1.2relating to taxation; corporate franchise; modifying rules for foreign operating
1.3corporations and exclusion of foreign royalties;amending Minnesota Statutes
1.42012, sections 289A.08, subdivision 3, as amended; 290.01, subdivisions 19c,
1.5as amended, 19d, as amended, by adding a subdivision; 290.0921, subdivision
1.63, as amended, by adding a subdivision; 290.095, subdivision 2, as amended;
1.7290.10, subdivision 1, as amended; 290.17, subdivision 4, as amended; 290.191,
1.8subdivision 5, as amended.
1.9BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.10    Section 1. Minnesota Statutes 2012, section 289A.08, subdivision 3, as amended by
1.11Laws 2013, chapter 143, article 6, section 5, is amended to read:
1.12    Subd. 3. Corporations. (a) A corporation that is subject to the state's jurisdiction to
1.13tax under section 290.014, subdivision 5, must file a return, except that a foreign operating
1.14corporation as defined in section 290.01, subdivision 6c, is not required to file a return.
1.15(b) Members of a unitary business that are required to file a combined report on one
1.16return must designate a member of the unitary business to be responsible for tax matters,
1.17including the filing of returns, the payment of taxes, additions to tax, penalties, interest,
1.18or any other payment, and for the receipt of refunds of taxes or interest paid in excess of
1.19taxes lawfully due. The designated member must be a member of the unitary business that
1.20is filing the single combined report and either:
1.21(1) a corporation that is subject to the taxes imposed by chapter 290; or
1.22(2) a corporation that is not subject to the taxes imposed by chapter 290:
1.23(i) Such corporation consents by filing the return as a designated member under this
1.24clause to remit taxes, penalties, interest, or additions to tax due from the members of the
1.25unitary business subject to tax, and receive refunds or other payments on behalf of other
1.26members of the unitary business. The member designated under this clause is a "taxpayer"
2.1for the purposes of this chapter and chapter 270C, and is liable for any liability imposed
2.2on the unitary business under this chapter and chapter 290.
2.3(ii) If the state does not otherwise have the jurisdiction to tax the member designated
2.4under this clause, consenting to be the designated member does not create the jurisdiction
2.5to impose tax on the designated member, other than as described in item (i).
2.6(iii) The member designated under this clause must apply for a business tax account
2.7identification number.
2.8(c) The commissioner shall adopt rules for the filing of one return on behalf of the
2.9members of an affiliated group of corporations that are required to file a combined report.
2.10All members of an affiliated group that are required to file a combined report must file one
2.11return on behalf of the members of the group under rules adopted by the commissioner.
2.12(d) If a corporation claims on a return that it has paid tax in excess of the amount of
2.13taxes lawfully due, that corporation must include on that return information necessary for
2.14payment of the tax in excess of the amount lawfully due by electronic means.
2.15EFFECTIVE DATE.This section is effective for taxable years beginning after
2.16December 31, 2013.

2.17    Sec. 2. Minnesota Statutes 2012, section 290.01, as amended by Laws 2013, chapter
2.18143, article 6, is amended by adding a subdivision to read:
2.19    Subd. 6c. Foreign operating corporation. The term "foreign operating
2.20corporation," when applied to a corporation, means a domestic corporation with the
2.21following characteristics:
2.22(1) it is part of a unitary business at least one member of which is taxable in this state;
2.23(2) it has at least 80 percent of the gross income from all sources of the corporation
2.24in the tax year is active foreign business income; and
2.25(3) for purposes of this subdivision, active foreign business income means gross
2.26income that is (i) derived from sources without the United States, as defined in subtitle A,
2.27chapter 1, subchapter N, part 1, of the Internal Revenue Code; and (ii) attributable to the
2.28active conduct of a trade or business in a foreign country.
2.29EFFECTIVE DATE.This section is effective for taxable years beginning after
2.30December 31, 2013.

