"ARTICLE 1 INCOME AND FRANCHISE TAXES

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1 moves to amend H.F. No. 848 as follows: Delete everything after the enacting clause and insert: "ARTICLE 1 INCOME AND FRANCHISE TAXES Section 1. [16A.728] LONG-TERM CARE SAVINGS PLAN. Subdivision 1. Definitions. (a) For purposes of this section, the following terms have the meanings given. (b) "Long-term care expense" means the cost of long-term care in a long-term care facility and the cost of care provided in a person's home when the person receiving the care is unable to perform multiple basic life functions independently. (c) "Long-term care insurance premiums" means premiums paid for a long-term care insurance policy, as defined in section (d) "Participant" means an individual who has entered into a participation agreement or established an account under the plan with a financial institution with which the commissioner has an agreement under subdivision 2, paragraph (a). (e) "Qualified individual" means a person who: (1) incurred long-term care expenses during the taxable year; or (2) turned 50 years of age or older during the taxable year and who made payments for long-term care insurance premiums during the taxable year. Subd. 2. Commissioner duties; participation agreement. (a) The Minnesota long-term care savings plan is created. The commissioner shall select the administrator of the plan. If the commissioner receives no acceptable responses to a request for proposals for an administrator for the plan by November 1, 2015, the commissioner may enter into agreements with state chartered or federally chartered banks, savings banks, savings associations, trust companies, or credit unions, or a subsidiary of such an entity, to Article 1 Section 1. 1

2 receive contributions in the form of account deposits. The commissioner may adopt and promulgate rules and regulations to carry out the duties under this subdivision. (b) If an administrator is selected, participants must enter into participation agreements with the commissioner, and if an administrator is not selected, participants may make contributions to an account with a financial institution with which the commissioner has an agreement under paragraph (a). A lifetime maximum of $200,000 may be contributed by a participant. The commissioner must adjust the dollar limitation annually for inflation as provided in section 151 of the Internal Revenue Code of 1986, as amended. (c) Each participation agreement must provide that the agreement may be canceled or transferred to a spouse upon the terms and conditions set by the commissioner. If the participation agreement is canceled or the Minnesota long-term care savings plan is terminated, a participant may receive the principal amount of all contributions made by the participant or on behalf of the participant plus the actual investment earnings on the contributions, less any losses incurred on the contributions. A participant must not receive more than the fair market value of the account under the participation agreement on the applicable liquidation date. (d) A participant retains ownership of all contributions up to the date of use. (e) State income tax treatment of contributions and investment earnings is as provided in section , subdivisions 19a and 19b. Subd. 3. Long-term care savings plan trust. If an administrator for the Minnesota long-term care savings plan is selected under subdivision 2, the Minnesota long-term care savings plan trust is created. The commissioner is the trustee of the trust and is responsible for the administration, operation, and maintenance of the plan and has all the powers necessary to carry out and effectuate the purposes, objectives, and provisions of the Minnesota long-term care savings plan for the administration, operation, and maintenance of the trust, except that the investment officer has fiduciary responsibility to make all decisions regarding the investment of the money in the trust, including the selection of all investment options and the approval of all fees and other costs charged to trust assets, except costs for administration, operation, and maintenance of the trust, under the directions, guidelines, and policies established by the State Board of Investment. The commissioner may adopt and promulgate rules for the efficient administration, operation, and maintenance of the trust. The commissioner must not adopt and promulgate rules and regulations that in any way interfere with the fiduciary responsibility of the state investment officer to make all decisions regarding the investment of money in the trust. The State Board of Investment may adopt and promulgate rules and regulations to provide for the prudent investment of the assets of the trust. The State Board of Investment or its designee Article 1 Section 1. 2

