Minnesota Legislature
HF 1068
as introduced - 90th Legislature (2017 - 2018) Posted on 03/23/2017 04:33pm
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A bill for an act
relating to taxation; individual income; modifying the dependent care credit;
amending Minnesota Statutes 2016, sections 290.067, subdivisions 1, 2, 2b, 3;
290.0674, by adding a subdivision; repealing Minnesota Statutes 2016, section
290.067, subdivision 2a.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2016, section 290.067, subdivision 1, is amended to read:
Subdivision 1.
Amount of credit.
(a) A taxpayer may take as a credit against the tax
due from the taxpayer and a spouse, if any, under this chapter an amount equal to the new text begin sum
of new text end dependent care deleted text begin credit for which the taxpayer is eligible pursuant to the provisions of
section 21 of the Internal Revenue Code subject to the limitations provided in subdivision
2 except thatdeleted text end new text begin credits calculated under this paragraph and paragraphs (b), (d), and (e).new text end In
determining whether deleted text begin the child qualified as a dependentdeleted text end new text begin expenses were paid to care for a
qualifying individualnew text end , income received as a Minnesota family investment program grant or
allowance to or on behalf of the deleted text begin childdeleted text end new text begin qualifying individualnew text end must not be taken into account
in determining whether the deleted text begin childdeleted text end new text begin qualifying individualnew text end received more than half of the deleted text begin child'sdeleted text end new text begin
individual'snew text end support from the taxpayerdeleted text begin , and the provisions of section 32(b)(1)(D) of the
Internal Revenue Code do not applydeleted text end .
(b) deleted text begin If a child who has not attained the age of six years at the close of the taxable year is
cared for at a licensed family day care home operated by the child's parent, the taxpayer is
deemed to have paid employment-related expenses.deleted text end new text begin A taxpayer who incurs actual
employment-related expenses may take as a credit against the tax imposed under this chapter
an amount equal to the dependent care credit for which the taxpayer is eligible under section
21 of the Internal Revenue Code.
new text end
new text begin
(c) A taxpayer who elects to claim a credit under paragraph (d) or (e) may claim a credit
under paragraph (b) only for employment-related expenses paid to care for qualifying
individuals other than a child for whom deemed expenses were used to claim the credit
under paragraph (d) or (e).
new text end
new text begin (d) In lieu of the credit under paragraph (b), a taxpayer who operates a licensed family
day care home may elect to claim as a credit against the tax imposed under this chapter an
amount equal to the dependent care credit for which the taxpayer is eligible under section
21 of the Internal Revenue Code, calculated using deemed expenses rather than actual
expenses paid. new text end If the child is 16 months old or younger at the close of the taxable year, the
deleted text begin amount ofdeleted text end new text begin deemednew text end expenses deleted text begin deemed to have been paid equalsdeleted text end new text begin are equal tonew text end the maximum
deleted text begin limitdeleted text end new text begin amount of employment-related expenses incurred during the taxable year that may be
taken into accountnew text end for one deleted text begin qualifieddeleted text end new text begin qualifyingnew text end individual under section 21(c) and (d) of the
Internal Revenue Code. If the child is older than 16 months of age but has not attained the
age of six years at the close of the taxable year, the deleted text begin amount of expenses deemed to have
been paid equalsdeleted text end new text begin deemed expenses are equal tonew text end the amount the licensee would charge for
the care of a child of the same age for the same number of hours of care.new text begin If the child has
attained the age of six at the close of the taxable year, deemed expenses are zero.
new text end
deleted text begin (c) If adeleted text end new text begin (e) In lieu of the credit under paragraph (b), a new text end married couplenew text begin may elect to claim
a credit against the tax imposed under this chapter as computed under paragraph (f), if the
married couplenew text end :
(1) has a child who has not attained the age of one year at the close of the taxable year;
(2) files a joint tax return for the taxable year; deleted text begin and
deleted text end
(3) does not participate in a dependent care assistance program as defined in section 129
of the Internal Revenue Codedeleted text begin , in lieu of the actual employment related expenses paid for
that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of (i)
the combined earned income of the couple or (ii) the amount of the maximum limit for one
qualified individual under section 21(c) and (d) of the Internal Revenue Code will be deemed
to be the employment related expense paid for that child. The earned income limitation of
section 21(d) of the Internal Revenue Code shall not apply to this deemed amount. These
deemed amounts apply regardless of whether any employment-related expenses have been
paid.deleted text end new text begin ; and
new text end
new text begin
(4) does not operate a licensed family day care center home.
