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HF 912

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

KEY: stricken = removed, old language.
underscored = added, new language.
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A bill for an act
relating to human services; modifying MFIP and child care provisions;
changing and clarifying foreign operating corporation provisions; amending
Minnesota Statutes 2006, sections 119B.09, subdivision 1; 119B.12, by adding a
subdivision; 256J.21, subdivision 2; 256J.24, subdivision 5; 256J.53, subdivision
2; 256J.95, subdivision 9; 290.01, subdivisions 6b, 19c, 19d; 290.34, subdivision
1; repealing Minnesota Statutes 2006, sections 256B.0631; 256J.24, subdivision
6; 256J.37, subdivisions 3a, 3b.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1

WELFARE PROVISIONS

Section 1.

Minnesota Statutes 2006, section 119B.09, subdivision 1, is amended to read:


Subdivision 1.

General eligibility requirements for all applicants for child
care assistance.

(a) Child care services must be available to families who need child
care to find or keep employment or to obtain the training or education necessary to find
employment and whodeleted text begin :
deleted text end

deleted text begin (1)deleted text end have household income less than or equal to deleted text begin 250 percent of the federal poverty
guidelines
deleted text end new text begin 75 percent of the state median incomenew text end , adjusted for family size, and meet the
requirements of section 119B.05; new text begin or new text end receive MFIP assistancedeleted text begin ;deleted text end and are participating in
employment and training services under chapter 256J or 256Kdeleted text begin ; or
deleted text end

deleted text begin (2) have household income less than or equal to 175 percent of the federal poverty
guidelines, adjusted for family size, at program entry and less than 250 percent of the
federal poverty guidelines, adjusted for family size, at program exit
deleted text end .

(b) Child care services must be made available as in-kind services.

(c) All applicants for child care assistance and families currently receiving child care
assistance must be assisted and required to cooperate in establishment of paternity and
enforcement of child support obligations for all children in the family as a condition
of program eligibility. For purposes of this section, a family is considered to meet the
requirement for cooperation when the family complies with the requirements of section
256.741.

Sec. 2.

Minnesota Statutes 2006, section 119B.12, is amended by adding a subdivision
to read:


new text begin Subd. 4. new text end

new text begin Co-payment fee for families with annual incomes that exceed the
federal poverty level.
new text end

new text begin The monthly family co-payment fee for families with annual
incomes greater than the federal poverty level, adjusted for family size, is determined
as follows:
new text end

new text begin (a) The family's annual gross income is converted into a percentage of state median
income (SMI) for a family of four, adjusted for family size, by dividing the family's annual
gross income by 100 percent of the SMI for a family of four, adjusted for family size. The
percentage must be carried out to the nearest 100th of a percent.
new text end

new text begin (b) If the family's annual gross income is less than or equal to 75 percent of the
SMI for a family of four, adjusted for family size, the family's monthly co-payment fee
is the fixed percentage established for the family's income range in clauses (1) to (60),
multiplied by the highest possible income within that income range, divided by 12, and
rounded to the nearest whole dollar.
new text end

