1.1.................... moves to amend H.F. No. 1777 as follows:
1.2Delete everything after the enacting clause and insert:

1.3    "Section 1. Minnesota Statutes 2012, 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 April 14,
1.72011 December 20, 2013.
1.8EFFECTIVE DATE.This section is effective retroactively for taxable years
1.9beginning after December 31, 2012.

1.10    Sec. 2. Minnesota Statutes 2012, section 289A.08, subdivision 7, is amended to read:
1.11    Subd. 7. Composite income tax returns for nonresident partners, shareholders,
1.12and beneficiaries. (a) The commissioner may allow a partnership with nonresident
1.13partners to file a composite return and to pay the tax on behalf of nonresident partners who
1.14have no other Minnesota source income. This composite return must include the names,
1.15addresses, Social Security numbers, income allocation, and tax liability for the nonresident
1.16partners electing to be covered by the composite return.
1.17(b) The computation of a partner's tax liability must be determined by multiplying
1.18the income allocated to that partner by the highest rate used to determine the tax liability
1.19for individuals under section 290.06, subdivision 2c. Nonbusiness deductions, standard
1.20deductions, or personal exemptions are not allowed.
1.21(c) The partnership must submit a request to use this composite return filing method
1.22for nonresident partners. The requesting partnership must file a composite return in the
1.23form prescribed by the commissioner of revenue. The filing of a composite return is
1.24considered a request to use the composite return filing method.
2.1(d) The electing partner must not have any Minnesota source income other than the
2.2income from the partnership and other electing partnerships. If it is determined that the
2.3electing partner has other Minnesota source income, the inclusion of the income and tax
2.4liability for that partner under this provision will not constitute a return to satisfy the
2.5requirements of subdivision 1. The tax paid for the individual as part of the composite return
2.6is allowed as a payment of the tax by the individual on the date on which the composite
2.7return payment was made. If the electing nonresident partner has no other Minnesota
2.8source income, filing of the composite return is a return for purposes of subdivision 1.
2.9(e) This subdivision does not negate the requirement that an individual pay estimated
2.10tax if the individual's liability would exceed the requirements set forth in section 289A.25.
2.11The individual's liability to pay estimated tax is, however, satisfied when the partnership
2.12pays composite estimated tax in the manner prescribed in section 289A.25.
2.13(f) If an electing partner's share of the partnership's gross income from Minnesota
2.14sources is less than the filing requirements for a nonresident under this subdivision, the tax
2.15liability is zero. However, a statement showing the partner's share of gross income must
2.16be included as part of the composite return.
2.17(g) The election provided in this subdivision is only available to a partner who has
2.18no other Minnesota source income and who is either (1) a full-year nonresident individual
2.19or (2) a trust or estate that does not claim a deduction under either section 651 or 661 of
2.20the Internal Revenue Code.
2.21(h) A corporation defined in section 290.9725 and its nonresident shareholders may
2.22make an election under this paragraph. The provisions covering the partnership apply to
2.23the corporation and the provisions applying to the partner apply to the shareholder.
2.24(i) Estates and trusts distributing current income only and the nonresident individual
2.25beneficiaries of the estates or trusts may make an election under this paragraph. The
2.26provisions covering the partnership apply to the estate or trust. The provisions applying to
2.27the partner apply to the beneficiary.
2.28(j) For the purposes of this subdivision, "income" means the partner's share of
2.29federal adjusted gross income from the partnership modified by the additions provided in
2.30section 290.01, subdivision 19a, clauses (6) to (10) (9), and the subtractions provided in:
2.31(i) section 290.01, subdivision 19b, clause (8), to the extent the amount is assignable or
2.32allocable to Minnesota under section 290.17; and (ii) section 290.01, subdivision 19b,
2.33clause (13). The subtraction allowed under section 290.01, subdivision 19b, clause (8), is
2.34only allowed on the composite tax computation to the extent the electing partner would
2.35have been allowed the subtraction.
3.1EFFECTIVE DATE.This section is effective retroactively for taxable years
3.2beginning after December 31, 2012.

3.3    Sec. 3. Minnesota Statutes 2013 Supplement, section 290.01, subdivision 19, is
3.4amended to read:
3.5    Subd. 19. Net income. The term "net income" means the federal taxable income,
3.6as defined in section 63 of the Internal Revenue Code of 1986, as amended through the
3.7date named in this subdivision, incorporating the federal effective dates of changes to the
3.8Internal Revenue Code and any elections made by the taxpayer in accordance with the
3.9Internal Revenue Code in determining federal taxable income for federal income tax
3.10purposes, and with the modifications provided in subdivisions 19a to 19f.
3.11    In the case of a regulated investment company or a fund thereof, as defined in section
3.12851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
3.13company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
3.14except that:
3.15    (1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
3.16Revenue Code does not apply;
3.17    (2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal
3.18Revenue Code must be applied by allowing a deduction for capital gain dividends and
3.19exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal
3.20Revenue Code; and
3.21    (3) the deduction for dividends paid must also be applied in the amount of any
3.22undistributed capital gains which the regulated investment company elects to have treated
3.23as provided in section 852(b)(3)(D) of the Internal Revenue Code.
3.24    The net income of a real estate investment trust as defined and limited by section
3.25856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
3.26taxable income as defined in section 857(b)(2) of the Internal Revenue Code.
3.27    The net income of a designated settlement fund as defined in section 468B(d) of
3.28the Internal Revenue Code means the gross income as defined in section 468B(b) of the
3.29Internal Revenue Code.
3.30    The Internal Revenue Code of 1986, as amended through April 14, 2011 December
3.3120, 2013, shall be in effect for taxable years beginning after December 31, 1996, and
3.32before January 1, 2012, and for taxable years beginning after December 31, 2012. The
3.33Internal Revenue Code of 1986, as amended through January 3, 2013, is in effect for
3.34taxable years beginning after December 31, 2011, and before January 1, 2013.
4.1The provisions of sections 315 and 331 of the American Taxpayer Relief Act of
4.22012, Public Law 112-240, extension of increased expensing limitations and treatment
4.3of certain real property as section 179 property and extension and modification of bonus
4.4depreciation, are effective at the same time they become effective for federal purposes.
4.5    Except as otherwise provided, references to the Internal Revenue Code in
4.6subdivisions 19 to 19f mean the code in effect for purposes of determining net income for
4.7the applicable year.
4.8EFFECTIVE DATE.This section is effective the day following final enactment,
4.9except the changes incorporated by federal changes are effective retroactively at the same
4.10time as the changes were effective for federal purposes.

