1.1                          A bill for an act 
  1.2             relating to education; making nonpublic schools 
  1.3             subject to the state's high school graduation 
  1.4             requirements if families of students receiving 
  1.5             educational services from the nonpublic school claim a 
  1.6             tax reimbursement for education-related expenses; 
  1.7             amending Minnesota Statutes 2002, sections 123B.41, 
  1.8             subdivision 1; 290.01, subdivision 19b; 290.0674, 
  1.9             subdivision 2; proposing coding for new law in 
  1.10            Minnesota Statutes, chapter 123B.  
  1.11  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.12     Section 1.  Minnesota Statutes 2002, section 123B.41, 
  1.13  subdivision 1, is amended to read: 
  1.14     Subdivision 1.  [APPLICATION.] As used in sections 123B.40 
  1.15  to 123B.48 123B.485, the terms defined in this section shall 
  1.16  have the meanings ascribed to them. 
  1.17     Sec. 2.  [123B.485] [ADDITIONAL REQUIREMENTS.] 
  1.18     (a) A nonpublic school that provides or contracts for an 
  1.19  education-related course, program, or activity for a student in 
  1.20  kindergarten through grade 12 must elect whether or not to admit 
  1.21  students whose families intend to claim a tax deduction under 
  1.22  section 290.01, subdivision 19b, or a tax credit under section 
  1.23  290.0674 for education expenses related to the course, program, 
  1.24  or activity.  If a nonpublic school elects to admit into an 
  1.25  education-related course, program, or activity those students 
  1.26  whose families intend to claim a tax deduction under section 
  1.27  290.01, subdivision 19b, or a tax credit under section 290.0674 
  1.28  for education expenses related to the course, program, or 
  2.1   activity, then the nonpublic school is subject to the state's 
  2.2   high school graduation requirements under chapter 120B. 
  2.3      (b) By July 1 of each year, a nonpublic school must use a 
  2.4   standard state-developed form to inform the department of 
  2.5   revenue and the department of children, families, and learning 
  2.6   whether or not it will admit into an education-related course, 
  2.7   program, or activity those students whose families intend to 
  2.8   claim a tax deduction under section 290.01, subdivision 19b, or 
  2.9   a tax credit under section 290.0674 for education expenses 
  2.10  related to the course, program, or activity.  Before admitting 
  2.11  students into an education-related course, program, or activity, 
  2.12  the nonpublic school must inform students and their families 
  2.13  orally and in writing of the school's election under paragraph 
  2.14  (a), indicating whether or not the school is subject to the 
  2.15  state's high school graduation requirements under chapter 120B. 
  2.16     (c) If a family seeks to enroll its dependent in an 
  2.17  education-related course, program, or activity through a 
  2.18  nonpublic school that is subject to paragraph (a), and the 
  2.19  nonpublic school fails to implement the state's high school 
  2.20  graduation requirements under chapter 120B, then the family may 
  2.21  maintain any action provided by law for enforcing this section.  
  2.22  In addition, the department of children, families, and learning 
  2.23  under this paragraph may reduce any allotments to the nonpublic 
  2.24  school to the extent permitted by law. 
  2.25     (d) The department of children, families, and learning is 
  2.26  responsible for ensuring that nonpublic schools comply with this 
  2.27  section. 
