Minnesota Legislature
HF 64
as introduced - 90th Legislature (2017 - 2018) Posted on 01/13/2017 09:59am
Current Version - as introduced
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A bill for an act
relating to taxation; individual income; modifying the dependent care credit;
amending Minnesota Statutes 2016, sections 290.067, subdivisions 1, 2, 2b, 3;
290.0674, subdivision 2, by adding a subdivision; repealing Minnesota Statutes
2016, section 290.067, subdivision 2a.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2016, section 290.067, subdivision 1, is amended to read:
Subdivision 1.
Amount of credit.
(a) A taxpayer may take as a credit against the tax
due from the taxpayer and a spouse, if any, under this chapter an amount equal to new text begin 140 percent
of new text end the dependent care credit for which the taxpayer is eligible pursuant to the provisions of
section 21 of the Internal Revenue Code subject to the limitations provided in subdivision
2 except that in determining whether the child qualified as a dependent, income received
as a Minnesota family investment program grant or allowance to or on behalf of the child
must not be taken into account in determining whether the child received more than half of
the child's support from the taxpayer, and the provisions of section 32(b)(1)(D) of the Internal
Revenue Code do not apply.
(b) If a child who has not attained the age of six years at the close of the taxable year is
cared for at a licensed family day care home operated by the child's parent, the taxpayer is
deemed to have paid employment-related expensesnew text begin , and is allowed a credit equal to 140
percent of the credit for which the taxpayer would be eligible under section 21 of the Internal
Revenue Code based on the deemed expensesnew text end . If the child is 16 months old or younger at
the close of the taxable year, the amount of expenses deemed to have been paid equals the
maximum limit for one qualified individual under section 21(c) and (d) of the Internal
Revenue Code. If the child is older than 16 months of age but has not attained the age of
six years at the close of the taxable year, the amount of expenses deemed to have been paid
equals the amount the licensee would charge for the care of a child of the same age for the
same number of hours of care.
(c) If a married couple:
(1) has a child who has not attained the age of one year at the close of the taxable year;
(2) files a joint tax return for the taxable year; and
(3) does not participate in a dependent care assistance program as defined in section 129
of the Internal Revenue Code, in lieu of the actual employment related expenses paid for
that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of (i)
the combined earned income of the couple or (ii) the amount of the maximum limit for one
qualified individual under section 21(c) and (d) of the Internal Revenue Code will be deemed
to be the employment related expense paid for that childnew text begin , and the taxpayer is allowed a
credit equal to 140 percent of the credit for which the taxpayer would be eligible under
section 21 of the Internal Revenue Code based on the deemed expensesnew text end . The earned income
limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed
amount. These deemed amounts apply regardless of whether any employment-related
expenses have been paid.
(d) If the taxpayer is not required and does not file a federal individual income tax return
for the tax year, no credit is allowed for any amount paid to any person unless:
(1) the name, address, and taxpayer identification number of the person are included on
the return claiming the credit; or
(2) if the person is an organization described in section 501(c)(3) of the Internal Revenue
Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name
and address of the person are included on the return claiming the credit.
In the case of a failure to provide the information required under the preceding sentence,
the preceding sentence does not apply if it is shown that the taxpayer exercised due diligence
in attempting to provide the information required.
(e) In the case of a nonresident, part-year resident, or a person who has earned income
not subject to tax under this chapter including earned income excluded pursuant to section
290.0132, subdivision 10, the credit determined under section 21 of the Internal Revenue
Code must be allocated based on the ratio by which the earned income of the claimant and
the claimant's spouse from Minnesota sources bears to the total earned income of the claimant
and the claimant's spouse.
(f) For residents of Minnesota, the subtractions for military pay under section 290.0132,
subdivisions 11 and 12, are not considered "earned income not subject to tax under this
chapter."
(g) For residents of Minnesota, the exclusion of combat pay under section 112 of the
Internal Revenue Code is not considered "earned income not subject to tax under this
chapter."
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2016.
new text end
Sec. 2.
Minnesota Statutes 2016, section 290.067, subdivision 2, is amended to read:
Subd. 2.
Limitations.
deleted text begin
The credit for expenses incurred for the care of each dependent
shall not exceed $720 in any taxable year, and the total credit for all dependents of a claimant
shall not exceed $1,440 in a taxable year.
deleted text end
deleted text begin
The maximum total credit shall be reduced according to the amount of the income of
the claimant and a spouse, if any, as follows:
deleted text end
deleted text begin
income up to $18,040, $720 maximum for one dependent, $1,440 for all dependents;
deleted text end
deleted text begin
income over $18,040, the maximum credit for one dependent shall be reduced by $18
for every $350 of additional income, $36 for all dependents.
deleted text end
new text begin
(a) For taxpayers with adjusted gross income of more than $100,000, the credit is limited
to the lesser of:
new text end
new text begin
(1) the credit otherwise calculated under this subdivision; or
new text end
new text begin
(2) 140 percent of the maximum credit allowed under section 21 of the Internal Revenue
Code, minus five percent of federal adjusted gross income in excess of $100,000, but not
less than zero.