4.11    Sec. 4. Minnesota Statutes 2012, section 290.01, subdivision 19a, is amended to read:
4.12    Subd. 19a. Additions to federal taxable income. For individuals, estates, and
4.13trusts, there shall be added to federal taxable income:
4.14    (1)(i) interest income on obligations of any state other than Minnesota or a political
4.15or governmental subdivision, municipality, or governmental agency or instrumentality
4.16of any state other than Minnesota exempt from federal income taxes under the Internal
4.17Revenue Code or any other federal statute; and
4.18    (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
4.19Code, except:
4.20(A) the portion of the exempt-interest dividends exempt from state taxation under
4.21the laws of the United States; and
4.22(B) the portion of the exempt-interest dividends derived from interest income
4.23on obligations of the state of Minnesota or its political or governmental subdivisions,
4.24municipalities, governmental agencies or instrumentalities, but only if the portion of the
4.25exempt-interest dividends from such Minnesota sources paid to all shareholders represents
4.2695 percent or more of the exempt-interest dividends, including any dividends exempt
4.27under subitem (A), that are paid by the regulated investment company as defined in section
4.28851(a) of the Internal Revenue Code, or the fund of the regulated investment company as
4.29defined in section 851(g) of the Internal Revenue Code, making the payment; and
4.30    (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
4.31government described in section 7871(c) of the Internal Revenue Code shall be treated as
4.32interest income on obligations of the state in which the tribe is located;
4.33    (2) to the extent allowed as a deduction under section 63(d) of the Internal Revenue
4.34Code:
5.1    (i) the amount of income, sales and use, motor vehicle sales, or excise taxes paid or
5.2accrued within the taxable year under this chapter and the amount of taxes based on net
5.3income paid, sales and use, motor vehicle sales, or excise taxes paid to any other state or
5.4to any province or territory of Canada, to the extent allowed as a deduction under section
5.563(d) of the Internal Revenue Code, but the addition;
5.6    (ii) the amount of mortgage insurance premiums treated as qualified residence
5.7interest, as provided in section 163(h) of the Internal Revenue Code; and
5.8(iii) the amount allowed under the enhanced charitable deduction for contributions
5.9of food inventory under section 170(e)(3)(C) of the Internal Revenue Code, to the extent
5.10deducted from gross income; but
5.11    (iv) the sum of the additions made under items (i), (ii), and (iii) may not be more
5.12than the amount by which the itemized deductions as allowed under section 63(d) of
5.13the Internal Revenue Code state itemized deduction exceeds the amount of the standard
5.14deduction as defined in section 63(c) of the Internal Revenue Code, disregarding the
5.15amounts allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code,
5.16 minus any addition that would have been required under clause (21) (17) if the taxpayer
5.17had claimed the standard deduction. For the purpose of this paragraph, the disallowance of
5.18itemized deductions under section 68 of the Internal Revenue Code of 1986, income, sales
5.19and use, motor vehicle sales, or excise taxes are the last itemized deductions disallowed;.
5.20For purposes of this clause, income, sales and use, motor vehicle sales, and excise taxes,
5.21the enhanced charitable deduction for contributions of food inventory, and mortgage
5.22insurance premiums treated as qualified residence interest are the last itemized deductions
5.23disallowed under clause (15);
5.24    (3) the capital gain amount of a lump-sum distribution to which the special tax under
5.25section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
5.26    (4) the amount of income taxes paid or accrued within the taxable year under this
5.27chapter and taxes based on net income paid to any other state or any province or territory
5.28of Canada, to the extent allowed as a deduction in determining federal adjusted gross
5.29income. For the purpose of this paragraph, income taxes do not include the taxes imposed
5.30by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
5.31    (5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
5.32other than expenses or interest used in computing net interest income for the subtraction
5.33allowed under subdivision 19b, clause (1);
5.34    (6) the amount of a partner's pro rata share of net income which does not flow
5.35through to the partner because the partnership elected to pay the tax on the income under
5.36section 6242(a)(2) of the Internal Revenue Code;
6.1    (7) 80 percent of the depreciation deduction allowed under section 168(k) of the
6.2Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
6.3in the taxable year generates a deduction for depreciation under section 168(k) and the
6.4activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
6.5the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
6.6limited to excess of the depreciation claimed by the activity under section 168(k) over the
6.7amount of the loss from the activity that is not allowed in the taxable year. In succeeding
6.8taxable years when the losses not allowed in the taxable year are allowed, the depreciation
6.9under section 168(k) is allowed;
6.10    (8) 80 percent of the amount by which the deduction allowed by section 179 of the
6.11Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
6.12Revenue Code of 1986, as amended through December 31, 2003;
6.13    (9) to the extent deducted in computing federal taxable income, the amount of the
6.14deduction allowable under section 199 of the Internal Revenue Code;
6.15    (10) for taxable years beginning before January 1, 2013, the exclusion allowed under
6.16section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;
6.17(11) the amount of expenses disallowed under section 290.10, subdivision 2;
6.18    (12) (11) for taxable years beginning before January 1, 2010, the amount deducted
6.19for qualified tuition and related expenses under section 222 of the Internal Revenue Code,
6.20to the extent deducted from gross income;
6.21    (13) (12) for taxable years beginning before January 1, 2010, and for taxable years
6.22beginning after December 31, 2012, and before January 1, 2014, the amount deducted for
6.23certain expenses of elementary and secondary school teachers under section 62(a)(2)(D)
6.24of the Internal Revenue Code, to the extent deducted from gross income;
6.25(14) the additional standard deduction for property taxes payable that is allowable
6.26under section 63(c)(1)(C) of the Internal Revenue Code;
6.27(15) the additional standard deduction for qualified motor vehicle sales taxes
6.28allowable under section 63(c)(1)(E) of the Internal Revenue Code;
6.29(16) (13) discharge of indebtedness income resulting from reacquisition of business
6.30indebtedness and deferred under section 108(i) of the Internal Revenue Code;
6.31(17) the amount of unemployment compensation exempt from tax under section
6.3285(c) of the Internal Revenue Code;
6.33(18) (14) changes to federal taxable income attributable to a net operating loss that
6.34the taxpayer elected to carry back for more than two years for federal purposes but for
6.35which the losses can be carried back for only two years under section 290.095, subdivision
6.3611 , paragraph (c);
7.1(19) (15) to the extent included in the computation of federal taxable income in
7.2taxable years beginning after December 31, 2010, the amount of disallowed itemized
7.3deductions, but the amount of disallowed itemized deductions plus the addition required
7.4under clause (2) may not be more than the amount by which the itemized deductions as
7.5allowed under section 63(d) of the Internal Revenue Code exceeds the amount of the
7.6standard deduction as defined in section 63(c) of the Internal Revenue Code, disregarding
7.7the amounts allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue
7.8Code, and reduced by any addition that would have been required under clause (21) (17) if
7.9the taxpayer had claimed the standard deduction:
7.10(i) the amount of disallowed itemized deductions is equal to the lesser of:
7.11(A) three percent of the excess of the taxpayer's federal adjusted gross income
7.12over the applicable amount; or
7.13(B) 80 percent of the amount of the itemized deductions otherwise allowable to the
7.14taxpayer under the Internal Revenue Code for the taxable year;
7.15(ii) the term "applicable amount" means $100,000, or $50,000 in the case of a
7.16married individual filing a separate return. Each dollar amount shall be increased by
7.17an amount equal to:
7.18(A) such dollar amount, multiplied by
7.19(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
7.20Revenue Code for the calendar year in which the taxable year begins, by substituting
7.21"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof;
7.22(iii) the term "itemized deductions" does not include:
7.23(A) the deduction for medical expenses under section 213 of the Internal Revenue
7.24Code;
7.25(B) any deduction for investment interest as defined in section 163(d) of the Internal
7.26Revenue Code; and
7.27(C) the deduction under section 165(a) of the Internal Revenue Code for casualty or
7.28theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue
7.29Code or for losses described in section 165(d) of the Internal Revenue Code;
7.30(20) (16) to the extent included in federal taxable income in taxable years beginning
7.31after December 31, 2010, the amount of disallowed personal exemptions for taxpayers
7.32with federal adjusted gross income over the threshold amount:
7.33(i) the disallowed personal exemption amount is equal to the dollar amount of the
7.34personal exemptions claimed by the taxpayer in the computation of federal taxable income
7.35multiplied by the applicable percentage;
8.1(ii) "applicable percentage" means two percentage points for each $2,500 (or
8.2fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable
8.3year exceeds the threshold amount. In the case of a married individual filing a separate
8.4return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In
8.5no event shall the applicable percentage exceed 100 percent;
8.6(iii) the term "threshold amount" means:
8.7(A) $150,000 in the case of a joint return or a surviving spouse;
8.8(B) $125,000 in the case of a head of a household;
8.9(C) $100,000 in the case of an individual who is not married and who is not a
8.10surviving spouse or head of a household; and
8.11(D) $75,000 in the case of a married individual filing a separate return; and
8.12(iv) the thresholds shall be increased by an amount equal to:
8.13(A) such dollar amount, multiplied by
8.14(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
8.15Revenue Code for the calendar year in which the taxable year begins, by substituting
8.16"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; and
8.17(21) (17) to the extent deducted in the computation of federal taxable income, for
8.18taxable years beginning after December 31, 2010, and before January 1, 2013 2014, the
8.19difference between the standard deduction allowed under section 63(c) of the Internal
8.20Revenue Code and the standard deduction allowed for 2011 and, 2012, and 2013 under the
8.21Internal Revenue Code as amended through December 1, 2010.;
8.22(18) for taxable years beginning after December 31, 2012, and before January 1,
8.232014, to the extent deducted in the computation of federal taxable income, the amount by
8.24which the student loan interest deduction allowed by section 221 of the Internal Revenue
8.25Code exceeds the amount allowable under section 221 of the Internal Revenue Code of
8.261986, as amended through June 6, 2001; and
8.27(19) for taxable years beginning after December 31, 2012, and before January 1,
8.282014, to the extent excluded from gross income, the amount by which the exclusion
8.29for qualified transportation fringe benefits under section 132(f) of the Internal Revenue
8.30Code exceeds $125 per month.
8.31EFFECTIVE DATE.This section is effective retroactively for taxable years
8.32beginning after December 31, 2012.