2.31    Sec. 3. Minnesota Statutes 2012, section 290.01, subdivision 19c, as amended by Laws
2.322013, chapter 143, article 6, section 8, is amended to read:
3.1    Subd. 19c. Corporations; additions to federal taxable income. For corporations,
3.2there shall be added to federal taxable income:
3.3    (1) the amount of any deduction taken for federal income tax purposes for income,
3.4excise, or franchise taxes based on net income or related minimum taxes, including but not
3.5limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
3.6another state, a political subdivision of another state, the District of Columbia, or any
3.7foreign country or possession of the United States;
3.8    (2) interest not subject to federal tax upon obligations of: the United States, its
3.9possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
3.10state, any of its political or governmental subdivisions, any of its municipalities, or any
3.11of its governmental agencies or instrumentalities; the District of Columbia; or Indian
3.12tribal governments;
3.13    (3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
3.14Revenue Code;
3.15    (4) the amount of any net operating loss deduction taken for federal income tax
3.16purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
3.17deduction under section 810 of the Internal Revenue Code;
3.18    (5) the amount of any special deductions taken for federal income tax purposes
3.19under sections 241 to 247 and 965 of the Internal Revenue Code;
3.20    (6) losses from the business of mining, as defined in section 290.05, subdivision 1,
3.21clause (a), that are not subject to Minnesota income tax;
3.22    (7) the amount of any capital losses deducted for federal income tax purposes under
3.23sections 1211 and 1212 of the Internal Revenue Code;
3.24    (8) the amount of percentage depletion deducted under sections 611 through 614 and
3.25291 of the Internal Revenue Code;
3.26    (9) for certified pollution control facilities placed in service in a taxable year
3.27beginning before December 31, 1986, and for which amortization deductions were elected
3.28under section 169 of the Internal Revenue Code of 1954, as amended through December
3.2931, 1985, the amount of the amortization deduction allowed in computing federal taxable
3.30income for those facilities;
3.31    (10) the amount of a partner's pro rata share of net income which does not flow
3.32through to the partner because the partnership elected to pay the tax on the income under
3.33section 6242(a)(2) of the Internal Revenue Code;
3.34    (11) any increase in subpart F income, as defined in section 952(a) of the Internal
3.35Revenue Code, for the taxable year when subpart F income is calculated without regard to
3.36the provisions of Division C, title III, section 303(b) of Public Law 110-343;
4.1    (12) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A)
4.2and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer
4.3has an activity that in the taxable year generates a deduction for depreciation under
4.4section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year
4.5that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed
4.6under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the
4.7depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the
4.8amount of the loss from the activity that is not allowed in the taxable year. In succeeding
4.9taxable years when the losses not allowed in the taxable year are allowed, the depreciation
4.10under section 168(k)(1)(A) and (k)(4)(A) is allowed;
4.11    (13) 80 percent of the amount by which the deduction allowed by section 179 of the
4.12Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
4.13Revenue Code of 1986, as amended through December 31, 2003;
4.14    (14) to the extent deducted in computing federal taxable income, the amount of the
4.15deduction allowable under section 199 of the Internal Revenue Code;
4.16    (15) the amount of expenses disallowed under section 290.10, subdivision 2; and
4.17(16) discharge of indebtedness income resulting from reacquisition of business
4.18indebtedness and deferred under section 108(i) of the Internal Revenue Code.;
4.19(17) the amount of any deemed dividend from a foreign operating corporation
4.20determined pursuant to section 290.17, subdivision 4, paragraph (j). The deemed dividend
4.21shall be reduced by the amount of the addition to income required by clauses (18) to (21);
4.22(18) an amount equal to the interest and intangible expenses, losses, and costs paid,
4.23accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit
4.24of a corporation that is a member of the taxpayer's unitary business group that qualifies
4.25as a foreign operating corporation. For purposes of this clause, intangible expenses and
4.26costs include:
4.27(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
4.28use, maintenance or management, ownership, sale, exchange, or any other disposition of
4.29intangible property;
4.30(ii) losses incurred, directly or indirectly, from factoring transactions or discounting
4.31transactions;
4.32(iii) royalty, patent, technical, and copyright fees;
4.33(iv) licensing fees; and
4.34(v) other similar expenses and costs.
5.1For purposes of this clause, "intangible property" includes stocks, bonds, patents,
5.2patent applications, trade names, trademarks, service marks, copyrights, mask works,
5.3trade secrets, and similar types of intangible assets.
5.4This clause does not apply to any item of interest or intangible expenses or costs
5.5paid, accrued, or incurred, directly or indirectly, to a foreign operating corporation with
5.6respect to such item of income to the extent that the income to the foreign operating
5.7corporation is income from sources without the United States as defined in subtitle A,
5.8chapter 1, subchapter N, part 1, of the Internal Revenue Code;
5.9(19) except as already included in the taxpayer's taxable income pursuant to clause
5.10(20), any interest income and income generated from intangible property received or
5.11accrued by a foreign operating corporation that is a member of the taxpayer's unitary
5.12group. For purposes of this clause, income generated from intangible property includes:
5.13(i) income related to the direct or indirect acquisition, use, maintenance or
5.14management, ownership, sale, exchange, or any other disposition of intangible property;
5.15(ii) income from factoring transactions or discounting transactions;
5.16(iii) royalty, patent, technical, and copyright fees;
5.17(iv) licensing fees; and
5.18(v) other similar income.
