HF 3667

as introduced - 93rd Legislature (2023 - 2024) Posted on 02/13/2024 03:52pm

A bill for an act
relating to taxation; individual income; providing a subtraction for certain
discharges of indebtedness; excluding certain discharges of indebtedness from
income for purposes of the property tax refund and the renter's income tax credit;
amending Minnesota Statutes 2022, section 290.0132, by adding a subdivision;
Minnesota Statutes 2023 Supplement, sections 290.0693, subdivision 1; 290A.03,
subdivision 3.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2022, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 36. new text end

new text begin Discharges of indebtedness; coerced debt. new text end

new text begin The amount of discharge of
indebtedness awarded to a claimant under section 332.74, subdivision 3, is a subtraction.
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, 2023.
new text end

Sec. 2.

Minnesota Statutes 2023 Supplement, section 290.0693, subdivision 1, is amended
to read:

Subdivision 1.

Definitions.

(a) For the purposes of this section, the following terms have
the meanings given.

new text begin (b) "Combined exemption amount" means the sum of:
new text end

new text begin (1) for the taxpayer's first dependent, the exemption amount multiplied by 1.4;
new text end

new text begin (2) for the taxpayer's second dependent, the exemption amount multiplied by 1.3;
new text end

new text begin (3) for the taxpayer's third dependent, the exemption amount multiplied by 1.2;
new text end

new text begin (4) for the taxpayer's fourth dependent, the exemption amount multiplied by 1.1;
new text end

new text begin (5) for the taxpayer's fifth dependent, the exemption amount; and
new text end

new text begin (6) if the taxpayer or taxpayer's spouse had a disability or attained the age of 65 on or
before the close of the taxable year, the exemption amount.
new text end

deleted text begin (b) deleted text end new text begin (c) new text end "Dependent" means any individual who is considered a dependent under sections
151 and 152 of the Internal Revenue Code.

deleted text begin (c) deleted text end new text begin (d) new text end "Disability" has the meaning given in section 290A.03, subdivision 10.

deleted text begin (d) deleted text end new text begin (e) new text end "Exemption amount" means the exemption amount under section 290.0121,
subdivision 1, paragraph (b).

deleted text begin (e) deleted text end new text begin (f) new text end "Gross rent" means rent paid for the right of occupancy, at arm's length, of a
homestead, exclusive of charges for any medical services furnished by the landlord as a
part of the rental agreement, whether expressly set out in the rental agreement or not. The
gross rent of a resident of a nursing home or intermediate care facility is $600 per month.
The gross rent of a resident of an adult foster care home is $930 per month. The commissioner
shall annually adjust the amounts in this paragraph as provided in section 270C.22. The
statutory year is 2023. If the landlord and tenant have not dealt with each other at arm's
length and the commissioner determines that the gross rent charged was excessive, the
commissioner may adjust the gross rent to a reasonable amount for purposes of this section.

deleted text begin (f) deleted text end new text begin (g) new text end "Homestead" has the meaning given in section 290A.03, subdivision 6.

deleted text begin (g) deleted text end new text begin (h) new text end "Household" has the meaning given in section 290A.03, subdivision 4.

deleted text begin (h) deleted text end new text begin (i) new text end "Household income" means all income received by all persons of a household in
a taxable year while members of the household, other than income of a dependent.

deleted text begin (i) deleted text end new text begin (j) new text end "Income" means adjusted gross income, minus:

(1) deleted text begin for the taxpayer's first dependent, the exemption amount multiplied by 1.4 deleted text end new text begin the
taxpayer's combined exemption amount new text end ; new text begin and
new text end