  2.28     Sec. 3.  Minnesota Statutes 2002, section 290.01, 
  2.29  subdivision 19b, is amended to read: 
  2.30     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  2.31  individuals, estates, and trusts, there shall be subtracted from 
  2.32  federal taxable income: 
  2.33     (1) interest income on obligations of any authority, 
  2.34  commission, or instrumentality of the United States to the 
  2.35  extent includable in taxable income for federal income tax 
  2.36  purposes but exempt from state income tax under the laws of the 
  3.1   United States; 
  3.2      (2) if included in federal taxable income, the amount of 
  3.3   any overpayment of income tax to Minnesota or to any other 
  3.4   state, for any previous taxable year, whether the amount is 
  3.5   received as a refund or as a credit to another taxable year's 
  3.6   income tax liability; 
  3.7      (3) the amount paid to others, less the amount used to 
  3.8   claim the credit allowed under section 290.0674, not to exceed 
  3.9   $1,625 for each qualifying child in grades kindergarten to 6 and 
  3.10  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
  3.11  textbooks, and transportation of each qualifying child in 
  3.12  attending an elementary or secondary school situated in 
  3.13  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
  3.14  wherein a resident of this state may legally fulfill the state's 
  3.15  compulsory attendance laws, which is not operated for profit, 
  3.16  and which adheres to the provisions of the Civil Rights Act of 
  3.17  1964 and chapter 363.  For the purposes of this clause, 
  3.18  "tuition" includes fees or tuition as defined in section 
  3.19  290.0674, subdivision 1, clause (1).  As used in this clause, 
  3.20  "textbooks" includes books and other instructional materials and 
  3.21  equipment purchased or leased for use in elementary and 
  3.22  secondary schools in teaching only those subjects legally and 
  3.23  commonly taught in public elementary and secondary schools in 
  3.24  this state.  Equipment expenses qualifying for deduction 
  3.25  includes expenses as defined and limited in section 290.0674, 
  3.26  subdivision 1, clause (3).  "Textbooks" does not include 
  3.27  instructional books and materials used in the teaching of 
  3.28  religious tenets, doctrines, or worship, the purpose of which is 
  3.29  to instill such tenets, doctrines, or worship, nor does it 
  3.30  include books or materials for, or transportation to, 
  3.31  extracurricular activities including sporting events, musical or 
  3.32  dramatic events, speech activities, driver's education, or 
  3.33  similar programs.  No taxpayer whose dependent receives 
  3.34  education-related services in a nonpublic school may claim any 
  3.35  amount of education-related expenses under this clause unless 
  3.36  the nonpublic school providing or contracting for the services 
  4.1   is subject to the state's high school graduation requirements, 
  4.2   consistent with section 123B.485, paragraphs (a) and (b).  For 
  4.3   purposes of the subtraction provided by this clause, "qualifying 
  4.4   child" has the meaning given in section 32(c)(3) of the Internal 
  4.5   Revenue Code; 
  4.6      (4) income as provided under section 290.0802; 
  4.7      (5) to the extent included in federal adjusted gross 
  4.8   income, income realized on disposition of property exempt from 
  4.9   tax under section 290.491; 
  4.10     (6) to the extent not deducted in determining federal 
  4.11  taxable income or used to claim the long-term care insurance 
  4.12  credit under section 290.0672, the amount paid for health 
  4.13  insurance of self-employed individuals as determined under 
  4.14  section 162(l) of the Internal Revenue Code, except that the 
  4.15  percent limit does not apply.  If the individual deducted 
  4.16  insurance payments under section 213 of the Internal Revenue 
  4.17  Code of 1986, the subtraction under this clause must be reduced 
  4.18  by the lesser of: 
  4.19     (i) the total itemized deductions allowed under section 
  4.20  63(d) of the Internal Revenue Code, less state, local, and 
  4.21  foreign income taxes deductible under section 164 of the 
  4.22  Internal Revenue Code and the standard deduction under section 
  4.23  63(c) of the Internal Revenue Code; or 
  4.24     (ii) the lesser of (A) the amount of insurance qualifying 