5.19For purposes of this clause, "intangible property" includes stocks, bonds, patents,
5.20patent applications, trade names, trademarks, service marks, copyrights, mask works,
5.21trade secrets, and similar types of intangible assets.
5.22This clause does not apply to any item of interest or intangible income received or
5.23accrued by a foreign operating corporation with respect to such item of income to the
5.24extent that the income is income from sources without the United States as defined in
5.25subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code;
5.26(20) the dividends attributable to the income of a foreign operating corporation that
5.27is a member of the taxpayer's unitary group in an amount that is equal to the dividends
5.28paid deduction of a real estate investment trust under section 561(a) of the Internal
5.29Revenue Code for amounts paid or accrued by the real estate investment trust to the
5.30foreign operating corporation; and
5.31(21) the income of a foreign operating corporation that is a member of the taxpayer's
5.32unitary group in an amount that is equal to gains derived from the sale of real or personal
5.33property located in the United States.
5.34EFFECTIVE DATE.This section is effective for taxable years beginning after
5.35December 31, 2013.

6.1    Sec. 4. Minnesota Statutes 2012, section 290.01, subdivision 19d, as amended by Laws
6.22013, chapter 143, article 6, section 9, is amended to read:
6.3    Subd. 19d. Corporations; modifications decreasing federal taxable income. For
6.4corporations, there shall be subtracted from federal taxable income after the increases
6.5provided in subdivision 19c:
6.6    (1) the amount of foreign dividend gross-up added to gross income for federal
6.7income tax purposes under section 78 of the Internal Revenue Code;
6.8    (2) the amount of salary expense not allowed for federal income tax purposes due to
6.9claiming the work opportunity credit under section 51 of the Internal Revenue Code;
6.10    (3) any dividend (not including any distribution in liquidation) paid within the
6.11taxable year by a national or state bank to the United States, or to any instrumentality of
6.12the United States exempt from federal income taxes, on the preferred stock of the bank
6.13owned by the United States or the instrumentality;
6.14    (4) amounts disallowed for intangible drilling costs due to differences between
6.15this chapter and the Internal Revenue Code in taxable years beginning before January
6.161, 1987, as follows:
6.17    (i) to the extent the disallowed costs are represented by physical property, an amount
6.18equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
6.19subdivision 7 , subject to the modifications contained in subdivision 19e; and
6.20    (ii) to the extent the disallowed costs are not represented by physical property, an
6.21amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
6.22290.09, subdivision 8 ;
6.23    (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
6.24Internal Revenue Code, except that:
6.25    (i) for capital losses incurred in taxable years beginning after December 31, 1986,
6.26capital loss carrybacks shall not be allowed;
6.27    (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
6.28a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
6.29allowed;
6.30    (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
6.31capital loss carryback to each of the three taxable years preceding the loss year, subject to
6.32the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
6.33    (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
6.34a capital loss carryover to each of the five taxable years succeeding the loss year to the
6.35extent such loss was not used in a prior taxable year and subject to the provisions of
6.36Minnesota Statutes 1986, section 290.16, shall be allowed;
7.1    (6) an amount for interest and expenses relating to income not taxable for federal
7.2income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
7.3expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
7.4291 of the Internal Revenue Code in computing federal taxable income;
7.5    (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
7.6which percentage depletion was disallowed pursuant to subdivision 19c, clause (8), a
7.7reasonable allowance for depletion based on actual cost. In the case of leases the deduction
7.8must be apportioned between the lessor and lessee in accordance with rules prescribed
7.9by the commissioner. In the case of property held in trust, the allowable deduction must
7.10be apportioned between the income beneficiaries and the trustee in accordance with the
7.11pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
7.12of the trust's income allocable to each;
7.13    (8) for certified pollution control facilities placed in service in a taxable year
7.14beginning before December 31, 1986, and for which amortization deductions were elected
7.15under section 169 of the Internal Revenue Code of 1954, as amended through December
7.1631, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
7.171986, section 290.09, subdivision 7;
7.18    (9) amounts included in federal taxable income that are due to refunds of income,
7.19excise, or franchise taxes based on net income or related minimum taxes paid by the
7.20corporation to Minnesota, another state, a political subdivision of another state, the
7.21District of Columbia, or a foreign country or possession of the United States to the extent
