1.1.................... moves to amend H.F. No. 392 as follows:
1.2Delete everything after the enacting clause and insert:

1.3    "Section 1. Minnesota Statutes 2008, section 289A.02, subdivision 7, is amended to
1.4read:
1.5    Subd. 7. Internal Revenue Code. Unless specifically defined otherwise, "Internal
1.6Revenue Code" means the Internal Revenue Code of 1986, as amended through February
1.713, 2008 December 31, 2008.
1.8EFFECTIVE DATE.This section is effective the day following final enactment,
1.9except the changes incorporated by federal changes are effective at the same time as the
1.10changes were effective for federal purposes.

1.11    Sec. 2. Minnesota Statutes 2008, section 290.01, subdivision 19, is amended to read:
1.12    Subd. 19. Net income. The term "net income" means the federal taxable income,
1.13as defined in section 63 of the Internal Revenue Code of 1986, as amended through the
1.14date named in this subdivision, incorporating the federal effective dates of changes to the
1.15Internal Revenue Code and any elections made by the taxpayer in accordance with the
1.16Internal Revenue Code in determining federal taxable income for federal income tax
1.17purposes, and with the modifications provided in subdivisions 19a to 19f.
1.18    In the case of a regulated investment company or a fund thereof, as defined in section
1.19851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
1.20company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
1.21except that:
1.22    (1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
1.23Revenue Code does not apply;
1.24    (2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal
1.25Revenue Code must be applied by allowing a deduction for capital gain dividends and
2.1exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal
2.2Revenue Code; and
2.3    (3) the deduction for dividends paid must also be applied in the amount of any
2.4undistributed capital gains which the regulated investment company elects to have treated
2.5as provided in section 852(b)(3)(D) of the Internal Revenue Code.
2.6    The net income of a real estate investment trust as defined and limited by section
2.7856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
2.8taxable income as defined in section 857(b)(2) of the Internal Revenue Code.
2.9    The net income of a designated settlement fund as defined in section 468B(d) of
2.10the Internal Revenue Code means the gross income as defined in section 468B(b) of the
2.11Internal Revenue Code.
2.12    The Internal Revenue Code of 1986, as amended through February 13, 2008
2.13December 31, 2008, shall be in effect for taxable years beginning after December 31, 1996.
2.14    Except as otherwise provided, references to the Internal Revenue Code in
2.15subdivisions 19 to 19f mean the code in effect for purposes of determining net income for
2.16the applicable year.
2.17EFFECTIVE DATE.This section is effective for taxable years beginning after
2.18December 31, 2007.

2.19    Sec. 3. Minnesota Statutes 2008, section 290.01, subdivision 19a, is amended to read:
2.20    Subd. 19a. Additions to federal taxable income. For individuals, estates, and
2.21trusts, there shall be added to federal taxable income:
2.22    (1)(i) interest income on obligations of any state other than Minnesota or a political
2.23or governmental subdivision, municipality, or governmental agency or instrumentality
2.24of any state other than Minnesota exempt from federal income taxes under the Internal
2.25Revenue Code or any other federal statute; and
2.26    (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
2.27Code, except the portion of the exempt-interest dividends derived from interest income
2.28on obligations of the state of Minnesota or its political or governmental subdivisions,
2.29municipalities, governmental agencies or instrumentalities, but only if the portion of the
2.30exempt-interest dividends from such Minnesota sources paid to all shareholders represents
2.3195 percent or more of the exempt-interest dividends that are paid by the regulated
2.32investment company as defined in section 851(a) of the Internal Revenue Code, or the
2.33fund of the regulated investment company as defined in section 851(g) of the Internal
2.34Revenue Code, making the payment; and
3.1    (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
3.2government described in section 7871(c) of the Internal Revenue Code shall be treated as
3.3interest income on obligations of the state in which the tribe is located;
3.4    (2) the amount of income or sales and use taxes paid or accrued within the taxable
3.5year under this chapter and the amount of taxes based on net income paid or sales and
3.6use taxes paid to any other state or to any province or territory of Canada, to the extent
3.7allowed as a deduction under section 63(d) of the Internal Revenue Code, but the addition
3.8may not be more than the amount by which the itemized deductions as allowed under
3.9section 63(d) of the Internal Revenue Code exceeds the amount of the standard deduction