new text begin (1) less than 35.01 percent of SMI -- 2.20%
new text end

new text begin (2) 35.01 to 42.00 percent of SMI -- 2.70%
new text end

new text begin (3) 42.01 to 43.00 percent of SMI -- 3.75%
new text end

new text begin (4) 43.01 to 44.00 percent of SMI -- 4.00%
new text end

new text begin (5) 44.01 to 45.00 percent of SMI -- 4.25%
new text end

new text begin (6) 45.01 to 46.00 percent of SMI -- 4.50%
new text end

new text begin (7) 46.01 to 47.00 percent of SMI -- 4.75%
new text end

new text begin (8) 47.01 to 48.00 percent of SMI -- 5.00%
new text end

new text begin (9) 48.01 to 49.00 percent of SMI -- 5.25%
new text end

new text begin (10) 49.01 to 50.00 percent of SMI -- 5.50%
new text end

new text begin (11) 50.01 to 50.50 percent of SMI -- 5.75%
new text end

new text begin (12) 50.51 to 51.00 percent of SMI -- 6.00%
new text end

new text begin (13) 51.01 to 51.50 percent of SMI -- 6.25%
new text end

new text begin (14) 51.51 to 52.00 percent of SMI -- 6.50%
new text end

new text begin (15) 52.01 to 52.50 percent of SMI -- 6.75%
new text end

new text begin (16) 52.51 to 53.00 percent of SMI -- 7.00%
new text end

new text begin (17) 53.01 to 53.50 percent of SMI -- 7.25%
new text end

new text begin (18) 53.51 to 54.00 percent of SMI -- 7.50%
new text end

new text begin (19) 54.01 to 54.50 percent of SMI -- 7.75%
new text end

new text begin (20) 54.51 to 55.00 percent of SMI -- 8.00%
new text end

new text begin (21) 55.01 to 55.50 percent of SMI -- 8.30%
new text end

new text begin (22) 55.51 to 56.00 percent of SMI -- 8.60%
new text end

new text begin (23) 56.01 to 56.50 percent of SMI -- 8.90%
new text end

new text begin (24) 56.51 to 57.00 percent of SMI -- 9.20%
new text end

new text begin (25) 57.01 to 57.50 percent of SMI -- 9.50%
new text end

new text begin (26) 57.51 to 58.00 percent of SMI -- 9.80%
new text end

new text begin (27) 58.01 to 58.50 percent of SMI -- 10.10%
new text end

new text begin (28) 58.51 to 59.00 percent of SMI -- 10.40%
new text end

new text begin (29) 59.01 to 59.50 percent of SMI -- 10.70%
new text end

new text begin (30) 59.51 to 60.00 percent of SMI -- 11.00%
new text end

new text begin (31) 60.01 to 60.50 percent of SMI -- 11.30%
new text end

new text begin (32) 60.51 to 61.00 percent of SMI -- 11.60%
new text end

new text begin (33) 61.01 to 61.50 percent of SMI -- 11.90%
new text end

new text begin (34) 61.51 to 62.00 percent of SMI -- 12.20%
new text end

new text begin (35) 62.01 to 62.50 percent of SMI -- 12.50%
new text end

new text begin (36) 62.51 to 63.00 percent of SMI -- 12.80%
new text end

new text begin (37) 63.01 to 63.50 percent of SMI -- 13.10%
new text end

new text begin (38) 63.51 to 64.00 percent of SMI -- 13.40%
new text end

new text begin (39) 64.01 to 64.50 percent of SMI -- 13.70%
new text end

new text begin (40) 64.51 to 65.00 percent of SMI -- 14.00%
new text end

new text begin (41) 65.01 to 65.50 percent of SMI -- 14.30%
new text end

new text begin (42) 65.51 to 66.00 percent of SMI -- 14.60%
new text end

new text begin (43) 66.01 to 66.50 percent of SMI -- 14.90%
new text end

new text begin (44) 66.51 to 67.00 percent of SMI -- 15.20%
new text end

new text begin (45) 67.01 to 67.50 percent of SMI -- 15.50%
new text end

new text begin (46) 67.51 to 68.00 percent of SMI -- 15.80%
new text end

new text begin (47) 68.01 to 68.50 percent of SMI -- 16.10%
new text end

new text begin (48) 68.51 to 69.00 percent of SMI -- 16.40%
new text end

new text begin (49) 69.01 to 69.50 percent of SMI -- 16.70%
new text end

new text begin (50) 69.51 to 70.00 percent of SMI -- 17.00%
new text end

new text begin (51) 70.01 to 70.50 percent of SMI -- 17.30%
new text end

new text begin (52) 70.51 to 71.00 percent of SMI -- 17.60%
new text end

new text begin (53) 71.01 to 71.50 percent of SMI -- 17.90%
new text end

new text begin (54) 71.51 to 72.00 percent of SMI -- 18.20%
new text end

new text begin (55) 72.01 to 72.50 percent of SMI -- 18.50%
new text end

new text begin (56) 72.51 to 73.00 percent of SMI -- 18.80%
new text end

new text begin (57) 73.01 to 73.50 percent of SMI -- 19.10%
new text end

new text begin (58) 73.51 to 74.00 percent of SMI -- 19.40%
new text end

new text begin (59) 74.01 to 74.50 percent of SMI -- 19.70%
new text end

new text begin (60) 74.51 to 75.00 percent of SMI -- 20.00%
new text end

Sec. 3.

Minnesota Statutes 2006, section 256J.21, subdivision 2, is amended to read:


Subd. 2.

Income exclusions.

