HF 377

as introduced - 82nd Legislature (2001 - 2002) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to taxation; individual income; extending the 
  1.3             credit for taxes paid to other states to taxes of 
  1.4             German Lander; amending Minnesota Statutes 2000, 
  1.5             section 290.06, subdivision 22. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  Minnesota Statutes 2000, section 290.06, 
  1.8   subdivision 22, is amended to read: 
  1.9      Subd. 22.  [CREDIT FOR TAXES PAID TO ANOTHER STATE.] (a) A 
  1.10  taxpayer who is liable for taxes on or measured by net income to 
  1.11  another state or province or territory of Canada, as provided in 
  1.12  paragraphs (b) through (f), upon income allocated or apportioned 
  1.13  to Minnesota, is entitled to a credit for the tax paid to 
  1.14  another state or province or territory of Canada if the tax is 
  1.15  actually paid in the taxable year or a subsequent taxable year.  
  1.16  A taxpayer who is a resident of this state pursuant to section 
  1.17  290.01, subdivision 7, clause (2), and who is subject to income 
  1.18  tax as a resident in the state of the individual's domicile is 
  1.19  not allowed this credit unless the state of domicile does not 
  1.20  allow a similar credit. 
  1.21     (b) For an individual, estate, or trust, the credit is 
  1.22  determined by multiplying the tax payable under this chapter by 
  1.23  the ratio derived by dividing the income subject to tax in the 
  1.24  other state or province or territory of Canada that is also 
  1.25  subject to tax in Minnesota while a resident of Minnesota by the 
  2.1   taxpayer's federal adjusted gross income, as defined in section 
  2.2   62 of the Internal Revenue Code, modified by the addition 
  2.3   required by section 290.01, subdivision 19a, clause (1), and the 
  2.4   subtraction allowed by section 290.01, subdivision 19b, clause 
  2.5   (1), to the extent the income is allocated or assigned to 
  2.6   Minnesota under sections 290.081 and 290.17.  
  2.7      (c) If the taxpayer is an athletic team that apportions all 
  2.8   of its income under section 290.17, subdivision 5, the credit is 
  2.9   determined by multiplying the tax payable under this chapter by 
  2.10  the ratio derived from dividing the total net income subject to 
  2.11  tax in the other state or province or territory of Canada by the 
  2.12  taxpayer's Minnesota taxable income. 
  2.13     (d) The credit determined under paragraph (b) or (c) shall 
  2.14  not exceed the amount of tax so paid to the other state or 
  2.15  province or territory of Canada on the gross income earned 
  2.16  within the other state or province or territory of Canada 
  2.17  subject to tax under this chapter, nor shall the allowance of 
  2.18  the credit reduce the taxes paid under this chapter to an amount 
  2.19  less than what would be assessed if such income amount was 
  2.20  excluded from taxable net income. 
  2.21     (e) In the case of the tax assessed on a lump sum 
  2.22  distribution under section 290.032, the credit allowed under 
  2.23  paragraph (a) is the tax assessed by the other state or province 
  2.24  or territory of Canada on the lump sum distribution that is also 
  2.25  subject to tax under section 290.032, and shall not exceed the 
  2.26  tax assessed under section 290.032.  To the extent the total 
  2.27  lump sum distribution defined in section 290.032, subdivision 1, 
  2.28  includes lump sum distributions received in prior years or is 
  2.29  all or in part an annuity contract, the reduction to the tax on 
  2.30  the lump sum distribution allowed under section 290.032, 
  2.31  subdivision 2, includes tax paid to another state that is 
  2.32  properly apportioned to that distribution. 
  2.33     (f) If a Minnesota resident reported an item of income to 
  2.34  Minnesota and is assessed tax in such other state or province or 
  2.35  territory of Canada on that same income after the Minnesota 
  2.36  statute of limitations has expired, the taxpayer shall receive a 
  3.1   credit for that year under paragraph (a), notwithstanding any 
  3.2   statute of limitations to the contrary.  The claim for the 
  3.3   credit must be submitted within one year from the date the taxes 
  3.4   were paid to the other state or province or territory of 
  3.5   Canada.  The taxpayer must submit sufficient proof to show 
  3.6   entitlement to a credit. 
  3.7      (g) For the purposes of this subdivision, a resident 
  3.8   shareholder of a corporation treated as an "S" corporation under 
  3.9   section 290.9725, must be considered to have paid a tax imposed 
  3.10  on the shareholder in an amount equal to the shareholder's pro 
  3.11  rata share of any net income tax paid by the S corporation to 
  3.12  another state.  For the purposes of the preceding sentence, the 
  3.13  term "net income tax" means any tax imposed on or measured by a 
  3.14  corporation's net income. 
  3.15     (h) For the purposes of this subdivision, a resident 
  3.16  partner of an entity taxed as a partnership under the Internal 
  3.17  Revenue Code must be considered to have paid a tax imposed on 
  3.18  the partner in an amount equal to the partner's pro rata share 
  3.19  of any net income tax paid by the partnership to another state.  
  3.20  For purposes of the preceding sentence, the term "net income" 
  3.21  tax means any tax imposed on or measured by a partnership's net 
  3.22  income. 
  3.23     (i) For the purposes of this subdivision, "another state": 
  3.24     (1) includes: 
  3.25     (i) the District of Columbia, but does not include; 
  3.26     (ii) a province or territory of Canada; and 
  3.27     (iii) a land of the Federal Republic of Germany; but 
  3.28     (2) excludes Puerto Rico or and the several territories 
  3.29  organized by Congress. 
  3.30     (j) The limitations on the credit in paragraphs (b), (c), 
  3.31  and (d), are imposed on a state by state basis. 
  3.32     (k) For a tax imposed by a province or territory of Canada 
  3.33  or by a land of the Federal Republic of Germany, the tax for 
  3.34  purposes of this subdivision is the excess of the tax over the 
  3.35  amount of the foreign tax credit allowed under section 27 of the 
  3.36  Internal Revenue Code.  In determining the amount of the foreign 
  4.1   tax credit allowed, the net income taxes imposed by Canada and 
  4.2   the Federal Republic of Germany on the income are deducted first.
  4.3   Any remaining amount of the allowable foreign tax credit reduces 
  4.4   the provincial, territorial, or land tax that qualifies for the 
  4.5   credit under this subdivision. 
  4.6      [EFFECTIVE DATE.] This section is effective for taxable 
  4.7   years beginning after December 31, 2000.