3.10as defined in section 63(c) of the Internal Revenue Code, disregarding the amount allowed
3.11under section 63(c)(1)(C) of the Internal Revenue Code. For the purpose of this paragraph,
3.12the disallowance of itemized deductions under section 68 of the Internal Revenue Code of
3.131986, income or sales and use tax is the last itemized deduction disallowed;
3.14    (3) the capital gain amount of a lump-sum distribution to which the special tax under
3.15section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
3.16    (4) the amount of income taxes paid or accrued within the taxable year under this
3.17chapter and taxes based on net income paid to any other state or any province or territory
3.18of Canada, to the extent allowed as a deduction in determining federal adjusted gross
3.19income. For the purpose of this paragraph, income taxes do not include the taxes imposed
3.20by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
3.21    (5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
3.22other than expenses or interest used in computing net interest income for the subtraction
3.23allowed under subdivision 19b, clause (1);
3.24    (6) the amount of a partner's pro rata share of net income which does not flow
3.25through to the partner because the partnership elected to pay the tax on the income under
3.26section 6242(a)(2) of the Internal Revenue Code;
3.27    (7) 80 percent of the depreciation deduction allowed under section 168(k) of the
3.28Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
3.29in the taxable year generates a deduction for depreciation under section 168(k) and the
3.30activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
3.31the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
3.32limited to excess of the depreciation claimed by the activity under section 168(k) over the
3.33amount of the loss from the activity that is not allowed in the taxable year. In succeeding
3.34taxable years when the losses not allowed in the taxable year are allowed, the depreciation
3.35under section 168(k) is allowed;
4.1    (8) 80 percent of the amount by which the deduction allowed by section 179 of the
4.2Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
4.3Revenue Code of 1986, as amended through December 31, 2003;
4.4    (9) to the extent deducted in computing federal taxable income, the amount of the
4.5deduction allowable under section 199 of the Internal Revenue Code;
4.6    (10) the exclusion allowed under section 139A of the Internal Revenue Code for
4.7federal subsidies for prescription drug plans;
4.8(11) the amount of expenses disallowed under section 290.10, subdivision 2;
4.9    (12) for taxable years beginning after December 31, 2006, and before January 1,
4.102008, the amount deducted for qualified tuition and related expenses under section 222 of
4.11the Internal Revenue Code, to the extent deducted from gross income; and
4.12    (13) for taxable years beginning after December 31, 2006, and before January 1,
4.132008, the amount deducted for certain expenses of elementary and secondary school
4.14teachers under section 62(a)(2)(D) of the Internal Revenue Code, to the extent deducted
4.15from gross income.; and
4.16(14) the additional standard deduction for property taxes payable that is allowable
4.17under section 63(c)(1)(C) of the Internal Revenue Code.
4.18EFFECTIVE DATE.This section is effective for taxable years beginning after
4.19December 31, 2007.

4.20    Sec. 4. Minnesota Statutes 2008, section 290.01, subdivision 19c, is amended to read:
4.21    Subd. 19c. Corporations; additions to federal taxable income. For corporations,
4.22there shall be added to federal taxable income:
4.23    (1) the amount of any deduction taken for federal income tax purposes for income,
4.24excise, or franchise taxes based on net income or related minimum taxes, including but not
4.25limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
4.26another state, a political subdivision of another state, the District of Columbia, or any
4.27foreign country or possession of the United States;
4.28    (2) interest not subject to federal tax upon obligations of: the United States, its
4.29possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
4.30state, any of its political or governmental subdivisions, any of its municipalities, or any
4.31of its governmental agencies or instrumentalities; the District of Columbia; or Indian
4.32tribal governments;
4.33    (3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
4.34Revenue Code;
5.1    (4) the amount of any net operating loss deduction taken for federal income tax
5.2purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
5.3deduction under section 810 of the Internal Revenue Code;
5.4    (5) the amount of any special deductions taken for federal income tax purposes
5.5under sections 241 to 247 and 965 of the Internal Revenue Code;
5.6    (6) losses from the business of mining, as defined in section 290.05, subdivision 1,
5.7clause (a), that are not subject to Minnesota income tax;
5.8    (7) the amount of any capital losses deducted for federal income tax purposes under
