the provisions of this chapter, the terms "tangible personal property"
43.33and "retail sale" include taxable services listed in clause (6), items (i) to (vi) and (viii),
43.34and the provision of these taxable services, unless specifically provided otherwise.
43.35Services performed by an employee for an employer are not taxable. Services performed
43.36by a partnership or association for another partnership or association are not taxable if
44.1one of the entities owns or controls more than 80 percent of the voting power of the
44.2equity interest in the other entity. Services performed between members of an affiliated
44.3group of corporations are not taxable. For purposes of the preceding sentence, "affiliated
44.4group of corporations" means those entities that would be classified as members of an
44.5affiliated group as defined under United States Code, title 26, section 1504, disregarding
44.6the exclusions in section 1504(b).
44.7    For purposes of clause (5), "road construction" means construction of (1) public
44.8roads, (2) cartways, and (3) private roads in townships located outside of the seven-county
44.9metropolitan area up to the point of the emergency response location sign.
44.10    (h) A sale and a purchase includes the furnishing for a consideration of tangible
44.11personal property or taxable services by the United States or any of its agencies or
44.12instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political
44.13subdivisions.
44.14    (i) A sale and a purchase includes the furnishing for a consideration of
44.15telecommunications services, ancillary services associated with telecommunication
44.16services, cable and pay television services, and direct satellite services. Telecommunication
44.17services include, but are not limited to, the following services, as defined in section
44.18297A.669 : air-to-ground radiotelephone service, mobile telecommunication service,
44.19postpaid calling service, prepaid calling service, prepaid wireless calling service, and
44.20private communication services. The services in this paragraph are taxed to the extent
44.21allowed under federal law.
44.22    (j) A sale and a purchase includes the furnishing for a consideration of installation if
44.23the installation charges would be subject to the sales tax if the installation were provided
44.24by the seller of the item being installed.
44.25    (k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer
44.26to a customer when (1) the vehicle is rented by the customer for a consideration, or (2)
44.27the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section
44.2859B.02, subdivision 11.
44.29    (l) A sale and a purchase includes the furnishing for a consideration of specified
44.30digital products or other digital products and granting the right for a consideration to use
44.31specified digital products or other digital products on a temporary or permanent basis and
44.32regardless of whether the purchaser is required to make continued payments for such
44.33right. Wherever the term "tangible personal property" is used in this chapter, other than in
44.34subdivisions 10 and 38, the provisions also apply to specified digital products, or other
44.35digital products, unless specifically provided otherwise or the context indicates otherwise.
44.36(m) A sale and purchase includes:
45.1(1) any service performed for the care, cleansing, beautification, or alteration of the
45.2appearance of the body, skin, nails, or hair, or in the enhancement of personal relaxation,
45.3appearance, or health, but excluding mortuary services;
45.4(2) repair labor for:
45.5(i) farm machinery as defined under section 297A.61, subdivision 12;
45.6(ii) motor vehicles as defined under section 297B.01, subdivision 11, except for
45.7motor vehicles sold at wholesale auction at an auto auction facility; and
45.8(iii) any other tangible personal property;
45.9(3) warehousing or storage services for tangible personal property excluding storage
45.10of farm products and storage of electronic data; and
45.11(4) the furnishing for consideration of documents prepared in connection with any
45.12legal proceeding, including a trial hearing, deposition, arbitration, or mediation.
45.13(n) A sale and purchase includes any personal service not subject to taxation under
45.14paragraph (g), clause (6), or paragraph (m), including, but not limited to, event planning,
45.15dating services, personal shopping, personal concierge services, or personal or household
45.16organizing services, but excluding the services in section 297A.715, subdivisions 19 to 27.
45.17(o) In applying the provisions of this chapter, the terms "tangible personal property"
45.18and "retail sale" include taxable services listed in paragraph (g), clause (6), items (i) to (vi)
45.19and (viii), and paragraphs (m) and (n), and the provision of these taxable services, unless
45.20specifically provided otherwise.
45.21EFFECTIVE DATE.This section is effective for sales and purchases made after
45.22June 30, 2013.

45.23    Sec. 3. Minnesota Statutes 2012, section 297A.61, subdivision 4, is amended to read:
45.24    Subd. 4. Retail sale. (a) A "retail sale" means:
45.25    (1) any sale, lease, or rental of tangible personal property for any purpose, other than
45.26resale, sublease, or subrent of items by the purchaser in the normal course of business
45.27as defined in subdivision 21; and
45.28    (2) any sale of a service enumerated in subdivision 3, for any purpose other than
45.29resale by the purchaser in the normal course of business as defined in subdivision 21.
45.30    (b) A sale of property used by the owner only by leasing it to others or by holding it
45.31in an effort to lease it, and put to no use by the owner other than resale after the lease or
45.32effort to lease, is a sale of property for resale.
45.33    (c) A sale of master computer software that is purchased and used to make copies for
45.34sale or lease is a sale of property for resale.
46.1    (d) A sale of building materials, supplies, and equipment to owners, contractors,
46.2subcontractors, or builders for the erection of buildings or the alteration, repair, or
46.3improvement of real property is a retail sale in whatever quantity sold, whether the sale is
46.4for purposes of resale in the form of real property or otherwise.
46.5    (e) A sale of carpeting, linoleum, or similar floor covering to a person who provides
46.6for installation of the floor covering is a retail sale and not a sale for resale since a sale of
46.7floor covering which includes installation is a contract for the improvement of real property.
46.8    (f) A sale of shrubbery, plants, sod, trees, and similar items to a person who provides
46.9for installation of the items is a retail sale and not a sale for resale since a sale of
46.10shrubbery, plants, sod, trees, and similar items that includes installation is a contract for
46.11the improvement of real property.
46.12    (g) A sale of tangible personal property that is awarded as prizes is a retail sale and
46.13is not considered a sale of property for resale.
46.14    (h) A sale of tangible personal property utilized or employed in the furnishing or
46.15providing of services under subdivision 3, paragraph (g), clause (1), including, but not
46.16limited to, property given as promotional items, is a retail sale and is not considered a
46.17sale of property for resale.
46.18    (i) A sale of tangible personal property used in conducting lawful gambling under
46.19chapter 349 or the State Lottery under chapter 349A, including, but not limited to, property
46.20given as promotional items, is a retail sale and is not considered a sale of property for resale.
46.21    (j) A sale of machines, equipment, or devices that are used to furnish, provide, or
46.22dispense goods or services, including, but not limited to, coin-operated devices, is a retail
46.23sale and is not considered a sale of property for resale.
46.24    (k) In the case of a lease, a retail sale occurs (1) when an obligation to make a lease
46.25payment becomes due under the terms of the agreement or the trade practices of the
46.26lessor or (2) in the case of a lease of a motor vehicle, as defined in section 297B.01,
46.27subdivision 11 , but excluding vehicles with a manufacturer's gross vehicle weight rating
46.28greater than 10,000 pounds and rentals of vehicles for not more than 28 days, at the time
46.29the lease is executed.
46.30    (l) In the case of a conditional sales contract, a retail sale occurs upon the transfer of
46.31title or possession of the tangible personal property.
46.32    (m) A sale of a bundled transaction in which one or more of the products included
46.33in the bundle is a taxable product is a retail sale, except that if one of the products
46.34is a telecommunication service, ancillary service, Internet access, or audio or video
46.35programming service, and the seller has maintained books and records identifying through
46.36reasonable and verifiable standards the portions of the price that are attributable to the
47.1distinct and separately identifiable products, then the products are not considered part of a
47.2bundled transaction. For purposes of this paragraph:
47.3    (1) the books and records maintained by the seller must be maintained in the regular
47.4course of business, and do not include books and records created and maintained by the
47.5seller primarily for tax purposes;
47.6    (2) books and records maintained in the regular course of business include, but are
47.7not limited to, financial statements, general ledgers, invoicing and billing systems and
47.8reports, and reports for regulatory tariffs and other regulatory matters; and
47.9    (3) books and records are maintained primarily for tax purposes when the books
47.10and records identify taxable and nontaxable portions of the price, but the seller maintains
47.11other books and records that identify different prices attributable to the distinct products
47.12included in the same bundled transaction.
47.13(n) A sale of motor vehicle repair paint and materials by a motor vehicle repair or
47.14body shop business is a retail sale and the sales tax is imposed on the gross receipts from the
47.15retail sale of the paint and materials. The motor vehicle repair or body shop that purchases
47.16motor vehicle repair paint and motor vehicle repair materials for resale must either:
47.17(1) separately state each item of paint and each item of materials, and the sales price
47.18of each, on the invoice to the purchaser; or
47.19(2) in order to calculate the sales price of the paint and materials, use a method
47.20which estimates the amount and monetary value of the paint and materials used in
47.21the repair of the motor vehicle by multiplying the number of labor hours by a rate of
47.22consideration for the paint and materials used in the repair of the motor vehicle following
47.23industry standard practices that fairly calculate the gross receipts from the retail sale of
47.24the motor vehicle repair paint and motor vehicle repair materials. An industry standard
47.25practice fairly calculates the gross receipts if the sales price of the paint and materials used
47.26or consumed in the repair of a motor vehicle equals or exceeds the purchase price paid
47.27by the motor vehicle repair or body shop business. Under clause (1), the invoice must
47.28either separately state the "paint and materials" as a single taxable item, or separately state
47.29"paint" as a taxable item and "materials" as a taxable item. This clause does not apply to
47.30wholesale transactions at an auto auction facility.
47.31    (o) A sale of specified digital products or other digital products to an end user with
47.32or without rights of permanent use and regardless of whether rights of use are conditioned
47.33upon continued payment by the purchaser is a retail sale. When a digital code has been
47.34purchased that relates to specified digital products or other digital products, the subsequent
47.35receipt of or access to the related specified digital products or other digital products
47.36is not a retail sale.
48.1EFFECTIVE DATE.This section is effective for sales and purchases made after
48.2June 30, 2013.

48.3    Sec. 4. Minnesota Statutes 2012, section 297A.61, subdivision 10, is amended to read:
48.4    Subd. 10. Tangible personal property. (a) "Tangible personal property" means
48.5personal property that can be seen, weighed, measured, felt, or touched, or that is in any
48.6other manner perceptible to the senses. "Tangible personal property" includes, but is not
48.7limited to, electricity, water, gas, steam, and prewritten computer software.
48.8    (b) Tangible personal property does not include:
48.9    (1) large ponderous machinery and equipment used in a business or production
48.10activity which at common law would be considered to be real property;
48.11    (2) property which is subject to an ad valorem property tax;
48.12    (3) property described in section 272.02, subdivision 9, clauses (a) to (d); and
48.13    (4) property described in section 272.03, subdivision 2, clauses (3) and (5).; and
48.14(5) specified digital products, or other digital products, transferred electronically,
48.15except that prewritten computer software delivered electronically is tangible personal
48.16property.
48.17EFFECTIVE DATE.This section is effective for sales and purchases made after
48.18June 30, 2013.

48.19    Sec. 5. Minnesota Statutes 2012, section 297A.61, subdivision 17a, is amended to read:
48.20    Subd. 17a. Delivered electronically. "Delivered electronically" means delivered
48.21to the purchaser by means other than tangible storage media and, unless the context
48.22indicates otherwise, applies to the delivery of computer software. Computer software is
48.23not considered delivered electronically to a purchaser simply because the purchaser has
48.24access to the product.
48.25EFFECTIVE DATE.This section is effective for sales and purchases the day
48.26following final enactment.

48.27    Sec. 6. Minnesota Statutes 2012, section 297A.61, subdivision 25, is amended to read:
48.28    Subd. 25. Cable Pay television service. "Cable Pay television service" means
48.29the transmission of video, audio, or other programming service to purchasers, and the
48.30subscriber interaction, if any, required for the selection or use of the programming service,
48.31regardless of whether the programming is transmitted over facilities owned or operated
48.32by the cable service provider or over facilities owned or operated by one or more dealers
49.1of communications services. The term includes point-to-multipoint distribution direct to
49.2home satellite services by which programming is transmitted or broadcast by microwave
49.3or other equipment directly to the subscriber's premises, or any similar or comparable
49.4method of service. The term includes basic, extended, premium, all programming services,
49.5including subscriptions, digital video recorders, pay-per-view, digital, and music services.
49.6EFFECTIVE DATE.This section is effective for sales and purchases made after
49.7June 30, 2013.

49.8    Sec. 7. Minnesota Statutes 2012, section 297A.61, subdivision 38, is amended to read:
49.9    Subd. 38. Bundled transaction. (a) "Bundled transaction" means the retail sale
49.10of two or more products when the products are otherwise distinct and identifiable, and
49.11the products are sold for one nonitemized price. As used in this subdivision, "product"
49.12includes tangible personal property, services, intangibles, and digital goods, including
49.13specified digital products or other digital products, but does not include real property or
49.14services to real property. A bundled transaction does not include the sale of any products
49.15in which the sales price varies, or is negotiable, based on the selection by the purchaser of
49.16the products included in the transaction.
49.17    (b) For purposes of this subdivision, "distinct and identifiable" products does not
49.18include:
49.19    (1) packaging and other materials, such as containers, boxes, sacks, bags, and
49.20bottles, wrapping, labels, tags, and instruction guides, that accompany the retail sale of the
49.21products and are incidental or immaterial to the retail sale. Examples of packaging that are
49.22incidental or immaterial include grocery sacks, shoe boxes, dry cleaning garment bags,
49.23and express delivery envelopes and boxes;
49.24    (2) a promotional product provided free of charge with the required purchase of
49.25another product. A promotional product is provided free of charge if the sales price of
49.26another product, which is required to be purchased in order to receive the promotional
49.27product, does not vary depending on the inclusion of the promotional product; and
49.28    (3) items included in the definition of sales price.
49.29    (c) For purposes of this subdivision, the term "one nonitemized price" does not
49.30include a price that is separately identified by product on binding sales or other supporting
49.31sales-related documentation made available to the customer in paper or electronic form
49.32including but not limited to an invoice, bill of sale, receipt, contract, service agreement,
49.33lease agreement, periodic notice of rates and services, rate card, or price list.
49.34    (d) A transaction that otherwise meets the definition of a bundled transaction is
49.35not a bundled transaction if it is:
50.1    (1) the retail sale of tangible personal property and a service and the tangible
50.2personal property is essential to the use of the service, and is provided exclusively in
50.3connection with the service, and the true object of the transaction is the service;
50.4    (2) the retail sale of services if one service is provided that is essential to the use or
50.5receipt of a second service and the first service is provided exclusively in connection with
50.6the second service and the true object of the transaction is the second service;
50.7    (3) a transaction that includes taxable products and nontaxable products and the
50.8purchase price or sales price of the taxable products is de minimis; or
50.9    (4) the retail sale of exempt tangible personal property and taxable tangible personal
50.10property if:
50.11    (i) the transaction includes food and food ingredients, drugs, durable medical
50.12equipment, mobility enhancing equipment, over-the-counter drugs, prosthetic devices,
50.13or medical supplies; and
50.14    (ii) the seller's purchase price or sales price of the taxable tangible personal property is
50.1550 percent or less of the total purchase price or sales price of the bundled tangible personal
50.16property. Sellers must not use a combination of the purchase price and sales price of the
50.17tangible personal property when making the 50 percent determination for a transaction.
50.18    (e) For purposes of this subdivision, "purchase price" means the measure subject to
50.19use tax on purchases made by the seller, and "de minimis" means that the seller's purchase
50.20price or sales price of the taxable products is ten percent or less of the total purchase
50.21price or sales price of the bundled products. Sellers shall use either the purchase price
50.22or the sales price of the products to determine if the taxable products are de minimis.
50.23Sellers must not use a combination of the purchase price and sales price of the products
50.24to determine if the taxable products are de minimis. Sellers shall use the full term of a
50.25service contract to determine if the taxable products are de minimis.
50.26EFFECTIVE DATE.This section is effective for sales and purchases made after
50.27June 30, 2013.

50.28    Sec. 8. Minnesota Statutes 2012, section 297A.61, subdivision 45, is amended to read:
50.29    Subd. 45. Ring tone. "Ring tone" means a digitized sound file that is downloaded
50.30onto a device and that may be used to alert the customer of a telecommunication service
50.31 with respect to a communication. A ring tone does not include ring back tones or other
50.32digital audio files that are not stored on the purchaser's communication device.
50.33EFFECTIVE DATE.This section is effective for sales and purchases made after
50.34June 30, 2013.

51.1    Sec. 9. Minnesota Statutes 2012, section 297A.61, is amended by adding a subdivision
51.2to read:
51.3    Subd. 49. Motor vehicle repair paint and motor vehicle repair materials.
51.4"Motor vehicle repair paint" means a substance composed of solid matter suspended in a
51.5liquid medium and applied as a protective or decorative coating to the surface of a motor
51.6vehicle in order to restore the motor vehicle to its original condition, and includes primer,
51.7body paint, clear coat, and paint thinner used to paint motor vehicles, as defined in section
51.8297B.01. "Motor vehicle repair materials" means items, other than motor vehicle repair
51.9paint or motor vehicle parts, that become a part of a repaired motor vehicle or are consumed
51.10in repairing the motor vehicle at retail, and include abrasives, battery water, body filler or
51.11putty, bolts and nuts, brake fluid, buffing pads, chamois, cleaning compounds, degreasing
51.12compounds, glaze, grease, grinding discs, hydraulic jack oil, lubricants, masking tape,
51.13oxygen and acetylene, polishes, rags, razor blades, sandpaper, sanding discs, scuff pads,
51.14sealer, solder, solvents, striping tape, tack cloth, thinner, waxes, and welding rods. Motor
51.15vehicle repair materials do not include items that are not used directly on the motor vehicle,
51.16such as floor dry that is used to clean the shop, or cleaning compounds and rags that are
51.17used to clean tools, equipment, or the shop and are not used to clean the motor vehicle.
51.18EFFECTIVE DATE.This section is effective for sales and purchases made after
51.19June 30, 2013.

51.20    Sec. 10. Minnesota Statutes 2012, section 297A.61, is amended by adding a
51.21subdivision to read:
51.22    Subd. 50. Digital audio works. "Digital audio works" means works that result from
51.23a fixation of a series of musical, spoken, or other sounds, that are transferred electronically.
51.24Digital audio works includes such items as the following which may either be prerecorded
51.25or live: songs, music, readings of books or other written materials, speeches, ring tones, or
51.26other sound recordings. Digital audio works does not include audio greeting cards sent by
51.27electronic mail. Unless the context provides otherwise, in this chapter digital audio works
51.28includes the digital code, or a subscription to or access to a digital code, for receiving,
51.29accessing, or otherwise obtaining digital audio works.
51.30EFFECTIVE DATE.This section is effective for sales and purchases made after
51.31June 30, 2013.

51.32    Sec. 11. Minnesota Statutes 2012, section 297A.61, is amended by adding a
51.33subdivision to read:
52.1    Subd. 51. Digital audiovisual works. "Digital audiovisual works" means a series
52.2of related images which, when shown in succession, impart an impression of motion,
52.3together with accompanying sounds, if any, that are transferred electronically. Digital
52.4audiovisual works includes such items as motion pictures, movies, musical videos, news
52.5and entertainment, and live events. Digital audiovisual works does not include video
52.6greeting cards sent by electronic mail. Unless the context provides otherwise, in this
52.7chapter digital audiovisual works includes the digital code, or a subscription to or access to
52.8a digital code, for receiving, accessing, or otherwise obtaining digital audiovisual works.
52.9EFFECTIVE DATE.This section is effective for sales and purchases made after
52.10June 30, 2013.