3 may select and enter into agreements with individuals and entities to provide investment advice and management of the assets held by the trust, establish investment guidelines, objectives, and performance standards for the assets held by the trust, and approve any fees, commissions, and expenses which directly or indirectly affect the return on assets. Subd. 4. Authorized withdrawals. A qualified individual may make withdrawals as a participant in the Minnesota long-term care savings plan to pay or reimburse long-term care expenses or long-term care insurance premiums. Any participant who is not a qualified individual or who makes a withdrawal for any reason other than a transfer of funds to a spouse, payment of long-term care expenses or long-term care insurance premiums, or the death of the participant is subject to a ten percent penalty on the amount withdrawn. The commissioner shall collect the penalty. EFFECTIVE DATE. This section is effective the day following final enactment Sec. 2. Minnesota Statutes 2014, section 62V.05, subdivision 5, is amended to read: Subd. 5. Health carrier and health plan requirements; participation. (a) Beginning January 1, 2015, the board may establish certification requirements for health carriers and health plans to be offered through MNsure that satisfy federal requirements under section 1311(c)(1) of the Affordable Care Act, Public Law (b) Paragraph (a) does not apply if by June 1, 2013, the legislature enacts regulatory requirements that: (1) apply uniformly to all health carriers and health plans in the individual market; (2) apply uniformly to all health carriers and health plans in the small group market; and (3) satisfy minimum federal certification requirements under section 1311(c)(1) of the Affordable Care Act, Public Law (c) In accordance with section 1311(e) of the Affordable Care Act, Public Law , the board shall establish policies and procedures for certification and selection of health plans to be offered as qualified health plans through MNsure. The board shall certify and select a health plan as a qualified health plan to be offered through MNsure, if: (1) the health plan meets the minimum certification requirements established in paragraph (a) or the market regulatory requirements in paragraph (b); (2) the board determines that making the health plan available through MNsure is in the interest of qualified individuals and qualified employers; (3) the health carrier applying to offer the health plan through MNsure also applies to offer health plans at each actuarial value level and service area that the health carrier currently offers in the individual and small group markets; and Article 1 Sec. 2. 3

4 (4) the health carrier does not apply to offer health plans in the individual and small group markets through MNsure under a separate license of a parent organization or holding company under section 60D.15, that is different from what the health carrier offers in the individual and small group markets outside MNsure. (d) In determining the interests of qualified individuals and employers under paragraph (c), clause (2), the board may not exclude a health plan for any reason specified under section 1311(e)(1)(B) of the Affordable Care Act, Public Law The board may consider: (1) affordability; (2) quality and value of health plans; (3) promotion of prevention and wellness; (4) promotion of initiatives to reduce health disparities; (5) market stability and adverse selection; (6) meaningful choices and access; (7) alignment and coordination with state agency and private sector purchasing strategies and payment reform efforts; and (8) other criteria that the board determines appropriate. (e) For qualified health plans offered through MNsure on or after January 1, 2015, the board shall establish policies and procedures under paragraphs (c) and (d) for selection of health plans to be offered as qualified health plans through MNsure by February 1 of each year, beginning February 1, The board shall consistently and uniformly apply all policies and procedures and any requirements, standards, or criteria to all health carriers and health plans. For any policies, procedures, requirements, standards, or criteria that are defined as rules under section 14.02, subdivision 4, the board may use the process described in subdivision 9. (f) For 2014, the board shall not have the power to select health carriers and health plans for participation in MNsure. The board shall permit all health plans that meet the certification requirements under section 1311(c)(1) of the Affordable Care Act, Public Law , to be offered through MNsure. (g) Under this subdivision, the board shall have the power to verify that health carriers and health plans are properly certified to be eligible for participation in MNsure. (h) The board has the authority to decertify health carriers and health plans that fail to maintain compliance with section 1311(c)(1) of the Affordable Care Act, Public Law (i) For qualified health plans offered through MNsure beginning January 1, 2015, health carriers must use the most current addendum for Indian health care providers Article 1 Sec. 2. 4

