as introduced - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to taxation; individual income; allowing a 1.3 long-term capital gain exclusion; amending Minnesota 1.4 Statutes 2002, sections 290.01, subdivision 19b; 1.5 290.091, subdivisions 1, 2, 6. 1.6 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.7 Section 1. Minnesota Statutes 2002, section 290.01, 1.8 subdivision 19b, is amended to read: 1.9 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 1.10 individuals, estates, and trusts, there shall be subtracted from 1.11 federal taxable income: 1.12 (1) interest income on obligations of any authority, 1.13 commission, or instrumentality of the United States to the 1.14 extent includable in taxable income for federal income tax 1.15 purposes but exempt from state income tax under the laws of the 1.16 United States; 1.17 (2) if included in federal taxable income, the amount of 1.18 any overpayment of income tax to Minnesota or to any other 1.19 state, for any previous taxable year, whether the amount is 1.20 received as a refund or as a credit to another taxable year's 1.21 income tax liability; 1.22 (3) the amount paid to others, less the amount used to 1.23 claim the credit allowed under section 290.0674, not to exceed 1.24 $1,625 for each qualifying child in grades kindergarten to 6 and 1.25 $2,500 for each qualifying child in grades 7 to 12, for tuition, 2.1 textbooks, and transportation of each qualifying child in 2.2 attending an elementary or secondary school situated in 2.3 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 2.4 wherein a resident of this state may legally fulfill the state's 2.5 compulsory attendance laws, which is not operated for profit, 2.6 and which adheres to the provisions of the Civil Rights Act of 2.7 1964 and chapter 363. For the purposes of this clause, 2.8 "tuition" includes fees or tuition as defined in section 2.9 290.0674, subdivision 1, clause (1). As used in this clause, 2.10 "textbooks" includes books and other instructional materials and 2.11 equipment purchased or leased for use in elementary and 2.12 secondary schools in teaching only those subjects legally and 2.13 commonly taught in public elementary and secondary schools in 2.14 this state. Equipment expenses qualifying for deduction 2.15 includes expenses as defined and limited in section 290.0674, 2.16 subdivision 1, clause (3). "Textbooks" does not include 2.17 instructional books and materials used in the teaching of 2.18 religious tenets, doctrines, or worship, the purpose of which is 2.19 to instill such tenets, doctrines, or worship, nor does it 2.20 include books or materials for, or transportation to, 2.21 extracurricular activities including sporting events, musical or 2.22 dramatic events, speech activities, driver's education, or 2.23 similar programs. For purposes of the subtraction provided by 2.24 this clause, "qualifying child" has the meaning given in section 2.25 32(c)(3) of the Internal Revenue Code; 2.26 (4) income as provided under section 290.0802; 2.27 (5) to the extent included in federal adjusted gross 2.28 income, income realized on disposition of property exempt from 2.29 tax under section 290.491; 2.30 (6) to the extent not deducted in determining federal 2.31 taxable income or used to claim the long-term care insurance 2.32 credit under section 290.0672, the amount paid for health 2.33 insurance of self-employed individuals as determined under 2.34 section 162(l) of the Internal Revenue Code, except that the 2.35 percent limit does not apply. If the individual deducted 2.36 insurance payments under section 213 of the Internal Revenue 3.1 Code of 1986, the subtraction under this clause must be reduced 3.2 by the lesser of: 3.3 (i) the total itemized deductions allowed under section 3.4 63(d) of the Internal Revenue Code, less state, local, and 3.5 foreign income taxes deductible under section 164 of the 3.6 Internal Revenue Code and the standard deduction under section 3.7 63(c) of the Internal Revenue Code; or 3.8 (ii) the lesser of (A) the amount of insurance qualifying 3.9 as "medical care" under section 213(d) of the Internal Revenue 3.10 Code to the extent not deducted under section 162(1) of the 3.11 Internal Revenue Code or excluded from income or (B) the total 3.12 amount deductible for medical care under section 213(a); 3.13 (7) the exemption amount allowed under Laws 1995, chapter 3.14 255, article 3, section 2, subdivision 3; 3.15 (8) to the extent included in federal taxable income, 3.16 postservice benefits for youth community service under section 3.17 124D.42 for volunteer service under United States Code, title 3.18 42, sections 12601 to 12604; 3.19 (9) to the extent not deducted in determining federal 3.20 taxable income by an individual who does not itemize deductions 3.21 for federal income tax purposes for the taxable year, an amount 3.22 equal to 50 percent of the excess of charitable contributions 3.23 allowable as a deduction