HF 42

as introduced - 84th Legislature, 2005 1st Special Session (2005 - 2005) Posted on 12/15/2009 12:00am

A bill for an act
relating to taxes; adding a fourth bracket to the
income tax; increasing the cigarette tax; modifying
the dedication of cigarette tax revenues; imposing a
floor stocks tax; amending Minnesota Statutes 2004,
sections 290.06, subdivision 2c; 297F.05, subdivision
1; 297F.10, subdivision 1.

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

Section 1.

Minnesota Statutes 2004, section 290.06,
subdivision 2c, is amended to read:

Subd. 2c.

Schedules of rates for individuals, estates,
and trusts.

(a) The income taxes imposed by this chapter upon
married individuals filing joint returns and surviving spouses
as defined in section 2(a) of the Internal Revenue Code must be
computed by applying to their taxable net income the following
schedule of rates:

new text begin For taxable years beginning after December 31, 2004, and
before January 1, 2006,
new text end

(1) On the first $25,680, 5.35 percent;

(2) On all over $25,680, but not over $102,030, 7.05
percent;

(3) On all over $102,030, new text begin but not over $250,000, new text end 7.85
percent new text begin ;
new text end

new text begin (4) On all over $250,000, 8.325 percent; and
new text end

new text begin For taxable years beginning after December 31, 2005,
new text end

new text begin (1) On the first $25,680, 5.35 percent;
new text end

new text begin (2) On all over $25,680, but not over $102,030, 7.05
percent;
new text end

new text begin (3) On all over $102,030, but not over $250,000, 7.85
percent;
new text end

new text begin (4) On all over $250,000, 8.8 percent, for taxable years
beginning before the fourth bracket termination year as defined
in paragraph (f). For the fourth bracket termination year and
subsequent taxable years, the income included in this clause
will be subject to the rate in clause (3) new text end .

Married individuals filing separate returns, estates, and
trusts must compute their income tax by applying the above rates
to their taxable income, except that the income brackets will be
one-half of the above amounts.

(b) The income taxes imposed by this chapter upon unmarried
individuals must be computed by applying to taxable net income
the following schedule of rates:

new text begin For taxable years beginning after December 31, 2004, and
before January 1, 2006,
new text end

(1) On the first $17,570, 5.35 percent;

(2) On all over $17,570, but not over $57,710, 7.05
percent;

(3) On all over $57,710, new text begin but not over $166,665, new text end 7.85
percent new text begin ;
new text end

new text begin (4) On all over $166,665, 8.325 percent; and
new text end

new text begin For taxable years beginning after December 31, 2005,
new text end

new text begin (1) On the first $17,570, 5.35 percent;
new text end

new text begin (2) On all over $17,570, but not over $57,710, 7.05
percent;
new text end

new text begin (3) On all over $57,710, but not over $166,665, 7.85
percent;
new text end

new text begin (4) On all over $166,665, 8.8 percent, for taxable years
beginning before the fourth bracket termination year as defined
in paragraph (f). For the fourth bracket termination year and
subsequent taxable years, the income included in this clause
will be subject to the rate in clause (3) new text end .

(c) The income taxes imposed by this chapter upon unmarried
individuals qualifying as a head of household as defined in
section 2(b) of the Internal Revenue Code must be computed by
applying to taxable net income the following schedule of rates:

new text begin For taxable years beginning after December 31, 2004, and
before January 1, 2006,
new text end

(1) On the first $21,630, 5.35 percent;

(2) On all over $21,630, but not over $86,910, 7.05
percent;

(3) On all over $86,910, new text begin but not over $208,330, new text end 7.85
percent new text begin ;
new text end

new text begin (4) On all over $208,330, 8.325 percent; and
new text end

new text begin For taxable years beginning after December 31, 2005,
new text end

new text begin (1) On the first $21,630, 5.35 percent;
new text end

new text begin (2) On all over $21,630, but not over $86,910, 7.05
percent;
new text end

new text begin (3) On all over $86,910, but not over $208,330, 7.85
percent;
new text end

new text begin (4) On all over $208,330, 8.8 percent, for taxable years
beginning before the fourth bracket termination year as defined
in paragraph (f). For the fourth bracket termination year and
subsequent years, the income included in this clause will be
subject to the rate in clause (3) new text end .