5 approved by the Centers for Medicare and Medicaid Services and the tribes as part of their contracts with Indian health care providers. MNsure shall comply with all future changes in federal law with regard to health coverage for the tribes. (j) Health carriers offering coverage through MNsure shall provide a premium advance to qualified individuals eligible for a state tax credit under section , equal to the amount of the tax credit calculated under that section. Individuals receiving a premium advance under this paragraph must pay to the health carrier the full amount of the premium advance by April 15 of the year following the coverage year for which the premium advance was provided. The MNsure eligibility system must automatically notify health carriers: (1) if an enrollee is eligible for a state tax credit under section ; and (2) the amount of the applicable state tax credit. EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, Sec. 3. Minnesota Statutes 2014, section 116J.8737, subdivision 5, is amended to read: Subd. 5. Credit allowed. (a)(1) A qualified investor or qualified fund is eligible for a credit equal to 25 percent of the qualified investment in a qualified small business. Investments made by a pass-through entity qualify for a credit only if the entity is a qualified fund. The commissioner must not allocate more than $15,000,000 in credits to qualified investors or qualified funds for taxable years beginning after December 31, 2013, and before January 1, , and must not allocate more than $18,000,000 in credits to qualified investors or qualified funds for taxable years beginning after December 31, 2014, and before January 1, 2019; and (2) for taxable years beginning after December 31, 2014, and before January 1, 2017, $7,500, percent of the amount available for the taxable year must be allocated to credits for qualifying investments in qualified greater Minnesota businesses and minorityor women-owned qualified small businesses in Minnesota. Any portion of a taxable year's credits that is reserved for qualifying investments in greater Minnesota businesses and minority- or women-owned qualified small businesses in Minnesota that is not allocated by September 30 of the taxable year is available for allocation to other credit applications beginning on October 1. Any portion of a taxable year's credits that is not allocated by the commissioner does not cancel and may be carried forward to subsequent taxable years until all credits have been allocated. (b) The commissioner may not allocate more than a total maximum amount in credits for a taxable year to a qualified investor for the investor's cumulative qualified investments Article 1 Sec. 3. 5

6 as an individual qualified investor and as an investor in a qualified fund; for married couples filing joint returns the maximum is $250,000, and for all other filers the maximum is $125,000. The commissioner may not allocate more than a total of $1,000,000 in credits over all taxable years for qualified investments in any one qualified small business. (c) The commissioner may not allocate a credit to a qualified investor either as an individual qualified investor or as an investor in a qualified fund if, at the time the investment is proposed: (1) the investor is an officer or principal of the qualified small business; or (2) the investor, either individually or in combination with one or more members of the investor's family, owns, controls, or holds the power to vote 20 percent or more of the outstanding securities of the qualified small business. A member of the family of an individual disqualified by this paragraph is not eligible for a credit under this section. For a married couple filing a joint return, the limitations in this paragraph apply collectively to the investor and spouse. For purposes of determining the ownership interest of an investor under this paragraph, the rules under section 267(c) and 267(e) of the Internal Revenue Code apply. (d) Applications for tax credits for 2010 must be made available on the department's Web site by September 1, 2010, and the department must begin accepting applications by September 1, Applications for subsequent years must be made available by November 1 of the preceding year. (e) Qualified investors and qualified funds must apply to the commissioner for tax credits. Tax credits must be allocated to qualified investors or qualified funds in the order that the tax credit request applications are filed with the department. The commissioner must approve or reject tax credit request applications within 15 days of receiving the application. The investment specified in the application must be made within 60 days of the allocation of the credits. If the investment is not made within 60 days, the credit allocation is canceled and available for reallocation. A qualified investor or qualified fund that fails to invest as specified in the application, within 60 days of allocation of the credits, must notify the commissioner of the failure to invest within five business days of the expiration of the 60-day investment period. (f) All tax credit request applications filed with the department on the same day must be treated as having been filed contemporaneously. If two or more qualified investors or qualified funds file tax credit request applications on the same day, and the aggregate amount of credit allocation claims exceeds the aggregate limit of credits under this section or the lesser amount of credits that remain unallocated on that day, then the credits must be allocated among the qualified investors or qualified funds who filed on that day on a Article 1 Sec. 3. 6

7 pro rata basis with respect to the amounts claimed. The pro rata allocation for any one qualified investor or qualified fund is the product obtained by multiplying a fraction, the numerator of which is the amount of the credit allocation claim filed on behalf of a qualified investor and the denominator of which is the total of all credit allocation claims filed on behalf of all applicants on that day, by the amount of credits that remain unallocated on that day for the taxable year. (g) A qualified investor or qualified fund, or a qualified small business acting on their behalf, must notify the commissioner when an investment for which credits were allocated has been made, and the taxable year in which the investment was made. A qualified fund must also provide the commissioner with a statement indicating the amount invested by each investor in the qualified fund based on each investor's share of the assets of the qualified fund at the time of the qualified investment. After receiving notification that the investment was made, the commissioner must issue credit certificates for the taxable year in which the investment was made to the qualified investor or, for an investment made by a qualified fund, to each qualified investor who is an investor in the fund. The certificate must state that the credit is subject to revocation if the qualified investor or qualified fund does not hold the investment in the qualified small business for at least three years, consisting of the calendar year in which the investment was made and the two following years. The three-year holding period does not apply if: (1) the investment by the qualified investor or qualified fund becomes worthless before the end of the three-year period; (2) 80 percent or more of the assets of the qualified small business is sold before the end of the three-year period; (3) the qualified small business is sold before the end of the three-year period; (4) the qualified small business's common stock begins trading on a public exchange before the end of the three-year period; or (5) the qualified investor dies before the end of the three-year period. (h) The commissioner must notify the commissioner of revenue of credit certificates issued under this section. EFFECTIVE DATE. This section is effective the day following final enactment for taxable years beginning after December 31, Sec. 4. [116J.8739] TECHNOLOGY CORPORATE TAX BENEFIT REFUND PROGRAM. Subdivision 1. Program established. The commissioner shall establish a corporate tax benefit refund program to allow new or expanding technology and biotechnology Article 1 Sec. 4. 7

