1.2relating to taxation; income and corporate franchise; providing for a subtraction
1.3of certain railroad track maintenance expenditures;amending Minnesota Statutes
1.42012, sections 290.01, subdivisions 19b, 19d; 290.091, subdivision 2.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.6    Section 1. Minnesota Statutes 2012, section 290.01, subdivision 19b, is amended to read:
1.7    Subd. 19b. Subtractions from federal taxable income. For individuals, estates,
1.8and trusts, there shall be subtracted from federal taxable income:
1.9    (1) net interest income on obligations of any authority, commission, or
1.10instrumentality of the United States to the extent includable in taxable income for federal
1.11income tax purposes but exempt from state income tax under the laws of the United States;
1.12    (2) if included in federal taxable income, the amount of any overpayment of income
1.13tax to Minnesota or to any other state, for any previous taxable year, whether the amount
1.14is received as a refund or as a credit to another taxable year's income tax liability;
1.15    (3) the amount paid to others, less the amount used to claim the credit allowed under
1.16section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
1.17to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
1.18transportation of each qualifying child in attending an elementary or secondary school
1.19situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
1.20resident of this state may legally fulfill the state's compulsory attendance laws, which
1.21is not operated for profit, and which adheres to the provisions of the Civil Rights Act
1.22of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
1.23tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
1.24"textbooks" includes books and other instructional materials and equipment purchased
2.1or leased for use in elementary and secondary schools in teaching only those subjects
2.2legally and commonly taught in public elementary and secondary schools in this state.
2.3Equipment expenses qualifying for deduction includes expenses as defined and limited in
2.4section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
2.5books and materials used in the teaching of religious tenets, doctrines, or worship, the
2.6purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
2.7or materials for, or transportation to, extracurricular activities including sporting events,
2.8musical or dramatic events, speech activities, driver's education, or similar programs. No
2.9deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
2.10the qualifying child's vehicle to provide such transportation for a qualifying child. For
2.11purposes of the subtraction provided by this clause, "qualifying child" has the meaning
2.12given in section 32(c)(3) of the Internal Revenue Code;
2.13    (4) income as provided under section 290.0802;
2.14    (5) to the extent included in federal adjusted gross income, income realized on
2.15disposition of property exempt from tax under section 290.491;
2.16    (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
2.17of the Internal Revenue Code in determining federal taxable income by an individual
2.18who does not itemize deductions for federal income tax purposes for the taxable year, an
2.19amount equal to 50 percent of the excess of charitable contributions over $500 allowable
2.20as a deduction for the taxable year under section 170(a) of the Internal Revenue Code,
2.21under the provisions of Public Law 109-1 and Public Law 111-126;
2.22    (7) for individuals who are allowed a federal foreign tax credit for taxes that do not
2.23qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
2.24of subnational foreign taxes for the taxable year, but not to exceed the total subnational
2.25foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
2.26"federal foreign tax credit" means the credit allowed under section 27 of the Internal
2.27Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
2.28under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
2.29the extent they exceed the federal foreign tax credit;
2.30    (8) in each of the five tax years immediately following the tax year in which an
2.31addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case of a
2.32shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
2.33delayed depreciation. For purposes of this clause, "delayed depreciation" means the amount
2.34of the addition made by the taxpayer under subdivision 19a, clause (7), or subdivision 19c,
2.35clause (15), in the case of a shareholder of an S corporation, minus the positive value of