5.9sections 1211 and 1212 of the Internal Revenue Code;
5.10    (8) the exempt foreign trade income of a foreign sales corporation under sections
5.11921(a) and 291 of the Internal Revenue Code;
5.12    (9) the amount of percentage depletion deducted under sections 611 through 614 and
5.13291 of the Internal Revenue Code;
5.14    (10) for certified pollution control facilities placed in service in a taxable year
5.15beginning before December 31, 1986, and for which amortization deductions were elected
5.16under section 169 of the Internal Revenue Code of 1954, as amended through December
5.1731, 1985, the amount of the amortization deduction allowed in computing federal taxable
5.18income for those facilities;
5.19    (11) the amount of any deemed dividend from a foreign operating corporation
5.20determined pursuant to section 290.17, subdivision 4, paragraph (g). The deemed dividend
5.21shall be reduced by the amount of the addition to income required by clauses (20), (21),
5.22(22), and (23);
5.23    (12) the amount of a partner's pro rata share of net income which does not flow
5.24through to the partner because the partnership elected to pay the tax on the income under
5.25section 6242(a)(2) of the Internal Revenue Code;
5.26    (13) the amount of net income excluded under section 114 of the Internal Revenue
5.27Code;
5.28    (14) any increase in subpart F income, as defined in section 952(a) of the Internal
5.29Revenue Code, for the taxable year when subpart F income is calculated without regard
5.30to the provisions of section 103 of Public Law 109-222 Division C, title III, section
5.31303a(1)-(2) of Public Law 110-343;
5.32    (15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A)
5.33and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer
5.34has an activity that in the taxable year generates a deduction for depreciation under
5.35section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year
5.36that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed
6.1under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the
6.2depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the
6.3amount of the loss from the activity that is not allowed in the taxable year. In succeeding
6.4taxable years when the losses not allowed in the taxable year are allowed, the depreciation
6.5under section 168(k)(1)(A) and (k)(4)(A) is allowed;
6.6    (16) 80 percent of the amount by which the deduction allowed by section 179 of the
6.7Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
6.8Revenue Code of 1986, as amended through December 31, 2003;
6.9    (17) to the extent deducted in computing federal taxable income, the amount of the
6.10deduction allowable under section 199 of the Internal Revenue Code;
6.11    (18) the exclusion allowed under section 139A of the Internal Revenue Code for
6.12federal subsidies for prescription drug plans;
6.13    (19) the amount of expenses disallowed under section 290.10, subdivision 2;
6.14    (20) an amount equal to the interest and intangible expenses, losses, and costs paid,
6.15accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit
6.16of a corporation that is a member of the taxpayer's unitary business group that qualifies
6.17as a foreign operating corporation. For purposes of this clause, intangible expenses and
6.18costs include:
6.19    (i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
6.20use, maintenance or management, ownership, sale, exchange, or any other disposition of
6.21intangible property;
6.22    (ii) losses incurred, directly or indirectly, from factoring transactions or discounting
6.23transactions;
6.24    (iii) royalty, patent, technical, and copyright fees;
6.25    (iv) licensing fees; and
6.26    (v) other similar expenses and costs.
6.27For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
6.28applications, trade names, trademarks, service marks, copyrights, mask works, trade
6.29secrets, and similar types of intangible assets.
6.30This clause does not apply to any item of interest or intangible expenses or costs paid,
6.31accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect
6.32to such item of income to the extent that the income to the foreign operating corporation
6.33is income from sources without the United States as defined in subtitle A, chapter 1,
6.34subchapter N, part 1, of the Internal Revenue Code;
6.35    (21) except as already included in the taxpayer's taxable income pursuant to clause
6.36(20), any interest income and income generated from intangible property received or
7.1accrued by a foreign operating corporation that is a member of the taxpayer's unitary
7.2group. For purposes of this clause, income generated from intangible property includes:
7.3    (i) income related to the direct or indirect acquisition, use, maintenance or
7.4management, ownership, sale, exchange, or any other disposition of intangible property;
7.5    (ii) income from factoring transactions or discounting transactions;
7.6    (iii) royalty, patent, technical, and copyright fees;
7.7    (iv) licensing fees; and
7.8    (v) other similar income.