52.11    Sec. 12. Minnesota Statutes 2012, section 297A.61, is amended by adding a
52.12subdivision to read:
52.13    Subd. 52. Digital books. "Digital books" means any literary works, other than
52.14digital audiovisual works or digital audio works, expressed in words, numbers, or other
52.15verbal or numerical symbols or indicia so long as the product is generally recognized in
52.16the ordinary and usual sense as a "book." It includes works of fiction and nonfiction and
52.17short stories. It does not include periodicals, magazines, newspapers, or other news or
52.18information products, chat rooms, or weblogs. Unless the context provides otherwise, in
52.19this chapter digital books includes the digital code, or a subscription to or access to a
52.20digital code, for receiving, accessing, or otherwise obtaining digital books.
52.21EFFECTIVE DATE.This section is effective for sales and purchases made after
52.22June 30, 2013.

52.23    Sec. 13. Minnesota Statutes 2012, section 297A.61, is amended by adding a
52.24subdivision to read:
52.25    Subd. 53. Digital code. "Digital code" means a code which provides a purchaser
52.26with a right to obtain one or more specified digital products or other digital products.
52.27A digital code may be transferred electronically, such as through electronic mail, or it
52.28may be transferred on a tangible medium, such as on a plastic card, a piece of paper or
52.29invoice, or imprinted on another product. A digital code is not a code that represents a
52.30stored monetary value that is deducted from a total as it is used by the purchaser, and it
52.31is not a code that represents a redeemable card, gift card, or gift certificate that entitles
52.32the holder to select a digital product of an indicated cash value. The end user of a digital
53.1code is any purchaser except one who receives the contractual right to redistribute a digital
53.2product which is the subject of the transaction.
53.3EFFECTIVE DATE.This section is effective for sales and purchases made after
53.4June 30, 2013.

53.5    Sec. 14. Minnesota Statutes 2012, section 297A.61, is amended by adding a
53.6subdivision to read:
53.7    Subd. 54. Other digital products. "Other digital products" means the following
53.8items when transferred electronically:
53.9(1) greeting cards;
53.10(2) finished artwork available for reproduction, display, or similar purposes;
53.11(3) video or electronic games;
53.12(4) periodicals;
53.13(5) magazines; and
53.14(6) other news or information products, excluding newspapers.
53.15EFFECTIVE DATE.This section is effective for sales and purchases made after
53.16June 30, 2013.

53.17    Sec. 15. Minnesota Statutes 2012, section 297A.61, is amended by adding a
53.18subdivision to read:
53.19    Subd. 55. Specified digital products. "Specified digital products" means digital
53.20audio works, digital audiovisual works, and digital books that are transferred electronically
53.21to a customer.
53.22EFFECTIVE DATE.This section is effective for sales and purchases made after
53.23June 30, 2013.

53.24    Sec. 16. Minnesota Statutes 2012, section 297A.61, is amended by adding a
53.25subdivision to read:
53.26    Subd. 56. Transferred electronically. "Transferred electronically" means obtained
53.27by the purchaser by means other than tangible storage media. For purposes of this
53.28subdivision, it is not necessary that a copy of the product be physically transferred to
53.29the purchaser. A product will be considered to have been transferred electronically to a
53.30purchaser if the purchaser has access to the product.
54.1EFFECTIVE DATE.This section is effective for sales and purchases made after
54.2June 30, 2013.

54.3    Sec. 17. Minnesota Statutes 2012, section 297A.61, is amended by adding a
54.4subdivision to read:
54.5    Subd. 57. Service. "Service" means all activities engaged in for a fee, retainer,
54.6commission, or other consideration, as distinguished from sales and purchases of tangible
54.7personal property. In determining what is a service, the intended use, or the principal or
54.8ultimate objective of the contracting parties, shall not be controlling.
54.9EFFECTIVE DATE.This section is effective for sales and purchases made after
54.10June 30, 2013.

54.11    Sec. 18. Minnesota Statutes 2012, section 297A.62, subdivision 1, is amended to read:
54.12    Subdivision 1. Generally. Except as otherwise provided in subdivision 3 or in this
54.13chapter, a sales tax of 6.5 5.677 percent is imposed on the gross receipts from retail sales
54.14as defined in section 297A.61, subdivision 4, made in this state or to a destination in this
54.15state by a person who is required to have or voluntarily obtains a permit under section
54.16297A.83, subdivision 1 .
54.17EFFECTIVE DATE.This section is effective for sales and purchases made after
54.18June 30, 2013.

54.19    Sec. 19. Minnesota Statutes 2012, section 297A.62, subdivision 1a, is amended to read:
54.20    Subd. 1a. Constitutionally required sales tax increase. Except as otherwise
54.21provided in subdivision 3 or in this chapter, an additional sales tax of 0.375 0.323 percent,
54.22as required under the Minnesota Constitution, article XI, section 15, is imposed on the gross
54.23receipts from retail sales as defined in section 297A.61, subdivision 4, made in this state or
54.24to a destination in this state by a person who is required to have or voluntarily obtains a
54.25permit under section 297A.83, subdivision 1. This additional tax expires July 1, 2034.
54.26EFFECTIVE DATE.This section is effective for sales and purchases made after
54.27June 30, 2013.

54.28    Sec. 20. Minnesota Statutes 2012, section 297A.65, is amended to read:
54.29297A.65 LOTTERY TICKETS; IN LIEU TAX.
55.1Sales of state lottery tickets are exempt from the tax imposed under section
55.2297A.62 . The State Lottery must on or before the 20th day of each month transmit to
55.3the commissioner of revenue an amount equal to the gross receipts from the sale of
55.4lottery tickets for the previous month multiplied by the a tax rate under section 297A.62,
55.5subdivision 1 of 6.5 percent. The resulting payment is in lieu of the sales tax that otherwise
55.6would be imposed by this chapter. The commissioner shall deposit the money transmitted
55.7as provided by section 297A.94 and the money must be treated as other proceeds of the
55.8sales tax. For purposes of this section, "gross receipts" means the proceeds of the sale
55.9of tickets before deduction of a commission or other compensation paid to the vendor or
55.10retailer for selling tickets.
55.11EFFECTIVE DATE.This section is effective for sales and purchases made after
55.12June 30, 2013.

55.13    Sec. 21. Minnesota Statutes 2012, section 297A.66, subdivision 1, is amended to read:
55.14    Subdivision 1. Definitions. (a) To the extent allowed by the United States
55.15Constitution and the laws of the United States, A"retailer maintaining a place of business
55.16in this state," or a similar term, means a retailer:
55.17    (1) having or maintaining within this state, directly or by a subsidiary or an affiliate,
55.18 an office, place of distribution, sales or sample room or place, warehouse, or other place
55.19of business; or
55.20    (2) having utilizing a representative, including, but not limited to, an affiliate, agent,
55.21salesperson, canvasser, or solicitor operating in this state under the authority of the retailer
55.22or its subsidiary, for any purpose, including the repairing, selling, delivering, installing, or
55.23soliciting of orders for the retailer's goods or services, or the leasing of tangible personal
55.24property located in this state, whether the place of business or agent, representative, affiliate,
55.25 salesperson, canvasser, or solicitor is located in the state permanently or temporarily, or
55.26whether or not the retailer, subsidiary, or affiliate is authorized to do business in this state.
55.27    (b) "Destination of a sale" means the location to which the retailer makes delivery of
55.28the property sold, or causes the property to be delivered, to the purchaser of the property,
55.29or to the agent or designee of the purchaser. The delivery may be made by any means,
55.30including the United States Postal Service or a for-hire carrier.
55.31    (c) A retailer shall be presumed to be "maintaining a place of business in this state" if:
55.32    (1) any person, other than a person acting in the person's capacity as a common
55.33carrier, that has substantial nexus with this state:
55.34    (i) sells a similar line of products as the retailer and does so under the same or
55.35a similar business name;
56.1    (ii) maintains an office, distribution facility, warehouse or storage place, or similar
56.2place of business in the state to facilitate the delivery of property or services sold by the
56.3retailer to the retailer's customers;
56.4    (iii) uses trademarks, service marks, or trade names in the state that are substantially
56.5the same or substantially similar to those used by the retailer;
56.6    (iv) delivers, installs, assembles, or performs maintenance services for the retailer's
56.7customers within the state;
56.8    (v) facilitates the retailer's delivery of property to customers in the state by allowing
56.9the retailer's customers to pick up property sold by the retailer at an office, distribution
56.10facility, warehouse, storage space, or similar place of business maintained by the person in
56.11the state;
56.12    (vi) conducts any other activities in the state that are significantly associated with the
56.13retailer's ability to establish and maintain a market in the state for the retailer's sales; or
56.14    (2) any affiliated person has substantial nexus with the state.
56.15    (d) The presumptions in paragraph (c) may be rebutted by demonstrating that the
56.16activities of the person or affiliated person in the state are not significantly associated with
56.17the retailer's ability to establish or maintain a market in this state for the retailer's sales.
56.18    (e) "Affiliated person" means any person that is a member of the same controlled
56.19group of corporations, as defined in section 1563(a) of the Internal Revenue Code as
56.20the retailer, or any other entity that, notwithstanding its form of organization, bears the
56.21same ownership relationship to the retailer as a corporation that is a member of the same
56.22controlled group of corporations as defined in section 1563(a) of the Internal Revenue Code.
56.23    (f) "Solicitor" means a person, whether an independent contractor or other
56.24representative, who directly or indirectly solicits business for the retailer.
56.25     (1) A retailer is presumed to have a solicitor in this state if it enters into an agreement
56.26with one or more persons under which the person, for a commission or other consideration,
56.27while within this state directly or indirectly refers potential customers, whether by a link
56.28on an Internet Web site, by telemarketing, by an in-person oral presentation, or otherwise,
56.29to the retailer, if the cumulative gross receipts from the sales by the retailer to customers in
56.30the state who are referred to the retailer by all persons within this state with this type of an
56.31agreement with the retailer is in excess of $10,000 during the preceding 12 months.
56.32    (2) The presumption in clause (1) may be rebutted by submitting proof that the
56.33persons with whom the retailer has an agreement did not engage in any activity within the
56.34state that was significantly associated with the retailer's ability to establish or maintain
56.35the retailer's market in the state during the preceding 12 months. Such proof may consist
56.36of sworn written statements from all of the persons within this state with whom the
57.1retailer has an agreement stating that they did not engage in any solicitation in this state
57.2on behalf of the retailer during the preceding year, provided that such statements were
57.3provided and obtained in good faith.
57.4    (3) Nothing in this section shall be construed to narrow the scope of the terms
57.5"agent," "salesperson," "canvasser," or "other representative" for purposes of subdivision
57.61, paragraph (a).

57.7    Sec. 22. Minnesota Statutes 2012, section 297A.66, subdivision 3, is amended to read:
57.8    Subd. 3. Retailer not maintaining place of business in this state. (a) To the
57.9extent allowed by the United States Constitution and the laws of the United States, a
57.10retailer making retail sales from outside this state to a destination within this state and
57.11not maintaining a place of business in this state shall collect sales and use taxes and remit
57.12them to the commissioner under section 297A.77, if the retailer engages in the regular or
57.13systematic soliciting of sales from potential customers in this state by:
57.14    (1) distribution, by mail or otherwise, of catalogs, periodicals, advertising flyers, or
57.15other written solicitations of business to customers in this state;
57.16    (2) display of advertisements on billboards or other outdoor advertising in this state;
57.17    (3) advertisements in newspapers published in this state;
57.18    (4) advertisements in trade journals or other periodicals the circulation of which is
57.19primarily within this state;
57.20    (5) advertisements in a Minnesota edition of a national or regional publication or
57.21a limited regional edition in which this state is included as part of a broader regional or
57.22national publication which are not placed in other geographically defined editions of the
57.23same issue of the same publication;
57.24    (6) advertisements in regional or national publications in an edition which is not
57.25by its contents geographically targeted to Minnesota but which is sold over the counter
57.26in Minnesota or by subscription to Minnesota residents;
57.27    (7) advertisements broadcast on a radio or television station located in Minnesota; or
57.28    (8) any other solicitation by telegraphy, telephone, computer database, cable, optic,
57.29microwave, or other communication system.
57.30    This paragraph (a) must be construed without regard to the state from which
57.31distribution of the materials originated or in which they were prepared.
57.32    (b) The location within or without this state of independent vendors that provide
57.33products or services to the retailer in connection with its solicitation of customers within this
57.34state, including such products and services as creation of copy, printing, distribution, and
57.35recording, is not considered in determining whether the retailer is required to collect tax.
58.1    (c) A retailer not maintaining a place of business in this state is presumed, subject to
58.2rebuttal, to be engaged in regular solicitation within this state if it engages in any of the
58.3activities in paragraph (a) and:
58.4    (1) makes 100 or more retail sales from outside this state to destinations in this state
58.5during a period of 12 consecutive months; or
58.6    (2) makes ten or more retail sales totaling more than $100,000 from outside this state
58.7to destinations in this state during a period of 12 consecutive months.

58.8    Sec. 23. Minnesota Statutes 2012, section 297A.66, is amended by adding a
58.9subdivision to read:
58.10    Subd. 7. Severability. The legislature intends that the provisions of this section
58.11are severable. If any provision contained in this bill is held invalid or unconstitutional, or
58.12its application is held invalid or unconstitutional, that finding shall not affect the other
58.13provisions or applications that can be given effect without the invalid or unconstitutional
58.14provision or application.
58.15EFFECTIVE DATE.This section is effective for sales and purchases made after
58.16June 30, 2013.

58.17    Sec. 24. Minnesota Statutes 2012, section 297A.665, is amended to read:
58.18297A.665 PRESUMPTION OF TAX; BURDEN OF PROOF.
58.19    (a) For the purpose of the proper administration of this chapter and to prevent
58.20evasion of the tax, until the contrary is established, it is presumed that:
58.21    (1) all gross receipts are subject to the tax; and
58.22    (2) all retail sales for delivery in Minnesota are for storage, use, or other consumption
58.23in Minnesota.
58.24    (b) The burden of proving that a sale is not a taxable retail sale is on the seller.
58.25However, a seller is relieved of liability if:
58.26    (1) the seller obtains a fully completed exemption certificate or all the relevant
58.27information required by section 297A.72, subdivision 2, at the time of the sale or within
58.2890 days after the date of the sale; or
58.29    (2) if the seller has not obtained a fully completed exemption certificate or all the
58.30relevant information required by section 297A.72, subdivision 2, within the time provided
58.31in clause (1), within 120 days after a request for substantiation by the commissioner,
58.32the seller either:
59.1    (i) obtains in good faith a fully completed exemption certificate or all the relevant
59.2information required by section 297A.72, subdivision 2, from the purchaser; or
59.3    (ii) proves by other means that the transaction was not subject to tax;
59.4    (3) in the case of drop shipment sales, a seller engaged in drop shipping may claim a
59.5resale exemption based on an exemption certificate provided by its customer or reseller,
59.6or any other acceptable information available to the seller engaged in drop shipping
59.7evidencing qualification for a resale exemption, regardless of whether the customer or
59.8e-seller is registered to collect and remit sales and use tax in the state.
59.9    (c) Notwithstanding paragraph (b), relief from liability does not apply to a seller who:
59.10    (1) fraudulently fails to collect the tax; or
59.11    (2) solicits purchasers to participate in the unlawful claim of an exemption.
59.12    (d) A certified service provider, as defined in section 297A.995, subdivision 2, is
59.13relieved of liability under this section to the extent a seller who is its client is relieved of
59.14liability.
59.15    (e) A purchaser of tangible personal property or any items listed in section 297A.63
59.16that are shipped or brought to Minnesota by the purchaser has the burden of proving that the
59.17property was not purchased from a retailer for storage, use, or consumption in Minnesota.
59.18    (f) If a seller claims that certain sales are exempt and does not provide the certificate,
59.19information, or proof required by paragraph (b), clause (2), within 120 days after the date
59.20of the commissioner's request for substantiation, then the exemptions claimed by the seller
59.21that required substantiation are disallowed.
59.22EFFECTIVE DATE.This section is effective for sales and purchases made after
59.23June 30, 2013.

59.24    Sec. 25. Minnesota Statutes 2012, section 297A.668, is amended by adding a
59.25subdivision to read:
59.26    Subd. 6a. Multiple points of use. (a) Notwithstanding the provisions of
59.27subdivisions 2 and 3, a business purchaser that is not a holder of a direct pay permit that
59.28purchases electronically delivered goods or services that will be concurrently available for
59.29use in more than one taxing jurisdiction may deliver to the seller in conjunction with its
59.30purchase a multiple points of use certificate disclosing this fact.
59.31(b) Upon receipt of the multiple points of use certificate, the seller is relieved of the
59.32obligation to collect, pay, or remit the applicable tax and the purchaser is obligated to
59.33collect, pay, or remit the applicable tax on a direct pay basis.
60.1(c) The purchaser delivering the multiple points of use certificate has sole discretion
60.2to use any reasonable but consistent and uniform method of apportionment that is supported
60.3by the purchaser's business records as they exist at the time of the consummation of the sale.
60.4(d) The multiple points of use certificate remains in effect for all future sales by the
60.5seller to the purchaser until it is revoked by the purchaser in writing.
60.6(e) A holder of a direct pay permit is not required to deliver a multiple points of use
60.7certificate to the seller. A direct pay permit holder shall follow the provisions of paragraph
60.8(c) in apportioning the tax due on electronically delivered goods or services that will be
60.9concurrently available for use in more than one taxing jurisdiction.
60.10(f) A seller is relieved of liability if:
60.11(1) the seller obtains a fully completed multiple points of use certificate or all the
60.12relevant information required by section 297A.72, subdivision 2, at the time of the sale or
60.13within 90 days after the date of the sale; or
60.14(2) within 120 days after a request for substantiation by the commissioner, the
60.15seller either:
60.16(i) obtains in good faith a fully completed multiple points of use certificate or all the
60.17relevant information required by section 297A.72, subdivision 2, from the purchaser; or
60.18(ii) proves by other means that the transaction was not subject to tax.
60.19EFFECTIVE DATE.This section is effective for sales and purchases made after
60.20June 30, 2013.