7.22that the taxes were added to federal taxable income under subdivision 19c, clause (1), in a
7.23prior taxable year;
7.24    (10) income or gains from the business of mining as defined in section 290.05,
7.25subdivision 1 , clause (a), that are not subject to Minnesota franchise tax;
7.26    (11) the amount of disability access expenditures in the taxable year which are not
7.27allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
7.28    (12) the amount of qualified research expenses not allowed for federal income tax
7.29purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
7.30the amount exceeds the amount of the credit allowed under section 290.068;
7.31    (13) the amount of salary expenses not allowed for federal income tax purposes due to
7.32claiming the Indian employment credit under section 45A(a) of the Internal Revenue Code;
7.33    (14) any decrease in subpart F income, as defined in section 952(a) of the Internal
7.34Revenue Code, for the taxable year when subpart F income is calculated without regard to
7.35the provisions of Division C, title III, section 303(b) of Public Law 110-343;
8.1    (15) in each of the five tax years immediately following the tax year in which an
8.2addition is required under subdivision 19c, clause (12), an amount equal to one-fifth of
8.3the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
8.4amount of the addition made by the taxpayer under subdivision 19c, clause (12). The
8.5resulting delayed depreciation cannot be less than zero;
8.6    (16) in each of the five tax years immediately following the tax year in which an
8.7addition is required under subdivision 19c, clause (13), an amount equal to one-fifth of the
8.8amount of the addition;
8.9(17) to the extent included in federal taxable income, discharge of indebtedness
8.10income resulting from reacquisition of business indebtedness included in federal taxable
8.11income under section 108(i) of the Internal Revenue Code. This subtraction applies only
8.12to the extent that the income was included in net income in a prior year as a result of the
8.13addition under subdivision 19c, clause (16); and
8.14(18) the amount of expenses not allowed for federal income tax purposes due
8.15to claiming the railroad track maintenance credit under section 45G(a) of the Internal
8.16Revenue Code.; and
8.17(19) 80 percent of royalties, fees, or other like income accrued or received from a
8.18foreign operating corporation or a foreign corporation which is part of the same unitary
8.19business as the receiving corporation, unless the income resulting from such payments or
8.20accruals is income from sources within the United States as defined in subtitle A, chapter
8.211, subchapter N, part 1, of the Internal Revenue Code.
8.22EFFECTIVE DATE.This section is effective for taxable years beginning after
8.23December 31, 2013.

8.24    Sec. 5. Minnesota Statutes 2012, section 290.0921, subdivision 3, as amended by Laws
8.252013, chapter 143, article 6, section 24, is amended to read:
8.26    Subd. 3. Alternative minimum taxable income. "Alternative minimum taxable
8.27income" is Minnesota net income as defined in section 290.01, subdivision 19, and
8.28includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e),
8.29(f), and (h) of the Internal Revenue Code. If a corporation files a separate company
8.30Minnesota tax return, the minimum tax must be computed on a separate company basis.
8.31If a corporation is part of a tax group filing a unitary return, the minimum tax must be
8.32computed on a unitary basis. The following adjustments must be made.
8.33(1) For purposes of the depreciation adjustments under section 56(a)(1) and
8.3456(g)(4)(A) of the Internal Revenue Code, the basis for depreciable property placed in
8.35service in a taxable year beginning before January 1, 1990, is the adjusted basis for federal
9.1income tax purposes, including any modification made in a taxable year under section
9.2290.01, subdivision 19e , or Minnesota Statutes 1986, section 290.09, subdivision 7,
9.3paragraph (c).
9.4For taxable years beginning after December 31, 2000, the amount of any remaining
9.5modification made under section 290.01, subdivision 19e, or Minnesota Statutes 1986,
9.6section 290.09, subdivision 7, paragraph (c), not previously deducted is a depreciation
9.7allowance in the first taxable year after December 31, 2000.
9.8(2) The portion of the depreciation deduction allowed for federal income tax
9.9purposes under section 168(k) of the Internal Revenue Code that is required as an
9.10addition under section 290.01, subdivision 19c, clause (12), is disallowed in determining
9.11alternative minimum taxable income.
9.12(3) The subtraction for depreciation allowed under section 290.01, subdivision 19d,
9.13clause (15), is allowed as a depreciation deduction in determining alternative minimum
9.14taxable income.
9.15(4) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d)
9.16of the Internal Revenue Code does not apply.
9.17(5) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal
9.18Revenue Code does not apply.
9.19(6) The tax preference for depletion under section 57(a)(1) of the Internal Revenue
9.20Code does not apply.
9.21(7) The tax preference for intangible drilling costs under section 57(a)(2) of the
9.22Internal Revenue Code must be calculated without regard to subparagraph (E) and the
9.23subtraction under section 290.01, subdivision 19d, clause (4).