The following must be excluded in determining a
family's available income:

(1) payments for basic care, difficulty of care, and clothing allowances received for
providing family foster care to children or adults under Minnesota Rules, parts 9555.5050
to 9555.6265, 9560.0521, and 9560.0650 to 9560.0655, and payments received and used
for care and maintenance of a third-party beneficiary who is not a household member;

(2) reimbursements for employment training received through the Workforce
Investment Act of 1998, United States Code, title 20, chapter 73, section 9201;

(3) reimbursement for out-of-pocket expenses incurred while performing volunteer
services, jury duty, employment, or informal carpooling arrangements directly related to
employment;

(4) all educational assistance, except the county agency must count graduate student
teaching assistantships, fellowships, and other similar paid work as earned income and,
after allowing deductions for any unmet and necessary educational expenses, shall
count scholarships or grants awarded to graduate students that do not require teaching
or research as unearned income;

(5) loans, regardless of purpose, from public or private lending institutions,
governmental lending institutions, or governmental agencies;

(6) loans from private individuals, regardless of purpose, provided an applicant or
participant documents that the lender expects repayment;

(7)(i) state income tax refunds; and

(ii) federal income tax refunds;

(8)(i) federal earned income credits;

(ii) Minnesota working family credits;

(iii) state homeowners and renters credits under chapter 290A; and

(iv) federal or state tax rebates;

(9) funds received for reimbursement, replacement, or rebate of personal or real
property when these payments are made by public agencies, awarded by a court, solicited
through public appeal, or made as a grant by a federal agency, state or local government,
or disaster assistance organizations, subsequent to a presidential declaration of disaster;

(10) the portion of an insurance settlement that is used to pay medical, funeral, and
burial expenses, or to repair or replace insured property;

(11) reimbursements for medical expenses that cannot be paid by medical assistance;

(12) payments by a vocational rehabilitation program administered by the state
under chapter 268A, except those payments that are for current living expenses;

(13) in-kind income, including any payments directly made by a third party to a
provider of goods and services;

(14) assistance payments to correct underpayments, but only for the month in which
the payment is received;

(15) payments for short-term emergency needs under section 256J.626, subdivision
2
;

(16) funeral and cemetery payments as provided by section 256.935;

(17) nonrecurring cash gifts of $30 or less, not exceeding $30 per participant in
a calendar month;

(18) any form of energy assistance payment made through Public Law 97-35,
Low-Income Home Energy Assistance Act of 1981, payments made directly to energy
providers by other public and private agencies, and any form of credit or rebate payment
issued by energy providers;

(19) Supplemental Security Income (SSI), including retroactive SSI payments and
other income of an SSI recipientdeleted text begin , except as described in section 256J.37, subdivision 3bdeleted text end ;

(20) Minnesota supplemental aid, including retroactive payments;

(21) proceeds from the sale of real or personal property;

(22) state adoption assistance payments under section 259.67, and up to an equal
amount of county adoption assistance payments;

(23) state-funded family subsidy program payments made under section 252.32
to help families care for children with developmental disabilities, consumer support
grant funds under section 256.476, and resources and services for a disabled household
member under one of the home and community-based waiver services programs under
chapter 256B;

(24) interest payments and dividends from property that is not excluded from and
that does not exceed the asset limit;

(25) rent rebates;

(26) income earned by a minor caregiver, minor child through age 6, or a minor
child who is at least a half-time student in an approved elementary or secondary education
program;

(27) income earned by a caregiver under age 20 who is at least a half-time student in
an approved elementary or secondary education program;

(28) MFIP child care payments under section 119B.05;

(29) all other payments made through MFIP to support a caregiver's pursuit of
greater economic stability;

(30) income a participant receives related to shared living expenses;

(31) reverse mortgages;

(32) benefits provided by the Child Nutrition Act of 1966, United States Code, title
42, chapter 13A, sections 1771 to 1790;

(33) benefits provided by the women, infants, and children (WIC) nutrition program,
United States Code, title 42, chapter 13A, section 1786;

(34) benefits from the National School Lunch Act, United States Code, title 42,
chapter 13, sections 1751 to 1769e;

(35) relocation assistance for displaced persons under the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970, United States Code, title
42, chapter 61, subchapter II, section 4636, or the National Housing Act, United States
Code, title 12, chapter 13, sections 1701 to 1750jj;

(36) benefits from the Trade Act of 1974, United States Code, title 19, chapter
12, part 2, sections 2271 to 2322;

(37) war reparations payments to Japanese Americans and Aleuts under United
States Code, title 50, sections 1989 to 1989d;