60.21    Sec. 26. Minnesota Statutes 2012, section 297A.67, subdivision 7, is amended to read:
60.22    Subd. 7. Drugs; medical devices. (a) Sales of the following drugs and medical
60.23devices for human use are exempt:
60.24    (1) prescription drugs, including over-the-counter drugs;
60.25    (2) single-use finger-pricking devices for the extraction of blood and other single-use
60.26devices and single-use diagnostic agents used in diagnosing, monitoring, or treating
60.27diabetes;
60.28    (3) insulin and medical oxygen for human use, regardless of whether prescribed
60.29or sold over the counter;
60.30    (4) prosthetic devices;
60.31    (5) durable medical equipment for home use only;
60.32    (6) mobility enhancing equipment;
60.33    (7) prescription corrective eyeglasses; and
60.34    (8) kidney dialysis equipment, including repair and replacement parts.
60.35    (b) For purposes of this subdivision:
61.1    (1) "Drug" means a compound, substance, or preparation, and any component of
61.2a compound, substance, or preparation, other than food and food ingredients, dietary
61.3supplements, or alcoholic beverages that is:
61.4    (i) recognized in the official United States Pharmacopoeia, official Homeopathic
61.5Pharmacopoeia of the United States, or official National Formulary, and supplement
61.6to any of them;
61.7    (ii) intended for use in the diagnosis, cure, mitigation, treatment, or prevention
61.8of disease; or
61.9    (iii) intended to affect the structure or any function of the body.
61.10    (2) "Durable medical equipment" means equipment, including repair and
61.11replacement parts, but not including mobility enhancing equipment, that:
61.12    (i) can withstand repeated use;
61.13    (ii) is primarily and customarily used to serve a medical purpose;
61.14    (iii) generally is not useful to a person in the absence of illness or injury; and
61.15    (iv) is not worn in or on the body.
61.16    For purposes of this clause, "repair and replacement parts" includes all components
61.17or attachments used in conjunction with the durable medical equipment, but does not
61.18include repair and replacement parts which are for single patient use only.
61.19    (3) "Mobility enhancing equipment" means equipment, including repair and
61.20replacement parts, but not including durable medical equipment, that:
61.21    (i) is primarily and customarily used to provide or increase the ability to move from
61.22one place to another and that is appropriate for use either in a home or a motor vehicle;
61.23    (ii) is not generally used by persons with normal mobility; and
61.24    (iii) does not include any motor vehicle or equipment on a motor vehicle normally
61.25provided by a motor vehicle manufacturer.
61.26    (4) "Over-the-counter drug" means a drug that contains a label that identifies the
61.27product as a drug as required by Code of Federal Regulations, title 21, section 201.66. The
61.28label must include a "drug facts" panel or a statement of the active ingredients with a list of
61.29those ingredients contained in the compound, substance, or preparation. Over-the-counter
61.30drugs do not include grooming and hygiene products, regardless of whether they otherwise
61.31meet the definition. "Grooming and hygiene products" are soaps, cleaning solutions,
61.32shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and sunscreens.
61.33    (5) (4) "Prescribed" and "prescription" means a direction in the form of an order,
61.34formula, or recipe issued in any form of oral, written, electronic, or other means of
61.35transmission by a duly licensed health care professional.
62.1    (6) (5) "Prosthetic device" means a replacement, corrective, or supportive device,
62.2including repair and replacement parts, worn on or in the body to:
62.3    (i) artificially replace a missing portion of the body;
62.4    (ii) prevent or correct physical deformity or malfunction; or
62.5    (iii) support a weak or deformed portion of the body.
62.6Prosthetic device does not include corrective eyeglasses.
62.7    (7) (6) "Kidney dialysis equipment" means equipment that:
62.8    (i) is used to remove waste products that build up in the blood when the kidneys are
62.9not able to do so on their own; and
62.10    (ii) can withstand repeated use, including multiple use by a single patient,
62.11notwithstanding the provisions of clause (2).
62.12EFFECTIVE DATE.This section is effective for sales and purchases made after
62.13June 30, 2013.

62.14    Sec. 27. Minnesota Statutes 2012, section 297A.68, subdivision 2, is amended to read:
62.15    Subd. 2. Materials consumed in industrial production. (a) Materials stored, used,
62.16or consumed in industrial production of tangible personal property intended to be sold
62.17ultimately at retail, are exempt, whether or not the item so used becomes an ingredient
62.18or constituent part of the property produced. Materials that qualify for this exemption
62.19include, but are not limited to, the following:
62.20(1) chemicals, including chemicals used for cleaning food processing machinery
62.21and equipment;
62.22(2) materials, including chemicals, fuels, and electricity purchased by persons
62.23engaged in industrial production to treat waste generated as a result of the production
62.24process;
62.25(3) fuels, electricity, gas, and steam used or consumed in the production process,
62.26except that electricity, gas, or steam used for space heating, cooling, or lighting is exempt
62.27if (i) it is in excess of the average climate control or lighting for the production area, and
62.28(ii) it is necessary to produce that particular product;
62.29(4) petroleum products and lubricants;
62.30(5) packaging materials, including returnable containers used in packaging food
62.31and beverage products;
62.32(6) accessory tools, equipment, and other items that are separate detachable units
62.33with an ordinary useful life of less than 12 months used in producing a direct effect upon
62.34the product; and
63.1(7) the following materials, tools, and equipment used in metal-casting: crucibles,
63.2thermocouple protection sheaths and tubes, stalk tubes, refractory materials, molten metal
63.3filters and filter boxes, degassing lances, and base blocks.
63.4(b) This exemption does not include:
63.5(1) machinery, equipment, implements, tools, accessories, appliances, contrivances
63.6and furniture and fixtures, except those listed in paragraph (a), clause (6); and
63.7(2) petroleum and special fuels used in producing or generating power for propelling
63.8ready-mixed concrete trucks on the public highways of this state.
63.9(c) Industrial production includes, but is not limited to, research, development,
63.10design or production of any tangible personal property, manufacturing, processing (other
63.11than by restaurants and consumers) of agricultural products (whether vegetable or animal),
63.12commercial fishing, refining, smelting, reducing, brewing, distilling, printing, mining,
63.13quarrying, lumbering, generating electricity, the production of road building materials,
63.14and the research, development, design, or production of computer software. Industrial
63.15production does not include painting, cleaning, repairing or similar processing of property
63.16except as part of the original manufacturing process.
63.17(d) Industrial production does not include:
63.18(1) the furnishing of services listed in section 297A.61, subdivision 3, paragraph (g),
63.19clause (6), items (i) to (vi) and (viii), or paragraph (m) or (n); or
63.20(2) the transportation, transmission, or distribution of petroleum, liquefied gas,
63.21natural gas, water, or steam, in, by, or through pipes, lines, tanks, mains, or other means of
63.22transporting those products. For purposes of this paragraph, "transportation, transmission,
63.23or distribution" does not include blending of petroleum or biodiesel fuel as defined
63.24in section 239.77.
63.25EFFECTIVE DATE.This section is effective for sales and purchases made after
63.26June 30, 2013.

63.27    Sec. 28. Minnesota Statutes 2012, section 297A.68, subdivision 5, is amended to read:
63.28    Subd. 5. Capital equipment. (a) Capital equipment is exempt. Except as provided
63.29in paragraphs (e) and (f), the tax must be imposed and collected as if the rate under section
63.30297A.62, subdivision 1 , applied, and then refunded in the manner provided in section
63.31297A.75 .
63.32"Capital equipment" means machinery and equipment purchased or leased, and used
63.33in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining,
63.34or refining tangible personal property to be sold ultimately at retail if the machinery and
63.35equipment are essential to the integrated production process of manufacturing, fabricating,
64.1mining, or refining. Capital equipment also includes machinery and equipment
64.2used primarily to electronically transmit results retrieved by a customer of an online
64.3computerized data retrieval system.
64.4(b) Capital equipment includes, but is not limited to:
64.5(1) machinery and equipment used to operate, control, or regulate the production
64.6equipment;
64.7(2) machinery and equipment used for research and development, design, quality
64.8control, and testing activities;
64.9(3) environmental control devices that are used to maintain conditions such as
64.10temperature, humidity, light, or air pressure when those conditions are essential to and are
64.11part of the production process;
64.12(4) materials and supplies used to construct and install machinery or equipment;
64.13(5) repair and replacement parts, including accessories, whether purchased as spare
64.14parts, repair parts, or as upgrades or modifications to machinery or equipment;
64.15(6) materials used for foundations that support machinery or equipment;
64.16(7) materials used to construct and install special purpose buildings used in the
64.17production process;
64.18(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed
64.19as part of the delivery process regardless if mounted on a chassis, repair parts for
64.20ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and
64.21(9) machinery or equipment used for research, development, design, or production
64.22of computer software.
64.23(c) Capital equipment does not include the following:
64.24(1) motor vehicles taxed under chapter 297B;
64.25(2) machinery or equipment used to receive or store raw materials;
64.26(3) building materials, except for materials included in paragraph (b), clauses (6)
64.27and (7);
64.28(4) machinery or equipment used for nonproduction purposes, including, but not
64.29limited to, the following: plant security, fire prevention, first aid, and hospital stations;
64.30support operations or administration; pollution control; and plant cleaning, disposal of
64.31scrap and waste, plant communications, space heating, cooling, lighting, or safety;
64.32(5) farm machinery and aquaculture production equipment as defined by section
64.33297A.61 , subdivisions 12 and 13;
64.34(6) machinery or equipment purchased and installed by a contractor as part of an
64.35improvement to real property;
65.1(7) machinery and equipment used by restaurants in the furnishing, preparing, or
65.2serving of prepared foods as defined in section 297A.61, subdivision 31;
65.3(8) machinery and equipment used to furnish the services listed in section 297A.61,
65.4subdivision 3 , paragraph (g), clause (6), items (i) to (vi) and (viii);
65.5(9) machinery or equipment used in the transportation, transmission, or distribution
65.6of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines,
65.7tanks, mains, or other means of transporting those products. This clause does not apply to
65.8machinery or equipment used to blend petroleum or biodiesel fuel as defined in section
65.9239.77 ; or
65.10(10) any other item that is not essential to the integrated process of manufacturing,
65.11fabricating, mining, or refining.
65.12(d) For purposes of this subdivision:
65.13(1) "Equipment" means independent devices or tools separate from machinery but
65.14essential to an integrated production process, including computers and computer software,
65.15used in operating, controlling, or regulating machinery and equipment; and any subunit or
65.16assembly comprising a component of any machinery or accessory or attachment parts of
65.17machinery, such as tools, dies, jigs, patterns, and molds.
65.18(2) "Fabricating" means to make, build, create, produce, or assemble components or
65.19property to work in a new or different manner.
65.20(3) "Integrated production process" means a process or series of operations through
65.21which tangible personal property is manufactured, fabricated, mined, or refined. For
65.22purposes of this clause, (i) manufacturing begins with the removal of raw materials
65.23from inventory and ends when the last process prior to loading for shipment has been
65.24completed; (ii) fabricating begins with the removal from storage or inventory of the
65.25property to be assembled, processed, altered, or modified and ends with the creation
65.26or production of the new or changed product; (iii) mining begins with the removal of
65.27overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
65.28ends when the last process before stockpiling is completed; and (iv) refining begins with
65.29the removal from inventory or storage of a natural resource and ends with the conversion
65.30of the item to its completed form.
65.31(4) "Machinery" means mechanical, electronic, or electrical devices, including
65.32computers and computer software, that are purchased or constructed to be used for the
65.33activities set forth in paragraph (a), beginning with the removal of raw materials from
65.34inventory through completion of the product, including packaging of the product.
66.1(5) "Machinery and equipment used for pollution control" means machinery and
66.2equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
66.3described in paragraph (a).
66.4(6) "Manufacturing" means an operation or series of operations where raw materials
66.5are changed in form, composition, or condition by machinery and equipment and which
66.6results in the production of a new article of tangible personal property. For purposes of
66.7this subdivision, "manufacturing" includes the generation of electricity or steam to be
66.8sold at retail.
66.9(7) "Mining" means the extraction of minerals, ores, stone, or peat.
66.10(8) "Online data retrieval system" means a system whose cumulation of information
66.11is equally available and accessible to all its customers.
66.12(9) "Primarily" means machinery and equipment used 50 percent or more of the time
66.13in an activity described in paragraph (a).
66.14(10) "Refining" means the process of converting a natural resource to an intermediate
66.15or finished product, including the treatment of water to be sold at retail.
66.16(11) This subdivision does not apply to telecommunications equipment as
66.17provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit
66.18for telecommunications services.
66.19(e) Materials exempt under this section may be purchased without imposing and
66.20collecting the tax and without applying for a refund under section 297A.75, provided that:
66.21(1) the purchaser employed not more than 80 full-time equivalent employees at
66.22any time during calendar year 2012; and
66.23(2) if another business owns at least 20 percent of the purchaser, then the sum of the
66.24number of full-time equivalent employees employed by the purchaser and the number
66.25of full-time equivalent employees employed by any other business that owns at least 20
66.26percent of the purchaser's business is not more than 80 full-time equivalent employees
66.27during calendar year 2012. This clause must be applied for each business that owns at
66.28least 20 percent of the purchaser.
66.29(f) For the state's fiscal year 2016 and thereafter, all purchases exempt under this
66.30section may be purchased without imposing and collecting the tax and without applying
66.31for a refund under section 297A.75.
66.32EFFECTIVE DATE.Paragraph (e) is effective for sales and purchases made after
66.33June 30, 2013, and through June 30, 2015; and paragraph (f) is effective for sales and
66.34purchases made after June 30, 2015.

66.35    Sec. 29. Minnesota Statutes 2012, section 297A.68, subdivision 10, is amended to read:
67.1    Subd. 10. Publications; publication materials. Tangible personal property that
67.2is used or consumed in producing any publication regularly issued at average intervals
67.3not exceeding three months is exempt, and any such publication is exempt. "Publication"
67.4includes, but is not limited to, a qualified newspaper as defined by section 331A.02,
67.5together with any supplements or enclosures. "Publication" does not include magazines
67.6and periodicals, whether sold over the counter or by subscription. Tangible personal
67.7property that is used or consumed in producing a publication does not include machinery,
67.8equipment, implements, tools, accessories, appliances, contrivances, furniture, and fixtures
67.9used in the publication, or fuel, electricity, gas, or steam used for space heating or lighting.
67.10Advertising contained in a publication is a nontaxable service and is exempt.
67.11Persons who publish or sell newspapers are engaging in a nontaxable service with
67.12respect to gross receipts realized from such news-gathering or news-publishing activities,
67.13including the sale of advertising.
67.14EFFECTIVE DATE.This section is effective for sales and purchases made after
67.15June 30, 2013.

67.16    Sec. 30. Minnesota Statutes 2012, section 297A.70, subdivision 2, is amended to read:
67.17    Subd. 2. Sales to government. (a) All sales, except those listed in paragraph (b),
67.18to the following governments and political subdivisions, or to the listed agencies or
67.19instrumentalities of governments and political subdivisions, are exempt:
67.20(1) the United States and its agencies and instrumentalities;
67.21(2) school districts, local governments, the University of Minnesota, state universities,
67.22community colleges, technical colleges, state academies, the Perpich Minnesota Center for
67.23Arts Education, and an instrumentality of a political subdivision that is accredited as an
67.24optional/special function school by the North Central Association of Colleges and Schools;
67.25(3) hospitals and nursing homes owned and operated by political subdivisions of
67.26the state of tangible personal property and taxable services used at or by hospitals and
67.27nursing homes;
67.28(4) the Metropolitan Council, for its purchases of vehicles and repair parts to equip
67.29operations provided for in section 473.4051;
67.30(5) other states or political subdivisions of other states, if the sale would be exempt
67.31from taxation if it occurred in that state; and
67.32(6) public libraries, public library systems, multicounty, multitype library systems as
67.33defined in section 134.001, county law libraries under chapter 134A, state agency libraries,
67.34the state library under section 480.09, and the Legislative Reference Library; and.
67.35(7) towns.
68.1(b) This exemption does not apply to the sales of the following products and services:
68.2(1) building, construction, or reconstruction materials purchased by a contractor
68.3or a subcontractor as a part of a lump-sum contract or similar type of contract with a
68.4guaranteed maximum price covering both labor and materials for use in the construction,
68.5alteration, or repair of a building or facility;
68.6(2) construction materials purchased by tax exempt entities or their contractors to
68.7be used in constructing buildings or facilities which will not be used principally by the
68.8tax exempt entities;
68.9(3) the leasing of a motor vehicle as defined in section 297B.01, subdivision 11,
68.10except for leases entered into by the United States or its agencies or instrumentalities;
68.11(4) lodging as defined under section 297A.61, subdivision 3, paragraph (g), clause
68.12(2), and prepared food, candy, soft drinks, and alcoholic beverages as defined in section
68.13297A.67, subdivision 2 , except for lodging, prepared food, candy, soft drinks, and alcoholic
68.14beverages purchased directly by the United States or its agencies or instrumentalities; or
68.15(5) goods or services purchased by a town local government as inputs to goods and
68.16services that are generally provided by a private business and the purchases would be
68.17taxable if made by a private business engaged in the same activity.
68.18(c) As used in this subdivision, "school districts" means public school entities and
68.19districts of every kind and nature organized under the laws of the state of Minnesota, and
68.20any instrumentality of a school district, as defined in section 471.59.
68.21(d) As used in this subdivision, "local governments" means cities, counties, and
68.22townships.
68.23(d) (e) As used in this subdivision, "goods or services generally provided by a private
68.24business" include, but are not limited to, goods or services provided by liquor stores, gas
68.25and electric utilities, golf courses, marinas, health and fitness centers, campgrounds, cafes,
68.26and laundromats. "Goods or services generally provided by a private business" do not
68.27include housing services, sewer and water services, wastewater treatment, ambulance and
68.28other public safety services, correctional services, chore or homemaking services provided
68.29to elderly or disabled individuals, or road and street maintenance or lighting.
68.30EFFECTIVE DATE.This section is effective for sales and purchases made after
68.31June 30, 2013.

68.32    Sec. 31. Minnesota Statutes 2012, section 297A.70, subdivision 4, is amended to read:
68.33    Subd. 4. Sales to nonprofit groups. (a) All sales, except those listed in paragraph
68.34(b), to the following "nonprofit organizations" are exempt:
69.1(1) a corporation, society, association, foundation, or institution organized and
69.2operated exclusively for charitable, religious, or educational purposes if the item
69.3purchased is used in the performance of charitable, religious, or educational functions; and
69.4(2) any senior citizen group or association of groups that:
69.5(i) in general limits membership to persons who are either age 55 or older, or
69.6physically disabled;
69.7(ii) is organized and operated exclusively for pleasure, recreation, and other
69.8nonprofit purposes, not including housing, no part of the net earnings of which inures to
69.9the benefit of any private shareholders; and
69.10(iii) is an exempt organization under section 501(c) of the Internal Revenue Code.
69.11For purposes of this subdivision, charitable purpose includes the maintenance of a
69.12cemetery owned by a religious organization.
69.13(b) This exemption does not apply to the following sales:
69.14(1) building, construction, or reconstruction materials purchased by a contractor
69.15or a subcontractor as a part of a lump-sum contract or similar type of contract with a
69.16guaranteed maximum price covering both labor and materials for use in the construction,
69.17alteration, or repair of a building or facility;
69.18(2) construction materials purchased by tax-exempt entities or their contractors to
69.19be used in constructing buildings or facilities that will not be used principally by the
69.20tax-exempt entities; and
69.21(3) lodging as defined under section 297A.61, subdivision 3, paragraph (g), clause
69.22(2), and prepared food, candy, soft drinks, and alcoholic beverages as defined in section
69.23297A.67, subdivision 2 , except wine purchased by an established religious organization
69.24for sacramental purposes or as allowed under subdivision 9a; and
69.25(4) leasing of a motor vehicle as defined in section 297B.01, subdivision 11, except
69.26as provided in paragraph (c).
69.27(c) This exemption applies to the leasing of a motor vehicle as defined in section
69.28297B.01, subdivision 11 , only if the vehicle is:
69.29(1) a truck, as defined in section 168.002, a bus, as defined in section 168.002, or a
69.30passenger automobile, as defined in section 168.002, if the automobile is designed and
69.31used for carrying more than nine persons including the driver; and
69.32(2) intended to be used primarily to transport tangible personal property or
69.33individuals, other than employees, to whom the organization provides service in
69.34performing its charitable, religious, or educational purpose.
70.1(d) A limited liability company also qualifies for exemption under this subdivision if
70.2(1) it consists of a sole member that would qualify for the exemption, and (2) the items
70.3purchased qualify for the exemption.
70.4EFFECTIVE DATE.This section is effective retroactively for sales and purchases
70.5made after June 30, 2012.