7.9For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
7.10applications, trade names, trademarks, service marks, copyrights, mask works, trade
7.11secrets, and similar types of intangible assets.
7.12This clause does not apply to any item of interest or intangible income received or accrued
7.13by a foreign operating corporation with respect to such item of income to the extent that
7.14the income is income from sources without the United States as defined in subtitle A,
7.15chapter 1, subchapter N, part 1, of the Internal Revenue Code;
7.16    (22) the dividends attributable to the income of a foreign operating corporation that
7.17is a member of the taxpayer's unitary group in an amount that is equal to the dividends
7.18paid deduction of a real estate investment trust under section 561(a) of the Internal
7.19Revenue Code for amounts paid or accrued by the real estate investment trust to the
7.20foreign operating corporation;
7.21    (23) the income of a foreign operating corporation that is a member of the taxpayer's
7.22unitary group in an amount that is equal to gains derived from the sale of real or personal
7.23property located in the United States; and
7.24    (24) for taxable years beginning after December 31, 2006, and before January 1,
7.252008, the additional amount allowed as a deduction for donation of computer technology
7.26and equipment under section 170(e)(6) of the Internal Revenue Code, to the extent
7.27deducted from taxable income.
7.28EFFECTIVE DATE.This section is effective for taxable years after December
7.2931, 2007.

7.30    Sec. 5. Minnesota Statutes 2008, section 290.01, subdivision 19d, is amended to read:
7.31    Subd. 19d. Corporations; modifications decreasing federal taxable income. For
7.32corporations, there shall be subtracted from federal taxable income after the increases
7.33provided in subdivision 19c:
7.34    (1) the amount of foreign dividend gross-up added to gross income for federal
7.35income tax purposes under section 78 of the Internal Revenue Code;
8.1    (2) the amount of salary expense not allowed for federal income tax purposes due to
8.2claiming the work opportunity credit under section 51 of the Internal Revenue Code;
8.3    (3) any dividend (not including any distribution in liquidation) paid within the
8.4taxable year by a national or state bank to the United States, or to any instrumentality of
8.5the United States exempt from federal income taxes, on the preferred stock of the bank
8.6owned by the United States or the instrumentality;
8.7    (4) amounts disallowed for intangible drilling costs due to differences between
8.8this chapter and the Internal Revenue Code in taxable years beginning before January
8.91, 1987, as follows:
8.10    (i) to the extent the disallowed costs are represented by physical property, an amount
8.11equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
8.12subdivision 7 , subject to the modifications contained in subdivision 19e; and
8.13    (ii) to the extent the disallowed costs are not represented by physical property, an
8.14amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
8.15290.09, subdivision 8 ;
8.16    (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
8.17Internal Revenue Code, except that:
8.18    (i) for capital losses incurred in taxable years beginning after December 31, 1986,
8.19capital loss carrybacks shall not be allowed;
8.20    (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
8.21a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
8.22allowed;
8.23    (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
8.24capital loss carryback to each of the three taxable years preceding the loss year, subject to
8.25the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
8.26    (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
8.27a capital loss carryover to each of the five taxable years succeeding the loss year to the
8.28extent such loss was not used in a prior taxable year and subject to the provisions of
8.29Minnesota Statutes 1986, section 290.16, shall be allowed;
8.30    (6) an amount for interest and expenses relating to income not taxable for federal
8.31income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
8.32expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
8.33291 of the Internal Revenue Code in computing federal taxable income;
8.34    (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
8.35which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
8.36reasonable allowance for depletion based on actual cost. In the case of leases the deduction
9.1must be apportioned between the lessor and lessee in accordance with rules prescribed
9.2by the commissioner. In the case of property held in trust, the allowable deduction must
9.3be apportioned between the income beneficiaries and the trustee in accordance with the
9.4pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
9.5of the trust's income allocable to each;
9.6    (8) for certified pollution control facilities placed in service in a taxable year
9.7beginning before December 31, 1986, and for which amortization deductions were elected
9.8under section 169 of the Internal Revenue Code of 1954, as amended through December