new text end
new text begin
(f) A married couple meeting the requirements of paragraph (e) is allowed a credit against
the tax due under this chapter equal to the dependent care credit for which the couple is
eligible under section 21 of the Internal Revenue Code, calculated using deemed expenses
rather than actual employment-related expenses paid. For purposes of this paragraph, deemed
expenses are the lesser of (1) the combined earned income of the couple, or (2) the maximum
amount of employment-related expenses incurred during the taxable year that may be taken
into account for one qualifying individual under section 21(c) and (d) of the Internal Revenue
Code, or for two qualifying individuals for a taxpayer with two children who have not
attained the age of one. The earned income limitation in section 21(d) of the Internal Revenue
Code does not apply to this deemed amount. The deemed amount applies regardless of
whether the taxpayer has paid any employment-related expenses.
new text end
deleted text begin (d)deleted text end new text begin (g)new text end If the taxpayer is not required and does not file a federal individual income tax
return for the tax year, new text begin or if the taxpayer does file a federal return but does not claim a
federal dependent care credit, new text end no credit is allowed for any amount paid to any person unless:
(1) the name, address, and taxpayer identification number of the person are included on
the return claiming the credit; or
(2) if the person is an organization described in section 501(c)(3) of the Internal Revenue
Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name
and address of the person are included on the return claiming the credit.
In the case of a failure to provide the information required under the preceding sentence,
the preceding sentence does not apply if it is shown that the taxpayer exercised due diligence
in attempting to provide the information required.
deleted text begin (e)deleted text end new text begin (h)new text end In the case of a nonresident, part-year resident, or a person who has earned income
not subject to tax under this chapter including earned income excluded pursuant to section
290.0132, subdivision 10, the credit determined under new text begin this new text end section deleted text begin 21 of the Internal Revenue
Codedeleted text end must be allocated based on the ratio by which the earned income of the claimant and
the claimant's spouse from Minnesota sources bears to the total earned income of the claimant
and the claimant's spouse.
deleted text begin (f)deleted text end new text begin (i)new text end For residents of Minnesota, the subtractions for military pay under section
290.0132, subdivisions 11 and 12, are not considered "earned income not subject to tax
under this chapter."
deleted text begin (g)deleted text end new text begin (j)new text end For residents of Minnesota, the exclusion of combat pay under section 112 of the
Internal Revenue Code is not considered "earned income not subject to tax under this
chapter."
new text begin
(k) For purposes of this section, the terms "qualifying individual" and
"employment-related expenses" have the meanings given in section 21 of the Internal
Revenue Code.
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 290.067, subdivision 2, is amended to read:
Subd. 2.
Limitations.
deleted text begin
The credit for expenses incurred for the care of each dependent
shall not exceed $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
(a) The maximum credit under subdivision 1, paragraph (b), is:
new text end
new text begin
(1) $1,050 for a taxpayer with employment-related expenses for one qualifying individual;
new text end
new text begin
(2) $2,100 for a taxpayer with employment-related expenses for two or more qualifying
individuals;
new text end
new text begin
(3) $1,050 for a taxpayer who elects to claim a credit under subdivision 1, paragraph
(d) or (e), if that credit is based on deemed expenses for one child; and
new text end
new text begin
(4) $0 for a taxpayer who elects to claim a credit under subdivision 1, paragraph (d) or
(e), if that credit is based on deemed expenses for two or more children.
new text end
new text begin
(b) The maximum credit under subdivision 1, paragraphs (d) and (e), is:
new text end
new text begin
(1) $720 for a taxpayer with deemed expenses for one child; and
new text end
new text begin
(2) $1,440 for a taxpayer with deemed expenses for two or more children.
