Minnesota Legislature
HF 328
as introduced - 90th Legislature (2017 - 2018) Posted on 01/30/2017 03:50pm
Bill Text Versions
| Engrossments | ||
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| Introduction | Posted on 01/19/2017 |
Current Version - as introduced
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A bill for an act
relating to taxation; individual income; providing for a maximum rate of 7.85
percent on active trade or business income; amending Minnesota Statutes 2016,
sections 290.06, subdivisions 2c, 2d; 290.0675, subdivisions 1, 3.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2016, 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:
(1) On the first deleted text begin $35,480deleted text end new text begin $37,110new text end , 5.35 percent;
(2) On all over deleted text begin $35,480deleted text end new text begin $37,110new text end , but not over deleted text begin $140,960deleted text end new text begin $147,450new text end , 7.05 percent;
(3) On all over deleted text begin $140,960, but not over $250,000deleted text end new text begin $147,450new text end , 7.85 percent;
(4) On all deleted text begin over $250,000, 9.85 percentdeleted text end new text begin taxable net income, after subtracting active trade
or business income, over $261,510, an additional 2.0 percentnew 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:
(1) On the first deleted text begin $24,270deleted text end new text begin $25,390new text end , 5.35 percent;
(2) On all over deleted text begin $24,270deleted text end new text begin $25,390new text end , but not over deleted text begin $79,730deleted text end new text begin $83,400new text end , 7.05 percent;
(3) On all over deleted text begin $79,730, but not over $150,000deleted text end new text begin $83,400new text end , 7.85 percent;
(4) On all deleted text begin over $150,000, 9.85 percentdeleted text end new text begin taxable net income, after subtracting active trade
or business income, over $156,910, an additional 2.0 percentnew 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:
(1) On the first deleted text begin $29,880deleted text end new text begin $31,260new text end , 5.35 percent;
(2) On all over deleted text begin $29,880deleted text end new text begin $31,260new text end , but not over deleted text begin $120,070deleted text end new text begin $125,600new text end , 7.05 percent;
(3) On all over deleted text begin $120,070, but not over $200,000deleted text end new text begin $125,600new text end , 7.85 percent;
(4) On all deleted text begin over $200,000, 9.85 percentdeleted text end new text begin taxable net income, after subtracting active trade
or business income, over $209,210, an additional 2.0 percentnew 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 290.0131, subdivisions 2 and 6 to 11, and reduced by the Minnesota assignable
portion of the subtraction for United States government interest under section 290.0132,
subdivision 2, and the subtractions under section 290.0132, subdivisions 9, 10, 14, 15, 17,
and 18, 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, increased by the amounts specified in section 290.0131,
subdivisions 2 and 6 to 11, and reduced by the amounts specified in section 290.0132,
subdivisions 2, 9, 10, 14, 15, 17, and 18.
new text begin
(f) For purposes of this subdivision, "active trade or business income" means the
distributive share of income or loss, as defined in sections 703(a) and 1366(a)(2) of the
Internal Revenue Code, combined from all businesses, firms, partnerships, or S corporations
in which the taxpayer materially participates, as defined in section 469(h) of the Internal
Revenue Code, and that have employees or tangible property in this state, but in no case
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 290.06, subdivision 2d, is amended to read:
Subd. 2d.
Inflation adjustment of brackets.
(a) For taxable years beginning after
December 31, deleted text begin 2013deleted text end new text begin 2017new text end , the minimum and maximum dollar amounts for each rate bracket
for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the percentage
determined under paragraph (b). For the purpose of making the adjustment as provided in
this subdivision all of the rate brackets provided in subdivision 2c shall be the rate brackets
as they existed for taxable years beginning after December 31, deleted text begin 2012deleted text end new text begin 2016new text end , and before
January 1, deleted text begin 2014deleted text end new text begin 2018new text end . The rate applicable to any rate bracket must not be changed. The
dollar amounts setting forth the tax shall be adjusted to reflect the changes in the rate brackets.
The rate brackets as adjusted must be rounded to the nearest $10 amount. If the rate bracket
ends in $5, it must be rounded up to the nearest $10 amount.