9.24(8) The tax preference for tax exempt interest under section 57(a)(5) of the Internal
9.25Revenue Code does not apply.
9.26(9) The tax preference for charitable contributions of appreciated property under
9.27section 57(a)(6) of the Internal Revenue Code does not apply.
9.28(10) For purposes of calculating the tax preference for accelerated depreciation or
9.29amortization on certain property placed in service before January 1, 1987, under section
9.3057(a)(7) of the Internal Revenue Code, the deduction allowable for the taxable year is the
9.31deduction allowed under section 290.01, subdivision 19e.
9.32For taxable years beginning after December 31, 2000, the amount of any remaining
9.33modification made under section 290.01, subdivision 19e, not previously deducted is a
9.34depreciation or amortization allowance in the first taxable year after December 31, 2004.
9.35(11) For purposes of calculating the adjustment for adjusted current earnings in
9.36section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable
10.1income" as it is used in section 56(g) of the Internal Revenue Code, means alternative
10.2minimum taxable income as defined in this subdivision, determined without regard to the
10.3adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.
10.4(12) For purposes of determining the amount of adjusted current earnings under
10.5section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section
10.656(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend
10.7gross-up subtracted as provided in section 290.01, subdivision 19d, clause (1), or (ii) the
10.8amount of refunds of income, excise, or franchise taxes subtracted as provided in section
10.9290.01, subdivision 19d , clause (9), or (iii) the amount of royalties, fees, or other like
10.10income subtracted as provided in section 290.01, subdivision 19d, clause (19).
10.11(13) Alternative minimum taxable income excludes the income from operating in a
10.12job opportunity building zone as provided under section 469.317.
10.13(14) Alternative minimum taxable income excludes the income from operating in a
10.14biotechnology and health sciences industry zone as provided under section 469.337.
10.15Items of tax preference must not be reduced below zero as a result of the
10.16modifications in this subdivision.
10.17EFFECTIVE DATE.This section is effective for taxable years beginning after
10.18December 31, 2013.

10.19    Sec. 6. Minnesota Statutes 2012, section 290.0921, as amended by Laws 2013, chapter
10.20143, article 6, is amended by adding a subdivision to read:
10.21    Subd. 7a. Foreign operating companies. The income and deductions related to
10.22foreign operating companies, as defined in section 290.01, subdivision 6c, that are used
10.23to calculate Minnesota alternative minimum taxable income, are limited to the amounts
10.24included for purposes of calculating taxable income under section 290.01, subdivision 29.
10.25EFFECTIVE DATE.This section is effective for taxable years beginning after
10.26December 31, 2013.

10.27    Sec. 7. Minnesota Statutes 2012, section 290.095, subdivision 2, as amended by Laws
10.282013, chapter 143, article 6, section 26, is amended to read:
10.29    Subd. 2. Defined and limited. (a) The term "net operating loss" as used in this
10.30section shall mean a net operating loss as defined in section 172(c) of the Internal Revenue
10.31Code, with the modifications specified in subdivision 4. The deductions provided in
10.32section 290.21 and the modification provided in section 290.01, subdivision 19d, clause
10.33(19), cannot be used in the determination of a net operating loss.
11.1(b) The term "net operating loss deduction" as used in this section means the
11.2aggregate of the net operating loss carryovers to the taxable year, computed in accordance
11.3with subdivision 3. The provisions of section 172(b) of the Internal Revenue Code relating
11.4to the carryback of net operating losses, do not apply.
11.5EFFECTIVE DATE.This section is effective for taxable years beginning after
11.6December 31, 2013.

11.7    Sec. 8. Minnesota Statutes 2012, section 290.10, subdivision 1, as amended by Laws
11.82013, chapter 143, article 6, section 27, is amended to read:
11.9    Subdivision 1. Expenses, interest, and taxes. Except as provided in section 290.17,
11.10subdivision 4 , paragraph (k), in computing the net income of a taxpayer no deduction shall
11.11in any case be allowed for expenses, interest and taxes connected with or allocable against
11.12the production or receipt of all income not included in the measure of the tax imposed by
11.13this chapter, except that for corporations engaged in the business of mining or producing
11.14iron ore, the mining of which is subject to the occupation tax imposed by section 298.01,
11.15subdivision 4 , this shall not prevent the deduction of expenses and other items to the extent
11.16that the expenses and other items are allowable under this chapter and are not deductible,
11.17capitalizable, retainable in basis, or taken into account by allowance or otherwise in
11.18computing the occupation tax and do not exceed the amounts taken for federal income tax
11.19purposes for that year. Occupation taxes imposed under chapter 298, royalty taxes imposed
11.20under chapter 299, or depletion expenses may not be deducted under this subdivision.