70.6    Sec. 32. Minnesota Statutes 2012, section 297A.70, subdivision 5, is amended to read:
70.7    Subd. 5. Veterans groups. Sales to an organization of military service veterans or
70.8an auxiliary unit of an organization of military service veterans are exempt if:
70.9(1) the organization or auxiliary unit is organized within the state of Minnesota
70.10and is exempt from federal taxation under section 501(c), clause (19), of the Internal
70.11Revenue Code; and
70.12(2) the tangible personal property is or services are for charitable, civic, educational,
70.13or nonprofit uses and not for social, recreational, pleasure, or profit uses.
70.14EFFECTIVE DATE.This section is effective for sales and purchases made after
70.15June 30, 2013.

70.16    Sec. 33. Minnesota Statutes 2012, section 297A.70, is amended by adding a
70.17subdivision to read:
70.18    Subd. 9a. Established religious orders. Sales of lodging, prepared food, candy,
70.19soft drinks, and alcoholic beverages at noncatered events between an established religious
70.20order and an affiliated institution of higher education are exempt. For purposes of this
70.21subdivision, an institution of higher education is "affiliated" with an established religious
70.22order if members of the religious order are represented on the governing board of the
70.23institution of higher education and the two organizations share campus space and common
70.24facilities.
70.25EFFECTIVE DATE.This section is effective retroactively for sales and purchases
70.26made after June 30, 2012.

70.27    Sec. 34. Minnesota Statutes 2012, section 297A.70, subdivision 13, is amended to read:
70.28    Subd. 13. Fund-raising sales by or for nonprofit groups. (a) The following
70.29sales by the specified organizations for fund-raising purposes are exempt, subject to the
70.30limitations listed in paragraph (b):
70.31(1) all sales made by a nonprofit organization that exists solely for the purpose of
70.32providing educational or social activities for young people primarily age 18 and under;
71.1(2) all sales made by an organization that is a senior citizen group or association of
71.2groups if (i) in general it limits membership to persons age 55 or older; (ii) it is organized
71.3and operated exclusively for pleasure, recreation, and other nonprofit purposes; and (iii)
71.4no part of its net earnings inures to the benefit of any private shareholders;
71.5(3) the sale or use of tickets or admissions to a golf tournament held in Minnesota if
71.6the beneficiary of the tournament's net proceeds qualifies as a tax-exempt organization
71.7under section 501(c)(3) of the Internal Revenue Code; and
71.8(4) sales of candy sold for fund-raising purposes by a nonprofit organization that
71.9provides educational and social activities primarily for young people age 18 and under.
71.10(b) The exemptions listed in paragraph (a) are limited in the following manner:
71.11(1) the exemption under paragraph (a), clauses (1) and (2), applies only if the gross
71.12annual receipts of the organization from fund-raising do not exceed $10,000; and
71.13(2) the exemption under paragraph (a), clause (1), does not apply if the sales are
71.14derived from admission charges or from activities for which the money must be deposited
71.15with the school district treasurer under section 123B.49, subdivision 2, or be recorded in
71.16the same manner as other revenues or expenditures of the school district under section
71.17123B.49, subdivision 4 .
71.18(c) Sales of tangible personal property and services are exempt if the entire proceeds,
71.19less the necessary expenses for obtaining the property or services, will be contributed to
71.20a registered combined charitable organization described in section 43A.50, to be used
71.21exclusively for charitable, religious, or educational purposes, and the registered combined
71.22charitable organization has given its written permission for the sale. Sales that occur over
71.23a period of more than 24 days per year are not exempt under this paragraph.
71.24(d) For purposes of this subdivision, a club, association, or other organization of
71.25elementary or secondary school students organized for the purpose of carrying on sports,
71.26educational, or other extracurricular activities is a separate organization from the school
71.27district or school for purposes of applying the $10,000 limit.
71.28EFFECTIVE DATE.This section is effective for sales and purchases made after
71.29June 30, 2013.

71.30    Sec. 35. Minnesota Statutes 2012, section 297A.70, subdivision 14, is amended to read:
71.31    Subd. 14. Fund-raising events sponsored by nonprofit groups. (a) Sales of
71.32tangible personal property or services at, and admission charges for fund-raising events
71.33sponsored by, a nonprofit organization are exempt if:
71.34(1) all gross receipts are recorded as such, in accordance with generally accepted
71.35accounting practices, on the books of the nonprofit organization; and
72.1(2) the entire proceeds, less the necessary expenses for the event, will be used solely
72.2and exclusively for charitable, religious, or educational purposes. Exempt sales include
72.3the sale of prepared food, candy, and soft drinks at the fund-raising event.
72.4(b) This exemption is limited in the following manner:
72.5(1) it does not apply to admission charges for events involving bingo or other
72.6gambling activities or to charges for use of amusement devices involving bingo or other
72.7gambling activities;
72.8(2) all gross receipts are taxable if the profits are not used solely and exclusively for
72.9charitable, religious, or educational purposes;
72.10(3) it does not apply unless the organization keeps a separate accounting record,
72.11including receipts and disbursements from each fund-raising event that documents all
72.12deductions from gross receipts with receipts and other records;
72.13(4) it does not apply to any sale made by or in the name of a nonprofit corporation as
72.14the active or passive agent of a person that is not a nonprofit corporation;
72.15(5) all gross receipts are taxable if fund-raising events exceed 24 days per year;
72.16(6) it does not apply to fund-raising events conducted on premises leased for more
72.17than five days but less than 30 days; and
72.18(7) it does not apply if the risk of the event is not borne by the nonprofit organization
72.19and the benefit to the nonprofit organization is less than the total amount of the state and
72.20local tax revenues forgone by this exemption.
72.21(c) For purposes of this subdivision, a "nonprofit organization" means any unit of
72.22government, corporation, society, association, foundation, or institution organized and
72.23operated for charitable, religious, educational, civic, fraternal, and senior citizens' or
72.24veterans' purposes, no part of the net earnings of which inures to the benefit of a private
72.25individual.
72.26EFFECTIVE DATE.This section is effective for sales and purchases made after
72.27June 30, 2013.

72.28    Sec. 36. Minnesota Statutes 2012, section 297A.70, is amended by adding a
72.29subdivision to read:
72.30    Subd. 18. Nursing homes and boarding care homes. (a) All sales, except those
72.31listed in paragraph (b), to a nursing home licensed under section 144A.02 or a boarding
72.32care home certified as a nursing facility under title 19 of the Social Security Act are
72.33exempt if the facility:
72.34(1) is exempt from federal income taxation pursuant to section 501(c)(3) of the
72.35Internal Revenue Code; and
73.1(2) is certified to participate in the medical assistance program under title 19 of the
73.2Social Security Act, or certifies to the commissioner that it does not discharge residents
73.3due to the inability to pay.
73.4(b) This exemption does not apply to the following sales:
73.5(1) building, construction, or reconstruction materials purchased by a contractor
73.6or a subcontractor as a part of a lump-sum contract or similar type of contract with a
73.7guaranteed maximum price covering both labor and materials for use in the construction,
73.8alteration, or repair of a building or facility;
73.9(2) construction materials purchased by tax-exempt entities or their contractors to
73.10be used in constructing buildings or facilities that will not be used principally by the
73.11tax-exempt entities;
73.12(3) lodging as defined under section 297A.61, subdivision 3, paragraph (g), clause
73.13(2), and prepared food, candy, soft drinks, and alcoholic beverages as defined in section
73.14297A.67, subdivision 2; and
73.15(4) leasing of a motor vehicle as defined in section 297B.01, subdivision 11, except
73.16as provided in paragraph (c).
73.17(c) This exemption applies to the leasing of a motor vehicle as defined in section
73.18297B.01, subdivision 11, only if the vehicle is:
73.19(1) a truck, as defined in section 168.002; a bus, as defined in section 168.002; or a
73.20passenger automobile, as defined in section 168.002, if the automobile is designed and
73.21used for carrying more than nine persons including the driver; and
73.22(2) intended to be used primarily to transport tangible personal property or residents
73.23of the nursing home or boarding care home.
73.24EFFECTIVE DATE.This section is effective for sales and purchases made after
73.25June 30, 2013.

73.26    Sec. 37. [297A.715] SERVICE EXEMPTIONS.
73.27    Subdivision 1. Scope. To the extent provided in this section, the gross receipts from
73.28sales of and use of services listed in this section are specifically exempted from the taxes
73.29imposed by this chapter.
73.30    Subd. 2. Agriculture and forestry support. Agriculture and forestry support
73.31services are exempt. Agriculture and forestry support services include services such
73.32as aerial dusting or spraying; soil preparation activity or crop production services such
73.33as plowing, fertilizing, seed bed preparation, planting, cultivating, and crop protection
73.34services; mechanical harvesting, picking, and combining of crops, threshing, and related
73.35activities; postharvest activities, such as crop cleaning, sun-drying, shelling, fumigating,
74.1curing, sorting, grading, packing, and cooling; breeding services for livestock and
74.2working animals; dairy herd improvement activities; livestock spraying; sheep dipping
74.3and shearing; branding; hoof trimming; and support activities related to timber production
74.4and forest protection, such as estimating timber, forest firefighting, and forest pest control.
74.5    Subd. 3. Bank services. Bank services, excluding safe deposit box rental, are
74.6exempt. Bank services include services such as automated teller machine services;
74.7monthly maintenance; issuing credit cards, money orders, travelers' checks, and certified
74.8checks; cashing checks, transmitting or transferring money, including wire-transfers,
74.9accepting deposits, and clearinghouse and reserve services; lending and brokerage;
74.10investments; extending credit or arranging loans; sales financing; handling stop payment
74.11orders, overdrafts, and returned deposits; providing statements of account; and accepting
74.12payment by a particular method.
74.13    Subd. 4. Brokerage and investment counseling. Brokerage and investment
74.14counseling services are exempt. Brokerage and investment counseling services include
74.15services such as underwriting securities issues; making markets for securities and
74.16commodities; acting as agents or brokers between buyers and sellers of securities and
74.17commodities, providing securities and commodity exchange services; and other services,
74.18such as managing portfolios of assets; providing investment advice; trust, fiduciary, and
74.19custody services; and facilitating the buying and selling of stocks, stock options, bonds,
74.20or commodity contracts.
74.21    Subd. 5. Cemetery grounds maintenance. Cemetery grounds maintenance
74.22services are exempt. In addition to the exemption for lawn care and related services used
74.23in the maintenance of cemetery grounds provided by section 297A.67, subdivision 25,
74.24charges for cemetery grounds maintenance services include charges for services such as
74.25opening and closing graves; constructing and installing concrete forms at grave sites;
74.26placing memorials; maintaining the irrigation system; and maintaining equipment and
74.27tools necessary for cemetery maintenance. For purposes of this exemption, "cemetery"
74.28means a cemetery for human burial.
74.29    Subd. 6. Construction labor; real property. Labor services for construction or
74.30improvement of real property are exempt. Labor services for construction or improvement
74.31of real property include construction work on buildings and engineering projects such as
74.32highways, bridges, and utility systems; services by building equipment contractors, such
74.33as plumbing and heating; and services by specialty trade contractors needed to complete
74.34the basic structure of buildings, such as masons, glazers, roofers, foundation cement
74.35pourers, electricians, and plumbers, whether new work, additions, alterations, or repairs.
74.36These labor services also include demolition of buildings and structures; preparation of
75.1sites, such as under a "land clearing contract" for removal of trees, bushes, and shrubs,
75.2including the removal of roots and stumps, to develop a site, as described in section
75.3297A.68, subdivision 40; land subdivision; and services performed under a construction
75.4contract for the installation of shrubbery, plants, sod, trees, bushes, and similar items.
75.5    Subd. 7. Education services. (a) Education services provided by establishments
75.6such as schools, colleges, universities, and training centers, that are primarily engaged
75.7in furnishing academic courses and associated course work, including vocational and
75.8technical training, and that provide instruction and training in a wide variety of subjects,
75.9are exempt.
75.10(b) Educational services provided by any organization for purposes of continuing
75.11professional education or accreditation are exempt.
75.12    Subd. 8. Funeral and cremation services. Funeral and cremation services
75.13for humans are exempt. Charges for funeral and cremation services include charges
75.14for services such as preparing the dead for burial, interment, or cremation services;
75.15conducting funerals; providing facilities for wakes, visitation, and memorial services;
75.16cremation; arranging transportation for the dead; and basic services provided by funeral
75.17director and staff.
75.18    Subd. 9. Health care and medical services. Health care and medical services
75.19for humans, provided by a health care facility or health care professional, are exempt.
75.20Health care and medical services include services such as the following: dental services;
75.21services provided by medical and diagnostic laboratories; the transportation of patients;
75.22medical rescue services; services provided to hospital inpatients, including food services;
75.23outpatient services; physical therapy; psychiatric and mental health services; psychological
75.24services; vocational services provided to a patient; social work services provided to a
75.25patient; and services such as collecting, storing, and distributing blood and blood products.
75.26    Subd. 10. Insurance company commissions for policy sales. Insurance company
75.27commissions paid to an insurance agent for the service of selling an insurance policy
75.28are exempt.
75.29    Subd. 11. Mining support. Mining support services are exempt. Mining support
75.30services are those services which are required for the mining and quarrying of minerals,
75.31and for the extraction of oil and gas. Mining support services include services such
75.32as drilling; taking core samples and making geological observations at prospective
75.33sites; excavating slush pits and cellars; sinking shafts; removing overburden; tunneling;
75.34blasting; boring and testing; draining and pumping an excavation site; and such oil and
75.35gas operations as spudding in; well surveying; running, cutting, and pulling casings,
76.1tubes, and rods; cementing and shooting wells; perforating well casings; acidizing and
76.2chemically treating wells; and cleaning out, bailing, and swabbing wells.
76.3    Subd. 12. Public services. Services that are provided by government for a fee
76.4are exempt. Services that are provided by government for a fee include such services
76.5as issuing, renewing, and reinstating licenses and permits; inspection and certification
76.6of property, goods, and services, operations, and standards; and various other services
76.7provided by local, regional, state, and federal government agencies or officials; except
76.8services which are specifically enumerated in this chapter as being taxable services, even
76.9though provided by government.
76.10    Subd. 13. Transit service; student transportation. (a) Transit services are exempt.
76.11Transit services include use of bus, light rail, and other transit systems provided using
76.12regular routes and schedules; taxi cabs or other ground transport services used primarily
76.13for transporting natural persons; and include "special transportation services" by specially
76.14equipped vehicles, as defined in section 174.29.
76.15(b) Providing students with transportation services by school bus to and from school,
76.16college, university, and private career school is exempt; and transporting students under
76.17the Head Start Act, as defined in section 169.448, subdivision 3, is exempt. For purposes
76.18of this subdivision, a "school" is as defined in section 120A.22, subdivision 4; and "private
76.19career school" means a school licensed under section 141.25.
76.20    Subd. 14. Real estate services. Real estate services provided by a licensed real
76.21estate broker, licensed real estate salesperson, licensed real estate closing agent, or closing
76.22agent, as defined in chapter 82, are exempt; and real estate services provided by a licensed
76.23real estate appraiser, as defined in chapter 82B, are exempt.
76.24    Subd. 15. Social assistance services. (a) Social assistance services, such as the
76.25services provided by day care; babysitters; nursing homes; residential care facilities for
76.26people with intellectual and developmental disabilities, mental illness, or substance abuse
76.27problems; adoption agencies; and foster care, are exempt. Social assistance services
76.28include services such as life skills training; crisis intervention services; drug prevention
76.29services; emergency and relief services; rehabilitation counseling services; group and
76.30family support services; and assistance in daily living provided to ill, disabled, or infirm
76.31persons, such as grooming, dressing, transfer assistance, light housekeeping, preparing
76.32meals, performing errands, and providing companionship.
76.33(b) If a service is available to the general public, the fact that the service is provided
76.34to someone who is also receiving social assistance services does not mean that the service
76.35is a social assistance service.
77.1    Subd. 16. Storage of farm products and storage of refrigerated food. Storage of
77.2farm products and storage of refrigerated food, including grain elevator storage services,
77.3are exempt.
77.4    Subd. 17. Veterinary services. Services of practicing veterinary medicine, as that
77.5term is used in chapter 156, are exempt. This includes veterinary services for household
77.6pets and for animals kept for economic reasons, including livestock, laboratory animals,
77.7working animals, animals to be sold at retail in the normal course of business, and sport
77.8animals.
77.9    Subd. 18. Waste management services. Waste management services, meaning the
77.10collection, transportation, processing, treatment, and disposal of solid and hazardous
77.11waste, are exempt. Waste management services include the hauling of waste materials;
77.12operating materials recovery facilities; providing remediation services, meaning the
77.13cleanup of contaminated buildings, mine sites, soil, or ground water; and providing septic
77.14pumping and sewer cleaning.
77.15    Subd. 19. Legal services. Legal services, meaning the rendering of legal
77.16consultation or advice to a client; appearing on behalf of a client in any hearing,
77.17proceeding, or related deposition or discovery matter or before any judicial officer, court,
77.18public agency, referee, magistrate, commissioner, or hearing officer; or engaging in other
77.19activities that constitute the practice of law, are exempt, regardless of whether the legal
77.20services are performed by a licensed attorney or any other person working on behalf of a
77.21licensed attorney. The term legal services does not include prewritten computer software
77.22containing legal forms, agreements, or compilations of information relating to the law that
77.23is available for sale to the public.
77.24    Subd. 20. Accounting services. Accounting services, meaning services requiring
77.25accountancy or related skills, including accounting, assurance, financial management
77.26services, insolvency services, investment advice, are exempt, regardless of whether the
77.27services are performed by a member of a professional accounting body or any other person
77.28working on behalf of a member of a professional accounting body. The term accounting
77.29services does not include prewritten computer software, such as accounting forms or tax
77.30preparation or bookkeeping software that is available to the public.
77.31    Subd. 21. Business and management consulting. Business and management
77.32consulting services are exempt. Business and management consulting services includes
77.33providing advice on starting, managing, or operating a business or organization, and
77.34business, organizational, and operational strategy; conducting industry, market, and
77.35organizational research; and marketing a business, service, organization, or product.
78.1    Subd. 22. Architectural services. Architectural services are exempt. Architectural
78.2services include the design and structural plan of new or existing buildings, open areas,
78.3communities, and other artificial constructions and environments; and the supervision of
78.4construction work, regardless of whether the services are performed by a licensed architect
78.5or any other person working on behalf of a licensed architect.
78.6    Subd. 23. Engineering services. Engineering services, meaning the application of
78.7scientific principles to design or develop structures, machines, apparatus, or manufacturing
78.8or technological processes, are exempt, regardless of whether the service is performed
78.9by a person licensed in a field of engineering or any other person working on behalf of
78.10a licensed person. Engineering services include chemical, mechanical, civil, electrical,
78.11agricultural, biological, applied, energy, industrial, petroleum, and nuclear engineering.
78.12    Subd. 24. Information technology services. Information technology services
78.13are exempt. Information technology services include the study, design, development,
78.14application, implementation, installation, administration, support, or management
78.15of computer-based information systems; and the planning and management of the
78.16maintenance, upgrading, and replacement of hardware and software in a computer-based
78.17information system.
78.18    Subd. 25. Staffing and employment search services. Staffing and employment
78.19search services, meaning any service that matches employers to employees, whether for
78.20permanent or temporary placement, are exempt.
78.21    Subd. 26. Business support services. Business support services, including
78.22document preparation, information processing, research and compilation of information,
78.23billing and bookkeeping, bill paying, transcription, voice mail answering, correspondence,
78.24and administrative services provided to a business or organization, are exempt.
78.25    Subd. 27. Transportation services. Transportation services for the actual
78.26transportation of freight or property, including handling, drayage, storage, and packing are
78.27exempt. Transportation services include services by persons not otherwise engaged in the
78.28business of transporting freight or property for arranging transportation to customers for
78.29freight or property.
78.30    Subd. 28. Miscellaneous services. The following services are exempt:
78.31(1) coin-operated laundry facilities operated by a customer;
78.32(2) residential parking and parking at a meter;
78.33(3) security services performed within the jurisdiction served by off-duty licensed
78.34peace officers as defined in section 626.84, subdivision 1;
78.35(4) services provided by a nonprofit organization, or any organization at the direction
78.36of a county, for monitoring and electronic surveillance of persons placed on in-home
79.1detention pursuant to court order or under the direction of the Minnesota Department
79.2of Corrections;
79.3(5) horse boarding services;
79.4(6) shoe shining services;
79.5    (7) travel agency services;
79.6    (8) auctioneering fees; and
79.7(9) related-party services as follows:
79.8(i) services performed by an employee for an employer;
79.9(ii) services performed by a partnership or association for another partnership or
79.10association if one of the entities owns or controls more than 80 percent of the voting power
79.11of the equity interest in the other entity; and
79.12(iii) services performed between members of an affiliated group of corporations. For
79.13purposes of this item, "affiliated group of corporations" means those entities that would be
79.14classified as members of an affiliated group as defined under United States Code, title 26,
79.15section 1504, disregarding the exclusions in section 1504(b).
79.16EFFECTIVE DATE.This section is effective for sales and purchases made after
79.17June 30, 2013.