(b) The commissioner shall adjust the rate brackets and 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 "2012"deleted text end new text begin "2016"new text end shall be substituted for the word "1992." For deleted text begin 2014deleted text end new text begin 2018new text end ,
the commissioner shall then determine the percent change from the 12 months ending on
August 31, deleted text begin 2012deleted text end new text begin 2016new text end , to the 12 months ending on August 31, deleted text begin 2013deleted text end new text begin 2017new text end , and in each
subsequent year, from the 12 months ending on August 31, deleted text begin 2012deleted 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 shall not be considered a "rule" and shall not be
subject to the Administrative Procedure Act contained in chapter 14.
No later than December 15 of each year, the commissioner shall announce the specific
percentage that will be used to adjust the tax rate brackets.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2017.
new text end
Sec. 3.
Minnesota Statutes 2016, section 290.0675, subdivision 1, is amended to read:
Subdivision 1.
Definitions.
(a) For purposes of this section the following terms have
the meanings given.
(b) "Earned income" means the sum of the following, to the extent included in Minnesota
taxable income:
(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
(2) income received from a retirement pension, profit-sharing, stock bonus, or annuity
plan; and
(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue Code.
(c) "Taxable income" means net income as defined in section 290.01, subdivision 19.
(d) "Earned income of lesser-earning spouse" means the earned income of the spouse
with the lesser amount of earned income as defined in paragraph (b) for the taxable year
minus the sum of (i) the amount for one exemption under section 151(d) of the Internal
Revenue Code and (ii) one-half the amount of the standard deduction under section
63(c)(2)(A) and (4) of the Internal Revenue Code.
new text begin
(e) "Active trade or business income" has the meaning given in section 290.06,
subdivision 2c.
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. 4.
Minnesota Statutes 2016, section 290.0675, subdivision 3, is amended to read:
Subd. 3.
Credit amount.
new text begin (a) new text end The credit amount is the difference between deleted text begin the tax on the
couple's joint Minnesota taxable income under the rates and income levels in section 290.06,
subdivision 2c, paragraph (a), as adjusted for the taxable year by section 290.06, subdivision
2d, and the sum of the tax under the rates and income levels of section 290.06, subdivision
2c, paragraph (b), as adjusted for the taxable year by section 290.06, subdivision 2d, on the
earned income of the lesser-earning spouse, and the tax under the rates and income levels
of section 290.06, subdivision 2c, paragraph (b), as adjusted for the taxable year by section
290.06, subdivision 2d, on the couple's joint Minnesota taxable income, minus the earned
income of the lesser-earning spouse.deleted text end new text begin :
new text end
new text begin
(1) the tax on the couple's joint Minnesota taxable income under the rates and income
levels in section 290.06, subdivision 2c, paragraph (a), as adjusted for the taxable year by
section 290.06, subdivision 2d, after subtracting active trade or business income in calculating
the tax under section 290.06, subdivision 2c, paragraph (a), clause (4); and
new text end
new text begin
(2) the sum of:
new text end
new text begin
(i) the tax under the rates and income levels of section 290.06, subdivision 2c, paragraph
(b), as adjusted for the taxable year by section 290.06, subdivision 2d, on the earned income
of the lesser-earning spouse, after subtracting any active trade or business income included
in the earned income of the lesser-earning spouse in calculating the tax under section 290.06,
subdivision 2c, paragraph (b), clause (4); and
new text end
new text begin
(ii) the tax under the rates and income levels of section 290.06, subdivision 2c, paragraph
(b), as adjusted for the taxable year by section 290.06, subdivision 2d, on the couple's joint
Minnesota taxable income, minus the earned income of the lesser-earning spouse, after
subtracting any active trade or business income not included in the earned income of the
lesser-earning spouse in calculating the tax under section 290.06, subdivision 2c, paragraph
(b), clause (4).
new text end
new text begin (b) new text end The commissioner of revenue shall prepare and make available to taxpayers a
comprehensive table showing the credit under this section at brackets of earnings of the
lesser-earning spouse and joint taxable income. The brackets of earnings shall not be more
than $2,000.
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