11.21EFFECTIVE DATE.This section is effective for taxable years beginning after
11.22December 31, 2013.

11.23    Sec. 9. Minnesota Statutes 2012, section 290.17, subdivision 4, as amended by Laws
11.242013, chapter 143, article 6, section 28, is amended to read:
11.25    Subd. 4. Unitary business principle. (a) If a trade or business conducted wholly
11.26within this state or partly within and partly without this state is part of a unitary business,
11.27the entire income of the unitary business is subject to apportionment pursuant to section
11.28290.191 . Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
11.29business is considered to be derived from any particular source and none may be allocated
11.30to a particular place except as provided by the applicable apportionment formula. The
11.31provisions of this subdivision do not apply to business income subject to subdivision 5,
11.32income of an insurance company, or income of an investment company determined under
11.33section 290.36.
12.1(b) The term "unitary business" means business activities or operations which
12.2result in a flow of value between them. The term may be applied within a single legal
12.3entity or between multiple entities and without regard to whether each entity is a sole
12.4proprietorship, a corporation, a partnership or a trust.
12.5(c) Unity is presumed whenever there is unity of ownership, operation, and use,
12.6evidenced by centralized management or executive force, centralized purchasing,
12.7advertising, accounting, or other controlled interaction, but the absence of these
12.8centralized activities will not necessarily evidence a nonunitary business. Unity is also
12.9presumed when business activities or operations are of mutual benefit, dependent upon or
12.10contributory to one another, either individually or as a group.
12.11(d) Where a business operation conducted in Minnesota is owned by a business
12.12entity that carries on business activity outside the state different in kind from that
12.13conducted within this state, and the other business is conducted entirely outside the state, it
12.14is presumed that the two business operations are unitary in nature, interrelated, connected,
12.15and interdependent unless it can be shown to the contrary.
12.16(e) Unity of ownership does not exist when two or more corporations are involved
12.17unless more than 50 percent of the voting stock of each corporation is directly or indirectly
12.18owned by a common owner or by common owners, either corporate or noncorporate, or
12.19by one or more of the member corporations of the group. For this purpose, the term
12.20"voting stock" shall include membership interests of mutual insurance holding companies
12.21formed under section 66A.40.
12.22(f) The net income and apportionment factors under section 290.191 or 290.20 of
12.23foreign corporations and other foreign entities which are part of a unitary business shall
12.24not be included in the net income or the apportionment factors of the unitary business;
12.25except that the income and apportionment factors of a foreign entity, other than an entity
12.26treated as a C corporation for federal income tax purposes, that are included in the federal
12.27taxable income, as defined in section 63 of the Internal Revenue Code as amended through
12.28the date named in section 290.01, subdivision 19, of a domestic corporation, domestic
12.29entity, or individual must be included in determining net income and the factors to be used
12.30in the apportionment of net income pursuant to section 290.191 or 290.20. A foreign
12.31corporation or other foreign entity which is not included on a combined report and which
12.32is required to file a return under this chapter shall file on a separate return basis. The net
12.33income and apportionment factors under section 290.191 or 290.20 of foreign operating
12.34corporations shall not be included in the net income or the apportionment factors of the
12.35unitary business except as provided in paragraph (j).
13.1(g) For purposes of determining the net income of a unitary business and the factors
13.2to be used in the apportionment of net income pursuant to section 290.191 or 290.20, there
13.3must be included only the income and apportionment factors of domestic corporations or
13.4other domestic entities other than foreign operating corporations that are determined to
13.5be part of the unitary business pursuant to this subdivision, notwithstanding that foreign
13.6corporations or other foreign entities might be included in the unitary business; except that
13.7the income and apportionment factors of a foreign entity, other than an entity treated as
13.8a C corporation for federal income tax purposes, that is included in the federal taxable
13.9income, as defined in section 63 of the Internal Revenue Code as amended through the
13.10date named in section 290.01, subdivision 19, of a domestic corporation, domestic entity,
13.11or individual must be included in determining net income and the factors to be used in the
13.12apportionment of net income pursuant to section 290.191 or 290.20.