new text end
new text begin
(c) For a taxpayer who claims a credit under subdivision 1, paragraph (b), who has
federal adjusted gross income, as defined in the Internal Revenue Code, in excess of $77,000,
the credit under subdivision 1, paragraph (b), is equal to the lesser of:
new text end
new text begin
(1) the credit calculated under subdivision 1, paragraph (b); or
new text end
new text begin
(2) $600 minus five percent of federal adjusted gross income in excess of $77,000 for
a taxpayer with one qualifying individual, or $1,200 minus five percent of federal adjusted
gross income in excess of $77,000 for a taxpayer with two or more qualifying individuals,
but in no case is the credit less than zero.
new text end
new text begin
(d) For a taxpayer who elects to claim the credit under subdivision 1, paragraph (d) or
(e), with federal adjusted gross income, as defined in the Internal Revenue Code, in excess
of $25,000, the credit is equal to the lesser of:
new text end
new text begin
(1) the credit calculated under subdivision 1, paragraph (d) or (e); or
new text end
new text begin
(2) $720 minus five percent of federal adjusted gross income in excess of $25,000 for
a taxpayer with one qualifying individual, or $1,440 minus five percent of federal adjusted
gross income in excess of $25,000 for a taxpayer with two or more qualifying individuals,
but in no case is the credit 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. 3.
Minnesota Statutes 2016, section 290.067, subdivision 2b, is amended to read:
Subd. 2b.
Inflation adjustment.
The commissioner shall adjust the dollar amount of
the income threshold at which the maximum credit begins to be reduced under subdivision
2 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 "1999"deleted text end new text begin "2016"new text end shall be substituted
for the word "1992." For deleted text begin 2001deleted 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 1999deleted text end new text begin 2016new text end , to the 12 months ending on
August 31, deleted text begin 2000deleted text end new text begin 2017new text end , and in each subsequent year, from the 12 months ending on August
31, deleted text begin 1999deleted 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 must not be
considered a "rule" and is not subject to the Administrative Procedure Act contained in
chapter 14. The threshold amount as adjusted must be rounded to the nearest $10 amount.
If the amount ends in $5, the amount is rounded up to the nearest $10 amount.
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 290.067, subdivision 3, is amended to read:
Subd. 3.
Credit to be refundable.
If the amount of credit which a claimant would be
eligible to receive pursuant to this deleted text begin subdivisiondeleted text end new text begin sectionnew text end exceeds the claimant's tax liability
under chapter 290, the excess amount of the credit shall be refunded to the claimant by the
commissioner deleted text begin of revenuedeleted 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. 5.
Minnesota Statutes 2016, 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 deducted for tuition expenses under section 222 of the Internal Revenue
Code; and
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.
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, 2016.
new text end
Sec. 6. new text begin REPEALER.
new text end
new text begin
Minnesota Statutes 2016, section 290.067, subdivision 2a,
new text end
new text begin
is 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, 2016.
new text end
APPENDIX
Repealed Minnesota Statutes: 17-2449
290.067 DEPENDENT CARE CREDIT.
Subd. 2a.
Income.
(a) For purposes of this section, "income" means the sum of the following:
(1) federal adjusted gross income as defined in section 62 of the Internal Revenue Code; and
(2) the sum of the following amounts to the extent not included in clause (1):
(i) all nontaxable income;
(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;
(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;
(iv) cash public assistance and relief;
(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;
(vi) interest received from the federal or a state government or any instrumentality or political subdivision thereof;
(vii) workers' compensation;
(viii) nontaxable strike benefits;
(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;
(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 1986, as amended through December 31, 1995;
(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;
(xii) nontaxable scholarship or fellowship grants;
(xiii) the amount of deduction allowed under section 199 of the Internal Revenue Code;
(xiv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue Code;
(xv) the amount deducted for tuition expenses under section 222 of the Internal Revenue Code; and
(xvi) the amount deducted for certain expenses of elementary and secondary school teachers under section 62(a)(2)(D) of the Internal Revenue Code.
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.
(b) "Income" does not include:
(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;
(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;
(3) surplus food or other relief in kind supplied by a governmental agency;
(4) relief granted under chapter 290A;
(5) child support payments received under a temporary or final decree of dissolution or legal separation; and
(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.