(38) payments to veterans or their dependents as a result of legal settlements
regarding Agent Orange or other chemical exposure under Public Law 101-239, section
10405, paragraph (a)(2)(E);

(39) income that is otherwise specifically excluded from MFIP consideration in
federal law, state law, or federal regulation;

(40) security and utility deposit refunds;

(41) American Indian tribal land settlements excluded under Public Laws 98-123,
98-124, and 99-377 to the Mississippi Band Chippewa Indians of White Earth, Leech
Lake, and Mille Lacs reservations and payments to members of the White Earth Band,
under United States Code, title 25, chapter 9, section 331, and chapter 16, section 1407;

(42) all income of the minor parent's parents and stepparents when determining the
grant for the minor parent in households that include a minor parent living with parents or
stepparents on MFIP with other children;

(43) income of the minor parent's parents and stepparents equal to 200 percent of the
federal poverty guideline for a family size not including the minor parent and the minor
parent's child in households that include a minor parent living with parents or stepparents
not on MFIP when determining the grant for the minor parent. The remainder of income is
deemed as specified in section 256J.37, subdivision 1b;

(44) payments made to children eligible for relative custody assistance under section
257.85;

(45) vendor payments for goods and services made on behalf of a client unless the
client has the option of receiving the payment in cash; and

(46) the principal portion of a contract for deed payment.

Sec. 4.

Minnesota Statutes 2006, section 256J.24, subdivision 5, is amended to read:


Subd. 5.

MFIP transitional standard.

new text begin (a) new text end The MFIP transitional standard is based
on the number of persons in the assistance unit eligible for both food and cash assistance
unless the restrictions in subdivision 6 on the birth of a child apply. The following table
represents the transitional standards effective October 1, 2004.

Number of Eligible
People
Transitional
Standard
Cash Portion
Food Portion
1
$379:
$250
$129
2
$675:
$437
$238
3
$876:
$532
$344
4
$1,036:
$621
$415
5
$1,180:
$697
$483
6
$1,350:
$773
$577
7
$1,472:
$850
$622
8
$1,623:
$916
$707
9
$1,772:
$980
$792
10
$1,915:
$1,035
$880
over 10
add $142:
$53
$89
per additional member.

The commissioner shall annually publish in the State Register the transitional
standard for an assistance unit sizes 1 to 10 including a breakdown of the cash and food
portions.

new text begin (b) The commissioner shall increase the existing transitional standard by ten percent
effective July 1, 2007, to be distributed in the cash portion of the grant.
new text end

Sec. 5.

Minnesota Statutes 2006, section 256J.53, subdivision 2, is amended to read:


Subd. 2.

Approval of postsecondary education or training.

(a) deleted text begin In order for a
postsecondary education or training program to be an approved activity in an employment
plan, the participant must be working in unsubsidized employment at least 20 hours per
week.
deleted text end

deleted text begin (b)deleted text end Participants seeking approval of a postsecondary education or training plan
must provide documentation that:

(1) the employment goal can only be met with the additional education or training;

(2) there are suitable employment opportunities that require the specific education or
training in the area in which the participant resides or is willing to reside;

(3) the education or training will result in significantly higher wages for the
participant than the participant could earn without the education or training;

(4) the participant can meet the requirements for admission into the program; and

(5) there is a reasonable expectation that the participant will complete the training
program based on such factors as the participant's MFIP assessment, previous education,
training, and work history; current motivation; and changes in previous circumstances.

deleted text begin (c) The hourly unsubsidized employment requirement does not apply for intensive
education or training programs lasting 12 weeks or less when full-time attendance is
required.
deleted text end

deleted text begin (d)deleted text end new text begin (b) new text end Participants with an approved employment plan in place on July 1, 2003,
which includes more than 12 months of postsecondary education or training shall be
allowed to complete that plan provided that hourly requirements in section 256J.55,
subdivision 1
, and conditions specified in paragraph (b), and subdivisions 3 and 5 are met.
A participant whose case is subsequently closed for three months or less for reasons other
than noncompliance with program requirements and who returns to MFIP shall be allowed
to complete that plan provided that hourly requirements in section 256J.55, subdivision 1,
and conditions specified in paragraph (b) and subdivisions 3 and 5 are met.

Sec. 6.

Minnesota Statutes 2006, section 256J.95, subdivision 9, is amended to read:


Subd. 9.

Property and income limitations.