13.13(h) Each corporation or other entity, except a sole proprietorship, that is part of a
13.14unitary business must file combined reports as the commissioner determines. On the
13.15reports, all intercompany transactions between entities included pursuant to paragraph
13.16(g) must be eliminated and the entire net income of the unitary business determined in
13.17accordance with this subdivision is apportioned among the entities by using each entity's
13.18Minnesota factors for apportionment purposes in the numerators of the apportionment
13.19formula and the total factors for apportionment purposes of all entities included pursuant
13.20to paragraph (g) in the denominators of the apportionment formula. Except as otherwise
13.21provided by paragraph (f), all sales of the unitary business made within this state pursuant
13.22to section 290.191 or 290.20 must be included on the combined report of a corporation or
13.23other entity that is a member of the unitary business and is subject to the jurisdiction of
13.24this state to impose tax under this chapter.
13.25(i) If a corporation has been divested from a unitary business and is included in a
13.26combined report for a fractional part of the common accounting period of the combined
13.27report:
13.28(1) its income includable in the combined report is its income incurred for that part
13.29of the year determined by proration or separate accounting; and
13.30(2) its sales, property, and payroll included in the apportionment formula must
13.31be prorated or accounted for separately.
13.32(j) The adjusted net income of a foreign operating corporation shall be deemed to
13.33be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
13.34proportion to each shareholder's ownership, with which such corporation is engaged in
13.35a unitary business. Such deemed dividend shall be treated as a dividend under section
13.36290.21, subdivision 4.
14.1Dividends actually paid by a foreign operating corporation to a corporate shareholder
14.2which is a member of the same unitary business as the foreign operating corporation shall
14.3be eliminated from the net income of the unitary business in preparing a combined report
14.4for the unitary business. The adjusted net income of a foreign operating corporation
14.5shall be its net income adjusted as follows:
14.6(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
14.7Rico, or a United States possession or political subdivision of any of the foregoing shall
14.8be a deduction; and
14.9(2) the subtraction from federal taxable income for payments received from foreign
14.10corporations or foreign operating corporations under section 290.01, subdivision 19d,
14.11clause (19), shall not be allowed.
14.12If a foreign operating corporation incurs a net loss, neither income nor deduction from
14.13that corporation shall be included in determining the net income of the unitary business.
14.14(k) Deductions for expenses, interest, or taxes otherwise allowable under this chapter
14.15that are connected with or allocable against dividends, deemed dividends described
14.16in paragraph (j), or royalties, fees, or other like income described in section 290.01,
14.17subdivision 19d , clause (19), shall not be disallowed.
14.18EFFECTIVE DATE.This section is effective for taxable years beginning after
14.19December 31, 2013.

14.20    Sec. 10. Minnesota Statutes 2012, section 290.191, subdivision 5, as amended by Laws
14.212013, chapter 143, article 6, section 29, is amended to read:
14.22    Subd. 5. Determination of sales factor. For purposes of this section, the following
14.23rules apply in determining the sales factor.
14.24    (a) The sales factor includes all sales, gross earnings, or receipts received in the
14.25ordinary course of the business, except that the following types of income are not included
14.26in the sales factor:
14.27    (1) interest;
14.28    (2) dividends;
14.29    (3) sales of capital assets as defined in section 1221 of the Internal Revenue Code;
14.30    (4) sales of property used in the trade or business, except sales of leased property of
14.31a type which is regularly sold as well as leased; and
14.32    (5) sales of debt instruments as defined in section 1275(a)(1) of the Internal Revenue
14.33Code or sales of stock.; and
14.34(6) royalties, fees, or other like income of a type which qualify for a subtraction from
14.35federal taxable income under section 290.01, subdivision 19d, clause (19).
15.1    (b) Sales of tangible personal property are made within this state if the property is
15.2received by a purchaser at a point within this state, and the taxpayer is taxable in this state,
15.3regardless of the f.o.b. point, other conditions of the sale, or the ultimate destination
15.4of the property.
15.5    (c) Tangible personal property delivered to a common or contract carrier or foreign
15.6vessel for delivery to a purchaser in another state or nation is a sale in that state or nation,
15.7regardless of f.o.b. point or other conditions of the sale.
15.8    (d) Notwithstanding paragraphs (b) and (c), when intoxicating liquor, wine,
15.9fermented malt beverages, cigarettes, or tobacco products are sold to a purchaser who is
15.10licensed by a state or political subdivision to resell this property only within the state of
15.11ultimate destination, the sale is made in that state.
15.12    (e) Sales made by or through a corporation that is qualified as a domestic
15.13international sales corporation under section 992 of the Internal Revenue Code are not
15.14considered to have been made within this state.
15.15    (f) Sales, rents, royalties, and other income in connection with real property is
15.16attributed to the state in which the property is located.