3.1any net operating loss under section 172 of the Internal Revenue Code generated for the
3.2tax year of the addition. The resulting delayed depreciation cannot be less than zero;
3.3    (9) job opportunity building zone income as provided under section 469.316;
3.4    (10) to the extent included in federal taxable income, the amount of compensation
3.5paid to members of the Minnesota National Guard or other reserve components of the
3.6United States military for active service, excluding compensation for services performed
3.7under the Active Guard Reserve (AGR) program. For purposes of this clause, "active
3.8service" means (i) state active service as defined in section 190.05, subdivision 5a, clause
3.9(1); or (ii) federally funded state active service as defined in section 190.05, subdivision
3.105b , but "active service" excludes service performed in accordance with section 190.08,
3.11subdivision 3 ;
3.12    (11) to the extent included in federal taxable income, the amount of compensation
3.13paid to Minnesota residents who are members of the armed forces of the United States
3.14or United Nations for active duty performed under United States Code, title 10; or the
3.15authority of the United Nations;
3.16    (12) an amount, not to exceed $10,000, equal to qualified expenses related to a
3.17qualified donor's donation, while living, of one or more of the qualified donor's organs
3.18to another person for human organ transplantation. For purposes of this clause, "organ"
3.19means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
3.20"human organ transplantation" means the medical procedure by which transfer of a human
3.21organ is made from the body of one person to the body of another person; "qualified
3.22expenses" means unreimbursed expenses for both the individual and the qualified donor
3.23for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
3.24may be subtracted under this clause only once; and "qualified donor" means the individual
3.25or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
3.26individual may claim the subtraction in this clause for each instance of organ donation for
3.27transplantation during the taxable year in which the qualified expenses occur;
3.28    (13) in each of the five tax years immediately following the tax year in which an
3.29addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
3.30shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
3.31addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
3.32case of a shareholder of a corporation that is an S corporation, minus the positive value of
3.33any net operating loss under section 172 of the Internal Revenue Code generated for the
3.34tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
3.35subtraction is not allowed under this clause;
4.1    (14) to the extent included in the federal taxable income of a nonresident of
4.2Minnesota, compensation paid to a service member as defined in United States Code, title
4.310, section 101(a)(5), for military service as defined in the Servicemembers Civil Relief
4.4Act, Public Law 108-189, section 101(2);
4.5    (15) to the extent included in federal taxable income, the amount of national service
4.6educational awards received from the National Service Trust under United States Code,
4.7title 42, sections 12601 to 12604, for service in an approved Americorps National Service
4.8program;
4.9(16) to the extent included in federal taxable income, discharge of indebtedness
4.10income resulting from reacquisition of business indebtedness included in federal taxable
4.11income under section 108(i) of the Internal Revenue Code. This subtraction applies only
4.12to the extent that the income was included in net income in a prior year as a result of the
4.13addition under section 290.01, subdivision 19a, clause (16); and
4.14(17) the amount of the net operating loss allowed under section 290.095, subdivision
4.1511 , paragraph (c).; and
4.16(18) in the year that the expenditures are made for railroad track maintenance, as
4.17defined in section 45G(d) of the Internal Revenue Code, in the case of a shareholder of a
4.18corporation that is an S corporation or a partner in a partnership, an amount equal to the
4.19credit awarded pursuant to section 45G(a) of the Internal Revenue Code. The subtraction
4.20shall be reduced to an amount equal to the percentage of the shareholder's or partner's
4.21share of the net income of the S corporation or partnership.
4.22EFFECTIVE DATE.This section is effective for taxable years beginning after
4.23December 31, 2012.