The asset limits and exclusions in
section 256J.20 apply to applicants and recipients of DWP. All payments, unless excluded
in section 256J.21, must be counted as income to determine eligibility for the diversionary
work program. The county shall treat income as outlined in section 256J.37deleted text begin , except for
subdivision 3a
deleted text end . The initial income test and the disregards in section 256J.21, subdivision
3
, shall be followed for determining eligibility for the diversionary work program.

Sec. 7. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2006, sections 256B.0631; 256J.24, subdivision 6; and 256J.37,
subdivisions 3a and 3b,
new text end new text begin are repealed.
new text end

ARTICLE 2

FOREIGN OPERATING CORPORATIONS

Section 1.

Minnesota Statutes 2006, section 290.01, subdivision 6b, is amended to read:


Subd. 6b.

Foreign operating corporation.

The term "foreign operating
corporation," when applied to a corporation, means a domestic corporation with the
following characteristics:

(1) it is part of a unitary business at least one member of which is taxable in this state;

(2) it is not a foreign sales corporation under section 922 of the Internal Revenue
Code, as amended through December 31, 1999, for the taxable year;

(3)new text begin either new text end (i) deleted text begin the average of the percentages of its property and payrolls, including
the pro rata share of its unitary partnerships' property and payrolls, assigned to locations
outside the United States, where the United States includes the District of Columbia and
excludes the commonwealth of Puerto Rico and possessions of the United States, as
determined under section 290.191 or 290.20, is 80 percent or more; or (ii)
deleted text end it has in effect a
valid election under section 936 of the Internal Revenue Code; new text begin or (ii) at least 80 percent
of the gross income from all sources of the corporation in the tax year is active foreign
business income;
new text end and

(4) deleted text begin it has $1,000,000 of payroll and $2,000,000 of property, as determined under
section 290.191 or 290.20, that are located outside the United States. If the domestic
corporation does not have payroll as determined under section 290.191 or 290.20, but it
or its partnerships have paid $1,000,000 for work, performed directly for the domestic
corporation or the partnerships, outside the United States, then paragraph (3)(i) shall not
require payrolls to be included in the average calculation
deleted text end new text begin for purposes of this subdivision,
active foreign business income means gross income that is (i) derived from sources
without the United States, as defined in subtitle A, chapter 1, subchapter N, part 1, of the
Internal Revenue Code; and (ii) attributable to the active conduct of a trade or business in
a foreign country
new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2006.
new text end

Sec. 2.

Minnesota Statutes 2006, section 290.01, subdivision 19c, is amended to read:


Subd. 19c.

Corporations; additions to federal taxable income.

For corporations,
there shall be added to federal taxable income:

(1) the amount of any deduction taken for federal income tax purposes for income,
excise, or franchise taxes based on net income or related minimum taxes, including but not
limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
another state, a political subdivision of another state, the District of Columbia, or any
foreign country or possession of the United States;

(2) interest not subject to federal tax upon obligations of: the United States, its
possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
state, any of its political or governmental subdivisions, any of its municipalities, or any
of its governmental agencies or instrumentalities; the District of Columbia; or Indian
tribal governments;

(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
Revenue Code;

(4) the amount of any net operating loss deduction taken for federal income tax
purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
deduction under section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal income tax purposes
under sections 241 to 247 and 965 of the Internal Revenue Code;

(6) losses from the business of mining, as defined in section 290.05, subdivision 1,
clause (a), that are not subject to Minnesota income tax;

(7) the amount of any capital losses deducted for federal income tax purposes under
sections 1211 and 1212 of the Internal Revenue Code;

(8) the exempt foreign trade income of a foreign sales corporation under sections
921(a) and 291 of the Internal Revenue Code;

(9) the amount of percentage depletion deducted under sections 611 through 614 and
291 of the Internal Revenue Code;

(10) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, the amount of the amortization deduction allowed in computing federal taxable
income for those facilities;

(11) the amount of any deemed dividend from a foreign operating corporation
determined pursuant to section 290.17, subdivision 4, paragraph (g)new text begin . The deemed dividend
is reduced by the amount of the addition to income required by clauses (19), (20), (21),
and (22)
new text end ;

(12) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(13) the amount of net income excluded under section 114 of the Internal Revenue
Code;

(14) any increase in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard
to the provisions of section 103 of Public Law 109-222;

(15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A)
and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer
has an activity that in the taxable year generates a deduction for depreciation under
section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year
that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed
under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the
depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k)(1)(A) and (k)(4)(A) is allowed;