8 companies in this state with unused net operating loss carryovers under section to surrender those tax benefits for refunds. The refunds must be used to assist in the funding of costs incurred by the new or expanding technology and biotechnology company. Subd. 2. Definitions. (a) For purposes of this section, the following terms have the meanings given. (b) "Biotechnology" means the continually expanding body of fundamental knowledge about the functioning of biological systems from the macro level to the molecular and subatomic levels, as well as novel products, services, technologies, and subtechnologies developed as a result of insights gained from research advances that add to that body of fundamental knowledge. (c) "Biotechnology company" means an corporation that: (1) has its headquarters or base of operations in this state; (2) owns, has filed for, or has a valid license to use protected, proprietary intellectual property; and (3) is engaged in the research, development, production, or provision of biotechnology to develop or provide products or processes for specific commercial or public purposes including, but not limited to, medical, pharmaceutical, nutritional, and other health-related purposes, agricultural purposes, and environmental purposes. (d) "Full-time employee" means a person employed by a new or expanding technology or biotechnology company for consideration for at least 35 hours per week, or who renders any other standard of service generally accepted by custom or practice as full-time employment and whose wages are subject to withholding under section ; or who is a partner of a new or expanding technology or biotechnology company who works for the partnership for at least 35 hours per week, or who renders any other standard of service generally accepted by custom or practice as full-time employment, and whose distributive share of income, gain, loss, or deduction, or whose guaranteed payments, or any combination of them, is subject to the payment of estimated taxes, under section 289A.25. To qualify as a full-time employee, an employee must also receive from the new or expanding technology or biotechnology company group health benefits under a health plan as defined under section 62A.011, subdivision 3, or under a self-insured employee welfare benefit plan as defined in United States Code, title 29, section Full-time employee excludes any person who works as an independent contractor or on a consulting basis for the new or expanding technology or biotechnology company. (e) "New or expanding" means a technology or biotechnology company that: Article 1 Sec. 4. 8

9 (1) on June 30 of the year in which the corporation files an application for surrender of tax benefits under this section and on the date of the grant of the corporate tax benefit certificate, has fewer than 250 employees in the United States; (2) on June 30 of the year in which the corporation files the application, has at least one full-time employee working in this state if the company has been incorporated for less than three years, has at least five full-time employees working in this state if the company has been incorporated for more than three years but fewer than five years, and has at least ten full-time employees working in this state if the company has been incorporated for more than five years; and (3) on the date of the grant of the corporate tax benefit certificate, the corporation has the number of full-time employees in this state required by clause (2). (f) "Technology company" means a corporation that: (1) has its headquarters or base of operations in this state; (2) owns, has filed for, or has a valid license to use protected, proprietary intellectual property; and (3) employs some combination of the following: highly educated or trained managers and workers, or both, employed in this state who use sophisticated scientific research service or production equipment, processes, or knowledge to discover, develop, test, transfer, or manufacture a product or service. Subd. 3. Allocation of tax benefits; annual limit. (a) The commissioner, in cooperation with the commissioner of revenue, shall review and approve applications by new or expanding technology and biotechnology companies with unused but otherwise allowable net operating loss carryovers under section to surrender those tax benefits for the grant of a refund. The amount of the qualifying tax benefit is the amount of the net operating loss carryover multiplied by the new or expanding technology or biotechnology company's anticipated apportionment percentage, as determined under section , for the taxable year in which the benefit is surrendered and then multiplied by the corporate franchise tax rate under section , subdivision 1. (b) The commissioner must approve the grant of no more than $15,000,000 of tax benefit refunds in each fiscal year. If the total amount of tax benefits requested to be surrendered by approved applicants exceeds $15,000,000 for a fiscal year, the commissioner, in cooperation with the commissioner of revenue, must not approve the grant of more than $15,000,000 of tax benefits for that fiscal year and shall allocate the grant of tax benefit refunds by approved corporations using the following method: (1) an eligible applicant with $250,000 or less of qualifying tax benefits may surrender the entire amount of its tax benefits; Article 1 Sec. 4. 9