(2) deleted text begin for the taxpayer's second dependent, the exemption amount multiplied by 1.3; deleted text end new text begin the
amount of discharge of indebtedness subtracted under section 290.0132, subdivision 36.
new text end

deleted text begin (3) for the taxpayer's third dependent, the exemption amount multiplied by 1.2;
deleted text end

deleted text begin (4) for the taxpayer's fourth dependent, the exemption amount multiplied by 1.1;
deleted text end

deleted text begin (5) for the taxpayer's fifth dependent, the exemption amount; and
deleted text end

deleted text begin (6) if the taxpayer or taxpayer's spouse had a disability or attained the age of 65 on or
before the close of the taxable year, the exemption amount.
deleted text end

deleted text begin (j) deleted text end new text begin (k) new text end "Rent constituting property taxes" means 17 percent of the gross rent actually
paid in cash, or its equivalent, or the portion of rent paid in lieu of property taxes, in any
taxable year by a claimant for the right of occupancy of the claimant's Minnesota homestead
in the taxable year, and which rent constitutes the basis, in the succeeding taxable year of
a claim for a credit under this section by the claimant. If an individual occupies a homestead
with another person or persons not related to the individual as the individual's spouse or as
dependents, and the other person or persons are residing at the homestead under a rental or
lease agreement with the individual, the amount of rent constituting property tax for the
individual equals that portion not covered by the rental agreement.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2023.
new text end

Sec. 3.

Minnesota Statutes 2023 Supplement, section 290A.03, subdivision 3, is amended
to read:

Subd. 3.

Income.

(a) "Income" means the sum of the following:

(1) federal adjusted gross income as defined in 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, to the extent the sum of amounts exceeds the retirement base amount for
the claimant and spouse;

(xii) to the extent not included in federal adjusted gross income, distributions received
by the claimant or spouse from a traditional or Roth style retirement account or plan;

(xiii) nontaxable scholarship or fellowship grants;

(xiv) alimony received to the extent not included in the recipient's income;

(xv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue
Code;

(xvi) the amount deducted for tuition expenses under section 222 of the Internal Revenue
Code; and

(xvii) 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" shall mean federal adjusted gross income reflected in
the fiscal year ending in the calendar year. Federal adjusted gross income shall 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 which was exclusively funded by the claimant
or spouse and which funding payments were not excluded from federal adjusted gross
income in the years when the payments were made;

(3) to the extent included in federal adjusted gross income, amounts contributed by the
claimant or spouse to a traditional or Roth style retirement account or plan, but not to exceed
the retirement base amount reduced by the amount of contributions excluded from federal
adjusted gross income, but not less than zero;

(4) surplus food or other relief in kind supplied by a governmental agency;

(5) relief granted under this chapter;

(6) child support payments received under a temporary or final decree of dissolution or
legal separation;

(7) 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;

(8) alimony paid; deleted text begin or
deleted text end

(9) veterans disability compensation paid under title 38 of the United States Code new text begin ; or
new text end

new text begin (10) to the extent included in federal adjusted gross income, the amount of discharge of
indebtedness awarded to the claimant under section 332.74, subdivision 3 new text end .

(c) The sum of the following amounts may be subtracted from income:

(1) for the claimant's first dependent, the exemption amount multiplied by 1.4;

(2) for the claimant's second dependent, the exemption amount multiplied by 1.3;

(3) for the claimant's third dependent, the exemption amount multiplied by 1.2;

(4) for the claimant's fourth dependent, the exemption amount multiplied by 1.1;

(5) for the claimant's fifth dependent, the exemption amount; and

(6) if the claimant or claimant's spouse had a disability or attained the age of 65 on or
before December 31 of the year for which the taxes were levied, the exemption amount.

(d) For purposes of this subdivision, the following terms have the meanings given:

(1) "exemption amount" means the exemption amount under section 290.0121,
subdivision 1, paragraph (b), for the taxable year for which the income is reported;

(2) "retirement base amount" means the deductible amount for the taxable year for the
claimant and spouse under section 219(b)(5)(A) of the Internal Revenue Code, adjusted for
inflation as provided in section 219(b)(5)(C) of the Internal Revenue Code, without regard
to whether the claimant or spouse claimed a deduction; and

(3) "traditional or Roth style retirement account or plan" means retirement plans under
sections 401, 403, 408, 408A, and 457 of the Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property taxes payable in 2025 and
thereafter.
new text end