8.33    Sec. 5. Minnesota Statutes 2013 Supplement, section 290.01, subdivision 19b, is
8.34amended to read:
9.1    Subd. 19b. Subtractions from federal taxable income. For individuals, estates,
9.2and trusts, there shall be subtracted from federal taxable income:
9.3    (1) net interest income on obligations of any authority, commission, or
9.4instrumentality of the United States to the extent includable in taxable income for federal
9.5income tax purposes but exempt from state income tax under the laws of the United States;
9.6    (2) if included in federal taxable income, the amount of any overpayment of income
9.7tax to Minnesota or to any other state, for any previous taxable year, whether the amount
9.8is received as a refund or as a credit to another taxable year's income tax liability;
9.9    (3) the amount paid to others, less the amount used to claim the credit allowed under
9.10section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
9.11to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
9.12transportation of each qualifying child in attending an elementary or secondary school
9.13situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
9.14resident of this state may legally fulfill the state's compulsory attendance laws, which
9.15is not operated for profit, and which adheres to the provisions of the Civil Rights Act
9.16of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
9.17tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
9.18"textbooks" includes books and other instructional materials and equipment purchased
9.19or leased for use in elementary and secondary schools in teaching only those subjects
9.20legally and commonly taught in public elementary and secondary schools in this state.
9.21Equipment expenses qualifying for deduction includes expenses as defined and limited in
9.22section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
9.23books and materials used in the teaching of religious tenets, doctrines, or worship, the
9.24purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
9.25or materials for, or transportation to, extracurricular activities including sporting events,
9.26musical or dramatic events, speech activities, driver's education, or similar programs. No
9.27deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
9.28the qualifying child's vehicle to provide such transportation for a qualifying child. For
9.29purposes of the subtraction provided by this clause, "qualifying child" has the meaning
9.30given in section 32(c)(3) of the Internal Revenue Code;
9.31    (4) income as provided under section 290.0802;
9.32    (5) to the extent included in federal adjusted gross income, income realized on
9.33disposition of property exempt from tax under section 290.491;
9.34    (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
9.35of the Internal Revenue Code in determining federal taxable income by an individual
9.36who does not itemize deductions for federal income tax purposes for the taxable year, an
10.1amount equal to 50 percent of the excess of charitable contributions over $500 allowable
10.2as a deduction for the taxable year under section 170(a) of the Internal Revenue Code,
10.3under the provisions of Public Law 109-1 and Public Law 111-126;
10.4    (7) for individuals who are allowed a federal foreign tax credit for taxes that do not
10.5qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
10.6of subnational foreign taxes for the taxable year, but not to exceed the total subnational
10.7foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
10.8"federal foreign tax credit" means the credit allowed under section 27 of the Internal
10.9Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
10.10under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
10.11the extent they exceed the federal foreign tax credit;
10.12    (8) in each of the five tax years immediately following the tax year in which an
10.13addition is required under subdivision 19a, clause (7), or 19c, clause (12), in the case of a
10.14shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
10.15delayed depreciation. For purposes of this clause, "delayed depreciation" means the amount
10.16of the addition made by the taxpayer under subdivision 19a, clause (7), or subdivision 19c,
10.17clause (12), in the case of a shareholder of an S corporation, minus the positive value of
10.18any net operating loss under section 172 of the Internal Revenue Code generated for the
10.19tax year of the addition. The resulting delayed depreciation cannot be less than zero;
10.20    (9) job opportunity building zone income as provided under section 469.316;
10.21    (10) to the extent included in federal taxable income, the amount of compensation
10.22paid to members of the Minnesota National Guard or other reserve components of the
10.23United States military for active service, excluding compensation for services performed
10.24under the Active Guard Reserve (AGR) program. For purposes of this clause, "active
10.25service" means (i) state active service as defined in section 190.05, subdivision 5a, clause
10.26(1); or (ii) federally funded state active service as defined in section 190.05, subdivision
10.275b , but "active service" excludes service performed in accordance with section 190.08,
10.28subdivision 3 ;
10.29    (11) to the extent included in federal taxable income, the amount of compensation
10.30paid to Minnesota residents who are members of the armed forces of the United States
10.31or United Nations for active duty performed under United States Code, title 10; or the
10.32authority of the United Nations;
10.33    (12) an amount, not to exceed $10,000, equal to qualified expenses related to a
10.34qualified donor's donation, while living, of one or more of the qualified donor's organs
10.35to another person for human organ transplantation. For purposes of this clause, "organ"
10.36means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
11.1"human organ transplantation" means the medical procedure by which transfer of a human
11.2organ is made from the body of one person to the body of another person; "qualified
11.3expenses" means unreimbursed expenses for both the individual and the qualified donor
11.4for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
11.5may be subtracted under this clause only once; and "qualified donor" means the individual
11.6or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
11.7individual may claim the subtraction in this clause for each instance of organ donation for
11.8transplantation during the taxable year in which the qualified expenses occur;
11.9    (13) in each of the five tax years immediately following the tax year in which an
11.10addition is required under subdivision 19a, clause (8), or 19c, clause (13), in the case of a
11.11shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
11.12addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (13), in the
11.13case of a shareholder of a corporation that is an S corporation, minus the positive value of
11.14any net operating loss under section 172 of the Internal Revenue Code generated for the
11.15tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
11.16subtraction is not allowed under this clause;
11.17    (14) to the extent included in the federal taxable income of a nonresident of
11.18Minnesota, compensation paid to a service member as defined in United States Code, title
11.1910, section 101(a)(5), for military service as defined in the Servicemembers Civil Relief
11.20Act, Public Law 108-189, section 101(2);
11.21    (15) to the extent included in federal taxable income, the amount of national service
11.22educational awards received from the National Service Trust under United States Code,
11.23title 42, sections 12601 to 12604, for service in an approved Americorps National Service
11.24program;
11.25(16) to the extent included in federal taxable income, discharge of indebtedness
11.26income resulting from reacquisition of business indebtedness included in federal taxable
11.27income under section 108(i) of the Internal Revenue Code. This subtraction applies only
11.28to the extent that the income was included in net income in a prior year as a result of the
11.29addition under section 290.01, subdivision 19a, clause (16) (13);
11.30(17) the amount of the net operating loss allowed under section 290.095, subdivision
11.3111 , paragraph (c); and
11.32(18) the amount of expenses not allowed for federal income tax purposes due
11.33to claiming the railroad track maintenance credit under section 45G(a) of the Internal
11.34Revenue Code.;
11.35(19) the amount of the limitation on itemized deductions under section 68(b) of
11.36the Internal Revenue code; and
12.1(20) the amount of the phase-out of personal exemptions under section 151(d) of the
12.2Internal Revenue Code.
12.3EFFECTIVE DATE.This section is effective retroactively for taxable years
12.4beginning after December 31, 2012.

12.5    Sec. 6. Minnesota Statutes 2012, section 290.01, is amended by adding a subdivision
12.6to read:
12.7    Subd. 29a. State itemized deduction. "State itemized deduction" means
12.8federal itemized deductions, as defined in section 63(d) of the Internal Revenue Code,
12.9disregarding any limitation under section 68 of the Internal Revenue Code, and reduced
12.10by the amount of the addition required under subdivision 19a, clause (15).
12.11EFFECTIVE DATE.This section is effective retroactively for taxable years
12.12beginning after December 31, 2012.

