HF 772

as introduced - 87th Legislature (2011 - 2012) Posted on 02/28/2011 10:35am

A bill for an act
relating to taxation; individual income; modifying the dependent care credit;
amending Minnesota Statutes 2010, sections 290.067, subdivision 2; 290.0674,
subdivision 2, by adding a subdivision; repealing Minnesota Statutes 2010,
section 290.067, subdivisions 2a, 2b.

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

Section 1.

Minnesota Statutes 2010, section 290.067, subdivision 2, is amended to read:

Subd. 2.

Limitations.

The credit for expenses incurred for the care of each
dependent shall not exceed deleted text begin $720 in any taxable year, and the total credit for all dependents
of a claimant shall not exceed $1,440 in a taxable year. The maximum total credit shall
be reduced according to the amount of the income of the claimant and a spouse, if any,
as follows:
deleted text end

deleted text begin income up to $18,040, $720 maximum for one dependent, $1,440 for all dependents;
deleted text end

deleted text begin income over $18,040, the maximum credit for one dependent shall be reduced by
$18 for every $350 of additional income, $36 for all dependents.
deleted text end

deleted text begin The commissioner shall construct and make available to taxpayers tables showing
the amount of the credit at various levels of income and expenses. The tables shall follow
the schedule contained in this subdivision, except that the commissioner may graduate the
transitions between expenses and income brackets. deleted text end new text begin the dependent care credit for which
the taxpayer is eligible under the provisions of section 21 of the Internal Revenue Code,
without regard to the limitations of section 26 of the Internal Revenue Code, minus the
taxpayer's liability for federal income tax after deduction of the child tax credit. In the
case of a taxpayer eligible for a credit under the provisions of subdivision 1, paragraph
(b), or eligible for a credit as a result of income received as a Minnesota family investment
program grant or allowance not being taken into account in determining if a child qualified
as a dependent, as provided in subdivision 1, paragraph (a), the term "dependent care
credit for which the taxpayer is eligible under the provisions of section 21 of the Internal
Revenue Code" means the dependent care credit for which the taxpayer would be eligible
if the taxpayer had paid the deemed expense amount as provided in subdivision 1,
paragraph (b), or if income received as a Minnesota family investment program grant
or allowance had not been taken into account in determining if a child qualified as a
dependent, as provided in subdivision 1, paragraph (a). In no case may the credit under
this section be less than zero.
new text end

new text begin For purposes of this subdivision, "liability for federal income tax" means tax as
determined under sections 1, 2, 3, and 55 of the Internal Revenue Code, "child tax credit"
means the credit allowed under section 24 of the Internal Revenue Code, excluding the
additional credit under section 24(d) of the Internal Revenue Code, and "Internal Revenue
Code" means the Internal Revenue Code of 1986, as amended through December 17, 2010.
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, 2010.
new text end

Sec. 2.

Minnesota Statutes 2010, section 290.0674, subdivision 2, is amended to read:

Subd. 2.

Limitations.

(a) For claimants with income not greater than $33,500, the
maximum credit allowed for a family is $1,000 multiplied by the number of qualifying
children in kindergarten through grade 12 in the family. The maximum credit for families
with one qualifying child in kindergarten through grade 12 is reduced by $1 for each $4 of
household income over $33,500, and the maximum credit for families with two or more
qualifying children in kindergarten through grade 12 is reduced by $2 for each $4 of
household income over $33,500, but in no case is the credit less than zero.

deleted text begin For purposes of this section "income" has the meaning given in section 290.067,
subdivision 2a. deleted text end In the case of a married claimant, a credit is not allowed unless a joint
income tax return is filed.

(b) For a nonresident or part-year resident, the credit determined under subdivision 1
and the maximum credit amount in paragraph (a) must be allocated using the percentage
calculated in section 290.06, subdivision 2c, paragraph (e).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

Sec. 3.

Minnesota Statutes 2010, section 290.0674, is amended by adding a subdivision
to read:

new text begin Subd. 2a. new text end

new text begin Income. new text end

new text begin (a) For purposes of this section, "income" means the sum of
the following:
new text end

new text begin (1) federal adjusted gross income as defined in section 62 of the Internal Revenue
Code; and
new text end

new text begin (2) the sum of the following amounts to the extent not included in clause (1):
new text end

new text begin (i) all nontaxable income;
new text end

new text begin (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;
new text end

new text begin (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;
new text end

new text begin (iv) cash public assistance and relief;
new text end

new text begin (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;
new text end

new text begin (vi) interest received from the federal or a state government or any instrumentality
or political subdivision thereof;
new text end

new text begin (vii) workers' compensation;
new text end

new text begin (viii) nontaxable strike benefits;
new text end

new text begin (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;
new text end

new text begin (x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of
1986, as amended through December 31, 1995;
new text end

new text begin (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;
new text end

new text begin (xii) nontaxable scholarship or fellowship grants;
new text end

new text begin (xiii) the amount of deduction allowed under section 199 of the Internal Revenue
Code;
new text end

new text begin (xiv) the amount of deduction allowed under section 220 or 223 of the Internal
Revenue Code;
new text end

new text begin (xv) the amount of tuition expenses required to be added to income under section
290.01, subdivision 19a, clause (12);
new text end

new text begin (xvi) the amount deducted for certain expenses of elementary and secondary school
teachers under section 62(a)(2)(D) of the Internal Revenue Code; and
new text end

new text begin (xvii) unemployment compensation.
new text end

new text begin In the case of an individual who files an income tax return on a fiscal year basis, the
term "federal adjusted gross income" means federal adjusted gross income reflected in the
fiscal year ending in the next calendar year. Federal adjusted gross income may 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.
new text end

new text begin (b) "Income" does not include:
new text end

new text begin (1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and
102;
new text end

new text begin (2) amounts of any pension or annuity that were exclusively funded by the claimant
or spouse if the funding payments were not excluded from federal adjusted gross income
in the years when the payments were made;
new text end

new text begin (3) surplus food or other relief in kind supplied by a governmental agency;
new text end

new text begin (4) relief granted under chapter 290A;
new text end

new text begin (5) child support payments received under a temporary or final decree of dissolution
or legal separation; and
new text end

new text begin (6) 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.
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, 2010.
new text end

Sec. 4. new text begin REVISOR'S INSTRUCTION.
new text end

new text begin In subsequent editions of Minnesota Statutes, the revisor of statutes shall replace
references to the income definition in 290.067, subdivision 2a, with references to the
income definition in 290.0674, subdivision 2a.
new text end

Sec. 5. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2010, section 290.067, subdivisions 2a and 2b, new text end new text begin are repealed.
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, 2010.
new text end