79.18    Sec. 38. Minnesota Statutes 2012, section 297A.75, subdivision 1, is amended to read:
79.19    Subdivision 1. Tax collected. The tax on the gross receipts from the sale of the
79.20following exempt items must be imposed and collected as if the sale were taxable and the
79.21rate under section 297A.62, subdivision 1, applied. The exempt items include:
79.22    (1) capital equipment exempt under section 297A.68, subdivision 5;
79.23    (2) (1) building materials for an agricultural processing facility exempt under section
79.24297A.71, subdivision 13 ;
79.25    (3) (2) building materials for mineral production facilities exempt under section
79.26297A.71, subdivision 14 ;
79.27    (4) (3) building materials for correctional facilities under section 297A.71,
79.28subdivision 3 ;
79.29    (5) (4) building materials used in a residence for disabled veterans exempt under
79.30section 297A.71, subdivision 11;
79.31    (6) (5) elevators and building materials exempt under section 297A.71, subdivision
79.3212 ;
79.33    (7) (6) building materials for the Long Lake Conservation Center exempt under
79.34section 297A.71, subdivision 17;
80.1    (8) (7) materials and supplies for qualified low-income housing under section
80.2297A.71, subdivision 23 ;
80.3    (9) (8) materials, supplies, and equipment for municipal electric utility facilities
80.4under section 297A.71, subdivision 35;
80.5    (10) (9) equipment and materials used for the generation, transmission, and
80.6distribution of electrical energy and an aerial camera package exempt under section
80.7297A.68 , subdivision 37;
80.8    (11) (10) commuter rail vehicle and repair parts under section 297A.70, subdivision
80.93, paragraph (a), clause (10);
80.10    (12) (11) materials, supplies, and equipment for construction or improvement of
80.11projects and facilities under section 297A.71, subdivision 40;
80.12(13) (12) materials, supplies, and equipment for construction or improvement of a
80.13meat processing facility exempt under section 297A.71, subdivision 41;
80.14(14) (13) materials, supplies, and equipment for construction, improvement, or
80.15expansion of an aerospace defense manufacturing facility exempt under section 297A.71,
80.16subdivision 42;
80.17(15) (14) enterprise information technology equipment and computer software for
80.18use in a qualified data center exempt under section 297A.68, subdivision 42; and
80.19(16) (15) materials, supplies, and equipment for qualifying capital projects under
80.20section 297A.71, subdivision 44.
80.21EFFECTIVE DATE.This section is effective for sales and purchases made after
80.22June 30, 2015.

80.23    Sec. 39. Minnesota Statutes 2012, section 297A.75, subdivision 2, is amended to read:
80.24    Subd. 2. Refund; eligible persons. Upon application on forms prescribed by the
80.25commissioner, a refund equal to the tax paid on the gross receipts of the exempt items
80.26must be paid to the applicant. Only the following persons may apply for the refund:
80.27    (1) for subdivision 1, clauses (1) to (3) and (2), the applicant must be the purchaser;
80.28    (2) for subdivision 1, clauses (4) (3) and (7) (6), the applicant must be the
80.29governmental subdivision;
80.30    (3) for subdivision 1, clause (5) (4), the applicant must be the recipient of the
80.31benefits provided in United States Code, title 38, chapter 21;
80.32    (4) for subdivision 1, clause (6) (5), the applicant must be the owner of the
80.33homestead property;
80.34    (5) for subdivision 1, clause (8) (7), the owner of the qualified low-income housing
80.35project;
81.1    (6) for subdivision 1, clause (9) (8), the applicant must be a municipal electric utility
81.2or a joint venture of municipal electric utilities;
81.3    (7) for subdivision 1, clauses (10), (9), (12), (13), and (14), and (15), the owner
81.4of the qualifying business; and
81.5    (8) for subdivision 1, clauses (10), (11), (12), and (16) (15), the applicant must be
81.6the governmental entity that owns or contracts for the project or facility.
81.7EFFECTIVE DATE.This section is effective for sales and purchases made after
81.8June 30, 2015.

81.9    Sec. 40. Minnesota Statutes 2012, section 297A.75, subdivision 3, is amended to read:
81.10    Subd. 3. Application. (a) The application must include sufficient information
81.11to permit the commissioner to verify the tax paid. If the tax was paid by a contractor,
81.12subcontractor, or builder, under subdivision 1, clause (3), (4), (5), (6), (7), (8), (9), (10),
81.13(11), (12), (13), (14), or (15), or (16), the contractor, subcontractor, or builder must
81.14furnish to the refund applicant a statement including the cost of the exempt items and the
81.15taxes paid on the items unless otherwise specifically provided by this subdivision. The
81.16provisions of sections 289A.40 and 289A.50 apply to refunds under this section.
81.17    (b) An applicant may not file more than two applications per calendar year for
81.18refunds for taxes paid on capital equipment exempt under section 297A.68, subdivision 5.
81.19    (c) Total refunds for purchases of items in section 297A.71, subdivision 40, must not
81.20exceed $5,000,000 in fiscal years 2010 and 2011. Applications for refunds for purchases
81.21of items in sections 297A.70, subdivision 3, paragraph (a), clause (11), and 297A.71,
81.22subdivision 40, must not be filed until after June 30, 2009.
81.23EFFECTIVE DATE.This section is effective for sales and purchases made after
81.24June 30, 2015.

81.25    Sec. 41. Minnesota Statutes 2012, section 297A.815, subdivision 3, is amended to read:
81.26    Subd. 3. Motor vehicle lease sales tax revenue. (a) For purposes of this
81.27subdivision, "net revenue" means an amount equal to:
81.28    (1) the revenues, including interest and penalties, that would have been collected
81.29under this section, during the fiscal year if the rate had been 6.875 percent; less
81.30    (2) in fiscal year 2011, $30,100,000; in fiscal year 2012, $31,100,000; and in fiscal
81.31year 2013 and following fiscal years, $32,000,000.
82.1    (b) On or before June 30 of each fiscal year, the commissioner of revenue shall
82.2estimate the amount of the revenues and subtraction under paragraph (a) for the current
82.3fiscal year.
82.4    (c) On or after July 1 of the subsequent fiscal year, the commissioner of management
82.5and budget shall transfer the net revenue as estimated in paragraph (b) from the general
82.6fund, as follows:
82.7    (1) 50 percent to the greater Minnesota transit account; and
82.8    (2) 50 percent to the county state-aid highway fund. Notwithstanding any other law
82.9to the contrary, the commissioner of transportation shall allocate the funds transferred
82.10under this clause to the counties in the metropolitan area, as defined in section 473.121,
82.11subdivision 4, excluding the counties of Hennepin and Ramsey, so that each county shall
82.12receive of such amount the percentage that its population, as defined in section 477A.011,
82.13subdivision 3, estimated or established by July 15 of the year prior to the current calendar
82.14year, bears to the total population of the counties receiving funds under this clause.
82.15    (d) For fiscal years 2010 and 2011, the amount under paragraph (a), clause (1), must
82.16be calculated using the following percentages of the total revenues:
82.17    (1) for fiscal year 2010, 83.75 percent; and
82.18    (2) for fiscal year 2011, 93.75 percent.
82.19EFFECTIVE DATE.This section is effective for sales and purchases made after
82.20June 30, 2013.

82.21    Sec. 42. Minnesota Statutes 2012, section 469.190, is amended by adding a subdivision
82.22to read:
82.23    Subd. 1a. Tax base; locally collected taxes. A tax imposed on the gross receipts
82.24from lodging under this section or under a special law applies to the same base as taxes
82.25collected by the commissioner of revenue under subdivision 7 and section 270C.171.
82.26EFFECTIVE DATE.This section is effective the day following final enactment.
82.27In enacting this section, the legislature confirms its original intent in enacting Minnesota
82.28Statutes, section 469.190, its predecessor provisions, and any special laws authorizing
82.29political subdivisions to impose lodging taxes, and that those taxes were and are intended
82.30to apply to the entire consideration paid to obtain access to transient lodging, including
82.31ancillary or related services, such as services provided by accommodation intermediaries
82.32as defined in Minnesota Statutes, section 297A.61, and similar services. The provisions of
82.33this section must not be interpreted to imply a narrower construction of the tax base under
82.34lodging tax provisions of Minnesota law prior to the enactment of this section.

83.1    Sec. 43. DULUTH LOCAL SALES TAX; RATE REDUCTION.
83.2Notwithstanding Minnesota Statutes, section 297A.99 or 645.021, or any ordinance,
83.3city charter, or other provision of law, the city of Duluth shall reduce its rate of tax
83.4authorized under Laws 1973, chapter 461, section 1, as amended by Laws 1977, chapter
83.5438, to 0.87 percent.
83.6EFFECTIVE DATE.This section is effective for sales and purchases made after
83.7June 30, 2013.

83.8    Sec. 44. REVISOR'S INSTRUCTION.
83.9In Minnesota Rules, part 8130.9700, the revisor of statutes shall remove the last
83.10sentence in subpart 3, item B, that reads "Use of equipment on a time-sharing basis,
83.11where access to the equipment is only by means of remote access facilities, is not taxable
83.12leasing of such equipment."
83.13EFFECTIVE DATE.This section is effective for sales and purchases made after
83.14June 30, 2013.

83.15    Sec. 45. REPEALER.
83.16(a) Minnesota Statutes 2012, sections 297A.61, subdivision 27; 297A.66, subdivision
83.174; 297A.67, subdivision 8; and 297A.68, subdivisions 9, 22, and 35, are repealed.
83.18(b) Minnesota Rules, part 8130.0500, subpart 2, is repealed.
83.19EFFECTIVE DATE.This section is effective for sales and purchases made after
83.20June 30, 2013.


83.23    Section 1. Minnesota Statutes 2012, section 270C.56, subdivision 1, is amended to read:
83.24    Subdivision 1. Liability imposed. A person who, either singly or jointly with
83.25others, has the control of, supervision of, or responsibility for filing returns or reports,
83.26paying taxes, or collecting or withholding and remitting taxes and who fails to do so, or a
83.27person who is liable under any other law, is liable for the payment of taxes arising under
83.28chapters 295, 296A, 297A, 297F, and 297G, or sections 256.9658, 290.92, and 297E.02,
83.29and the applicable penalties and interest on those taxes.
83.30EFFECTIVE DATE.This section is effective July 1, 2013.

84.1    Sec. 2. Minnesota Statutes 2012, section 297F.01, is amended by adding a subdivision
84.2to read:
84.3    Subd. 9b. Little cigar. "Little cigar" means any roll for smoking made in whole or
84.4in part of tobacco if the product is wrapped in a substance containing tobacco other than
84.5natural leaf tobacco, uses an integrated cellulose acetate or other similar filter, and weighs
84.6not more than 4-1/2 pounds per thousand.
84.7EFFECTIVE DATE.This section is effective July 1, 2013.

84.8    Sec. 3. Minnesota Statutes 2012, section 297F.01, is amended by adding a subdivision
84.9to read:
84.10    Subd. 10b. Moist snuff. "Moist snuff" means any finely cut, ground, or powdered
84.11smokeless tobacco that is intended to be placed or dipped in the mouth.

84.12    Sec. 4. Minnesota Statutes 2012, section 297F.01, is amended by adding a subdivision
84.13to read:
84.14    Subd. 13a. Premium cigar. "Premium cigar" means any cigar that is
84.15hand-constructed and hand-rolled, has a wrapper that is made entirely from whole tobacco
84.16leaf, has a filler and binder that is made entirely of tobacco, except for adhesives or other
84.17materials used to maintain size, texture, or flavor, and has a wholesale price of no less
84.18than $2.
84.19EFFECTIVE DATE.This section is effective July 1, 2013.

84.20    Sec. 5. Minnesota Statutes 2012, section 297F.01, subdivision 19, is amended to read:
84.21    Subd. 19. Tobacco products. (a) "Tobacco products" means any product
84.22containing, made, or derived from tobacco that is intended for human consumption,
84.23whether chewed, smoked, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by
84.24any other means, or any component, part, or accessory of a tobacco product, including,
84.25but not limited to, cigars; little cigars; cheroots; stogies; periques; granulated, plug cut,
84.26crimp cut, ready rubbed, and other smoking tobacco; snuff; snuff flour; cavendish; plug
84.27and twist tobacco; fine-cut and other chewing tobacco; shorts; refuse scraps, clippings,
84.28cuttings and sweepings of tobacco, and other kinds and forms of tobacco; but does not
84.29include cigarettes as defined in this section. Tobacco products excludes any tobacco
84.30product that has been approved by the United States Food and Drug Administration for
84.31sale as a tobacco cessation product, as a tobacco dependence product, or for other medical
84.32purposes, and is being marketed and sold solely for such an approved purpose.
85.1(b) Except for the imposition of tax under section 297F.05, subdivisions 3 and 4,
85.2tobacco products includes a premium cigar, as defined in subdivision 13a.
85.3EFFECTIVE DATE.This section is effective July 1, 2013.

85.4    Sec. 6. Minnesota Statutes 2012, section 297F.05, subdivision 1, is amended to read:
85.5    Subdivision 1. Rates; cigarettes. A tax is imposed upon the sale of cigarettes in
85.6this state, upon having cigarettes in possession in this state with intent to sell, upon any
85.7person engaged in business as a distributor, and upon the use or storage by consumers, at
85.8the following rates:
85.9(1) on cigarettes weighing not more than three pounds per thousand, 24 108.5 mills,
85.10or 10.85 cents, on each such cigarette; and
85.11(2) on cigarettes weighing more than three pounds per thousand, 48 217 mills, or
85.1221.7 cents, on each such cigarette.
85.13EFFECTIVE DATE.This section is effective July 1, 2013.

85.14    Sec. 7. Minnesota Statutes 2012, section 297F.05, is amended by adding a subdivision
85.15to read:
85.16    Subd. 1a. Annual indexing. (a) Each year the commissioner shall adjust the
85.17tax rates under subdivision 1, including any adjustment made in prior years under this
85.18subdivision, by multiplying the mill rates for the current calendar year by an adjustment
85.19factor. The adjustment factor equals the in-lieu sales tax rate that applies to the following
85.20calendar year divided by the in-lieu sales tax rate for the current calendar year. For
85.21purposes of this subdivision, "in-lieu sales tax rate" means the tax rate established under
85.22section 297F.25, subdivision 1, rounded to 1/100 of one cent per cigarette.
85.23    (b) The commissioner shall publish the resulting rate by November 1 and the rate
85.24applies to sales made on or after January 1 of the following year.
85.25(c) The determination of the commissioner under this subdivision is not a rule and is
85.26not subject to the Administrative Procedure Act in chapter 14.
85.27EFFECTIVE DATE.This section is effective July 1, 2013.

85.28    Sec. 8. Minnesota Statutes 2012, section 297F.05, subdivision 3, is amended to read:
85.29    Subd. 3. Rates; tobacco products. (a) Except as provided in subdivision 3a, a tax is
85.30imposed upon all tobacco products in this state and upon any person engaged in business
85.31as a distributor, at the rate of 35 90 percent of the wholesale sales price of the tobacco
85.32products. The tax is imposed at the time the distributor:
86.1(1) brings, or causes to be brought, into this state from outside the state tobacco
86.2products for sale;
86.3(2) makes, manufactures, or fabricates tobacco products in this state for sale in
86.4this state; or
86.5(3) ships or transports tobacco products to retailers in this state, to be sold by those
86.6retailers.
86.7(b) Notwithstanding paragraph (a), a minimum tax equal to the rate imposed on a pack
86.8of 20 cigarettes weighing not more than three pounds per thousand, as established under
86.9subdivision 1, and adjusted by subdivision 1a, is imposed on each container of moist snuff.
86.10For purposes of this subdivision, a "container" means the smallest consumer-size can,
86.11package, or other container that is marketed or packaged by the manufacturer, distributor,
86.12or retailer for separate sale to a retail purchaser.
86.13(c) Notwithstanding paragraph (a), for little cigars, the tax on each little cigar shall
86.14be equal to the tax imposed per cigarette under subdivision 1, clause (1), and adjusted by
86.15subdivision 1a, and any successor provision taxing cigarettes.
86.16EFFECTIVE DATE.This section is effective July 1, 2013, except the minimum
86.17tax under paragraph (b) is effective January 1, 2014.

86.18    Sec. 9. Minnesota Statutes 2012, section 297F.05, is amended by adding a subdivision
86.19to read:
86.20    Subd. 3a. Rates; tobacco. (a) A tax is imposed upon all premium cigars in this state
86.21and upon any person engaged in business as a tobacco product distributor, at the lesser of:
86.22(1) the rate of 70 percent of the wholesale sales price of the premium cigars; or
86.23(2) $3.50 per premium cigar.
86.24(b) The tax imposed under paragraph (a) is imposed at the time the tobacco products
86.25distributor:
86.26(1) brings, or causes to be brought, into this state from outside the state premium
86.27cigars for sale;
86.28(2) makes, manufactures, or fabricates premium cigars in this state for sale in this
86.29state; or
86.30(3) ships or transports premium cigars to retailers in this state, to be sold by those
86.31retailers.
86.32EFFECTIVE DATE.This section is effective July 1, 2013.