10 (2) an eligible applicant with more than $250,000 of qualifying tax benefits may surrender a minimum of $250,000 of its tax benefits; and (3) an eligible applicant with more than $250,000 of qualifying tax benefits may surrender additional tax benefits determined by multiplying the applicant's tax benefits, less the minimum tax benefits that corporation is authorized to surrender under clause (2), by a fraction, the numerator of which is the total amount of tax benefit grants that the commissioner is authorized to approve less the total amount of tax benefits approved under clauses (1) and (2), and the denominator of which is the total amount of tax benefits requested to be surrendered by all eligible applicants less the total amount of tax benefit grants approved under clauses (1) and (2). (c) If the total amount of tax benefit grants that would be authorized using the method under paragraph (b) exceeds $15,000,000 for a fiscal year, then the commissioner, in cooperation with the commissioner of revenue, shall limit the total amount of tax benefit grants authorized to $15,000,000 by applying the above method on an apportioned basis. Subd. 4. Qualifying tax benefits and corporations. (a) For purposes of this section, qualifying tax benefits include an eligible applicant's unused but otherwise allowable carryover of net operating losses multiplied by the applicant's anticipated allocation factor as determined under section for the taxable year in which the benefit is surrendered and subsequently multiplied by the corporation franchise tax rate under section , subdivision 1. An eligible applicant's qualifying tax benefits are limited to net operating losses that the applicant requests to surrender in its application to the authority and must not, in total, exceed the maximum amount of tax benefits that the applicant is eligible to surrender. No application for a corporate tax benefit certificate must be approved in which the new or expanding technology or biotechnology company: (1) has demonstrated positive net operating income in any of the two previous full years of ongoing operations as determined on its financial statements issued according to generally accepted accounting standards endorsed by the Financial Accounting Standards Board; or (2) is directly or indirectly at least 50 percent owned or controlled by another corporation that has demonstrated positive net operating income in any of the two previous full years of ongoing operations as determined on its financial statements issued according to generally accepted accounting standards endorsed by the Financial Accounting Standards Board or is part of a consolidated group of affiliated corporations, as filed for federal income tax purposes, that in the aggregate has demonstrated positive net operating income in any of the two previous full years of ongoing operations as determined on Article 1 Sec

11 its combined financial statements issued according to generally accepted accounting standards endorsed by the Financial Accounting Standards Board. (b) The maximum lifetime value of surrendered tax benefits that a corporation may surrender under the program is $5,000,000. Subd. 5. Recapture of tax benefits. The commissioner, in consultation with the commissioner of revenue, shall establish procedures for the recapture of all of, or a portion of, the amount of a grant of a corporate tax benefit certificate from the new or expanding technology or biotechnology company receiving a grant for a refund of surrendered tax benefits under this section if the taxpayer fails to use the refund as required by this section or fails to maintain a headquarters or a base of operation in this state during the five years following receipt of the refund, except if the failure to maintain a headquarters or a base of operation in this state is due to the liquidation of the new or expanding technology or biotechnology company. Subd. 6. Approval of acquisition of tax benefits; purposes; required agreement. (a) The commissioner must not issue a corporate tax benefit certificate unless the applicant certifies that as of the date of the grant of the certificate that it is operating as a new or expanding technology or biotechnology company in this state and does not intend to cease operating as a new or expanding technology or biotechnology company in this state. (b) The recipient of a grant under this section must use the refund to pay expenses incurred for the operation of the new or expanding technology or biotechnology company in this state including, but not limited to, the expenses of fixed assets, such as the construction and acquisition and development of real estate, materials, start-up, tenant fit-out, working capital, salaries, research and development expenditures, and any other expenses determined by the commissioner to be necessary to carry out technology or biotechnology company operations in this state. (c) The commissioner shall enter into a written agreement with the new or expanding technology or biotechnology company specifying the terms and conditions of the grant of the certificate of tax benefits. The written agreement may require the maintenance by the new or expanding technology or biotechnology company of a headquarters or a base of operation in this state. EFFECTIVE DATE. This section is effective the day following final enactment and applies to taxable years beginning after December 31, Sec. 5. Minnesota Statutes 2014, section 289A.02, subdivision 7, as amended by Laws 2015, chapter 1, section 1, is amended to read: Article 1 Sec