4.24    Sec. 2. Minnesota Statutes 2012, section 290.01, subdivision 19d, is amended to read:
4.25    Subd. 19d. Corporations; modifications decreasing federal taxable income. For
4.26corporations, there shall be subtracted from federal taxable income after the increases
4.27provided in subdivision 19c:
4.28    (1) the amount of foreign dividend gross-up added to gross income for federal
4.29income tax purposes under section 78 of the Internal Revenue Code;
4.30    (2) the amount of salary expense not allowed for federal income tax purposes due to
4.31claiming the work opportunity credit under section 51 of the Internal Revenue Code;
4.32    (3) any dividend (not including any distribution in liquidation) paid within the
4.33taxable year by a national or state bank to the United States, or to any instrumentality of
4.34the United States exempt from federal income taxes, on the preferred stock of the bank
4.35owned by the United States or the instrumentality;
5.1    (4) amounts disallowed for intangible drilling costs due to differences between
5.2this chapter and the Internal Revenue Code in taxable years beginning before January
5.31, 1987, as follows:
5.4    (i) to the extent the disallowed costs are represented by physical property, an amount
5.5equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
5.6subdivision 7 , subject to the modifications contained in subdivision 19e; and
5.7    (ii) to the extent the disallowed costs are not represented by physical property, an
5.8amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
5.9290.09, subdivision 8 ;
5.10    (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
5.11Internal Revenue Code, except that:
5.12    (i) for capital losses incurred in taxable years beginning after December 31, 1986,
5.13capital loss carrybacks shall not be allowed;
5.14    (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
5.15a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
5.16allowed;
5.17    (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
5.18capital loss carryback to each of the three taxable years preceding the loss year, subject to
5.19the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
5.20    (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
5.21a capital loss carryover to each of the five taxable years succeeding the loss year to the
5.22extent such loss was not used in a prior taxable year and subject to the provisions of
5.23Minnesota Statutes 1986, section 290.16, shall be allowed;
5.24    (6) an amount for interest and expenses relating to income not taxable for federal
5.25income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
5.26expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
5.27291 of the Internal Revenue Code in computing federal taxable income;
5.28    (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
5.29which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
5.30reasonable allowance for depletion based on actual cost. In the case of leases the deduction
5.31must be apportioned between the lessor and lessee in accordance with rules prescribed
5.32by the commissioner. In the case of property held in trust, the allowable deduction must
5.33be apportioned between the income beneficiaries and the trustee in accordance with the
5.34pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
5.35of the trust's income allocable to each;
6.1    (8) for certified pollution control facilities placed in service in a taxable year
6.2beginning before December 31, 1986, and for which amortization deductions were elected
6.3under section 169 of the Internal Revenue Code of 1954, as amended through December
6.431, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
6.51986, section 290.09, subdivision 7;
6.6    (9) amounts included in federal taxable income that are due to refunds of income,
6.7excise, or franchise taxes based on net income or related minimum taxes paid by the
6.8corporation to Minnesota, another state, a political subdivision of another state, the
6.9District of Columbia, or a foreign country or possession of the United States to the extent
6.10that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
6.11clause (1), in a prior taxable year;
6.12    (10) 80 percent of royalties, fees, or other like income accrued or received from a
6.13foreign operating corporation or a foreign corporation which is part of the same unitary
6.14business as the receiving corporation, unless the income resulting from such payments or
6.15accruals is income from sources within the United States as defined in subtitle A, chapter
6.161, subchapter N, part 1, of the Internal Revenue Code;
6.17    (11) income or gains from the business of mining as defined in section 290.05,
6.18subdivision 1 , clause (a), that are not subject to Minnesota franchise tax;
6.19    (12) the amount of disability access expenditures in the taxable year which are not
6.20allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
6.21    (13) the amount of qualified research expenses not allowed for federal income tax
6.22purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
6.23the amount exceeds the amount of the credit allowed under section 290.068;
6.24    (14) the amount of salary expenses not allowed for federal income tax purposes due to
6.25claiming the Indian employment credit under section 45A(a) of the Internal Revenue Code;
6.26    (15) for a corporation whose foreign sales corporation, as defined in section 922
6.27of the Internal Revenue Code, constituted a foreign operating corporation during any
6.28taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
6.29claiming the deduction under section 290.21, subdivision 4, for income received from
6.30the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of
6.31income excluded under section 114 of the Internal Revenue Code, provided the income is
6.32not income of a foreign operating company;
6.33    (16) any decrease in subpart F income, as defined in section 952(a) of the Internal
6.34Revenue Code, for the taxable year when subpart F income is calculated without regard to
6.35the provisions of Division C, title III, section 303(b) of Public Law 110-343;
7.1    (17) in each of the five tax years immediately following the tax year in which an
7.2addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of
7.3the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
7.4amount of the addition made by the taxpayer under subdivision 19c, clause (15). The
7.5resulting delayed depreciation cannot be less than zero;
7.6    (18) in each of the five tax years immediately following the tax year in which an
7.7addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of
7.8the amount of the addition; and
7.9(19) to the extent included in federal taxable income, discharge of indebtedness
7.10income resulting from reacquisition of business indebtedness included in federal taxable
7.11income under section 108(i) of the Internal Revenue Code. This subtraction applies only
7.12to the extent that the income was included in net income in a prior year as a result of the
7.13addition under section 290.01, subdivision 19c, clause (25).; and
7.14(20) in the year that the expenditures are made for railroad track maintenance, as
7.15defined in section 45G(d) of the Internal Revenue Code, an amount equal to the credit
7.16awarded pursuant to section 45G(a) of the Internal Revenue Code.