new text end
new text begin
(b) For purposes of this subdivision, "federal adjusted gross income" has the meaning
given in section 62 of the Internal Revenue Code. For taxpayers who qualify for a credit
under this subdivision for one dependent, "the maximum credit allowed under section 21
of the Internal Revenue Code" means the maximum allowed for one dependent, and for
taxpayers who qualify for credits under this subdivision for the care of two or more
dependents, "the maximum credit allowed under section 21 of the Internal Revenue Code"
means the maximum allowed for the care of two or more dependents.
new text end
new text begin (c) new text end The commissioner shall construct and make available to taxpayers tables showing
the amount of the credit at various levels of income and expenses. The tables shall follow
the schedule contained in this subdivision, except that the commissioner may graduate the
transitions between expenses and income brackets.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2016.
new text end
Sec. 3.
Minnesota Statutes 2016, section 290.067, subdivision 2b, is amended to read:
Subd. 2b.
Inflation adjustment.
The commissioner shall adjust the dollar amount of
the income threshold at which the maximum credit begins to be reduced under subdivision
2 by the percentage determined pursuant to the provisions of section 1(f) of the Internal
Revenue Code, except that in section 1(f)(3)(B) the word deleted text begin "1999"deleted text end new text begin "2016"new text end shall be substituted
for the word "1992." For deleted text begin 2001deleted text end new text begin 2017new text end , the commissioner shall then determine the percent
change from the 12 months ending on August 31, deleted text begin 1999deleted text end new text begin 2016new text end , to the 12 months ending on
August 31, deleted text begin 2000deleted text end new text begin 2017new text end , and in each subsequent year, from the 12 months ending on August
31, deleted text begin 1999deleted text end new text begin 2016new text end , to the 12 months ending on August 31 of the year preceding the taxable
year. The determination of the commissioner pursuant to this subdivision must not be
considered a "rule" and is not subject to the Administrative Procedure Act contained in
chapter 14. The threshold amount as adjusted must be rounded to the nearest $10 amount.
If the amount ends in $5, the amount is rounded up to the nearest $10 amount.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2016.
new text end
Sec. 4.
Minnesota Statutes 2016, section 290.067, subdivision 3, is amended to read:
Subd. 3.
Credit to be refundable.
If the amount of credit which a claimant would be
eligible to receive pursuant to this deleted text begin subdivisiondeleted text end new text begin sectionnew text end exceeds the claimant's tax liability
under chapter 290, the excess amount of the credit shall be refunded to the claimant by the
commissioner of revenue.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2016.
new text end
Sec. 5.
Minnesota Statutes 2016, section 290.0674, subdivision 2, is amended to read:
Subd. 2.
Limitations.
(a) For claimants with income not greater than $33,500, the
maximum credit allowed for a family is $1,000 multiplied by the number of qualifying
children in kindergarten through grade 12 in the family. The maximum credit for families
with one qualifying child in kindergarten through grade 12 is reduced by $1 for each $4 of
household income over $33,500, and the maximum credit for families with two or more
qualifying children in kindergarten through grade 12 is reduced by $2 for each $4 of
household income over $33,500, but in no case is the credit less than zero.
For purposes of this section "income" has the meaning given in deleted text begin section ,deleted text end
subdivision 2a. In the case of a married claimant, a credit is not allowed unless a joint income
tax return is filed.
(b) For a nonresident or part-year resident, the credit determined under subdivision 1
and the maximum credit amount in paragraph (a) must be allocated using the percentage
calculated in section 290.06, subdivision 2c, paragraph (e).
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2016.
new text end
Sec. 6.
Minnesota Statutes 2016, section 290.0674, is amended by adding a subdivision
to read:
new text begin Subd. 2a. new text end
new text begin Income. new text end
new text begin
(a) For purposes of this section, "income" means the sum of the
following:
new text end
new text begin
(1) federal adjusted gross income as defined in section 62 of the Internal Revenue Code;
and
new text end
new text begin
(2) the sum of the following amounts to the extent not included in clause (1):
new text end
new text begin
(i) all nontaxable income;
new text end
new text begin
(ii) the amount of a passive activity loss that is not disallowed as a result of section 469,
paragraph (i) or (m), of the Internal Revenue Code, and the amount of passive activity loss
carryover allowed under section 469(b) of the Internal Revenue Code;
new text end
new text begin
(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a
solvent individual excluded from gross income under section 108(g) of the Internal Revenue
Code;
new text end
new text begin
(iv) cash public assistance and relief;
new text end
new text begin
(v) any pension or annuity, including railroad retirement benefits, all payments received
under the federal Social Security Act, Supplemental Security Income, and veterans benefits,
which was not exclusively funded by the claimant or spouse, or which was funded exclusively
by the claimant or spouse and which funding payments were excluded from federal adjusted
gross income in the years when the payments were made;
new text end
new text begin
(vi) interest received from the federal government or a state government or any
instrumentality or political subdivision thereof;
new text end
new text begin
(vii) workers' compensation;
new text end
new text begin
(viii) nontaxable strike benefits;
new text end
new text begin
(ix) the gross amounts of payments received in the nature of disability income or sick
pay as a result of accident, sickness, or other disability, whether funded through insurance
or otherwise;
new text end
new text begin
(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of
1986, as amended through December 31, 1995;
new text end
new text begin
(xi) contributions made by the claimant to an individual retirement account, including
a qualified voluntary employee contribution; simplified employee pension plan;
self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of
the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal
Revenue Code;
new text end
new text begin
(xii) nontaxable scholarship or fellowship grants;
new text end
new text begin
(xiii) the amount of deduction allowed under section 199 of the Internal Revenue Code;
new text end
new text begin
(xiv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue
Code;
new text end
new text begin
(xv) the amount deducted for tuition expenses under section 222 of the Internal Revenue
Code; and
new text end
new text begin
(xvi) the amount deducted for certain expenses of elementary and secondary school
teachers under section 62(a)(2)(D) of the Internal Revenue Code.