12 Subd. 7. Internal Revenue Code. Unless specifically defined otherwise, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through December 31, 2014 April 1, EFFECTIVE DATE. This section is effective the day following final enactment Sec. 6. Minnesota Statutes 2014, section 289A.12, is amended by adding a subdivision to read: Subd. 19. Charity health care services. (a) A medical professional, dentist, or chiropractor claiming the subtraction under section , subdivision 19b, clause (23), must file an informational report with the commissioner documenting the value of charity health care services that the individual provided during the taxable year. A business that employs a medical professional, dentist, or chiropractor may also file an informational report with the commissioner documenting the value of charity health care services its employees provided during the taxable year. The charity health care services reported to the commissioner must be limited to those services covered under medical assistance and for which a federal Medicaid match is available and must be calculated at the reimbursement rates provided in section 256B.76. (b) For purposes of this subdivision, the following terms have the meanings given: (1) "chiropractor" means an individual licensed under chapter 148; (2) "dentist" means an individual licensed under chapter 150A; and (3) "medical professional" means an individual licensed under chapter 147, an individual licensed under chapter 147B, and a mental health professional as defined under section , subdivision 18, or section , subdivision 27. (c) The commissioner shall define charity health care services for purposes of this subdivision. In developing this definition, the commissioner shall consider the criteria specified in Minnesota Rules, part , subpart 2. EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, Sec. 7. Minnesota Statutes 2014, section , subdivision 7, is amended to read: Subd. 7. Resident. (a) The term "resident" means any individual domiciled in Minnesota, except that an individual is not a "resident" for the period of time that the individual is a "qualified individual" as defined in section 911(d)(1) of the Internal Revenue Code, if the qualified individual notifies the county within three months of moving out of the country that homestead status be revoked for the Minnesota residence Article 1 Sec

13 of the qualified individual, and the property is not classified as a homestead while the individual remains a qualified individual. (b) "Resident" also means any individual domiciled outside the state who maintains a place of abode in the state and spends in the aggregate more than one-half of the tax year in Minnesota, unless: (1) the individual or the spouse of the individual is in the armed forces of the United States; or (2) the individual is covered under the reciprocity provisions in section For purposes of this subdivision, presence within the state for any part of a calendar day constitutes a day spent in the state, except that a day spent in Minnesota for the primary purpose of receiving medical treatment by the taxpayer, or the spouse, child, or parent of the taxpayer, is not treated as a day spent in Minnesota. "Medical treatment" means treatment as defined in section 213(d)(1)(A) of the Internal Revenue Code. Individuals shall keep adequate records to substantiate the days spent outside the state. The term "abode" means a dwelling maintained by an individual, whether or not owned by the individual and whether or not occupied by the individual, and includes a dwelling place owned or leased by the individual's spouse. (c) In determining where an individual is domiciled, neither the commissioner nor any court shall consider: (1) charitable contributions made by an the individual within or without the state in determining if the individual is domiciled in Minnesota.; (2) the location of the individual's attorney, certified public accountant, or financial advisor; or (3) the place of business of a financial institution at which the individual applies for any new type of credit or at which the individual opens or maintains any type of account. (d) For purposes of this subdivision, the following terms have the meanings given them: (1) "financial advisor" means a financial institution or an individual engaged in business as a certified financial planner, registered investment advisor, licensed insurance agent, or securities broker-dealer; and (2) "financial institution" means a financial institution as defined in section , subdivision 1; a state or nationally chartered credit union; or a registered broker-dealer under the Securities and Exchange Act of EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, Article 1 Sec