86.33    Sec. 10. Minnesota Statutes 2012, section 297F.05, subdivision 4, is amended to read:
87.1    Subd. 4. Use tax; tobacco products. (a) Except as provided in subdivision 4a, a tax
87.2is imposed upon the use or storage by consumers of tobacco products in this state, and
87.3upon such consumers, at the rate of 35 90 percent of the cost to the consumer of the tobacco
87.4products or the minimum tax under subdivision 3, paragraph (b), whichever is greater.
87.5(b) Notwithstanding paragraph (a), for little cigars, the tax on each little cigar
87.6shall be equal to the tax imposed per cigarette under subdivision 1, clause (1), and any
87.7successor provision taxing cigarettes.
87.8EFFECTIVE DATE.This section is effective July 1, 2013.

87.9    Sec. 11. Minnesota Statutes 2012, section 297F.05, is amended by adding a subdivision
87.10to read:
87.11    Subd. 4a. Use tax; premium cigars. A tax is imposed upon the use or storage by
87.12consumers of all premium cigars in this state, and upon such consumers, at the lesser of:
87.13(1) the rate of 70 percent of the cost to the consumer of the premium cigars; or
87.14(2) $3.50 per premium cigar.
87.15EFFECTIVE DATE.This section is effective July 1, 2013.

87.16    Sec. 12. Minnesota Statutes 2012, section 297F.24, subdivision 1, is amended to read:
87.17    Subdivision 1. Fee imposed. (a) A fee is imposed upon the sale of nonsettlement
87.18cigarettes in this state, upon having nonsettlement cigarettes in possession in this state
87.19with intent to sell, upon any person engaged in business as a distributor, and upon the use
87.20or storage by consumers of nonsettlement cigarettes. The fee equals a rate of 1.75 2.5
87.21cents per cigarette.
87.22(b) The purpose of this fee is to:
87.23(1) ensure that manufacturers of nonsettlement cigarettes pay fees to the state that
87.24are comparable to costs attributable to the use of the cigarettes;
87.25(2) prevent manufacturers of nonsettlement cigarettes from undermining the state's
87.26policy of discouraging underage smoking by offering nonsettlement cigarettes at prices
87.27substantially below the cigarettes of other manufacturers; and
87.28(3) fund such other purposes as the legislature determines appropriate.

87.29    Sec. 13. Minnesota Statutes 2012, section 297F.25, subdivision 1, is amended to read:
87.30    Subdivision 1. Imposition. (a) A tax is imposed on distributors on the sale of
87.31cigarettes by a cigarette distributor to a retailer or cigarette subjobber for resale in this
87.32state. The tax is equal to 6.5 percent of the weighted average retail price and must be
88.1expressed in cents per pack rounded to the nearest one-tenth of a cent. The weighted
88.2average retail price must be determined annually, with new rates published by November
88.31, and effective for sales on or after January 1 of the following year. The weighted average
88.4retail price must be established by surveying cigarette retailers statewide in a manner
88.5and time determined by the commissioner. The commissioner shall make an inflation
88.6adjustment in accordance with the Consumer Price Index for all urban consumers inflation
88.7indicator as published in the most recent state budget forecast. The commissioner shall use
88.8the inflation factor for the calendar year in which the new tax rate takes effect. If the survey
88.9indicates that the average retail price of cigarettes has not increased relative to the average
88.10retail price in the previous year's survey, then the commissioner shall not make an inflation
88.11adjustment. The determination of the commissioner pursuant to this subdivision is not a
88.12"rule" and is not subject to the Administrative Procedure Act contained in chapter 14. For
88.13packs of cigarettes with other than 20 cigarettes, the tax must be adjusted proportionally.
88.14(b) Notwithstanding paragraph (a), and in lieu of a survey of cigarette retailers, the
88.15tax calculation of the weighted average retail price for the sales of cigarettes from August
88.161, 2011, through December 31, 2011, shall be calculated by: (1) increasing the average
88.17retail price per pack of 20 cigarettes from the most recent survey by the percentage change
88.18in a weighted average of the presumed legal prices for cigarettes during the year after
88.19completion of that survey, as reported and published by the Department of Commerce
88.20under section 325D.371; (2) subtracting the sales tax included in the retail price; and (3)
88.21adjusting for expected inflation. The rate must be published by May 1 and is effective for
88.22sales after July 31. If the weighted average of the presumed legal prices indicates that the
88.23average retail price of cigarettes has not increased relative to the average retail price in the
88.24most recent survey, then no inflation adjustment must be made for any period that a rate
88.25change in section 297F.05, subdivision 1, is enacted after the current effective January 1
88.26rate and prior to the following January 1, the commissioner of revenue shall make a
88.27proportionate adjustment to the sales tax rate. For packs of cigarettes with other than 20
88.28cigarettes, the sales tax must be adjusted proportionally.
88.29EFFECTIVE DATE.This section is effective July 1, 2013.

88.30    Sec. 14. Minnesota Statutes 2012, section 325F.781, subdivision 1, is amended to read:
88.31    Subdivision 1. Definitions. (a) For purposes of this section, the following terms
88.32have the meanings given, unless the language or context clearly provides otherwise.
88.33(b) "Consumer" means an individual who purchases, receives, or possesses tobacco
88.34products for personal consumption and not for resale.
88.35(c) "Delivery sale" means:
89.1(1) a sale of tobacco products to a consumer in this state when:
89.2(i) the purchaser submits the order for the sale by means of a telephonic or other
89.3method of voice transmission, the mail or any other delivery service, or the Internet or
89.4other online service; or
89.5(ii) the tobacco products are delivered by use of the mail or other delivery service; or
89.6(2) a sale of tobacco products that satisfies the criteria in clause (1), item (i),
89.7regardless of whether the seller is located inside or outside of the state.
89.8A sale of tobacco products to an individual in this state must be treated as a sale to a
89.9consumer, unless the individual is licensed as a distributor or retailer of tobacco products.
89.10(d) "Delivery service" means a person, including the United States Postal Service,
89.11that is engaged in the commercial delivery of letters, packages, or other containers.
89.12(e) "Distributor" means a person, whether located inside or outside of this state,
89.13other than a retailer, who sells or distributes tobacco products in the state. Distributor does
89.14not include a tobacco products manufacturer, export warehouse proprietor, or importer
89.15with a valid permit under United States Code, title 26, section 5712 (1997), if the person
89.16sells or distributes tobacco products in this state only to distributors who hold valid and
89.17current licenses under the laws of a state, or to an export warehouse proprietor or another
89.18manufacturer. Distributor does not include a common or contract carrier that is transporting
89.19tobacco products under a proper bill of lading or freight bill that states the quantity, source,
89.20and destination of tobacco products, or a person who ships tobacco products through this
89.21state by common or contract carrier under a bill of lading or freight bill.
89.22(f) "Retailer" means a person, whether located inside or outside this state, who sells
89.23or distributes tobacco products to a consumer in this state.
89.24(g) "Tobacco products" means:
89.25(1) cigarettes, as defined in section 297F.01, subdivision 3; and
89.26(2) smokeless tobacco as defined in section 325F.76.; and
89.27(3) premium cigars as defined in section 297F.01, subdivision 13a.
89.28EFFECTIVE DATE.This section is effective July 1, 2013.

89.29    Sec. 15. FLOOR STOCKS TAX.
89.30(a) A floor stocks cigarette tax is imposed on every person engaged in the business
89.31in this state as a distributor, retailer, subjobber, vendor, manufacturer, or manufacturer's
89.32representative of cigarettes, on the stamped cigarettes and unaffixed stamps in the person's
89.33possession or under the person's control at 12:01 a.m. on July 1, 2013. The tax is imposed
89.34at the following rates:
90.1(1) on cigarettes weighing not more than three pounds per thousand, 47 mills on
90.2each cigarette; and
90.3(2) on cigarettes weighing more than three pounds per thousand, 94 mills on each
90.4cigarette.
90.5(b) Each distributor, on or before July 10, 2013, shall file a return with the
90.6commissioner of revenue, in the form the commissioner prescribes, showing the stamped
90.7cigarettes and unaffixed stamps on hand at 12:01 a.m. on July 1, 2013, and the amount of
90.8tax due on the cigarettes and unaffixed stamps.
90.9(c) Each retailer, subjobber, vendor, manufacturer, or manufacturer's representative,
90.10on or before July 10, 2013, shall file a return with the commissioner of revenue, in the
90.11form the commissioner prescribes, showing the cigarettes on hand at 12:01 a.m. on July 1,
90.122013, and the amount of tax due on the cigarettes.
90.13(d) The tax imposed by this section is due and payable on or before September 4,
90.142013, and after that date bears interest at the rate of one percent per month.
90.15EFFECTIVE DATE.This section is effective July 1, 2013.

90.16    Sec. 16. TOBACCO TAX COLLECTION REPORT.
90.17    Subdivision 1. Report to legislature. (a) The commissioner of revenue shall report
90.18to the 2014 legislature on the tobacco tax collection system, including recommendations
90.19to improve compliance under the excise tax for both cigarettes and other tobacco products.
90.20The purpose of the report is to provide information and guidance to the legislature on
90.21improvements to the tobacco tax collection system to:
90.22(1) provide a unified system of collecting both the cigarette and other tobacco
90.23taxes, regardless of category, size, or shape, that ensures the highest reasonable rates of
90.24tax collection;
90.25(2) discourage tax evasion; and
90.26(3) help to prevent illegal sale of tobacco products, which may make these products
90.27more accessible to youth.
90.28(b) In the report, the commissioner shall:
90.29(1) provide a detailed review of the present excise tax collection and compliance
90.30system as it applies to both cigarettes and other tobacco products. This must include
90.31an assessment of the levels of compliance for each category of products and the effect
90.32of the stamping requirement on compliance for each category of products and the effect
90.33of the stamping requirement on compliance rates for cigarettes relative to other tobacco
90.34products. It also must identify any weaknesses in the system;
91.1(2) survey the methods of collection and enforcement used by other states or nations,
91.2including identifying and discussing emerging best practices that ensure tracking of both
91.3cigarettes and other tobacco products and result in the highest rates of tax collection and
91.4compliance. These best practices must consider high-technology alternatives, such as use
91.5of bar codes, radio-frequency identification tags, or similar mechanisms for tracking
91.6compliance;
91.7(3) evaluate the adequacy and effectiveness of the existing penalties and other
91.8sanctions for noncompliance;
91.9(4) evaluate the adequacy of the resources allocated by the state to enforce the
91.10tobacco tax and prevention laws; and
91.11(5) make recommendations on implementation of a comprehensive tobacco tax
91.12collection system for Minnesota that can be implemented by January 1, 2014, including:
91.13(i) recommendations on the specific steps needed to institute and implement the new
91.14system, including estimates of the state's costs of doing so and any additional personnel
91.15requirements;
91.16(ii) recommendations on methods to recover the cost of implementing the system
91.17from the industry;
91.18(iii) evaluation of the extent to which the proposed system is sufficiently flexible
91.19and adaptable to adjust to modifications in the construction, packaging, formatting, and
91.20marketing of tobacco products by the industry; and
91.21(iv) recommendations to modify existing penalties or to impose new penalties or
91.22other sanctions to ensure compliance with the system.
91.23    Subd. 2. Due date. The report required by subdivision 1 is due January 1, 2014.
91.24    Subd. 3. Procedure. The report required under this section must be made in the
91.25manner provided under Minnesota Statutes, section 3.195. In addition, copies must be
91.26provided to the chairs and ranking minority members of the legislative committees and
91.27divisions with jurisdiction over taxation.
91.28    Subd. 4. Appropriation. (a) $100,000 is appropriated from the general fund to the
91.29commissioner of revenue for fiscal year 2014 for the cost of preparing the report under
91.30subdivision 1.
91.31(b) The appropriation under this subdivision is a onetime appropriation and is not
91.32included in the base budget.
91.33EFFECTIVE DATE.This section is effective the day following final enactment.

92.1    Sec. 17. REPEALER.
92.2Minnesota Statutes 2012, sections 16A.725; and 256.9658, are repealed.
92.3EFFECTIVE DATE.This section is effective July 1, 2013.


92.6    Section 1. Minnesota Statutes 2012, section 289A.38, is amended by adding a
92.7subdivision to read:
92.8    Subd. 17. Estate tax returns; unused deceased spousal exclusion.
92.9Notwithstanding any period of limitation in this section, after the time has expired within
92.10which a tax may be assessed with respect to a deceased spousal unused exclusion amount,
92.11as defined in section 291.016, subdivision 3, the commissioner may examine a return of
92.12the deceased spouse to make determinations with respect to that amount to carry out the
92.13purposes of section 291.016, subdivision 3.
92.14EFFECTIVE DATE.This section is effective for the estates of decedents dying
92.15after June 30, 2013.

92.16    Sec. 2. Minnesota Statutes 2012, section 291.005, subdivision 1, is amended to read:
92.17    Subdivision 1. Scope. Unless the context otherwise clearly requires, the following
92.18terms used in this chapter shall have the following meanings:
92.19    (1) "Commissioner" means the commissioner of revenue or any person to whom the
92.20commissioner has delegated functions under this chapter.
92.21    (2) "Federal gross estate" means the gross estate of a decedent as required to be valued
92.22and otherwise determined for federal estate tax purposes under the Internal Revenue Code.
92.23    (3) "Internal Revenue Code" means the United States Internal Revenue Code of
92.241986, as amended through April 14, 2011 January 3, 2013, but without regard to the
92.25provisions of sections 501 and 901 of Public Law 107-16, as amended by Public Law
92.26111-312, and section 301(c) of Public Law 111-312.
92.27    (4) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
92.28defined by section 2011(b)(3) of the Internal Revenue Code, plus
92.29(i) the amount of deduction for state death taxes allowed under section 2058 of
92.30the Internal Revenue Code; less
92.31(ii)(A) the value of qualified small business property under section 291.03,
92.32subdivision 9 , and the value of qualified farm property under section 291.03, subdivision
92.3310 , or (B) $4,000,000, whichever is less.
93.1    (5) "Minnesota gross estate" means the federal gross estate of a decedent after (a)
93.2excluding therefrom any property included therein which has its situs outside Minnesota,
93.3and (b) including therein any property omitted from the federal gross estate which is
93.4includable therein, has its situs in Minnesota, and was not disclosed to federal taxing
93.5authorities.
93.6    (6) (5) "Nonresident decedent" means an individual whose domicile at the time
93.7of death was not in Minnesota.
93.8    (7) (6) "Personal representative" means the executor, administrator or other person
93.9appointed by the court to administer and dispose of the property of the decedent. If there
93.10is no executor, administrator or other person appointed, qualified, and acting within this
93.11state, then any person in actual or constructive possession of any property having a situs in
93.12this state which is included in the federal gross estate of the decedent shall be deemed
93.13to be a personal representative to the extent of the property and the Minnesota estate tax
93.14due with respect to the property.
93.15    (8) (7) "Resident decedent" means an individual whose domicile at the time of
93.16death was in Minnesota.
93.17    (9) (8) "Situs of property" means, with respect to:
93.18(i) real property, the state or country in which it is located; with respect to
93.19(ii) tangible personal property, the state or country in which it was normally kept or
93.20located at the time of the decedent's death; and with respect to
93.21(iii) intangible personal property, the state or country in which the decedent was
93.22domiciled at death.
93.23EFFECTIVE DATE.This section is effective for the estates of decedents dying
93.24after June 30, 2013.

93.25    Sec. 3. [291.016] MINNESOTA TAXABLE ESTATE.
93.26    Subdivision 1. General. For purposes of the tax under this chapter, the Minnesota
93.27taxable estate equals the federal taxable estate as provided under section 2051 of the Internal
93.28Revenue Code, without regard to whether the estate is subject to the federal estate tax:
93.29(1) increased by the additions under subdivision 2; and
93.30(2) reduced by the sum of:
93.31(i) lesser of (A) the sum of the value of qualified small business property under
93.32section 291.03, subdivision 9, and the value of qualified farm property under section
93.33291.03, subdivision 10, or (B) $4,000,000; and
93.34(ii) the exclusion amount under subdivision 3.
94.1    Subd. 2. Additions. The following amounts, to the extent deducted in computing
94.2the federal taxable estate, must be added in computing the Minnesota taxable estate:
94.3(1) the amount of the deduction for state death taxes allowed under section 2058 of
94.4the Internal Revenue Code; and
94.5(2) the amount of the deduction for foreign death taxes allowed under section
94.62053(d) of the Internal Revenue Code.
94.7    Subd. 3. Exclusion amount; deceased spousal unused exclusion amount. (a)
94.8The exclusion amount equals the sum of:
94.9(1) $1,000,000; and
94.10(2) for a surviving spouse, the deceased spousal unused exclusion amount under
94.11paragraph (b).
94.12(b) For purposes of this subdivision, with respect to a surviving spouse of a deceased
94.13spouse dying after June 30, 2013, the term "deceased spousal unused exclusion amount"
94.14means the excess of:
94.15(1) the amount under paragraph (a), clause (1), over
94.16(2) the amount of the exclusion claimed on the Minnesota estate tax return filed for
94.17the last deceased spouse of the surviving spouse.
94.18A deceased spousal unused exclusion amount is not allowed to the estate of a surviving
94.19spouse under this subdivision, unless the executor of the estate of the deceased spouse
94.20files a Minnesota estate tax return on which the amount is claimed and elects on the return
94.21that the amount may be so taken into account. The election, once made, is irrevocable. No
94.22election may be made under this paragraph if the return is filed after the time prescribed
94.23by law, including extensions, for filing the return.
94.24EFFECTIVE DATE.This section is effective for decedents dying after June 30,
94.252013.

94.26    Sec. 4. Minnesota Statutes 2012, section 291.03, subdivision 1, is amended to read:
94.27    Subdivision 1. Tax amount. (a) The tax imposed shall be an amount equal to the
94.28proportion of the maximum credit for state death taxes computed under section 2011
94.29of the Internal Revenue Code, but using Minnesota adjusted taxable estate instead of
94.30federal adjusted taxable estate, as the Minnesota gross estate bears to the value of the
94.31federal gross estate.
94.32    (b) The tax determined under this subdivision must not be greater than the sum
94.33of the following amounts be computed by applying the following schedule of rates to
94.34the Minnesota taxable estate: (1) on the first $5,000,000, nine percent, and (2) on all
95.1over $5,000,000, 17 percent and multiplied by a fraction, the numerator of which is the
95.2Minnesota gross estate and the denominator of which is the federal gross estate:.
95.3    (1) the rates and brackets under section 2001(c) of the Internal Revenue Code
95.4multiplied by the sum of:
95.5    (i) the taxable estate, as defined under section 2051 of the Internal Revenue Code; plus
95.6    (ii) adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue
95.7Code; less
95.8(iii) the lesser of (A) the sum of the value of qualified small business property
95.9under subdivision 9, and the value of qualified farm property under subdivision 10, or
95.10(B) $4,000,000; less
95.11    (2) the amount of tax allowed under section 2001(b)(2) of the Internal Revenue
95.12Code; and less
95.13    (3) the federal credit allowed under section 2010 of the Internal Revenue Code.
95.14    (c) For purposes of this subdivision, "Internal Revenue Code" means the Internal
95.15Revenue Code of 1986, as amended through December 31, 2000.
95.16EFFECTIVE DATE.This section is effective for the estates of decedents dying
95.17after June 30, 2013.