new text end
new text begin
(b) In the case of an individual who files an income tax return on a fiscal year basis, the
term "federal adjusted gross income" means federal adjusted gross income reflected in the
fiscal year ending in the next calendar year. Federal adjusted gross income may not be
reduced by the amount of a net operating loss carryback or carryforward or a capital loss
carryback or carryforward allowed for the year.
new text end
new text begin
(c) "Income" does not include:
new text end
new text begin
(1) amounts excluded pursuant to sections 101(a) and 102 of the Internal Revenue Code;
new text end
new text begin
(2) amounts of any pension or annuity that were exclusively funded by the claimant or
spouse if the funding payments were not excluded from federal adjusted gross income in
the years when the payments were made;
new text end
new text begin
(3) surplus food or other relief in kind supplied by a governmental agency;
new text end
new text begin
(4) relief granted under chapter 290A;
new text end
new text begin
(5) child support payments received under a temporary or final decree of dissolution or
legal separation; and
new text end
new text begin
(6) restitution payments received by eligible individuals and excludable interest as
defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001,
Public Law 107-16.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2016.
new text end
Sec. 7. new text begin REPEALER.
new text end
new text begin
Minnesota Statutes 2016, section 290.067, subdivision 2a,
new text end
new text begin
is repealed.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2016.
new text end
APPENDIX
Repealed Minnesota Statutes: 17-0810
290.067 DEPENDENT CARE CREDIT.
Subd. 2a.
Income.
(a) For purposes of this section, "income" means the sum of the following:
(1) federal adjusted gross income as defined in section 62 of the Internal Revenue Code; and
(2) the sum of the following amounts to the extent not included in clause (1):
(i) all nontaxable income;
(ii) the amount of a passive activity loss that is not disallowed as a result of section 469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity loss carryover allowed under section 469(b) of the Internal Revenue Code;
(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a solvent individual excluded from gross income under section 108(g) of the Internal Revenue Code;
(iv) cash public assistance and relief;
(v) any pension or annuity (including railroad retirement benefits, all payments received under the federal Social Security Act, Supplemental Security Income, and veterans benefits), which was not exclusively funded by the claimant or spouse, or which was funded exclusively by the claimant or spouse and which funding payments were excluded from federal adjusted gross income in the years when the payments were made;
(vi) interest received from the federal or a state government or any instrumentality or political subdivision thereof;
(vii) workers' compensation;
(viii) nontaxable strike benefits;
(ix) the gross amounts of payments received in the nature of disability income or sick pay as a result of accident, sickness, or other disability, whether funded through insurance or otherwise;
(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 1986, as amended through December 31, 1995;
(xi) contributions made by the claimant to an individual retirement account, including a qualified voluntary employee contribution; simplified employee pension plan; self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal Revenue Code;
(xii) nontaxable scholarship or fellowship grants;
(xiii) the amount of deduction allowed under section 199 of the Internal Revenue Code;
(xiv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue Code;
(xv) the amount deducted for tuition expenses under section 222 of the Internal Revenue Code; and
(xvi) the amount deducted for certain expenses of elementary and secondary school teachers under section 62(a)(2)(D) of the Internal Revenue Code.
In the case of an individual who files an income tax return on a fiscal year basis, the term "federal adjusted gross income" means federal adjusted gross income reflected in the fiscal year ending in the next calendar year. Federal adjusted gross income may not be reduced by the amount of a net operating loss carryback or carryforward or a capital loss carryback or carryforward allowed for the year.
(b) "Income" does not include:
(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;
(2) amounts of any pension or annuity that were exclusively funded by the claimant or spouse if the funding payments were not excluded from federal adjusted gross income in the years when the payments were made;
(3) surplus food or other relief in kind supplied by a governmental agency;
(4) relief granted under chapter 290A;
(5) child support payments received under a temporary or final decree of dissolution or legal separation; and
(6) restitution payments received by eligible individuals and excludable interest as defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107-16.