12.13    Sec. 7. Minnesota Statutes 2013 Supplement, section 290.01, subdivision 31, is
12.14amended to read:
12.15    Subd. 31. Internal Revenue Code. Unless specifically defined otherwise, for
12.16taxable years beginning before January 1, 2012, and after December 31, 2012, "Internal
12.17Revenue Code" means the Internal Revenue Code of 1986, as amended through April 14,
12.182011; and for taxable years beginning after December 31, 2011, and before January 1,
12.192013, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
12.20through January 3 December 20, 2013. Internal Revenue Code also includes any
12.21uncodified provision in federal law that relates to provisions of the Internal Revenue
12.22Code that are incorporated into Minnesota law. When used in this chapter, the reference
12.23to "subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code" is to the
12.24Internal Revenue Code as amended through March 18, 2010.
12.25EFFECTIVE DATE.This section is effective the day following final enactment,
12.26except the changes incorporated by federal changes are effective retroactively at the same
12.27time the changes were effective for federal purposes.

12.28    Sec. 8. Minnesota Statutes 2013 Supplement, section 290.06, subdivision 2c, is
12.29amended to read:
12.30    Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income
12.31taxes imposed by this chapter upon married individuals filing joint returns and surviving
13.1spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
13.2applying to their taxable net income the following schedule of rates:
13.3    (1) On the first $35,480, 5.35 percent;
13.4    (2) On all over $35,480, but not over $140,960, 7.05 percent;
13.5    (3) On all over $140,960, but not over $250,000, 7.85 percent;
13.6(4) On all over $250,000, 9.85 percent.
13.7    Married individuals filing separate returns, estates, and trusts must compute their
13.8income tax by applying the above rates to their taxable income, except that the income
13.9brackets will be one-half of the above amounts.
13.10    (b) The income taxes imposed by this chapter upon unmarried individuals must be
13.11computed by applying to taxable net income the following schedule of rates:
13.12    (1) On the first $24,270, 5.35 percent;
13.13    (2) On all over $24,270, but not over $79,730, 7.05 percent;
13.14    (3) On all over $79,730, but not over $150,000, 7.85 percent;
13.15(4) On all over $150,000, 9.85 percent.
13.16    (c) The income taxes imposed by this chapter upon unmarried individuals qualifying
13.17as a head of household as defined in section 2(b) of the Internal Revenue Code must be
13.18computed by applying to taxable net income the following schedule of rates:
13.19    (1) On the first $29,880, 5.35 percent;
13.20    (2) On all over $29,880, but not over $120,070, 7.05 percent;
13.21    (3) On all over $120,070, but not over $200,000, 7.85 percent;
13.22(4) On all over $200,000, 9.85 percent.
13.23    (d) In lieu of a tax computed according to the rates set forth in this subdivision, the
13.24tax of any individual taxpayer whose taxable net income for the taxable year is less than
13.25an amount determined by the commissioner must be computed in accordance with tables
13.26prepared and issued by the commissioner of revenue based on income brackets of not
13.27more than $100. The amount of tax for each bracket shall be computed at the rates set
13.28forth in this subdivision, provided that the commissioner may disregard a fractional part of
13.29a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
13.30    (e) An individual who is not a Minnesota resident for the entire year must compute
13.31the individual's Minnesota income tax as provided in this subdivision. After the
13.32application of the nonrefundable credits provided in this chapter, the tax liability must
13.33then be multiplied by a fraction in which:
13.34    (1) the numerator is the individual's Minnesota source federal adjusted gross income
13.35as defined in section 62 of the Internal Revenue Code and increased by the additions
13.36required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), (13),
14.1and (16) to (18) (11) to (14), and (18) to (19), and reduced by the Minnesota assignable
14.2portion of the subtraction for United States government interest under section 290.01,
14.3subdivision 19b , clause (1), and the subtractions under section 290.01, subdivision 19b,
14.4clauses (8), (9), (13), (14), (16), and (17), after applying the allocation and assignability
14.5provisions of section 290.081, clause (a), or 290.17; and
14.6    (2) the denominator is the individual's federal adjusted gross income as defined in
14.7section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
14.8section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), (13), and (16) to
14.9(18) (11) to (14), and (18) to (19), and reduced by the amounts specified in section 290.01,
14.10subdivision 19b , clauses (1), (8), (9), (13), (14), (16), and (17).
14.11EFFECTIVE DATE.This section is effective retroactively for taxable years
14.12beginning after December 31, 2012.

14.13    Sec. 9. Minnesota Statutes 2012, section 290.067, subdivision 1, is amended to read:
14.14    Subdivision 1. Amount of credit. (a) A taxpayer may take as a credit against the
14.15tax due from the taxpayer and a spouse, if any, under this chapter an amount equal to the
14.16dependent care credit for which the taxpayer is eligible pursuant to the provisions of
14.17section 21 of the Internal Revenue Code subject to the limitations provided in subdivision
14.182 except that in determining whether the child qualified as a dependent, income received
14.19as a Minnesota family investment program grant or allowance to or on behalf of the child
14.20must not be taken into account in determining whether the child received more than half
14.21of the child's support from the taxpayer, and the provisions of section 32(b)(1)(D) of
14.22the Internal Revenue Code do not apply.
14.23(b) If a child who has not attained the age of six years at the close of the taxable year
14.24is cared for at a licensed family day care home operated by the child's parent, the taxpayer
14.25is deemed to have paid employment-related expenses. If the child is 16 months old or
14.26younger at the close of the taxable year, the amount of expenses deemed to have been paid
14.27equals the maximum limit for one qualified individual under section 21(c) and (d) of the
14.28Internal Revenue Code. If the child is older than 16 months of age but has not attained the
14.29age of six years at the close of the taxable year, the amount of expenses deemed to have
14.30been paid equals the amount the licensee would charge for the care of a child of the same
14.31age for the same number of hours of care.
14.32(c) If a married couple:
14.33(1) has a child who has not attained the age of one year at the close of the taxable year;
14.34(2) files a joint tax return for the taxable year; and
15.1(3) does not participate in a dependent care assistance program as defined in section
15.2129 of the Internal Revenue Code, in lieu of the actual employment related expenses paid
15.3for that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of
15.4(i) the combined earned income of the couple or (ii) the amount of the maximum limit for
15.5one qualified individual under section 21(c) and (d) of the Internal Revenue Code will
15.6be deemed to be the employment related expense paid for that child. The earned income
15.7limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed
15.8amount. These deemed amounts apply regardless of whether any employment-related
15.9expenses have been paid.
15.10(d) If the taxpayer is not required and does not file a federal individual income tax
15.11return for the tax year, no credit is allowed for any amount paid to any person unless:
15.12(1) the name, address, and taxpayer identification number of the person are included
15.13on the return claiming the credit; or
15.14(2) if the person is an organization described in section 501(c)(3) of the Internal
15.15Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code,
15.16the name and address of the person are included on the return claiming the credit.
15.17In the case of a failure to provide the information required under the preceding sentence,
15.18the preceding sentence does not apply if it is shown that the taxpayer exercised due
15.19diligence in attempting to provide the information required.
15.20(e) In the case of a nonresident, part-year resident, or a person who has earned
15.21income not subject to tax under this chapter including earned income excluded pursuant to
15.22section 290.01, subdivision 19b, clause (9), the credit determined under section 21 of the
15.23Internal Revenue Code must be allocated based on the ratio by which the earned income
15.24of the claimant and the claimant's spouse from Minnesota sources bears to the total earned
15.25income of the claimant and the claimant's spouse.
15.26(f) For residents of Minnesota, the subtractions for military pay under section
15.27290.01, subdivision 19b , clauses (10) and (11), are not considered "earned income not
15.28subject to tax under this chapter."
15.29(g) For residents of Minnesota, the exclusion of combat pay under section 112 of
15.30the Internal Revenue Code is not considered "earned income not subject to tax under
15.31this chapter."
15.32(h) For purposes of this section, for taxable years beginning after December 31,
15.332012, and before January 1, 2014, references to section 21 of the Internal Revenue Code
15.34are to section 21 of the Internal Revenue Code as amended through June 6, 2001.
15.35EFFECTIVE DATE.This section is effective retroactively for taxable years
15.36beginning after December 31, 2012.