9.931, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
9.101986, section 290.09, subdivision 7;
9.11    (9) amounts included in federal taxable income that are due to refunds of income,
9.12excise, or franchise taxes based on net income or related minimum taxes paid by the
9.13corporation to Minnesota, another state, a political subdivision of another state, the
9.14District of Columbia, or a foreign country or possession of the United States to the extent
9.15that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
9.16clause (1), in a prior taxable year;
9.17    (10) 80 percent of royalties, fees, or other like income accrued or received from a
9.18foreign operating corporation or a foreign corporation which is part of the same unitary
9.19business as the receiving corporation, unless the income resulting from such payments or
9.20accruals is income from sources within the United States as defined in subtitle A, chapter
9.211, subchapter N, part 1, of the Internal Revenue Code;
9.22    (11) income or gains from the business of mining as defined in section 290.05,
9.23subdivision 1 , clause (a), that are not subject to Minnesota franchise tax;
9.24    (12) the amount of disability access expenditures in the taxable year which are not
9.25allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
9.26    (13) the amount of qualified research expenses not allowed for federal income tax
9.27purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
9.28the amount exceeds the amount of the credit allowed under section 290.068;
9.29    (14) the amount of salary expenses not allowed for federal income tax purposes due
9.30to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
9.31Code;
9.32    (15) for taxable years beginning before January 1, 2008, the amount of the federal
9.33small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
9.34which is included in gross income under section 87 of the Internal Revenue Code;
9.35    (16) for a corporation whose foreign sales corporation, as defined in section 922
9.36of the Internal Revenue Code, constituted a foreign operating corporation during any
10.1taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
10.2claiming the deduction under section 290.21, subdivision 4, for income received from
10.3the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of
10.4income excluded under section 114 of the Internal Revenue Code, provided the income is
10.5not income of a foreign operating company;
10.6    (17) any decrease in subpart F income, as defined in section 952(a) of the Internal
10.7Revenue Code, for the taxable year when subpart F income is calculated without regard
10.8to the provisions of section 103 of Public Law 109-222 Division C, title III, section
10.9303(a)(1)-(2) of Public Law 110-343;
10.10    (18) in each of the five tax years immediately following the tax year in which an
10.11addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of
10.12the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
10.13amount of the addition made by the taxpayer under subdivision 19c, clause (15). The
10.14resulting delayed depreciation cannot be less than zero; and
10.15    (19) in each of the five tax years immediately following the tax year in which an
10.16addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of the
10.17amount of the addition.
10.18EFFECTIVE DATE.This section is effective for taxable years after December
10.1931, 2007.

10.20    Sec. 6. Minnesota Statutes 2008, section 290.01, is amended by adding a subdivision
10.21to read:
10.22    Subd. 19h. Certain preferred stock losses. A taxpayer must compute net income
10.23by treating losses from the sale or transfer of certain preferred stock, which the taxpayer
10.24treated as ordinary losses pursuant to Division A, title III, section 301 of Public Law
10.25110-343, as capital losses. The amount of net income under subdivision 19, taxable net
10.26income under subdivision 22, taxable income under subdivision 29, the numerator and
10.27denominator in 290.06, subdivision 2c, paragraph (e), individual alternative minimum
10.28taxable income under section 290.091, subdivision 2, corporate alternative minimum
10.29taxable income under section 290.0921, subdivision 3, and net operating losses under
10.30section 290.095 must be computed for each taxable year as if those losses had been
10.31treated by the taxpayer as capital losses under the Internal Revenue Code, including the
10.32limitations under section 1211.
10.33EFFECTIVE DATE.This section is effective at the same time as Division A, title
10.34III, section 301 of Public Law 110-343, is effective and applies to losses incurred after
10.35December 31, 2007.

11.1    Sec. 7. Minnesota Statutes 2008, section 290.01, subdivision 31, is amended to read:
11.2    Subd. 31. Internal Revenue Code. Unless specifically defined otherwise, "Internal
11.3Revenue Code" means the Internal Revenue Code of 1986, as amended through February
11.413, 2008 December 31, 2008. "Internal Revenue Code" also includes any uncodified
11.5provision in federal law that relates to provisions of the Internal Revenue Code that are
11.6incorporated into Minnesota law.