15.17    (g) Receipts from the lease or rental of tangible personal property, including finance
15.18leases and true leases, must be attributed to this state if the property is located in this
15.19state and to other states if the property is not located in this state. Receipts from the
15.20lease or rental of moving property including, but not limited to, motor vehicles, rolling
15.21stock, aircraft, vessels, or mobile equipment are included in the numerator of the receipts
15.22factor to the extent that the property is used in this state. The extent of the use of moving
15.23property is determined as follows:
15.24    (1) A motor vehicle is used wholly in the state in which it is registered.
15.25    (2) The extent that rolling stock is used in this state is determined by multiplying
15.26the receipts from the lease or rental of the rolling stock by a fraction, the numerator of
15.27which is the miles traveled within this state by the leased or rented rolling stock and the
15.28denominator of which is the total miles traveled by the leased or rented rolling stock.
15.29    (3) The extent that an aircraft is used in this state is determined by multiplying the
15.30receipts from the lease or rental of the aircraft by a fraction, the numerator of which is
15.31the number of landings of the aircraft in this state and the denominator of which is the
15.32total number of landings of the aircraft.
15.33    (4) The extent that a vessel, mobile equipment, or other mobile property is used in
15.34the state is determined by multiplying the receipts from the lease or rental of the property
15.35by a fraction, the numerator of which is the number of days during the taxable year the
15.36property was in this state and the denominator of which is the total days in the taxable year.
16.1    (h) Royalties and other income not described in paragraph (a), clause (6), received
16.2for the use of or for the privilege of using intangible property, including patents,
16.3know-how, formulas, designs, processes, patterns, copyrights, trade names, service names,
16.4franchises, licenses, contracts, customer lists, or similar items, must be attributed to the
16.5state in which the property is used by the purchaser. If the property is used in more
16.6than one state, the royalties or other income must be apportioned to this state pro rata
16.7according to the portion of use in this state. If the portion of use in this state cannot be
16.8determined, the royalties or other income must be excluded from both the numerator
16.9and the denominator. Intangible property is used in this state if the purchaser uses the
16.10intangible property or the rights therein in the regular course of its business operations in
16.11this state, regardless of the location of the purchaser's customers.
16.12    (i) Sales of intangible property are made within the state in which the property is
16.13used by the purchaser. If the property is used in more than one state, the sales must be
16.14apportioned to this state pro rata according to the portion of use in this state. If the
16.15portion of use in this state cannot be determined, the sale must be excluded from both the
16.16numerator and the denominator of the sales factor. Intangible property is used in this
16.17state if the purchaser used the intangible property in the regular course of its business
16.18operations in this state.
16.19    (j) Receipts from the performance of services must be attributed to the state where
16.20the services are received. For the purposes of this section, receipts from the performance
16.21of services provided to a corporation, partnership, or trust may only be attributed to a state
16.22where it has a fixed place of doing business. If the state where the services are received is
16.23not readily determinable or is a state where the corporation, partnership, or trust receiving
16.24the service does not have a fixed place of doing business, the services shall be deemed
16.25to be received at the location of the office of the customer from which the services were
16.26ordered in the regular course of the customer's trade or business. If the ordering office
16.27cannot be determined, the services shall be deemed to be received at the office of the
16.28customer to which the services are billed.
16.29    (k) For the purposes of this subdivision and subdivision 6, paragraph (l), receipts
16.30from management, distribution, or administrative services performed by a corporation
16.31or trust for a fund of a corporation or trust regulated under United States Code, title 15,
16.32sections 80a-1 through 80a-64, must be attributed to the state where the shareholder of
16.33the fund resides. Under this paragraph, receipts for services attributed to shareholders are
16.34determined on the basis of the ratio of: (1) the average of the outstanding shares in the
16.35fund owned by shareholders residing within Minnesota at the beginning and end of each
16.36year; and (2) the average of the total number of outstanding shares in the fund at the
17.1beginning and end of each year. Residence of the shareholder, in the case of an individual,
17.2is determined by the mailing address furnished by the shareholder to the fund. Residence
17.3of the shareholder, when the shares are held by an insurance company as a depositor for
17.4the insurance company policyholders, is the mailing address of the policyholders. In
17.5the case of an insurance company holding the shares as a depositor for the insurance
17.6company policyholders, if the mailing address of the policyholders cannot be determined
17.7by the taxpayer, the receipts must be excluded from both the numerator and denominator.
17.8Residence of other shareholders is the mailing address of the shareholder.
17.9EFFECTIVE DATE.This section is effective for taxable years beginning after
17.10December 31, 2013.