16.1    Sec. 10. Minnesota Statutes 2012, section 290.067, subdivision 2a, is amended to read:
16.2    Subd. 2a. Income. (a) For purposes of this section, "income" means the sum of
16.3the following:
16.4(1) federal adjusted gross income as defined in section 62 of the Internal Revenue
16.5Code; and
16.6(2) the sum of the following amounts to the extent not included in clause (1):
16.7(i) all nontaxable income;
16.8(ii) the amount of a passive activity loss that is not disallowed as a result of section
16.9469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity
16.10loss carryover allowed under section 469(b) of the Internal Revenue Code;
16.11(iii) an amount equal to the total of any discharge of qualified farm indebtedness
16.12of a solvent individual excluded from gross income under section 108(g) of the Internal
16.13Revenue Code;
16.14(iv) cash public assistance and relief;
16.15(v) any pension or annuity (including railroad retirement benefits, all payments
16.16received under the federal Social Security Act, supplemental security income, and veterans
16.17benefits), which was not exclusively funded by the claimant or spouse, or which was
16.18funded exclusively by the claimant or spouse and which funding payments were excluded
16.19from federal adjusted gross income in the years when the payments were made;
16.20(vi) interest received from the federal or a state government or any instrumentality
16.21or political subdivision thereof;
16.22(vii) workers' compensation;
16.23(viii) nontaxable strike benefits;
16.24(ix) the gross amounts of payments received in the nature of disability income or
16.25sick pay as a result of accident, sickness, or other disability, whether funded through
16.26insurance or otherwise;
16.27(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of
16.281986, as amended through December 31, 1995;
16.29(xi) contributions made by the claimant to an individual retirement account,
16.30including a qualified voluntary employee contribution; simplified employee pension plan;
16.31self-employed retirement plan; cash or deferred arrangement plan under section 401(k)
16.32of the Internal Revenue Code; or deferred compensation plan under section 457 of the
16.33Internal Revenue Code;
16.34(xii) nontaxable scholarship or fellowship grants;
16.35(xiii) the amount of deduction allowed under section 199 of the Internal Revenue
16.36Code;
17.1(xiv) the amount of deduction allowed under section 220 or 223 of the Internal
17.2Revenue Code;
17.3(xv) the amount of deducted for tuition expenses required to be added to income
17.4under section 290.01, subdivision 19a, clause (12) under section 222 of the Internal
17.5Revenue Code; and
17.6(xvi) the amount deducted for certain expenses of elementary and secondary school
17.7teachers under section 62(a)(2)(D) of the Internal Revenue Code; and.
17.8(xvii) unemployment compensation.
17.9In the case of an individual who files an income tax return on a fiscal year basis, the
17.10term "federal adjusted gross income" means federal adjusted gross income reflected in the
17.11fiscal year ending in the next calendar year. Federal adjusted gross income may not be
17.12reduced by the amount of a net operating loss carryback or carryforward or a capital loss
17.13carryback or carryforward allowed for the year.
17.14(b) "Income" does not include:
17.15(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;
17.16(2) amounts of any pension or annuity that were exclusively funded by the claimant
17.17or spouse if the funding payments were not excluded from federal adjusted gross income
17.18in the years when the payments were made;
17.19(3) surplus food or other relief in kind supplied by a governmental agency;
17.20(4) relief granted under chapter 290A;
17.21(5) child support payments received under a temporary or final decree of dissolution
17.22or legal separation; and
17.23(6) restitution payments received by eligible individuals and excludable interest as
17.24defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of
17.252001, Public Law 107-16.
17.26EFFECTIVE DATE.This section is effective retroactively for taxable years
17.27beginning after December 31, 2012.

17.28    Sec. 11. Minnesota Statutes 2012, section 290.0671, subdivision 1, is amended to read:
17.29    Subdivision 1. Credit allowed. (a) An individual is allowed a credit against the tax
17.30imposed by this chapter equal to a percentage of earned income. To receive a credit, a
17.31taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code.
17.32(b) For individuals with no qualifying children, the credit equals 1.9125 percent of
17.33the first $4,620 of earned income. The credit is reduced by 1.9125 percent of earned
17.34income or adjusted gross income, whichever is greater, in excess of $5,770, but in no
17.35case is the credit less than zero.
18.1(c) For individuals with one qualifying child, the credit equals 8.5 percent of the first
18.2$6,920 of earned income and 8.5 percent of earned income over $12,080 but less than
18.3$13,450. The credit is reduced by 5.73 percent of earned income or adjusted gross income,
18.4whichever is greater, in excess of $15,080, but in no case is the credit less than zero.
18.5(d) For individuals with two or more qualifying children, the credit equals ten percent
18.6of the first $9,720 of earned income and 20 percent of earned income over $14,860 but less
18.7than $16,800. The credit is reduced by 10.3 percent of earned income or adjusted gross
18.8income, whichever is greater, in excess of $17,890, but in no case is the credit less than zero.
18.9(e) For a nonresident or part-year resident, the credit must be allocated based on the
18.10percentage calculated under section 290.06, subdivision 2c, paragraph (e).
18.11(f) For a person who was a resident for the entire tax year and has earned income
18.12not subject to tax under this chapter, including income excluded under section 290.01,
18.13subdivision 19b , clause (9), the credit must be allocated based on the ratio of federal
18.14adjusted gross income reduced by the earned income not subject to tax under this chapter
18.15over federal adjusted gross income. For purposes of this paragraph, the subtractions
18.16for military pay under section 290.01, subdivision 19b, clauses (10) and (11), are not
18.17considered "earned income not subject to tax under this chapter."
18.18For the purposes of this paragraph, the exclusion of combat pay under section 112
18.19of the Internal Revenue Code is not considered "earned income not subject to tax under
18.20this chapter."
18.21(g) For tax years beginning after December 31, 2007, and before December 31,
18.222010, and for tax years beginning after December 31, 2017, the $5,770 in paragraph (b),
18.23the $15,080 in paragraph (c), and the $17,890 in paragraph (d), after being adjusted for
18.24inflation under subdivision 7, are each increased by $3,000 for married taxpayers filing joint
18.25returns. For tax years beginning after December 31, 2008, the commissioner shall annually
18.26adjust the $3,000 by the percentage determined pursuant to the provisions of section 1(f)
18.27of the Internal Revenue Code, except that in section 1(f)(3)(B), the word "2007" shall be
18.28substituted for the word "1992." For 2009, the commissioner shall then determine the
18.29percent change from the 12 months ending on August 31, 2007, to the 12 months ending on
18.30August 31, 2008, and in each subsequent year, from the 12 months ending on August 31,
18.312007, to the 12 months ending on August 31 of the year preceding the taxable year. The
18.32earned income thresholds as adjusted for inflation must be rounded to the nearest $10. If the
18.33amount ends in $5, the amount is rounded up to the nearest $10. The determination of the
18.34commissioner under this subdivision is not a rule under the Administrative Procedure Act.
18.35(h) For tax years beginning after December 31, 2010, and before January 1, 2012,
18.36 and for tax years beginning after December 31, 2013, and before January 1, 2018, the
19.1$5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph
19.2(d), after being adjusted for inflation under subdivision 7, are each increased by $5,000
19.3for married taxpayers filing joint returns. For tax years beginning after December 31,
19.42010, and before January 1, 2012, and for tax years beginning after December 31, 2013,
19.5and before January 1, 2018, the commissioner shall annually adjust the $5,000 by the
19.6percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue
19.7Code, except that in section 1(f)(3)(B), the word "2008" shall be substituted for the word
19.8"1992." For 2011, the commissioner shall then determine the percent change from the 12
19.9months ending on August 31, 2008, to the 12 months ending on August 31, 2010, and in
19.10each subsequent year, from the 12 months ending on August 31, 2008, to the 12 months
19.11ending on August 31 of the year preceding the taxable year. The earned income thresholds
19.12as adjusted for inflation must be rounded to the nearest $10. If the amount ends in $5, the
19.13amount is rounded up to the nearest $10. The determination of the commissioner under
19.14this subdivision is not a rule under the Administrative Procedure Act.
19.15(i) The commissioner shall construct tables showing the amount of the credit at
19.16various income levels and make them available to taxpayers. The tables shall follow
19.17the schedule contained in this subdivision, except that the commissioner may graduate
19.18the transition between income brackets.
19.19EFFECTIVE DATE.This section is effective for taxable years beginning after
19.20December 31, 2013.