95.18    Sec. 5. Minnesota Statutes 2012, section 291.03, subdivision 8, is amended to read:
95.19    Subd. 8. Definitions. (a) For purposes of this section, the following terms have the
95.20meanings given in this subdivision.
95.21(b) "Family member" means a family member as defined in section 2032A(e)(2) of
95.22the Internal Revenue Code, or a trust whose present beneficiaries are all family members
95.23as defined in section 2032A(e)(2) of the Internal Revenue Code.
95.24(c) "Qualified heir" means a family member who acquired qualified property from
95.25 upon the death of the decedent and satisfies the requirement under subdivision 9, clause
95.26(6) (7), or subdivision 10, clause (4) (5), for the property.
95.27(d) "Qualified property" means qualified small business property under subdivision
95.289 and qualified farm property under subdivision 10.
95.29EFFECTIVE DATE.This section is effective retroactively for estates of decedents
95.30dying after June 30, 2011.

95.31    Sec. 6. Minnesota Statutes 2012, section 291.03, subdivision 9, is amended to read:
95.32    Subd. 9. Qualified small business property. Property satisfying all of the following
95.33requirements is qualified small business property:
96.1(1) The value of the property was included in the federal adjusted taxable estate.
96.2(2) The property consists of the assets of a trade or business or shares of stock or
96.3other ownership interests in a corporation or other entity engaged in a trade or business.
96.4The decedent or the decedent's spouse must have materially participated in the trade or
96.5business within the meaning of section 469 of the Internal Revenue Code during the
96.6taxable year that ended before the date of the decedent's death. Shares of stock in a
96.7corporation or an ownership interest in another type of entity do not qualify under this
96.8subdivision if the shares or ownership interests are traded on a public stock exchange at
96.9any time during the three-year period ending on the decedent's date of death. For purposes
96.10of this subdivision, an ownership interest includes the interest the decedent is deemed to
96.11own under sections 2036, 2037, and 2038 of the Internal Revenue Code.
96.12(3) During the taxable year that ended before the decedent's death, the trade or
96.13business must not have been a passive activity within the meaning of section 469(c) of the
96.14Internal Revenue Code, and the decedent or the decedent's spouse must have materially
96.15participated in the trade or business within the meaning of section 469(h) of the Internal
96.16Revenue Code, excluding section 469(h)(3) of the Internal Revenue Code and any other
96.17provision provided by United States Department of the Treasury regulations that substitute
96.18material participation in prior taxable years for material participation in the taxable year
96.19that ended before the decedent's death.
96.20(4) The gross annual sales of the trade or business were $10,000,000 or less for the
96.21last taxable year that ended before the date of the death of the decedent.
96.22(4) (5) The property does not consist of cash or, cash equivalents, publicly traded
96.23securities, or assets not used in the operation of the trade or business. For property
96.24consisting of shares of stock or other ownership interests in an entity, the amount value of
96.25cash or, cash equivalents, publicly traded securities, or assets not used in the operation of
96.26the trade or business held by the corporation or other entity must be deducted from the
96.27value of the property qualifying under this subdivision in proportion to the decedent's
96.28share of ownership of the entity on the date of death.
96.29(5) (6) The decedent continuously owned the property, including property the
96.30decedent is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue
96.31Code, for the three-year period ending on the date of death of the decedent. In the case of
96.32a sole proprietor, if the property replaced similar property within the three-year period,
96.33the replacement property will be treated as having been owned for the three-year period
96.34ending on the date of death of the decedent.
96.35(6) A family member continuously uses the property in the operation of the trade or
96.36business for three years following the date of death of the decedent.
97.1(7) For three years following the date of death of the decedent, the trade or business
97.2is not a passive activity within the meaning of section 469(c) of the Internal Revenue Code,
97.3and a family member materially participates in the operation of the trade or business within
97.4the meaning of section 469(h) of the Internal Revenue Code, excluding section 469(h)(3) of
97.5the Internal Revenue Code and any other provision provided by United States Department
97.6of the Treasury regulations that substitute material participation in prior taxable years for
97.7material participation in the three years following the date of death of the decedent.
97.8(8) The estate and the qualified heir elect to treat the property as qualified small
97.9business property and agree, in the form prescribed by the commissioner, to pay the
97.10recapture tax under subdivision 11, if applicable.
97.11EFFECTIVE DATE.This section is effective retroactively for estates of decedents
97.12dying after June 30, 2011.

97.13    Sec. 7. Minnesota Statutes 2012, section 291.03, subdivision 10, is amended to read:
97.14    Subd. 10. Qualified farm property. Property satisfying all of the following
97.15requirements is qualified farm property:
97.16(1) The value of the property was included in the federal adjusted taxable estate.
97.17(2) The property consists of a farm meeting the requirements of agricultural land as
97.18defined in section 500.24, subdivision 2, paragraph (g), and is owned by a person or entity
97.19that is not excluded from owning agricultural land by section 500.24, and was classified
97.20for property tax purposes as the homestead of the decedent or the decedent's spouse or
97.21both under section 273.124, and as class 2a property under section 273.13, subdivision 23.
97.22(3) For property taxes payable in the taxable year of the decedent's death, the
97.23decedent's interest in the property was classified as the homestead of the decedent, the
97.24decedent's spouse, or both under section 273.124 and as class 2a property under section
97.25273.13, subdivision 23.
97.26(4) The decedent continuously owned the property, including property the decedent
97.27is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue Code, for
97.28the three-year period ending on the date of death of the decedent either by ownership of
97.29the agricultural land or pursuant to holding an interest in an entity that is not excluded
97.30from owning agricultural land under section 500.24.
97.31(4) A family member continuously uses the property in the operation of the trade or
97.32business (5) The property is classified for property tax purposes as class 2a property under
97.33section 273.13, subdivision 23, for three years following the date of death of the decedent.
98.1(5) (6) The estate and the qualified heir elect to treat the property as qualified farm
98.2property and agree, in a form prescribed by the commissioner, to pay the recapture tax
98.3under subdivision 11, if applicable.
98.4EFFECTIVE DATE.This section is effective retroactively for estates of decedents
98.5dying after June 30, 2011.

98.6    Sec. 8. Minnesota Statutes 2012, section 291.03, subdivision 11, is amended to read:
98.7    Subd. 11. Recapture tax. (a) If, within three years after the decedent's death and
98.8before the death of the qualified heir, the qualified heir disposes of any interest in the
98.9qualified property, other than by a disposition to a family member, or a family member
98.10ceases to use the qualified property which was acquired or passed from the decedent
98.11 satisfy the requirement under subdivision 9, clause (7); or 10, clause (5), an additional
98.12estate tax is imposed on the property. In the case of a sole proprietor, if the qualified heir
98.13replaces qualified small business property excluded under subdivision 9 with similar
98.14property, then the qualified heir will not be treated as having disposed of an interest in the
98.15qualified property.
98.16(b) The amount of the additional tax equals the amount of the exclusion claimed by
98.17the estate under subdivision 8, paragraph (d), multiplied by 16 percent.
98.18(c) The additional tax under this subdivision is due on the day which is six months
98.19after the date of the disposition or cessation in paragraph (a).
98.20EFFECTIVE DATE.This section is effective retroactively for estates of decedents
98.21dying after June 30, 2011.


98.24    Section 1. Minnesota Statutes 2012, section 477A.011, subdivision 30, is amended to
98.25read:
98.26    Subd. 30. Pre-1940 housing percentage. (a) Except as provided in paragraph (b),
98.27"pre-1940 housing percentage" for a city is 100 times the most recent federal census count
98.28by the United States Bureau of the Census of all housing units in the city built before
98.291940, divided by the total number of all housing units in the city. Housing units includes
98.30both occupied and vacant housing units as defined by the federal census.
98.31(b) For the city of East Grand Forks only, "pre-1940 housing percentage" is equal
98.32to 100 times the 1990 federal census count of all housing units in the city built before
98.331940, divided by the most recent counts by the United States Bureau of the Census of all
99.1housing units in the city. Housing units includes both occupied and vacant housing units
99.2as defined by the federal census.
99.3EFFECTIVE DATE.This section is effective for aids payable in calendar year
99.42014 and thereafter.

99.5    Sec. 2. Minnesota Statutes 2012, section 477A.011, is amended by adding a
99.6subdivision to read:
99.7    Subd. 30a. Percent of housing built between 1940 and 1970. "Percent of housing
99.8built between 1940 and 1970" is equal to 100 times the most recent count by the United
99.9States Bureau of the Census of all housing units in the city built after 1939 but before
99.101970, divided by the total number of all housing units in the city. Housing units includes
99.11both occupied and vacant housing units as defined by the federal census.
99.12EFFECTIVE DATE.This section is effective for aids payable in calendar year
99.132014 and thereafter.

99.14    Sec. 3. Minnesota Statutes 2012, section 477A.011, subdivision 34, is amended to read:
99.15    Subd. 34. City revenue need. (a) For a city with a population equal to or greater
99.16than 2,500 10,000, "city revenue need" is the greater of 285 or 1.15 times the sum of (1)
99.175.0734098 4.59 times the pre-1940 housing percentage; plus (2) 19.141678 times the
99.18population decline percentage 0.622 times the percent of housing built between 1940 and
99.191970; plus (3) 2504.06334 times the road accidents factor 169.415 times the jobs per
99.20capita; plus (4) 355.0547; minus (5) the metropolitan area factor; minus (6) 49.10638
99.21times the household size 307.664.
99.22    (b) For a city with a population equal to or greater than 2,500 and less than 10,000,
99.23city revenue need is 1.15 times the sum of (1) 572.62; plus (2) 5.026 times the pre-1940
99.24housing percentage; minus (3) 53.768 times household size; plus (4) 14.022 times peak
99.25population decline.
99.26    (b) (c) For a city with a population less than 2,500, "city revenue need" is the sum of
99.27(1) 2.387 times the pre-1940 housing percentage; plus (2) 2.67591 times the commercial
99.28industrial percentage; plus (3) 3.16042 times the population decline percentage; plus (4)
99.291.206 times the transformed population; minus (5) 62.772 410 plus 0.367 times the city's
99.30population over 100. The city revenue need under this paragraph shall not exceed 630.
99.31    (c) (d) For a city with a population of at least 2,500 or more and a population in one
99.32of the most recently available five years that was less than 2,500, "city revenue need"
99.33is the sum of (1) its city revenue need calculated under paragraph (a) multiplied by its
100.1transition factor; plus (2) its city revenue need calculated under the formula in paragraph
100.2(b) multiplied by the difference between one and its transition factor. For purposes of this
100.3paragraph, a city's "transition factor" is equal to 0.2 multiplied by the number of years that
100.4the city's population estimate has been 2,500 or more. This provision only applies for aids
100.5payable in calendar years 2006 to 2008 to cities with a 2002 population of less than 2,500.
100.6It applies to any city for aids payable in 2009 and thereafter but less than 3,000, the city
100.7revenue need equals (1) the transition factor times the city's revenue need calculated in
100.8paragraph (b) plus (2) 630 times the difference between one and the transition factor. For a
100.9city with a population of at least 10,000 but less than 10,500, the city revenue need equals
100.10(1) the transition factor times the city's revenue need calculated in paragraph (a) plus (2)
100.11the city's revenue need calculated under the formula in paragraph (b) times the difference
100.12between one and the transition factor. For purposes of this paragraph, "transition factor" is
100.130.2 percent times the amount that the city's population exceeds the minimum threshold in
100.14either of the first two sentences.
100.15    (d) (e) The city revenue need cannot be less than zero.
100.16    (e) (f) For calendar year 2005 2015 and subsequent years, the city revenue need for
100.17a city, as determined in paragraphs (a) to (d) (e), is multiplied by the ratio of the annual
100.18implicit price deflator for government consumption expenditures and gross investment for
100.19state and local governments as prepared by the United States Department of Commerce,
100.20for the most recently available year to the 2003 2013 implicit price deflator for state
100.21and local government purchases.
100.22EFFECTIVE DATE.This section is effective for aids payable in calendar year
100.232014 and thereafter.

100.24    Sec. 4. Minnesota Statutes 2012, section 477A.011, subdivision 42, is amended to read:
100.25    Subd. 42. City jobs base Jobs per capita in the city. (a) "City jobs base" for a city
100.26with a population of 5,000 or more is equal to the product of (1) $25.20, (2) the number of
100.27jobs per capita in the city, and (3) its population. For cities with a population less than
100.285,000, the city jobs base is equal to zero. For a city receiving aid under subdivision 36,
100.29paragraph (k), its city jobs base is reduced by the lesser of 36 percent of the amount of
100.30aid received under that paragraph or $1,000,000. No city's city jobs base may exceed
100.31$4,725,000 under this paragraph.
100.32    (b) For calendar year 2010 and subsequent years, the city jobs base for a city, as
100.33determined in paragraph (a), is multiplied by the ratio of the appropriation under section
100.34477A.03, subdivision 2a, for the year in which the aid is paid to the appropriation under
100.35that section for aids payable in 2009.
101.1    (c) For purposes of this subdivision, "Jobs per capita in the city" means (1) the
101.2average annual number of employees in the city based on the data from the Quarterly
101.3Census of Employment and Wages, as reported by the Department of Employment and
101.4Economic Development, for the most recent calendar year available as of May 1, 2008
101.5 November 1 of every odd-numbered year, divided by (2) the city's population for the
101.6same calendar year as the employment data. The commissioner of the Department of
101.7Employment and Economic Development shall certify to the city the average annual
101.8number of employees for each city by June 1, 2008 January 15 of every even-numbered
101.9year beginning with January 15, 2014. A city may challenge an estimate under this
101.10paragraph by filing its specific objection, including the names of employers that it feels
101.11may have misreported data, in writing with the commissioner by June 20, 2008 December
101.121 of every odd-numbered year. The commissioner shall make every reasonable effort to
101.13address the specific objection and adjust the data as necessary. The commissioner shall
101.14certify the estimates of the annual employment to the commissioner of revenue by July 15,
101.152008 January 15 of all even-numbered years, including any estimates still under objection.
101.16For aids payable in 2014, jobs per capita in the city shall be based on the annual number of
101.17employees and population for calendar year 2010 without additional review.
101.18EFFECTIVE DATE.This section is effective for aids payable in calendar year
101.192014 and thereafter.

101.20    Sec. 5. Minnesota Statutes 2012, section 477A.011, is amended by adding a
101.21subdivision to read:
101.22    Subd. 44. Peak population decline. "Peak population decline" is equal to 100 times
101.23the difference between one and the ratio of the city's current population to the highest city
101.24population reported in a federal census from the 1970 census or later. Peak population
101.25decline shall not be less than zero.
101.26EFFECTIVE DATE.This section is effective for aids payable in calendar year
101.272014 and thereafter.

101.28    Sec. 6. Minnesota Statutes 2012, section 477A.013, subdivision 8, is amended to read:
101.29    Subd. 8. City formula aid. (a) For aids payable in 2014 only, the formula aid for a
101.30city is equal to the sum of (1) its 2013 certified aid and (2) the product of (i) the difference
101.31between its unmet need and its 2013 certified aid, and (ii) the aid gap percentage.
101.32    (b) For aids payable in 2015 and thereafter, the formula aid for a city is equal to
101.33the sum of (1) its city jobs base, (2) its small city aid base, and (3) the need increase
102.1percentage multiplied by the average of its unmet need for the most recently available two
102.2years formula aid in the previous year and (2) the product of (i) the difference between
102.3its unmet need and its certified aid in the previous year under subdivision 9, and (ii)
102.4the aid gap percentage.
102.5No city may have a formula aid amount less than zero. The need increase aid gap
102.6 percentage must be the same for all cities.
102.7    The applicable need increase aid gap percentage must be calculated by the
102.8Department of Revenue so that the total of the aid under subdivision 9 equals the total
102.9amount available for aid under section 477A.03. Data used in calculating aids to cities
102.10under sections 477A.011 to 477A.013 shall be the most recently available data as of
102.11January 1 in the year in which the aid is calculated except that the data used to compute "net
102.12levy" in subdivision 9 is the data most recently available at the time of the aid computation.
102.13EFFECTIVE DATE.This section is effective for aids payable in calendar year
102.142014 and thereafter.

102.15    Sec. 7. Minnesota Statutes 2012, section 477A.013, subdivision 9, is amended to read:
102.16    Subd. 9. City aid distribution. (a) In calendar year 2013 2014 and thereafter, each
102.17city shall receive an aid distribution equal to the sum of (1) the city formula aid under
102.18subdivision 8, and (2) its city aid base aid adjustment under subdivision 13.
102.19    (b) For aids payable in 2013 and 2014 only, the total aid in the previous year for
102.20any city shall mean the amount of aid it was certified to receive for aids payable in 2012
102.21under this section. For aids payable in 2015 and thereafter, the total aid in the previous
102.22year for any city means the amount of aid it was certified to receive under this section in
102.23the previous payable year.
102.24    (c) For aids payable in 2010 and thereafter, the total aid for any city shall not exceed
102.25the sum of (1) ten percent of the city's net levy for the year prior to the aid distribution
102.26plus (2) its total aid in the previous year. For aids payable in 2009 and thereafter, the total
102.27aid for any city with a population of 2,500 or more may not be less than its total aid under
102.28this section in the previous year minus the lesser of $10 multiplied by its population, or ten
102.29percent of its net levy in the year prior to the aid distribution.
102.30    (d) (b) For aids payable in 2014 only, the total aid for a city may not be less than the
102.31amount it was certified to receive in 2013. For aids payable in 2010 2015 and thereafter,
102.32the total aid for a city with a population less than 2,500 must not be less than the amount
102.33it was certified to receive in the previous year minus the lesser of $10 multiplied by its
102.34population, or five percent of its 2003 certified aid amount. For aids payable in 2009 only,
103.1the total aid for a city with a population less than 2,500 must not be less than what it
103.2received under this section in the previous year unless its total aid in calendar year 2008
103.3was aid under section 477A.011, subdivision 36, paragraph (s), in which case its minimum
103.4aid is zero its net levy in the year prior to the aid distribution.
103.5    (e) A city's aid loss under this section may not exceed $300,000 in any year in
103.6which the total city aid appropriation under section 477A.03, subdivision 2a, is equal or
103.7greater than the appropriation under that subdivision in the previous year, unless the
103.8city has an adjustment in its city net tax capacity under the process described in section
103.9469.174, subdivision 28.
103.10    (f) If a city's net tax capacity used in calculating aid under this section has decreased
103.11in any year by more than 25 percent from its net tax capacity in the previous year due to
103.12property becoming tax-exempt Indian land, the city's maximum allowed aid increase
103.13under paragraph (c) shall be increased by an amount equal to (1) the city's tax rate in the
103.14year of the aid calculation, multiplied by (2) the amount of its net tax capacity decrease
103.15resulting from the property becoming tax exempt.
103.16EFFECTIVE DATE.This section is effective for aids payable in calendar year
103.172014 and thereafter.

103.18    Sec. 8. Minnesota Statutes 2012, section 477A.013, is amended by adding a
103.19subdivision to read:
103.20    Subd. 13. Certified aid adjustments. (a) A city that received an aid base increase
103.21under Minnesota Statutes 2012, section 477A.011, subdivision 36, paragraph (e), shall
103.22have its total aid under subdivision 9 increased by an amount equal to $150,000 for aids
103.23payable in 2014 through 2018.
103.24(b) A city that received a temporary aid increase under Minnesota Statutes 2012,
103.25section 477A.011, subdivision 36, paragraph (m), (v), or (w), shall have its total aid under
103.26subdivision 9 decreased by the amount of its aid base increase under those paragraphs in
103.27calendar year 2013.