14 Sec. 8. Minnesota Statutes 2014, section , subdivision 19, as amended by Laws 2015, chapter 1, section 2, is amended to read: Subd. 19. Net income. The term "net income" means the federal taxable income, as defined in section 63 of the Internal Revenue Code of 1986, as amended through the date named in this subdivision, incorporating the federal effective dates of changes to the Internal Revenue Code and any elections made by the taxpayer in accordance with the Internal Revenue Code in determining federal taxable income for federal income tax purposes, and with the modifications provided in subdivisions 19a to 19f. In the case of a regulated investment company or a fund thereof, as defined in section 851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, except that: (1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal Revenue Code does not apply; (2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal Revenue Code must be applied by allowing a deduction for capital gain dividends and exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal Revenue Code; and (3) the deduction for dividends paid must also be applied in the amount of any undistributed capital gains which the regulated investment company elects to have treated as provided in section 852(b)(3)(D) of the Internal Revenue Code. The net income of a real estate investment trust as defined and limited by section 856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust taxable income as defined in section 857(b)(2) of the Internal Revenue Code. The net income of a designated settlement fund as defined in section 468B(d) of the Internal Revenue Code means the gross income as defined in section 468B(b) of the Internal Revenue Code. The Internal Revenue Code of 1986, as amended through December 31, 2014 April 1, 2015, shall be in effect for taxable years beginning after December 31, Except as otherwise provided, references to the Internal Revenue Code in subdivisions 19 to 19f mean the code in effect for purposes of determining net income for the applicable year. EFFECTIVE DATE. This section is effective retroactively for taxable years beginning after December 31, Sec. 9. Minnesota Statutes 2014, section , subdivision 19a, is amended to read: Article 1 Sec

15 Subd. 19a. Additions to federal taxable income. For individuals, estates, and trusts, there shall be added to federal taxable income: (1)(i) interest income on obligations of any state other than Minnesota or a political or governmental subdivision, municipality, or governmental agency or instrumentality of any state other than Minnesota exempt from federal income taxes under the Internal Revenue Code or any other federal statute; and (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue Code, except: (A) the portion of the exempt-interest dividends exempt from state taxation under the laws of the United States; and (B) the portion of the exempt-interest dividends derived from interest income on obligations of the state of Minnesota or its political or governmental subdivisions, municipalities, governmental agencies or instrumentalities, but only if the portion of the exempt-interest dividends from such Minnesota sources paid to all shareholders represents 95 percent or more of the exempt-interest dividends, including any dividends exempt under subitem (A), that are paid by the regulated investment company as defined in section 851(a) of the Internal Revenue Code, or the fund of the regulated investment company as defined in section 851(g) of the Internal Revenue Code, making the payment; and (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal government described in section 7871(c) of the Internal Revenue Code shall be treated as interest income on obligations of the state in which the tribe is located; (2) the amount of income, sales and use, motor vehicle sales, or excise taxes paid or accrued within the taxable year under this chapter and the amount of taxes based on net income paid, sales and use, motor vehicle sales, or excise taxes paid to any other state or to any province or territory of Canada, to the extent allowed as a deduction under section 63(d) of the Internal Revenue Code, but the addition may not be more than the amount by which the state itemized deduction exceeds the amount of the standard deduction as defined in section 63(c) of the Internal Revenue Code, minus any addition that would have been required under clause (17) if the taxpayer had claimed the standard deduction. For the purpose of this clause, income, sales and use, motor vehicle sales, or excise taxes are the last itemized deductions disallowed under clause (15); (3) the capital gain amount of a lump-sum distribution to which the special tax under section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law , applies; (4) the amount of income taxes paid or accrued within the taxable year under this chapter and taxes based on net income paid to any other state or any province or territory of Canada, to the extent allowed as a deduction in determining federal adjusted gross Article 1 Sec

16 income. For the purpose of this paragraph, income taxes do not include the taxes imposed by sections , subdivision 1, paragraph (b), , , and ; (5) the amount of expense, interest, or taxes disallowed pursuant to section other than expenses or interest used in computing net interest income for the subtraction allowed under subdivision 19b, clause (1); (6) 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; (7) 80 percent of the depreciation deduction allowed under section 168(k) 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) 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)" for the taxable year is limited to excess of the depreciation claimed by the activity under section 168(k) 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) is allowed; (8) 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; (9) to the extent deducted in computing federal taxable income, the amount of the deduction allowable under section 199 of the Internal Revenue Code; (10) the amount of expenses disallowed under section , subdivision 2; (11) for taxable years beginning before January 1, 2010, the amount deducted for qualified tuition and related expenses under section 222 of the Internal Revenue Code, to the extent deducted from gross income; (12) for taxable years beginning before January 1, 2010, the amount deducted for certain expenses of elementary and secondary school teachers under section 62(a)(2)(D) of the Internal Revenue Code, to the extent deducted from gross income; (13) discharge of indebtedness income resulting from reacquisition of business indebtedness and deferred under section 108(i) of the Internal Revenue Code; (14) changes to federal taxable income attributable to a net operating loss that the taxpayer elected to carry back for more than two years for federal purposes but for which the losses can be carried back for only two years under section , subdivision 11, paragraph (c); Article 1 Sec