11.7EFFECTIVE DATE.This section is effective the day following final enactment,
11.8except the changes incorporated by federal changes are effective at the same time as the
11.9changes were effective for federal purposes.

11.10    Sec. 8. Minnesota Statutes 2008, section 290.067, subdivision 2a, is amended to read:
11.11    Subd. 2a. Income. (a) For purposes of this section, "income" means the sum of
11.12the following:
11.13(1) federal adjusted gross income as defined in section 62 of the Internal Revenue
11.14Code; and
11.15(2) the sum of the following amounts to the extent not included in clause (1):
11.16(i) all nontaxable income;
11.17(ii) the amount of a passive activity loss that is not disallowed as a result of section
11.18469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity
11.19loss carryover allowed under section 469(b) of the Internal Revenue Code;
11.20(iii) an amount equal to the total of any discharge of qualified farm indebtedness
11.21of a solvent individual excluded from gross income under section 108(g) of the Internal
11.22Revenue Code;
11.23(iv) cash public assistance and relief;
11.24(v) any pension or annuity (including railroad retirement benefits, all payments
11.25received under the federal Social Security Act, supplemental security income, and veterans
11.26benefits), which was not exclusively funded by the claimant or spouse, or which was
11.27funded exclusively by the claimant or spouse and which funding payments were excluded
11.28from federal adjusted gross income in the years when the payments were made;
11.29(vi) interest received from the federal or a state government or any instrumentality
11.30or political subdivision thereof;
11.31(vii) workers' compensation;
11.32(viii) nontaxable strike benefits;
11.33(ix) the gross amounts of payments received in the nature of disability income or
11.34sick pay as a result of accident, sickness, or other disability, whether funded through
11.35insurance or otherwise;
12.1(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of
12.21986, as amended through December 31, 1995;
12.3(xi) contributions made by the claimant to an individual retirement account,
12.4including a qualified voluntary employee contribution; simplified employee pension plan;
12.5self-employed retirement plan; cash or deferred arrangement plan under section 401(k)
12.6of the Internal Revenue Code; or deferred compensation plan under section 457 of the
12.7Internal Revenue Code;
12.8(xii) nontaxable scholarship or fellowship grants;
12.9(xiii) the amount of deduction allowed under section 199 of the Internal Revenue
12.10Code; and
12.11(xiv) the amount of deduction allowed under section 220 or 223 of the Internal
12.12Revenue Code.; and
12.13(xv) the amount of tuition expenses and educator expenses required to be added to
12.14income under section 290.01, subdivision 19a, clauses (12) and (13).
12.15In the case of an individual who files an income tax return on a fiscal year basis, the
12.16term "federal adjusted gross income" means federal adjusted gross income reflected in the
12.17fiscal year ending in the next calendar year. Federal adjusted gross income may not be
12.18reduced by the amount of a net operating loss carryback or carryforward or a capital loss
12.19carryback or carryforward allowed for the year.
12.20(b) "Income" does not include:
12.21(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and
12.22102;
12.23(2) amounts of any pension or annuity that were exclusively funded by the claimant
12.24or spouse if the funding payments were not excluded from federal adjusted gross income
12.25in the years when the payments were made;
12.26(3) surplus food or other relief in kind supplied by a governmental agency;
12.27(4) relief granted under chapter 290A;
12.28(5) child support payments received under a temporary or final decree of dissolution
12.29or legal separation; and
12.30(6) restitution payments received by eligible individuals and excludable interest as
12.31defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of
12.322001, Public Law 107-16.
12.33EFFECTIVE DATE.This section is effective for taxable years beginning after
12.34December 31, 2007.