19.21    Sec. 12. Minnesota Statutes 2012, section 290.0675, subdivision 1, is amended to read:
19.22    Subdivision 1. Definitions. (a) For purposes of this section the following terms
19.23have the meanings given.
19.24(b) "Earned income" means the sum of the following, to the extent included in
19.25Minnesota taxable income:
19.26(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
19.27(2) income received from a retirement pension, profit-sharing, stock bonus, or
19.28annuity plan; and
19.29(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue
19.30Code.
19.31(c) "Taxable income" means net income as defined in section 290.01, subdivision 19.
19.32(d) "Earned income of lesser-earning spouse" means the earned income of the spouse
19.33with the lesser amount of earned income as defined in paragraph (b) for the taxable year
19.34minus the sum of (i) the amount for one exemption under section 151(d) of the Internal
19.35Revenue Code and (ii) one-half the amount of the standard deduction under section
20.163(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition required
20.2under section 290.01, subdivision 19a, clause (21) (17), and one-half of the addition that
20.3would have been required under section 290.01, subdivision 19a, clause (21) (17), if the
20.4taxpayer had claimed the standard deduction.
20.5EFFECTIVE DATE.This section is effective retroactively for taxable years
20.6beginning after December 31, 2012.

20.7    Sec. 13. Minnesota Statutes 2013 Supplement, section 290.091, subdivision 2, is
20.8amended to read:
20.9    Subd. 2. Definitions. For purposes of the tax imposed by this section, the following
20.10terms have the meanings given:
20.11    (a) "Alternative minimum taxable income" means the sum of the following for
20.12the taxable year:
20.13    (1) the taxpayer's federal alternative minimum taxable income as defined in section
20.1455(b)(2) of the Internal Revenue Code;
20.15    (2) the taxpayer's itemized deductions allowed in computing federal alternative
20.16minimum taxable income, but excluding:
20.17    (i) the charitable contribution deduction under section 170 of the Internal Revenue
20.18Code;
20.19    (ii) the medical expense deduction;
20.20    (iii) the casualty, theft, and disaster loss deduction; and
20.21    (iv) the impairment-related work expenses of a disabled person;
20.22    (3) for depletion allowances computed under section 613A(c) of the Internal
20.23Revenue Code, with respect to each property (as defined in section 614 of the Internal
20.24Revenue Code), to the extent not included in federal alternative minimum taxable income,
20.25the excess of the deduction for depletion allowable under section 611 of the Internal
20.26Revenue Code for the taxable year over the adjusted basis of the property at the end of the
20.27taxable year (determined without regard to the depletion deduction for the taxable year);
20.28    (4) to the extent not included in federal alternative minimum taxable income, the
20.29amount of the tax preference for intangible drilling cost under section 57(a)(2) of the
20.30Internal Revenue Code determined without regard to subparagraph (E);
20.31    (5) to the extent not included in federal alternative minimum taxable income, the
20.32amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and
20.33    (6) the amount of addition required by section 290.01, subdivision 19a, clauses (7)
20.34to (9), (12), (13), and (16) to (18) (11) to (14), and (18) to (19);
20.35    less the sum of the amounts determined under the following:
21.1    (1) interest income as defined in section 290.01, subdivision 19b, clause (1);
21.2    (2) an overpayment of state income tax as provided by section 290.01, subdivision
21.319b , clause (2), to the extent included in federal alternative minimum taxable income;
21.4    (3) the amount of investment interest paid or accrued within the taxable year on
21.5indebtedness to the extent that the amount does not exceed net investment income, as
21.6defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include
21.7amounts deducted in computing federal adjusted gross income;
21.8    (4) amounts subtracted from federal taxable income as provided by section 290.01,
21.9subdivision 19b , clauses (6), (8) to (14), and (16); and
21.10(5) the amount of the net operating loss allowed under section 290.095, subdivision
21.1111 , paragraph (c).
21.12    In the case of an estate or trust, alternative minimum taxable income must be
21.13computed as provided in section 59(c) of the Internal Revenue Code.
21.14    (b) "Investment interest" means investment interest as defined in section 163(d)(3)
21.15of the Internal Revenue Code.
21.16    (c) "Net minimum tax" means the minimum tax imposed by this section.
21.17    (d) "Regular tax" means the tax that would be imposed under this chapter (without
21.18regard to this section and section 290.032), reduced by the sum of the nonrefundable
21.19credits allowed under this chapter.
21.20    (e) "Tentative minimum tax" equals 6.75 percent of alternative minimum taxable
21.21income after subtracting the exemption amount determined under subdivision 3.
21.22EFFECTIVE DATE.This section is effective retroactively for taxable years
21.23beginning after December 31, 2012.

21.24    Sec. 14. Minnesota Statutes 2013 Supplement, section 290A.03, subdivision 15,
21.25is amended to read:
21.26    Subd. 15. Internal Revenue Code. For taxable years beginning before January 1,
21.272012, and after December 31, 2012, "Internal Revenue Code" means the Internal Revenue
21.28Code of 1986, as amended through April 14, 2011; and for taxable years beginning after
21.29December 31, 2011, and before January 1, 2013, "Internal Revenue Code" means the
21.30Internal Revenue Code of 1986, as amended through January 3 December 20, 2013.
21.31EFFECTIVE DATE.This section is effective retroactively for property tax refunds
21.32based on property taxes payable after December 31, 2013, and rent paid after December
21.3331, 2012.