(d) In lieu of a tax computed according to the rates set
forth in this subdivision, the tax of any individual taxpayer
whose taxable net income for the taxable year is less than an
amount determined by the commissioner must be computed in
accordance with tables prepared and issued by the commissioner
of revenue based on income brackets of not more than $100. The
amount of tax for each bracket shall be computed at the rates
set forth in this subdivision, provided that the commissioner
may disregard a fractional part of a dollar unless it amounts to
50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the
entire year must compute the individual's Minnesota income tax
as provided in this subdivision. After the application of the
nonrefundable credits provided in this chapter, the tax
liability must then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source
federal adjusted gross income as defined in section 62 of the
Internal Revenue Code and increased by the additions required
under section 290.01, subdivision 19a, clauses (1), (5), and
(6), and reduced by the subtraction under section 290.01,
subdivision 19b, clause (11), and the Minnesota assignable
portion of the subtraction for United States government interest
under section 290.01, subdivision 19b, clause (1), after
applying the allocation and assignability provisions of section
290.081, clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted
gross income as defined in section 62 of the Internal Revenue
Code of 1986, increased by the amounts specified in section
290.01, subdivision 19a, clauses (1), (5), and (6), and reduced
by the amounts specified in section 290.01, subdivision 19b,
clauses (1) and (11).

new text begin (f) In this subdivision, the fourth bracket termination
year is the first taxable year beginning after the commissioner
of finance has determined that there will be a positive
unrestricted budgeting general fund balance at the close of the
biennium that is sufficient to complete the allocations required
under section 16A.152, subdivision 2, paragraph (a), clauses (1)
and (2).
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, 2004.
new text end

Sec. 2.

Minnesota Statutes 2004, section 297F.05,
subdivision 1, is amended to read:

Subdivision 1.

Rates; cigarettes.

A tax is imposed upon
the sale of cigarettes in this state, upon having cigarettes in
possession in this state with intent to sell, upon any person
engaged in business as a distributor, and upon the use or
storage by consumers, at the following rates:

(1) on cigarettes weighing not more than three pounds per
thousand, deleted text begin 24 deleted text end new text begin 36.5 new text end mills on each such cigarette; and

(2) on cigarettes weighing more than three pounds per
thousand, deleted text begin 48 deleted text end new text begin 73 new text end mills on each such cigarette.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2005.
new text end

Sec. 3.

Minnesota Statutes 2004, section 297F.10,
subdivision 1, is amended to read:

Subdivision 1.

Tax and use tax on cigarettes.

Revenue
received from cigarette taxes, as well as related penalties,
interest, license fees, and miscellaneous sources of revenue
shall be deposited by the commissioner in the state treasury and
credited as follows:

(1) the revenue produced by deleted text begin 3.25 deleted text end new text begin 3.38 new text end mills of the tax on
cigarettes weighing not more than three pounds a thousand and
deleted text begin 6.5 deleted text end new text begin 6.76 new text end mills of the tax on cigarettes weighing more than three
pounds a thousand must be credited to the Academic Health Center
special revenue fund hereby created and is annually appropriated
to the Board of Regents at the University of Minnesota for
Academic Health Center funding at the University of Minnesota;
and

(2) the revenue produced by deleted text begin 1.25 deleted text end new text begin 1.30 new text end mills of the tax on
cigarettes weighing not more than three pounds a thousand and
deleted text begin 2.5 deleted text end new text begin 2.60 new text end mills of the tax on cigarettes weighing more than three
pounds a thousand must be credited to the medical education and
research costs account hereby created in the special revenue
fund and is annually appropriated to the commissioner of health
for distribution under section 62J.692, subdivision 4; and

(3) the balance of the revenues derived from taxes,
penalties, and interest (under this chapter) and from license
fees and miscellaneous sources of revenue shall be credited to
the general fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for revenues
received for taxes subject to the rate increase in section 2, as
determined by the commissioner of revenue.
new text end

Sec. 4. new text begin FLOOR STOCKS TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Cigarettes. new text end

new text begin (a) A floor stocks tax is
imposed on every person engaged in business in this state as a
distributor, retailer, subjobber, vendor, manufacturer, or
manufacturer's representative of cigarettes, on the stamped
cigarettes and unaffixed stamps in the person's possession or
under the person's control at 12:01 a.m. on July 1, 2005. The
tax is imposed at the following rates:
new text end

new text begin (1) on cigarettes weighing not more than three pounds per
thousand, 12.5 mills on each cigarette; and
new text end

new text begin (2) on cigarettes weighing more than three pounds per
thousand, 25 mills on each cigarette.
new text end

new text begin (b) Each distributor, by July 8, 2005, shall file a report
with the commissioner of revenue, in the form the commissioner
prescribes, showing the stamped cigarettes and unaffixed stamps
on hand at 12:01 a.m. on July 1, 2005, and the amount of tax due
on the cigarettes and unaffixed stamps. The tax imposed by this
section is due and payable by August 1, 2005, and after that
date bears interest as provided in Minnesota Statutes, section
270.75. Each retailer, subjobber, vendor, manufacturer, or
manufacturer's representative shall file a return with the
commissioner, in the form the commissioner prescribes, showing
the cigarettes on hand at 12:01 a.m. on July 1, 2005, and pay
the tax due on them by August 1, 2005. Tax not paid by the due
date bears interest as provided in Minnesota Statutes, section
270.75.
new text end

new text begin Subd. 2. new text end

new text begin Audit and enforcement. new text end

new text begin The tax imposed by this
section is subject to the audit, assessment, and collection
provisions applicable to the taxes imposed under Minnesota
Statutes, chapter 297F. The commissioner shall deposit the
revenues from this tax in the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2005.
new text end