  4.25  as "medical care" under section 213(d) of the Internal Revenue 
  4.26  Code to the extent not deducted under section 162(1) of the 
  4.27  Internal Revenue Code or excluded from income or (B) the total 
  4.28  amount deductible for medical care under section 213(a); 
  4.29     (7) the exemption amount allowed under Laws 1995, chapter 
  4.30  255, article 3, section 2, subdivision 3; 
  4.31     (8) to the extent included in federal taxable income, 
  4.32  postservice benefits for youth community service under section 
  4.33  124D.42 for volunteer service under United States Code, title 
  4.34  42, sections 12601 to 12604; 
  4.35     (9) to the extent not deducted in determining federal 
  4.36  taxable income by an individual who does not itemize deductions 
  5.1   for federal income tax purposes for the taxable year, an amount 
  5.2   equal to 50 percent of the excess of charitable contributions 
  5.3   allowable as a deduction for the taxable year under section 
  5.4   170(a) of the Internal Revenue Code over $500; 
  5.5      (10) for taxable years beginning before January 1, 2008, 
  5.6   the amount of the federal small ethanol producer credit allowed 
  5.7   under section 40(a)(3) of the Internal Revenue Code which is 
  5.8   included in gross income under section 87 of the Internal 
  5.9   Revenue Code; 
  5.10     (11) for individuals who are allowed a federal foreign tax 
  5.11  credit for taxes that do not qualify for a credit under section 
  5.12  290.06, subdivision 22, an amount equal to the carryover of 
  5.13  subnational foreign taxes for the taxable year, but not to 
  5.14  exceed the total subnational foreign taxes reported in claiming 
  5.15  the foreign tax credit.  For purposes of this clause, "federal 
  5.16  foreign tax credit" means the credit allowed under section 27 of 
  5.17  the Internal Revenue Code, and "carryover of subnational foreign 
  5.18  taxes" equals the carryover allowed under section 904(c) of the 
  5.19  Internal Revenue Code minus national level foreign taxes to the 
  5.20  extent they exceed the federal foreign tax credit; and 
  5.21     (12) in each of the five tax years immediately following 
  5.22  the tax year in which an addition is required under subdivision 
  5.23  19a, clause (7), an amount equal to one-fifth of the delayed 
  5.24  depreciation.  For purposes of this clause, "delayed 
  5.25  depreciation" means the amount of the addition made by the 
  5.26  taxpayer under subdivision 19a, clause (7), minus the positive 
  5.27  value of any net operating loss under section 172 of the 
  5.28  Internal Revenue Code generated for the tax year of the 
  5.29  addition.  The resulting delayed depreciation cannot be less 
  5.30  than zero. 
  5.31     Sec. 4.  Minnesota Statutes 2002, section 290.0674, 
  5.32  subdivision 2, is amended to read: 
  5.33     Subd. 2.  [LIMITATIONS.] (a) For claimants with income not 
  5.34  greater than $33,500, the maximum credit allowed is $1,000 per 
  5.35  qualifying child and $2,000 per family.  No credit is allowed 
  5.36  for education-related expenses for claimants with income greater 
  6.1   than $37,500.  The maximum credit per child is reduced by $1 for 
  6.2   each $4 of household income over $33,500, and the maximum credit 
  6.3   per family is reduced by $2 for each $4 of household income over 
  6.4   $33,500, but in no case is the credit less than zero. 
  6.5      For purposes of this section "income" has the meaning given 
  6.6   in section 290.067, subdivision 2a.  In the case of a married 
  6.7   claimant, a credit is not allowed unless a joint income tax 
  6.8   return is filed. 
  6.9      (b) For a nonresident or part-year resident, the credit 
  6.10  determined under subdivision 1 and the maximum credit amount in 
  6.11  paragraph (a) must be allocated using the percentage calculated 
  6.12  in section 290.06, subdivision 2c, paragraph (e). 
  6.13     (c) No individual whose dependent receives 
  6.14  education-related services in a nonpublic school may claim a 
  6.15  credit under this section for education-related expenses unless 
  6.16  the nonpublic school providing or contracting for the services 
  6.17  is subject to the state's high school graduation requirements, 
  6.18  consistent with section 123B.485, paragraphs (a) and (b). 
  6.19     Sec. 5.  [EFFECTIVE DATE.] 
  6.20     Sections 1 to 4 are effective for the 2003 tax year and 
  6.21  later.