12.35    Sec. 9. Minnesota Statutes 2008, section 290A.03, subdivision 3, is amended to read:
13.1    Subd. 3. Income. (1) "Income" means the sum of the following:
13.2(a) federal adjusted gross income as defined in the Internal Revenue Code; and
13.3(b) the sum of the following amounts to the extent not included in clause (a):
13.4(i) all nontaxable income;
13.5(ii) the amount of a passive activity loss that is not disallowed as a result of section
13.6469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity
13.7loss carryover allowed under section 469(b) of the Internal Revenue Code;
13.8(iii) an amount equal to the total of any discharge of qualified farm indebtedness
13.9of a solvent individual excluded from gross income under section 108(g) of the Internal
13.10Revenue Code;
13.11(iv) cash public assistance and relief;
13.12(v) any pension or annuity (including railroad retirement benefits, all payments
13.13received under the federal Social Security Act, Supplemental Security Income, and
13.14veterans benefits), which was not exclusively funded by the claimant or spouse, or which
13.15was funded exclusively by the claimant or spouse and which funding payments were
13.16excluded from federal adjusted gross income in the years when the payments were made;
13.17(vi) interest received from the federal or a state government or any instrumentality
13.18or political subdivision thereof;
13.19(vii) workers' compensation;
13.20(viii) nontaxable strike benefits;
13.21(ix) the gross amounts of payments received in the nature of disability income or
13.22sick pay as a result of accident, sickness, or other disability, whether funded through
13.23insurance or otherwise;
13.24(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of
13.251986, as amended through December 31, 1995;
13.26(xi) contributions made by the claimant to an individual retirement account,
13.27including a qualified voluntary employee contribution; simplified employee pension plan;
13.28self-employed retirement plan; cash or deferred arrangement plan under section 401(k)
13.29of the Internal Revenue Code; or deferred compensation plan under section 457 of the
13.30Internal Revenue Code;
13.31(xii) nontaxable scholarship or fellowship grants;
13.32(xiii) the amount of deduction allowed under section 199 of the Internal Revenue
13.33Code; and
13.34(xiv) the amount of deduction allowed under section 220 or 223 of the Internal
13.35Revenue Code.; and
14.1(xv) the amount of tuition expenses and educator expenses required to be added to
14.2income under section 290.01, subdivision 19a, clauses (12) and (13).
14.3In the case of an individual who files an income tax return on a fiscal year basis, the
14.4term "federal adjusted gross income" shall mean federal adjusted gross income reflected
14.5in the fiscal year ending in the calendar year. Federal adjusted gross income shall not be
14.6reduced by the amount of a net operating loss carryback or carryforward or a capital loss
14.7carryback or carryforward allowed for the year.
14.8(2) "Income" does not include:
14.9(a) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and
14.10102;
14.11(b) amounts of any pension or annuity which was exclusively funded by the claimant
14.12or spouse and which funding payments were not excluded from federal adjusted gross
14.13income in the years when the payments were made;
14.14(c) surplus food or other relief in kind supplied by a governmental agency;
14.15(d) relief granted under this chapter;
14.16(e) child support payments received under a temporary or final decree of dissolution
14.17or legal separation; or
14.18(f) restitution payments received by eligible individuals and excludable interest as
14.19defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of
14.202001, Public Law 107-16.
14.21(3) The sum of the following amounts may be subtracted from income:
14.22(a) for the claimant's first dependent, the exemption amount multiplied by 1.4;
14.23(b) for the claimant's second dependent, the exemption amount multiplied by 1.3;
14.24(c) for the claimant's third dependent, the exemption amount multiplied by 1.2;
14.25(d) for the claimant's fourth dependent, the exemption amount multiplied by 1.1;
14.26(e) for the claimant's fifth dependent, the exemption amount; and
14.27(f) if the claimant or claimant's spouse was disabled or attained the age of 65
14.28on or before December 31 of the year for which the taxes were levied or rent paid, the
14.29exemption amount.
14.30For purposes of this subdivision, the "exemption amount" means the exemption
14.31amount under section 151(d) of the Internal Revenue Code for the taxable year for which
14.32the income is reported.
14.33EFFECTIVE DATE.This section is effective for property tax refunds based on
14.34property taxes payable after December 31, 2008, and rent paid after December 31, 2007,
14.35and thereafter.

15.1    Sec. 10. Minnesota Statutes 2008, section 290A.03, subdivision 15, is amended to read:
15.2    Subd. 15. Internal Revenue Code. "Internal Revenue Code" means the Internal
15.3Revenue Code of 1986, as amended through February 13, 2008 December 31, 2008.
15.4EFFECTIVE DATE.This section is effective for property tax refunds based on
15.5property taxes payable after December 31, 2008, and rent paid after December 31, 2007,
15.6and thereafter.