7.17EFFECTIVE DATE.This section is effective for taxable years beginning after
7.18December 31, 2012.

7.19    Sec. 3. Minnesota Statutes 2012, section 290.091, subdivision 2, is amended to read:
7.20    Subd. 2. Definitions. For purposes of the tax imposed by this section, the following
7.21terms have the meanings given:
7.22    (a) "Alternative minimum taxable income" means the sum of the following for
7.23the taxable year:
7.24    (1) the taxpayer's federal alternative minimum taxable income as defined in section
7.2555(b)(2) of the Internal Revenue Code;
7.26    (2) the taxpayer's itemized deductions allowed in computing federal alternative
7.27minimum taxable income, but excluding:
7.28    (i) the charitable contribution deduction under section 170 of the Internal Revenue
7.29Code;
7.30    (ii) the medical expense deduction;
7.31    (iii) the casualty, theft, and disaster loss deduction; and
7.32    (iv) the impairment-related work expenses of a disabled person;
7.33    (3) for depletion allowances computed under section 613A(c) of the Internal
7.34Revenue Code, with respect to each property (as defined in section 614 of the Internal
7.35Revenue Code), to the extent not included in federal alternative minimum taxable income,
8.1the excess of the deduction for depletion allowable under section 611 of the Internal
8.2Revenue Code for the taxable year over the adjusted basis of the property at the end of the
8.3taxable year (determined without regard to the depletion deduction for the taxable year);
8.4    (4) to the extent not included in federal alternative minimum taxable income, the
8.5amount of the tax preference for intangible drilling cost under section 57(a)(2) of the
8.6Internal Revenue Code determined without regard to subparagraph (E);
8.7    (5) to the extent not included in federal alternative minimum taxable income, the
8.8amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and
8.9    (6) the amount of addition required by section 290.01, subdivision 19a, clauses (7)
8.10to (9), (12), (13), and (16) to (18);
8.11    less the sum of the amounts determined under the following:
8.12    (1) interest income as defined in section 290.01, subdivision 19b, clause (1);
8.13    (2) an overpayment of state income tax as provided by section 290.01, subdivision
8.1419b , clause (2), to the extent included in federal alternative minimum taxable income;
8.15    (3) the amount of investment interest paid or accrued within the taxable year on
8.16indebtedness to the extent that the amount does not exceed net investment income, as
8.17defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include
8.18amounts deducted in computing federal adjusted gross income;
8.19    (4) amounts subtracted from federal taxable income as provided by section 290.01,
8.20subdivision 19b , clauses (6), (8) to (14), and (16), and (18); and
8.21(5) the amount of the net operating loss allowed under section 290.095, subdivision
8.2211 , paragraph (c).
8.23    In the case of an estate or trust, alternative minimum taxable income must be
8.24computed as provided in section 59(c) of the Internal Revenue Code.
8.25    (b) "Investment interest" means investment interest as defined in section 163(d)(3)
8.26of the Internal Revenue Code.
8.27    (c) "Net minimum tax" means the minimum tax imposed by this section.
8.28    (d) "Regular tax" means the tax that would be imposed under this chapter (without
8.29regard to this section and section 290.032), reduced by the sum of the nonrefundable
8.30credits allowed under this chapter.
8.31    (e) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable
8.32income after subtracting the exemption amount determined under subdivision 3.
8.33EFFECTIVE DATE.This section is effective for taxable years beginning after
8.34December 31, 2012.