22.1    Sec. 15. Minnesota Statutes 2013 Supplement, section 297A.61, subdivision 3, is
22.2amended to read:
22.3    Subd. 3. Sale and purchase. (a) "Sale" and "purchase" include, but are not limited
22.4to, each of the transactions listed in this subdivision. In applying the provisions of this
22.5chapter, the terms "tangible personal property" and "retail sale" include the taxable
22.6services listed in paragraph (g), clause (6), items (i) to (vi) and (viii), and the provision
22.7of these taxable services, unless specifically provided otherwise. Services performed by
22.8an employee for an employer are not taxable. Services performed by a partnership or
22.9association for another partnership or association are not taxable if one of the entities owns
22.10or controls more than 80 percent of the voting power of the equity interest in the other
22.11entity. Services performed between members of an affiliated group of corporations are not
22.12taxable. For purposes of the preceding sentence, "affiliated group of corporations" means
22.13those entities that would be classified as members of an affiliated group as defined under
22.14United States Code, title 26, section 1504, disregarding the exclusions in section 1504(b).
22.15    (b) Sale and purchase include:
22.16    (1) any transfer of title or possession, or both, of tangible personal property, whether
22.17absolutely or conditionally, for a consideration in money or by exchange or barter; and
22.18    (2) the leasing of or the granting of a license to use or consume, for a consideration
22.19in money or by exchange or barter, tangible personal property, other than a manufactured
22.20home used for residential purposes for a continuous period of 30 days or more.
22.21    (c) Sale and purchase include the production, fabrication, printing, or processing of
22.22tangible personal property for a consideration for consumers who furnish either directly or
22.23indirectly the materials used in the production, fabrication, printing, or processing.
22.24    (d) Sale and purchase include the preparing for a consideration of food.
22.25Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited
22.26to, the following:
22.27    (1) prepared food sold by the retailer;
22.28    (2) soft drinks;
22.29    (3) candy;
22.30    (4) dietary supplements; and
22.31    (5) all food sold through vending machines.
22.32    (e) A sale and a purchase includes the furnishing for a consideration of electricity,
22.33gas, water, or steam for use or consumption within this state.
22.34    (f) A sale and a purchase includes the transfer for a consideration of prewritten
22.35computer software whether delivered electronically, by load and leave, or otherwise.
23.1    (g) A sale and a purchase includes the furnishing for a consideration of the following
23.2services:
23.3    (1) the privilege of admission to places of amusement, recreational areas, or athletic
23.4events, and the making available of amusement devices, tanning facilities, reducing
23.5salons, steam baths, Turkish baths, health clubs, and spas or athletic facilities;
23.6    (2) lodging and related services by a hotel, rooming house, resort, campground,
23.7motel, or trailer camp, including furnishing the guest of the facility with access to
23.8telecommunication services, and the granting of any similar license to use real property in
23.9a specific facility, other than the renting or leasing of it for a continuous period of 30 days
23.10or more under an enforceable written agreement that may not be terminated without prior
23.11notice and including accommodations intermediary services provided in connection with
23.12other services provided under this clause;
23.13    (3) nonresidential parking services, whether on a contractual, hourly, or other
23.14periodic basis, except for parking at a meter;
23.15    (4) the granting of membership in a club, association, or other organization if:
23.16    (i) the club, association, or other organization makes available for the use of its
23.17members sports and athletic facilities, without regard to whether a separate charge is
23.18assessed for use of the facilities; and
23.19    (ii) use of the sports and athletic facility is not made available to the general public
23.20on the same basis as it is made available to members.
23.21Granting of membership means both onetime initiation fees and periodic membership
23.22dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and
23.23squash courts; basketball and volleyball facilities; running tracks; exercise equipment;
23.24swimming pools; and other similar athletic or sports facilities;
23.25    (5) delivery of aggregate materials by a third party, excluding delivery of aggregate
23.26material used in road construction; and delivery of concrete block by a third party if the
23.27delivery would be subject to the sales tax if provided by the seller of the concrete block.
23.28For purposes of this clause, "road construction" means construction of:
23.29    (i) public roads;
23.30    (ii) cartways; and
23.31    (iii) private roads in townships located outside of the seven-county metropolitan area
23.32up to the point of the emergency response location sign; and
23.33    (6) services as provided in this clause:
23.34    (i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
23.35and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
24.1drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
24.2include services provided by coin operated facilities operated by the customer;
24.3    (ii) motor vehicle washing, waxing, and cleaning services, including services
24.4provided by coin operated facilities operated by the customer, and rustproofing,
24.5undercoating, and towing of motor vehicles;
24.6    (iii) building and residential cleaning, maintenance, and disinfecting services and
24.7pest control and exterminating services;
24.8    (iv) detective, security, burglar, fire alarm, and armored car services; but not
24.9including services performed within the jurisdiction they serve by off-duty licensed peace
24.10officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit
24.11organization or any organization at the direction of a county for monitoring and electronic
24.12surveillance of persons placed on in-home detention pursuant to court order or under the
24.13direction of the Minnesota Department of Corrections;
24.14    (v) pet grooming services;
24.15    (vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
24.16and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor
24.17plant care; tree, bush, shrub, and stump removal, except when performed as part of a land
24.18clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for
24.19public utility lines. Services performed under a construction contract for the installation of
24.20shrubbery, plants, sod, trees, bushes, and similar items are not taxable;
24.21    (vii) massages, except when provided by a licensed health care facility or
24.22professional or upon written referral from a licensed health care facility or professional for
24.23treatment of illness, injury, or disease; and
24.24    (viii) the furnishing of lodging, board, and care services for animals in kennels and
24.25other similar arrangements, but excluding veterinary and horse boarding services.
24.26    (h) A sale and a purchase includes the furnishing for a consideration of tangible
24.27personal property or taxable services by the United States or any of its agencies or
24.28instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political
24.29subdivisions.
24.30    (i) A sale and a purchase includes the furnishing for a consideration of
24.31telecommunications services, ancillary services associated with telecommunication
24.32services, and pay television services. Telecommunication services include, but are
24.33not limited to, the following services, as defined in section 297A.669: air-to-ground
24.34radiotelephone service, mobile telecommunication service, postpaid calling service,
24.35prepaid calling service, prepaid wireless calling service, and private communication
24.36services. The services in this paragraph are taxed to the extent allowed under federal law.
25.1    (j) A sale and a purchase includes the furnishing for a consideration of installation if
25.2the installation charges would be subject to the sales tax if the installation were provided
25.3by the seller of the item being installed.
25.4    (k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer
25.5to a customer when (1) the vehicle is rented by the customer for a consideration, or (2)
25.6the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section
25.759B.02, subdivision 11.
25.8    (l) A sale and a purchase includes furnishing for a consideration of specified digital
25.9products or other digital products or granting the right for a consideration to use specified
25.10digital products or other digital products on a temporary or permanent basis and regardless
25.11of whether the purchaser is required to make continued payments for such right. Wherever
25.12the term "tangible personal property" is used in this chapter, other than in subdivisions 10
25.13and 38, the provisions also apply to specified digital products, or other digital products,
25.14unless specifically provided otherwise or the context indicates otherwise.
25.15(m) A sale and purchase includes the furnishing for consideration of the following
25.16services:
25.17(1) repairing and maintaining electronic and precision equipment, which service can
25.18be deducted as a business expense under the Internal Revenue Code. This includes, but
25.19is not limited to, repair or maintenance of electronic devices, computers and computer
25.20peripherals, monitors, computer terminals, storage devices, and CD-ROM drives; other
25.21office equipment such as photocopying machines, printers, and facsimile machines;
25.22televisions, stereos, sound systems, video or digital recorders and players; two-way radios
25.23and other communications equipment; radar and sonar equipment, scientific instruments,
25.24microscopes, and medical equipment;
25.25(2) repairing and maintaining commercial and industrial machinery and equipment.
25.26For purposes of this subdivision, the following items are not commercial or industrial
25.27machinery and equipment: (i) motor vehicles; (ii) furniture and fixtures; (iii) ships; (iv)
25.28railroad stock; and (v) aircraft; and
25.29(3) warehousing or storage services for tangible personal property, excluding:
25.30(i) agricultural products;
25.31(ii) refrigerated storage;
25.32(iii) electronic data; and
25.33(iv) self-storage services and storage of motor vehicles, recreational vehicles, and
25.34boats, not eligible to be deducted as a business expense under the Internal Revenue Code.
25.35EFFECTIVE DATE.This section is effective retroactively for sales and purchases
25.36made after June 30, 2013. Any person that paid tax on purchases under the stricken
26.1paragraph (m) after June 30, 2013, may apply for a direct refund. If qualified, the
26.2purchaser must file for the refund under section 289A.50, subdivision 2a; all others may
26.3apply for a direct refund under section 18.