(16) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;

(17) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code; deleted text begin and
deleted text end

(18) the exclusion allowed under section 139A of the Internal Revenue Code for
federal subsidies for prescription drug plansdeleted text begin .deleted text end new text begin ;
new text end

new text begin (19) an amount equal to the interest and intangible expenses, losses, and costs paid,
accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit
of a corporation that is a member of the taxpayer's unitary business group that qualifies
as a foreign operating corporation. For purposes of this clause, intangible expenses and
costs include:
new text end

new text begin (i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
use, maintenance or management, ownership, sale, exchange, or any other disposition of
intangible property;
new text end

new text begin (ii) losses incurred, directly or indirectly, from factoring transactions or discounting
transactions;
new text end

new text begin (iii) royalty, patent, technical, and copyright fees;
new text end

new text begin (iv) licensing fees; and
new text end

new text begin (v) other similar expenses and costs.
new text end

new text begin For purposes of this clause, "intangible property" includes stocks, bonds, patents,
patent applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.
new text end

new text begin This clause does not apply to any item of interest or intangible expenses or costs
paid, accrued, or incurred, directly or indirectly, to a foreign operating corporation with
respect to such item of income to the extent that the income to the foreign operating
corporation is income from sources without the United States, as defined in subtitle A,
chapter 1, subchapter N, part 1, of the Internal Revenue Code;
new text end

new text begin (20) except as already included in the taxpayer's taxable income under clause (19),
any interest income and income generated from intangible property received or accrued
by a foreign operating corporation that is a member of the taxpayer's unitary group. For
purposes of this clause, income generated from intangible property includes:
new text end

new text begin (i) income related to the direct or indirect acquisition, use, maintenance or
management, ownership, sale, exchange, or any other disposition of intangible property;
new text end

new text begin (ii) income from factoring transactions or discounting transactions;
new text end

new text begin (iii) royalty, patent, technical, and copyright fees;
new text end

new text begin (iv) licensing fees; and
new text end

new text begin (v) other similar income.
new text end

new text begin For purposes of this clause, "intangible property" includes stocks, bonds, patents,
patent applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.
new text end

new text begin This clause does not apply to any item of interest or intangible income received or
accrued by a foreign operating corporation with respect to such item of income to the
extent that the income is income from sources without the United States, as defined in
subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code;
new text end

new text begin (21) the dividends attributable to the income of a foreign operating corporation that
is a member of the taxpayer's unitary group in an amount that is equal to the dividends
paid deduction of a real estate investment trust under section 561(a) of the Internal
Revenue Code for amounts paid or accrued by the real estate investment trust to the
foreign operating corporation; and
new text end

new text begin (22) the income of a foreign operating corporation that is a member of the taxpayer's
unitary group in an amount that is equal to gains derived from the sale of real or personal
property located in the United States.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2006.
new text end

Sec. 3.

Minnesota Statutes 2006, section 290.01, subdivision 19d, is amended to read:


Subd. 19d.

Corporations; modifications decreasing federal taxable income.

For
corporations, there shall be subtracted from federal taxable income after the increases
provided in subdivision 19c:

(1) the amount of foreign dividend gross-up added to gross income for federal
income tax purposes under section 78 of the Internal Revenue Code;

(2) the amount of salary expense not allowed for federal income tax purposes due to
claiming the federal jobs credit under section 51 of the Internal Revenue Code;

(3) any dividend (not including any distribution in liquidation) paid within the
taxable year by a national or state bank to the United States, or to any instrumentality of
the United States exempt from federal income taxes, on the preferred stock of the bank
owned by the United States or the instrumentality;

(4) amounts disallowed for intangible drilling costs due to differences between
this chapter and the Internal Revenue Code in taxable years beginning before January
1, 1987, as follows:

(i) to the extent the disallowed costs are represented by physical property, an amount
equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
subdivision 7
, subject to the modifications contained in subdivision 19e; and

(ii) to the extent the disallowed costs are not represented by physical property, an
amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
290.09, subdivision 8;

(5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
Internal Revenue Code, except that:

(i) for capital losses incurred in taxable years beginning after December 31, 1986,
capital loss carrybacks shall not be allowed;

(ii) for capital losses incurred in taxable years beginning after December 31, 1986,
a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
allowed;

(iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
capital loss carryback to each of the three taxable years preceding the loss year, subject to
the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and

