HF 1499

as introduced - 90th Legislature (2017 - 2018) Posted on 02/22/2017 02:45pm

A bill for an act
relating to taxation; individual income; expanding the dependent care credit;
amending Minnesota Statutes 2016, section 290.067, subdivisions 1, 2b; repealing Minnesota Statutes 2016, section 290.067, subdivision 2.

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 the
dependent care credit for which the taxpayer is eligible pursuant to the provisions of section
21 of the Internal Revenue Code deleted text begin subject to the limitations provided in subdivision 2 deleted text end 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 expenses. 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 child. 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 (h) For taxpayers with federal adjusted gross income in excess of $70,000, the credit is
equal to the lesser of the credit otherwise calculated under this subdivision or the amount
equal to $600 minus five percent of federal adjusted gross income in excess of $70,000 for
taxpayers with one qualified individual or $1,200 minus five percent of federal adjusted
gross income in excess of $70,000 for taxpayers with two or more qualified individuals,
but in no case is the credit less than zero.
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. 2.

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
deleted text begin 2 deleted text end new text begin 1 new text end 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 2001 deleted text end new text begin 2018 new text end , the commissioner shall then determine the percent
change from the 12 months ending on August 31, deleted text begin 1999 deleted text end new text begin 2016 new text end , to the 12 months ending on
August 31, deleted text begin 2000 deleted text end new text begin 2017 new text end , and in each subsequent year, from the 12 months ending on August
31, deleted text begin 1999 deleted text end new text begin 2016 new 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. 3. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2016, section 290.067, subdivision 2, 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: 17-3029

290.067 DEPENDENT CARE CREDIT.

Subd. 2.

Limitations.

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. The maximum total credit shall be reduced according to the amount of the income of the claimant and a spouse, if any, as follows:

income up to $18,040, $720 maximum for one dependent, $1,440 for all dependents;

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.

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.