26.4    Sec. 16. Minnesota Statutes 2013 Supplement, section 297A.68, subdivision 5, is
26.5amended to read:
26.6    Subd. 5. Capital equipment. (a) Capital equipment is exempt.
26.7"Capital equipment" means machinery and equipment purchased or leased, and used
26.8in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining,
26.9or refining tangible personal property to be sold ultimately at retail if the machinery and
26.10equipment are essential to the integrated production process of manufacturing, fabricating,
26.11mining, or refining. Capital equipment also includes machinery and equipment
26.12used primarily to electronically transmit results retrieved by a customer of an online
26.13computerized data retrieval system.
26.14(b) Capital equipment includes, but is not limited to:
26.15(1) machinery and equipment used to operate, control, or regulate the production
26.16equipment;
26.17(2) machinery and equipment used for research and development, design, quality
26.18control, and testing activities;
26.19(3) environmental control devices that are used to maintain conditions such as
26.20temperature, humidity, light, or air pressure when those conditions are essential to and are
26.21part of the production process;
26.22(4) materials and supplies used to construct and install machinery or equipment;
26.23(5) repair and replacement parts, including accessories, whether purchased as spare
26.24parts, repair parts, or as upgrades or modifications to machinery or equipment;
26.25(6) materials used for foundations that support machinery or equipment;
26.26(7) materials used to construct and install special purpose buildings used in the
26.27production process;
26.28(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed
26.29as part of the delivery process regardless if mounted on a chassis, repair parts for
26.30ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and
26.31(9) machinery or equipment used for research, development, design, or production
26.32of computer software.
26.33(c) Capital equipment does not include the following:
26.34(1) motor vehicles taxed under chapter 297B;
26.35(2) machinery or equipment used to receive or store raw materials;
27.1(3) building materials, except for materials included in paragraph (b), clauses (6)
27.2and (7);
27.3(4) machinery or equipment used for nonproduction purposes, including, but not
27.4limited to, the following: plant security, fire prevention, first aid, and hospital stations;
27.5support operations or administration; pollution control; and plant cleaning, disposal of
27.6scrap and waste, plant communications, space heating, cooling, lighting, or safety;
27.7(5) farm machinery and aquaculture production equipment as defined by section
27.8297A.61 , subdivisions 12 and 13;
27.9(6) machinery or equipment purchased and installed by a contractor as part of an
27.10improvement to real property;
27.11(7) machinery and equipment used by restaurants in the furnishing, preparing, or
27.12serving of prepared foods as defined in section 297A.61, subdivision 31;
27.13(8) machinery and equipment used to furnish the services listed in section 297A.61,
27.14subdivision 3 , paragraph (g), clause (6), items (i) to (vi) and (viii);
27.15(9) machinery or equipment used in the transportation, transmission, or distribution
27.16of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines,
27.17tanks, mains, or other means of transporting those products. This clause does not apply to
27.18machinery or equipment used to blend petroleum or biodiesel fuel as defined in section
27.19239.77 ; or
27.20(10) any other item that is not essential to the integrated process of manufacturing,
27.21fabricating, mining, or refining.
27.22(d) For purposes of this subdivision:
27.23(1) "Equipment" means independent devices or tools separate from machinery but
27.24essential to an integrated production process, including computers and computer software,
27.25used in operating, controlling, or regulating machinery and equipment; and any subunit or
27.26assembly comprising a component of any machinery or accessory or attachment parts of
27.27machinery, such as tools, dies, jigs, patterns, and molds.
27.28(2) "Fabricating" means to make, build, create, produce, or assemble components or
27.29property to work in a new or different manner.
27.30(3) "Integrated production process" means a process or series of operations through
27.31which tangible personal property is manufactured, fabricated, mined, or refined. For
27.32purposes of this clause, (i) manufacturing begins with the removal of raw materials
27.33from inventory and ends when the last process prior to loading for shipment has been
27.34completed; (ii) fabricating begins with the removal from storage or inventory of the
27.35property to be assembled, processed, altered, or modified and ends with the creation
27.36or production of the new or changed product; (iii) mining begins with the removal of
28.1overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
28.2ends when the last process before stockpiling is completed; and (iv) refining begins with
28.3the removal from inventory or storage of a natural resource and ends with the conversion
28.4of the item to its completed form.
28.5(4) "Machinery" means mechanical, electronic, or electrical devices, including
28.6computers and computer software, that are purchased or constructed to be used for the
28.7activities set forth in paragraph (a), beginning with the removal of raw materials from
28.8inventory through completion of the product, including packaging of the product.
28.9(5) "Machinery and equipment used for pollution control" means machinery and
28.10equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
28.11described in paragraph (a).
28.12(6) "Manufacturing" means an operation or series of operations where raw materials
28.13are changed in form, composition, or condition by machinery and equipment and which
28.14results in the production of a new article of tangible personal property. For purposes of
28.15this subdivision, "manufacturing" includes the generation of electricity or steam to be
28.16sold at retail.
28.17(7) "Mining" means the extraction of minerals, ores, stone, or peat.
28.18(8) "Online data retrieval system" means a system whose cumulation of information
28.19is equally available and accessible to all its customers.
28.20(9) "Primarily" means machinery and equipment used 50 percent or more of the time
28.21in an activity described in paragraph (a).
28.22(10) "Refining" means the process of converting a natural resource to an intermediate
28.23or finished product, including the treatment of water to be sold at retail.
28.24(11) This subdivision does not apply to telecommunications equipment as provided
28.25in subdivision 35 35a, and does not apply to wire, cable, fiber, poles, or conduit for
28.26telecommunications services.
28.27EFFECTIVE DATE.This section is effective for sales and purchases made after
28.28June 30, 2014.

28.29    Sec. 17. Minnesota Statutes 2012, section 297A.68, is amended by adding a
28.30subdivision to read:
28.31    Subd. 35a. Telecommunications and pay television services machinery and
28.32equipment. (a) Telecommunications or pay television services machinery and equipment
28.33purchased or leased for use directly by a telecommunications or pay television service
28.34provider primarily in the provision of telecommunications or pay television services
29.1that are ultimately to be sold at retail are exempt, regardless of whether purchased by
29.2the owner, a contractor, or a subcontractor.
29.3(b) For purposes of this subdivision, "telecommunications or pay television services
29.4machinery and equipment" includes, but is not limited to:
29.5(1) machinery, equipment, and fixtures utilized in receiving, initiating,
29.6amplifying, processing, transmitting, retransmitting, recording, switching, or monitoring
29.7telecommunications or pay television services, such as computers, transformers, amplifiers,
29.8routers, bridges, repeaters, multiplexers, and other items performing comparable functions;
29.9(2) machinery, equipment, and fixtures used in the transportation of
29.10telecommunications or pay television services, radio transmitters and receivers, satellite
29.11equipment, microwave equipment, and other transporting media, but not wire, cable,
29.12fiber, poles, or conduit;
29.13(3) ancillary machinery, equipment, and fixtures that regulate, control, protect, or
29.14enable the machinery in clauses (1) and (2) to accomplish its intended function, such as
29.15auxiliary power supply, test equipment, towers, heating, ventilating, and air conditioning
29.16equipment necessary to the operation of the telecommunications or pay television services
29.17equipment; and software necessary to the operation of the telecommunications or pay
29.18television services equipment; and
29.19(4) repair and replacement parts, including accessories, whether purchased as spare
29.20parts, repair parts, or as upgrades or modifications to qualified machinery or equipment.
29.21EFFECTIVE DATE.This section is effective retroactively for sales and purchases
29.22made after June 30, 2013. Any person that is eligible for a refund under this section for
29.23sales made before July 1, 2014, may apply for a direct refund. If qualified, the purchaser
29.24must apply for the refund under section 289A.50, subdivision 2a; all others may apply for
29.25a direct refund under section 18.

29.26    Sec. 18. SALES TAX; TEMPORARY REFUND MECHANISM.
29.27Any purchaser that paid sales tax on items under the repealed paragraph (m) of section
29.28297A.61, subdivision 3, or on items now exempt under section 15 or 17 that may not file for
29.29a refund under section 289A.50, subdivision 2a, may apply directly to the commissioner of
29.30revenue for a refund under this section. This provision only applies to sales made after June
29.3130, 2013, and before July 1, 2014. The application must be made on forms prescribed by
29.32the commissioner and the purchaser may make only one application for the entire period.
29.33Interest on the refund shall be paid at the rate in Minnesota Statutes, section 270C.405,
29.34from 90 days after the refund claim is filed with the commissioner of revenue. The amount
29.35required to make the refunds is annually appropriated to the commissioner of revenue.

30.1    Sec. 19. INDIVIDUAL INCOME TAX COLLECTION ACTION PROHIBITED.
30.2Notwithstanding any law to the contrary, the commissioner shall not increase the
30.3amount due or decrease the refund for an individual income tax return for the taxable year
30.4beginning after December 31, 2012, and before January 1, 2014, to the extent the amount
30.5due was understated or the refund was overstated because the taxpayer recalculated federal
30.6adjusted gross income and deductions, exclusions, or other items that are determined
30.7relative to federal adjusted gross income in accordance with forms and instructions
30.8provided by the commissioner.
30.9EFFECTIVE DATE.This section is effective the day following final enactment.

30.10    Sec. 20. REPEALER.
30.11Minnesota Statutes 2013 Supplement, section 297A.61, subdivision 57, is repealed.
30.12EFFECTIVE DATE.This section is effective the day after final enactment."
30.13Delete the title and insert:
30.15relating to taxation; income and franchise; sales and use; conforming to changes
30.16in the Internal Revenue Code; extending the working family credit phaseout for
30.17married filers; exempting certain business transactions;amending Minnesota
30.18Statutes 2012, sections 289A.02, subdivision 7; 289A.08, subdivision 7; 290.01,
30.19subdivision 19a, by adding a subdivision; 290.067, subdivisions 1, 2a; 290.0671,
30.20subdivision 1; 290.0675, subdivision 1; 297A.68, by adding a subdivision;
30.21Minnesota Statutes 2013 Supplement, sections 290.01, subdivisions 19, 19b,
30.2231; 290.06, subdivision 2c; 290.091, subdivision 2; 290A.03, subdivision 15;
30.23297A.61, subdivision 3; 297A.68, subdivision 5; repealing Minnesota Statutes
30.242013 Supplement, section 297A.61, subdivision 57."