(iv) for capital losses incurred in taxable years beginning before January 1, 1987,
a capital loss carryover to each of the five taxable years succeeding the loss year to the
extent such loss was not used in a prior taxable year and subject to the provisions of
Minnesota Statutes 1986, section 290.16, shall be allowed;

(6) an amount for interest and expenses relating to income not taxable for federal
income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
291 of the Internal Revenue Code in computing federal taxable income;

(7) in the case of mines, oil and gas wells, other natural deposits, and timber for
which percentage depletion was disallowed pursuant to subdivision 19c, clause (11), a
reasonable allowance for depletion based on actual cost. In the case of leases the deduction
must be apportioned between the lessor and lessee in accordance with rules prescribed
by the commissioner. In the case of property held in trust, the allowable deduction must
be apportioned between the income beneficiaries and the trustee in accordance with the
pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
of the trust's income allocable to each;

(8) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
1986, section 290.09, subdivision 7;

(9) amounts included in federal taxable income that are due to refunds of income,
excise, or franchise taxes based on net income or related minimum taxes paid by the
corporation to Minnesota, another state, a political subdivision of another state, the
District of Columbia, or a foreign country or possession of the United States to the extent
that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
clause (1), in a prior taxable year;

(10) 80 percent of royalties, fees, or other like income accrued or received from a
foreign operating corporation or a foreign corporation which is part of the same unitary
business as the receiving corporationnew text begin , unless the income resulting from such payments or
accruals is income from sources within the United States as defined in subtitle A, chapter
1, subchapter N, part 1, of the Internal Revenue Code
new text end ;

(11) income or gains from the business of mining as defined in section 290.05,
subdivision 1
, clause (a), that are not subject to Minnesota franchise tax;

(12) the amount of disability access expenditures in the taxable year which are not
allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;

(13) the amount of qualified research expenses not allowed for federal income tax
purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
the amount exceeds the amount of the credit allowed under section 290.068;

(14) the amount of salary expenses not allowed for federal income tax purposes due
to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
Code;

(15) the amount of any refund of environmental taxes paid under section 59A of the
Internal Revenue Code;

(16) for taxable years beginning before January 1, 2008, the amount of the federal
small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
which is included in gross income under section 87 of the Internal Revenue Code;

(17) for a corporation whose foreign sales corporation, as defined in section 922
of the Internal Revenue Code, constituted a foreign operating corporation during any
taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
claiming the deduction under section 290.21, subdivision 4, for income received from
the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of
income excluded under section 114 of the Internal Revenue Code, provided the income is
not income of a foreign operating company;

(18) any decrease in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard
to the provisions of section 614 of Public Law 107-147;

(19) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of
the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
amount of the addition made by the taxpayer under subdivision 19c, clause (15). The
resulting delayed depreciation cannot be less than zero; and

(20) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of the
amount of the addition.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2006.
new text end

Sec. 4.

Minnesota Statutes 2006, section 290.34, subdivision 1, is amended to read:


Subdivision 1.

Business conducted in such a way as to create losses or improper
taxable net income.

new text begin (a) new text end When any corporation liable to taxation under this chapter
conducts its business in such a manner as, directly or indirectly, to benefit its members
or stockholders or any person or corporation interested in such business or to reduce the
income attributable to this state by selling the commodities or services in which it deals
at less than the fair price which might be obtained therefor, or buying such commodities
or services at more than the fair price for which they might have been obtained, or when
any corporation, a substantial portion of whose shares is owned directly or indirectly by
another corporation, deals in the commodities or services of the latter corporation in such
a manner as to create a loss or improper net income or to reduce the taxable net income
attributable to this state, the commissioner of revenue may determine the amount of its
income so as to reflect what would have been its reasonable taxable net income but for the
arrangements causing the understatement of its taxable net income or the overstatement of
its losses, having regard to the fair profits which, but for any agreement, arrangement, or
understanding, might have been or could have been obtained from such business.

new text begin (b) When any corporation engages in a transaction or series of transactions whose
primary business purpose is the avoidance of tax, or engages in a transaction or series of
transactions without economic substance, that transaction or series of transactions shall be
disregarded and the commissioner shall determine taxable net income without regard for
any such transaction or series of transactions.
new text end

Sec. 5. new text begin INTENT OF LEGISLATURE.
new text end

new text begin Section 4 does not change Minnesota law, but merely clarifies the legislature's
intention with respect to transactions without economic substance or business purpose.
new text end