103.28    Sec. 9. Minnesota Statutes 2012, section 477A.03, subdivision 2a, is amended to read:
103.29    Subd. 2a. Cities. For aids payable in 2013 2014 and thereafter, the total aid paid
103.30under section 477A.013, subdivision 9, is $426,438,012 $506,438,012.
103.31EFFECTIVE DATE.This section is effective for aids payable in calendar year
103.322014 and thereafter.

104.1    Sec. 10. PROPERTY TAX SAVINGS REPORT.
104.2(a) Beginning September 1, 2014, local governments, as defined in Minnesota
104.3Statutes, section 297A.70, subdivision 2, paragraph (d), shall report annually to the
104.4commissioner of revenue on the savings realized to their budgets for the period beginning
104.5July 1 of the previous year to June 30 in the year the report is due that resulted from the
104.6sales tax exemption authorized under Minnesota Statutes, section 297A.70, subdivision
104.72, together with the amount of any property tax levy reduction that resulted from that
104.8sales tax exemption.
104.9(b) Beginning February 1, 2015, the commissioner of revenue shall annually compile
104.10the reports required under paragraph (a) and report to the chairs and ranking minority
104.11members of the senate and house of representatives committees with jurisdiction over
104.12taxes and the majority and minority leaders of the house of representatives and senate.
104.13The report shall include a calculation of the property tax reduction statewide that resulted
104.14from the sales tax exemption authorized under Minnesota Statutes, section 297A.70,
104.15subdivision 2, and shall include a recommendation to impose levy limits under Minnesota
104.16Statutes, sections 275.70 to 275.74, if the total reported property tax reduction is not at
104.17least 75 percent of the reported savings from the sales tax exemption.
104.18EFFECTIVE DATE.This section is effective the day following final enactment.

104.19    Sec. 11. REPEALER.
104.20Minnesota Statutes 2012, sections 477A.011, subdivisions 2a, 19, 29, 31, 32, 33, 36,
104.2139, 40, 41, and 42; 477A.013, subdivisions 11 and 12; 477A.0133; and 477A.0134, are
104.22repealed.
104.23EFFECTIVE DATE.This section is effective for aids payable in calendar year
104.242014 and thereafter.


104.27    Section 1. Minnesota Statutes 2012, section 296A.09, subdivision 2, is amended to read:
104.28    Subd. 2. Jet fuel and special fuel tax imposed. There is imposed an excise tax
104.29of the same rate 15 cents per gallon as the aviation gasoline on all jet fuel or special
104.30fuel received, sold, stored, or withdrawn from storage in this state, for use as substitutes
104.31for aviation gasoline and not otherwise taxed as gasoline. Jet fuel is defined in section
104.32296A.01, subdivision 8 .

105.1    Sec. 2. Minnesota Statutes 2012, section 296A.09, is amended by adding a subdivision
105.2to read:
105.3    Subd. 3a. Excise tax for certain airline companies. Subdivision 2 does not apply
105.4to jet fuel or special fuel purchased by an airline company that is engaged in air commerce
105.5in this state and is required to pay air flight property tax under section 270.072. An excise
105.6tax of five cents per gallon is imposed on fuel that is described in this subdivision.

105.7    Sec. 3. Minnesota Statutes 2012, section 296A.17, subdivision 3, is amended to read:
105.8    Subd. 3. Refund on graduated basis. Any person who has directly or indirectly
105.9paid the excise tax on aviation gasoline or special fuel for aircraft use provided for by this
105.10chapter under section 296A.09, subdivision 3a, shall, as to all such aviation gasoline
105.11and special fuel received, stored, or withdrawn from storage by the person in this state
105.12in any calendar year and not sold or otherwise disposed of to others, or intended for
105.13sale or other disposition to others, on which such tax has been so paid, be entitled to
105.14the following graduated reductions in such tax for that calendar year, to be obtained by
105.15means of the following refunds:
105.16(1) on each gallon of such aviation gasoline or special fuel up to 50,000 gallons, all
105.17but five cents per gallon;
105.18(2) on each gallon of such aviation gasoline or special fuel above 50,000 gallons and
105.19not more than 150,000 gallons, all but two cents per gallon;
105.20(3) on each gallon of such aviation gasoline or special fuel above 150,000 gallons
105.21and not more than 200,000 gallons, all but one cent per gallon;
105.22(4) on each gallon of such aviation gasoline or special fuel above 200,000, all but
105.23one-half cent per gallon.

105.24    Sec. 4. Minnesota Statutes 2012, section 296A.17, is amended by adding a subdivision
105.25to read:
105.26    Subd. 3a. Nonrefundable excise tax. Any person who has directly or indirectly
105.27paid the jet fuel or special fuel tax imposed under section 296A.09, subdivision 2, is not
105.28entitled to a tax refund under subdivision 3.

105.29    Sec. 5. Minnesota Statutes 2012, section 297A.82, subdivision 4, is amended to read:
105.30    Subd. 4. Exemptions. (a) The following transactions are exempt from the tax
105.31imposed in this chapter to the extent provided.
106.1(b) The purchase or use of aircraft previously registered in Minnesota by a
106.2corporation or partnership is exempt if the transfer constitutes a transfer within the
106.3meaning of section 351 or 721 of the Internal Revenue Code.
106.4(c) The sale to or purchase, storage, use, or consumption by a licensed aircraft dealer
106.5of an aircraft for which a commercial use permit has been issued pursuant to section
106.6360.654 is exempt, if the aircraft is resold while the permit is in effect.
106.7(d) Air flight equipment when sold to, or purchased, stored, used, or consumed by
106.8airline companies, as defined in section 270.071, subdivision 4, is exempt. For purposes
106.9of this subdivision, "air flight equipment" includes airplanes and parts necessary for the
106.10repair and maintenance of such air flight equipment, and flight simulators, but does
106.11not include airplanes with a gross weight of less than 30,000 pounds that are used on
106.12intermittent or irregularly timed flights.
106.13(e) Sales of, and the storage, distribution, use, or consumption of aircraft, as defined
106.14in section 360.511 and approved by the Federal Aviation Administration, and which the
106.15seller delivers to a purchaser outside Minnesota or which, without intermediate use, is
106.16shipped or transported outside Minnesota by the purchaser are exempt, but only if the
106.17purchaser is not a resident of Minnesota and provided that the aircraft is not thereafter
106.18returned to a point within Minnesota, except in the course of interstate commerce or
106.19isolated and occasional use, and will be registered in another state or country upon its
106.20removal from Minnesota. This exemption applies even if the purchaser takes possession of
106.21the aircraft in Minnesota and uses the aircraft in the state exclusively for training purposes
106.22for a period not to exceed ten days prior to removing the aircraft from this state.
106.23(f) The sale or purchase of the following items that relate to aircraft operated under
106.24Federal Aviation Regulations, parts 91 and 135, and associated installation charges:
106.25equipment and parts necessary for repair and maintenance of aircraft and equipment
106.26and parts to upgrade and improve aircraft.

106.27    Sec. 6. Minnesota Statutes 2012, section 297A.82, is amended by adding a subdivision
106.28to read:
106.29    Subd. 4a. Deposit in state airports fund. Tax revenue collected from the sale or
106.30purchase of an aircraft taxable under this chapter must be deposited in the state airports
106.31fund, established in section 360.017.

106.32    Sec. 7. Minnesota Statutes 2012, section 360.531, is amended to read:
106.33360.531 TAXATION.
107.1    Subdivision 1. In lieu tax. All aircraft using the air space overlying the state of
107.2Minnesota or the airports thereof, except as set forth in section 360.55, shall be taxed in
107.3lieu of all other taxes thereon, on the basis and at the rate for the period January 1, 1966, to
107.4June 30, 1967, and for each fiscal year as follows.
107.5    Subd. 2. Rate. The tax shall be at the rate of one percent of value; provided that
107.6the minimum tax on an aircraft subject to the provisions of sections 360.511 to 360.67
107.7 shall not be less than 25 percent of the tax on said aircraft computed on its base price or
107.8$50 whichever is the higher. as follows:

107.9	Base Price		Tax
107.10	Under $499,999		$100
107.11	$500,000 to $999,999		$200
107.12	$1,000,000 to $2,499,999		$2,000
107.13	$2,500,000 to $4,999,999		$4,000
107.14	$5,000,000 to $7,499,999		$7,500
107.15	$7,500,000 to $9,999,999		$10,000
107.16	$10,000,000 to $12,499,999		$12,500
107.17	$12,500,000 to $14,999,999		$15,000
107.18	$15,000,000 to $17,499,999		$17,500
107.19	$17,500,000 to $19,999,999		$20,000
107.20	$20,000,000 to $22,499,999		$22,500
107.21	$22,500,000 to $24,999,999		$25,000
107.22	$25,000,000 to $27,499,999		$27,500
107.23	$27,500,000 to $29,999,999		$30,000
107.24	$30,000,000 to $39,999,999		$50,000
107.25	$40,000,000 and over		$75,000

107.26    Subd. 3. First year of life. "First year of life" means the year the aircraft was
107.27manufactured.
107.28    Subd. 4. Base price for taxation. For the purpose of fixing a base price for taxation
107.29from which depreciation in value at a fixed percent per annum can be counted, such, the
107.30base price is defined as follows:
107.31(a) The base price for taxation of an aircraft shall be the manufacturer's list price.
107.32(b) The commissioner shall have authority to fix the base value for taxation purposes
107.33of any aircraft of which no such similar or corresponding model has been manufactured,
107.34and of any rebuilt or foreign aircraft, any aircraft on which a record of the list price is not
107.35available, or any military aircraft converted for civilian use, using as a basis for such
107.36valuation the list price of aircraft with comparable performance characteristics, and taking
107.37into consideration the age and condition of the aircraft.
107.38    Subd. 5. Similarity of corresponding model. Models shall be deemed similar if
107.39substantially alike and of the same make. Models shall be deemed to be corresponding
108.1models for the purpose of taxation under sections 360.54 to 360.67 if of the same make
108.2and having approximately the same weight and type of frame and the same style and
108.3size of motor.
108.4    Subd. 6. Depreciation. After the first year of aircraft life the base value for taxation
108.5purposes shall be reduced as follows: ten percent the second year, and 15 percent the third
108.6and each succeeding year thereafter, but in no event shall such tax be reduced below
108.7the minimum.
108.8    Subd. 7. Prorating tax. When an aircraft first becomes subject to taxation during the
108.9period for which the tax is to be paid, the tax on it shall be for the remainder of that period,
108.10prorated on a monthly basis of 1/12 of the annual tax for each calendar month counting the
108.11month during which it becomes subject to the tax as the first month of such period.
108.12    Subd. 8. Tax, fiscal year. Every aircraft subject to the provisions of sections
108.13360.511 to 360.67 which has at any time since April 19, 1945, used the air space overlying
108.14the state of Minnesota or the airports thereof shall be taxed for the period from January 1,
108.151966, through June 30, 1967, and for each fiscal year thereafter in which it is so used. Any
108.16aircraft which does not use the air space overlying the state of Minnesota or the airports
108.17thereof at any time during the period of January 1, 1966, to and including June 30, 1967,
108.18or at any time during any fiscal year thereafter shall not be subject to the tax provided by
108.19sections 360.511 to 360.67 for such period. Rebuilt aircraft shall be subject to the tax
108.20provided by sections 360.511 to 360.67 for that portion of the aforesaid periods remaining
108.21after the aircraft has been rebuilt, prorated on a monthly basis.
108.22    Subd. 9. Assessed as personal property in certain cases. Aircraft subject to
108.23taxation under the provisions of sections 360.54 to 360.67 shall not be assessed as personal
108.24property and shall be subject to no tax except as provided for by these sections. Aircraft
108.25not subject to taxation as provided in these sections, but subject to taxation as personal
108.26property within the state of Minnesota shall be assessed and valued at 33-1/3 percent of
108.27the market value thereof and taxed at the rate and in the manner provided by law for the
108.28taxation of ordinary personal property. If the person against whom any tax has been levied
108.29on the ad valorem basis because of any aircraft shall, during the calendar year for which
108.30such ad valorem tax is levied, be also taxed under provisions of these sections, then and in
108.31that event, upon proper showing, the commissioner of revenue shall grant to the person
108.32against whom said ad valorem tax was levied, such reduction or abatement of net tax
108.33capacity or taxes as was occasioned by the so-called ad valorem tax imposed. If the ad
108.34valorem tax upon any aircraft has been assessed against a dealer in new and used aircraft,
108.35and the tax imposed by these sections for the required period is thereafter paid by the
108.36owner, then and in that event, upon proper showing, the commissioner of revenue, upon
109.1the application of said dealer, shall grant to such dealer against whom said ad valorem tax
109.2was levied such reduction or abatement of net tax capacity or taxes as was occasioned
109.3by the so-called ad valorem tax imposed.

109.4    Sec. 8. Minnesota Statutes 2012, section 360.66, is amended to read:
109.5360.66 STATE AIRPORTS FUND.
109.6    Subdivision 1. Tax credited to fund. The proceeds of the tax imposed on aircraft
109.7under sections 360.54 360.531 to 360.67 and all fees and penalties provided for therein
109.8shall be collected by the commissioner and paid into the state treasury and credited to the
109.9state airports fund created by other statutes of this state.
109.10    Subd. 2. Reimbursement for expenses. There shall be transferred by the
109.11commissioner of management and budget each year from the state airports fund to the
109.12general fund in the state treasury the amount expended from the latter fund for expenses of
109.13administering the provisions of sections 360.54 360.531 to 360.67.

109.14    Sec. 9. REPORT.
109.15On or before June 30, 2016, and every four years thereafter, the commissioner of
109.16transportation, in consultation with the commissioner of revenue, shall prepare and submit
109.17to the chairs and ranking minority members of the senate and house of representatives
109.18committees with jurisdiction over transportation policy and budget, a report that identifies
109.19the amount and sources of annual revenue attributable to each type of aviation tax, along
109.20with annual expenditures from the state airports fund, and any other transfers out of the
109.21fund, during the previous four years. The report must include draft legislation for any
109.22recommended statutory changes to ensure the future adequacy of the state airports fund.

109.23    Sec. 10. EFFECTIVE DATE.
109.24Sections 1 to 4 are effective July 1, 2014, and apply to sales and purchases made
109.25on or after that date. Sections 5 and 6 are effective July 1, 2013, and apply to sales and
109.26purchases made on or after that date. Sections 7 to 9 are effective July 1, 2014, and apply
109.27to aircraft tax due on or after that date. Section 10 is effective July 1, 2013.


109.30    Section 1. Minnesota Statutes 2012, section 270C.03, subdivision 1, is amended to read:
110.1    Subdivision 1. Powers and duties. The commissioner shall have and exercise
110.2the following powers and duties:
110.3    (1) administer and enforce the assessment and collection of taxes;
110.4    (2) make determinations, corrections, and assessments with respect to taxes,
110.5including interest, additions to taxes, and assessable penalties;
110.6    (3) use statistical or other sampling techniques consistent with generally accepted
110.7auditing standards in examining returns or records and making assessments;
110.8    (4) investigate the tax laws of other states and countries, and formulate and submit
110.9to the legislature such legislation as the commissioner may deem expedient to prevent
110.10evasions of state revenue laws and to secure just and equal taxation and improvement in
110.11the system of state revenue laws;
110.12    (5) consult and confer with the governor upon the subject of taxation, the
110.13administration of the laws in regard thereto, and the progress of the work of the
110.14department, and furnish the governor, from time to time, such assistance and information
110.15as the governor may require relating to tax matters;
110.16    (6) execute and administer any agreement with the secretary of the treasury or the
110.17Bureau of Alcohol, Tobacco, Firearms and Explosives in the Department of Justice of the
110.18United States or a representative of another state regarding the exchange of information
110.19and administration of the state revenue laws;
110.20    (7) require town, city, county, and other public officers to report information as to the
110.21collection of taxes received from licenses and other sources, and such other information
110.22as may be needful in the work of the commissioner, in such form as the commissioner
110.23may prescribe;
110.24    (8) authorize the use of unmarked motor vehicles to conduct seizures or criminal
110.25investigations pursuant to the commissioner's authority;
110.26    (9) authorize the participation in audits performed by the Multistate Tax Commission.
110.27For the purposes of chapter 270B, the Multistate Tax Commission will be considered to be
110.28a state for the purposes of auditing corporate sales, excise, and income tax returns;
110.29    (10) maintain toll-free telephone access for taxpayer assistance for calls from
110.30locations within the state; and
110.31    (10) (11) exercise other powers and authority and perform other duties required of or
110.32imposed upon the commissioner by law.
110.33EFFECTIVE DATE.This section is effective the day following final enactment.

110.34    Sec. 2. [295.61] SPORTS MEMORABILIA GROSS RECEIPTS TAX.
111.1    Subdivision 1. Definitions. (a) For purposes of this section, the following terms
111.2have the meanings given, unless the context clearly indicates otherwise.
111.3(b) "Commissioner" means the commissioner of revenue.
111.4(c) "Sale" means a transfer of title or possession of tangible personal property,
111.5whether absolutely or conditionally.
111.6(d) "Sports memorabilia" means items available for sale to the public that are sold
111.7under a license granted by any professional or Collegiate Division I sports league or
111.8association or a team that is a franchise of a professional sports league or association, an
111.9affiliate or subsidiary of a league, association, or a team, including:
111.10(1) one-of-a-kind items related to sports figures, teams, or events;
111.11(2) trading cards;
111.12(3) photographs;
111.13(4) clothing;
111.14(5) sports event licensed items;
111.15(6) sports equipment; and
111.16(7) similar items, but not food or beverage items.
111.17(e) "Wholesale" or "sale at wholesale" means a sale to a retailer, as defined in
111.18section 297A.61, subdivision 9, for the purpose of reselling the property to a third party.
111.19Wholesale does not mean a sale to a wholesaler.
111.20(f) "Wholesaler" means any person making wholesale sales of sports memorabilia
111.21to purchasers in the state.
111.22    Subd. 2. Imposition. A tax is imposed on each sale at wholesale of sports
111.23memorabilia equal to 13 percent of the gross revenues from the sale.
111.24    Subd. 3. Quarterly returns. Each wholesaler must file quarterly returns and make
111.25payments by April 18 for the quarter ending March 31; July 18 for the quarter ending June
111.2630; October 18 for the quarter ending September 30; and January 18 of the following
111.27calendar year for the quarter ending December 31.
111.28    Subd. 4. Compensating use tax. If the tax is not paid under subdivision 2, a
111.29compensating tax is imposed on possession for sale or use of sports memorabilia in the
111.30state. The rate of tax equals the rate under subdivision 2 and must be paid by the possessor
111.31of the items.
111.32    Subd. 5. Administrative provisions. Unless specifically provided otherwise by this
111.33section, the relevant audit, assessment, refund, penalty, interest, enforcement, collection
111.34remedies, appeal, and administrative provisions of chapters 270C and 289A apply to
111.35taxes imposed under this section.
112.1    Subd. 6. Disposition of revenues. The commissioner shall deposit the revenues
112.2from the tax in the general fund.
112.3EFFECTIVE DATE.This section is effective for sales and purchases made after
112.4June 30, 2013.

112.5    Sec. 3. REPEALER.
112.6Minnesota Statutes 2012, sections 290.171; 290.173; and 290.174, are repealed.
112.7EFFECTIVE DATE.This section is effective the day following final enactment.