17 (15) the amount of disallowed itemized deductions, but the amount of disallowed itemized deductions plus the addition required under clause (2) may not be more than the amount by which the itemized deductions as allowed under section 63(d) of the Internal Revenue Code exceeds the amount of the standard deduction as defined in section 63(c) of the Internal Revenue Code, and reduced by any addition that would have been required under clause (17) if the taxpayer had claimed the standard deduction: (i) the amount of disallowed itemized deductions is equal to the lesser of: (A) three percent of the excess of the taxpayer's federal adjusted gross income over the applicable amount; or (B) 80 percent of the amount of the itemized deductions otherwise allowable to the taxpayer under the Internal Revenue Code for the taxable year; (ii) the term "applicable amount" means $100,000, or $50,000 in the case of a married individual filing a separate return. Each dollar amount shall be increased by an amount equal to: (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue Code for the calendar year in which the taxable year begins, by substituting "calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; (iii) the term "itemized deductions" does not include: (A) the deduction for medical expenses under section 213 of the Internal Revenue Code; (B) any deduction for investment interest as defined in section 163(d) of the Internal Revenue Code; and (C) the deduction under section 165(a) of the Internal Revenue Code for casualty or theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue Code or for losses described in section 165(d) of the Internal Revenue Code; (16) the amount of disallowed personal exemptions for taxpayers with federal adjusted gross income over the threshold amount: (i) the disallowed personal exemption amount is equal to the number of personal exemptions allowed under section 151(b) and (c) of the Internal Revenue Code multiplied by the dollar amount for personal exemptions under section 151(d)(1) and (2) of the Internal Revenue Code, as adjusted for inflation by section 151(d)(4) of the Internal Revenue Code, and by the applicable percentage; (ii) "applicable percentage" means two percentage points for each $2,500 (or fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable year exceeds the threshold amount. In the case of a married individual filing a separate Article 1 Sec

18 return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In no event shall the applicable percentage exceed 100 percent; (iii) the term "threshold amount" means: (A) $150,000 in the case of a joint return or a surviving spouse; (B) $125,000 in the case of a head of a household; (C) $100,000 in the case of an individual who is not married and who is not a surviving spouse or head of a household; and (D) $75,000 in the case of a married individual filing a separate return; and (iv) the thresholds shall be increased by an amount equal to: (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue Code for the calendar year in which the taxable year begins, by substituting "calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; and (17) to the extent deducted in the computation of federal taxable income, for taxable years beginning after December 31, 2010, and before January 1, 2014, the difference between the standard deduction allowed under section 63(c) of the Internal Revenue Code and the standard deduction allowed for 2011, 2012, and 2013 under the Internal Revenue Code as amended through December 1, 2010.; and (18) the amount withdrawn by a participant in the Minnesota long-term care savings plan under section 16A.128 by a person who is not a qualified individual or for any reason other than a transfer of funds to a spouse, payment of long-term care expenses or long-term care insurance premiums, or the death of the participant, including withdrawals made by reason of cancellation of the participation agreement or termination of the plan. EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, Sec. 10. Minnesota Statutes 2014, section , subdivision 19b, is amended to read: Subd. 19b. Subtractions from federal taxable income. For individuals, estates, and trusts, there shall be subtracted from federal taxable income: (1) net interest income on obligations of any authority, commission, or instrumentality of the United States to the extent includable in taxable income for federal income tax purposes but exempt from state income tax under the laws of the United States; (2) if included in federal taxable income, the amount of any overpayment of income tax to Minnesota or to any other state, for any previous taxable year, whether the amount is received as a refund or as a credit to another taxable year's income tax liability; Article 1 Sec