15.7    Sec. 11. Minnesota Statutes 2008, section 291.005, subdivision 1, is amended to read:
15.8    Subdivision 1. Scope. Unless the context otherwise clearly requires, the following
15.9terms used in this chapter shall have the following meanings:
15.10    (1) "Federal gross estate" means the gross estate of a decedent as valued and
15.11otherwise determined for federal estate tax purposes by federal taxing authorities pursuant
15.12to the provisions of the Internal Revenue Code.
15.13    (2) "Minnesota gross estate" means the federal gross estate of a decedent after (a)
15.14excluding therefrom any property included therein which has its situs outside Minnesota,
15.15and (b) including therein any property omitted from the federal gross estate which is
15.16includable therein, has its situs in Minnesota, and was not disclosed to federal taxing
15.17authorities.
15.18    (3) "Personal representative" means the executor, administrator or other person
15.19appointed by the court to administer and dispose of the property of the decedent. If there
15.20is no executor, administrator or other person appointed, qualified, and acting within this
15.21state, then any person in actual or constructive possession of any property having a situs in
15.22this state which is included in the federal gross estate of the decedent shall be deemed
15.23to be a personal representative to the extent of the property and the Minnesota estate tax
15.24due with respect to the property.
15.25    (4) "Resident decedent" means an individual whose domicile at the time of death
15.26was in Minnesota.
15.27    (5) "Nonresident decedent" means an individual whose domicile at the time of
15.28death was not in Minnesota.
15.29    (6) "Situs of property" means, with respect to real property, the state or country in
15.30which it is located; with respect to tangible personal property, the state or country in which
15.31it was normally kept or located at the time of the decedent's death; and with respect to
15.32intangible personal property, the state or country in which the decedent was domiciled
15.33at death.
15.34    (7) "Commissioner" means the commissioner of revenue or any person to whom the
15.35commissioner has delegated functions under this chapter.
16.1    (8) "Internal Revenue Code" means the United States Internal Revenue Code of
16.21986, as amended through February 13, 2008 December 31, 2008.
16.3    (9) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
16.4defined by section 2011(b)(3) of the Internal Revenue Code, increased by the amount of
16.5deduction for state death taxes allowed under section 2058 of the Internal Revenue Code.
16.6EFFECTIVE DATE.This section is effective the day following final enactment,
16.7except the changes incorporated by federal changes are effective at the same time as the
16.8changes were effective for federal purposes.

16.9    Sec. 12. WITHHOLDING ON DIFFERENTIAL PAY.
16.10The commissioner must not assess tax, penalty, or interest against an employer for
16.11failing to withhold tax from differential wages, as defined in section 3401(h)(2) of the
16.12Internal Revenue Code, paid before January 1, 2010, to an employee who has been called
16.13to active duty in the military services.
16.14EFFECTIVE DATE.This section is effective the day following final enactment
16.15and applies to any failure to withhold that occurs after December 31, 2008, but before
16.16January 1, 2010.

16.17    Sec. 13. PAYMENT OF CORPORATE FRANCHISE TAX REFUNDS.
16.18(a) In paying refunds during fiscal year 2009 of overpayments of corporate franchise
16.19tax, the commissioner of revenue shall delay paying a sufficient number of these refunds
16.20until fiscal year 2010 so that $14,795,000 less in refunds is paid in fiscal year 2009 than
16.21otherwise would have been paid. Refunds delayed by the commissioner under this section
16.22are deemed to be due on July 1, 2010, if the law otherwise would provide an earlier date.
16.23(b) In paying refunds during fiscal year 2011 of overpayments of corporate franchise
16.24tax, the commissioner of revenue shall delay paying a sufficient number of these refunds
16.25until fiscal year 2012 so that $5,100,000 less in refunds is paid in fiscal year 2011 than
16.26otherwise would have been paid. Refunds delayed by the commissioner under this section
16.27are deemed to be due on July 1, 2012, if the law otherwise would provide an earlier date.
16.28(c) In carrying out this requirement, the commissioner shall, to the maximum extent
16.29possible, minimize delaying the payment of refunds that would result in payment of
16.30additional interest by the state.
16.31EFFECTIVE DATE.This section is effective for fiscal years 2009 and 2011 only."
16.32Amend the title accordingly