for the taxable year under section 3.24 170(a) of the Internal Revenue Code over $500; 3.25 (10) for taxable years beginning before January 1, 2008, 3.26 the amount of the federal small ethanol producer credit allowed 3.27 under section 40(a)(3) of the Internal Revenue Code which is 3.28 included in gross income under section 87 of the Internal 3.29 Revenue Code; 3.30 (11) for individuals who are allowed a federal foreign tax 3.31 credit for taxes that do not qualify for a credit under section 3.32 290.06, subdivision 22, an amount equal to the carryover of 3.33 subnational foreign taxes for the taxable year, but not to 3.34 exceed the total subnational foreign taxes reported in claiming 3.35 the foreign tax credit. For purposes of this clause, "federal 3.36 foreign tax credit" means the credit allowed under section 27 of 4.1 the Internal Revenue Code, and "carryover of subnational foreign 4.2 taxes" equals the carryover allowed under section 904(c) of the 4.3 Internal Revenue Code minus national level foreign taxes to the 4.4 extent they exceed the federal foreign tax credit;
and4.5 (12) in each of the five tax years immediately following 4.6 the tax year in which an addition is required under subdivision 4.7 19a, clause (7), an amount equal to one-fifth of the delayed 4.8 depreciation. For purposes of this clause, "delayed 4.9 depreciation" means the amount of the addition made by the 4.10 taxpayer under subdivision 19a, clause (7), minus the positive 4.11 value of any net operating loss under section 172 of the 4.12 Internal Revenue Code generated for the tax year of the 4.13 addition. The resulting delayed depreciation cannot be less 4.14 than zero; and 4.15 (13) to the extent included in federal taxable income, 60 4.16 percent of adjusted net capital gain, as defined in section 1(h) 4.17 of the Internal Revenue Code. 4.18 [EFFECTIVE DATE.] This section is effective for taxable 4.19 years beginning after December 31, 2002. 4.20 Sec. 2. Minnesota Statutes 2002, section 290.091, 4.21 subdivision 1, is amended to read: 4.22 Subdivision 1. [IMPOSITION OF TAX.] In addition to all 4.23 other taxes imposed by this chapter a tax is imposed on 4.24 individuals, estates, and trusts equal to the excess (if any) of 4.25 (a) an amount equal to 6.45.0 percent of alternative 4.26 minimum taxable income after subtracting the exemption amount, 4.27 over 4.28 (b) the regular tax for the taxable year. 4.29 [EFFECTIVE DATE.] This section is effective for taxable 4.30 years beginning after December 31, 2002. 4.31 Sec. 3. Minnesota Statutes 2002, section 290.091, 4.32 subdivision 2, is amended to read: 4.33 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 4.34 this section, the following terms have the meanings given: 4.35 (a) "Alternative minimum taxable income" means the sum of 4.36 the following for the taxable year: 5.1 (1) the taxpayer's federal alternative minimum taxable 5.2 income as defined in section 55(b)(2) of the Internal Revenue 5.3 Code; 5.4 (2) the taxpayer's itemized deductions allowed in computing 5.5 federal alternative minimum taxable income, but excluding: 5.6 (i) the charitable contribution deduction under section 170 5.7 of the Internal Revenue Code to the extent that the deduction 5.8 exceeds 1.3 percent of adjusted gross income, as defined in 5.9 section 62 of the Internal Revenue Code; 5.10 (ii) the medical expense deduction; 5.11 (iii) the casualty, theft, and disaster loss deduction; and 5.12 (iv) the impairment-related work expenses of a disabled 5.13 person; 5.14 (3) for depletion allowances computed under section 613A(c) 5.15 of the Internal Revenue Code, with respect to each property (as 5.16 defined in section 614 of the Internal Revenue Code), to the 5.17 extent not included in federal alternative minimum taxable 5.18 income, the excess of the deduction for depletion allowable 5.19 under section 611 of the Internal Revenue Code for the taxable 5.20 year over the adjusted basis of the property at the end of the 5.21 taxable year (determined without regard to the depletion 5.22 deduction for the taxable year); 5.23 (4) to the extent not included in federal alternative 5.24 minimum taxable income, the amount of the tax preference for 5.25 intangible drilling cost under section 57(a)(2) of the Internal 5.26 Revenue Code determined without regard to subparagraph (E); 5.27 (5) to the extent not included in federal alternative 5.28 minimum taxable income, the amount of interest income as 5.29 provided by section 290.01, subdivision 19a, clause (1); and 5.30 (6) the amount of addition required by section 290.01, 5.31 subdivision 19a, clause (7); 5.32 less the sum of the amounts determined under the following: 5.33 (1) interest income as defined in section 290.01, 5.34 subdivision 19b, clause (1); 5.35 (2) an overpayment of state income tax as provided by 5.36 section 290.01, subdivision 19b, clause (2), to the extent 6.1 included in federal alternative minimum taxable income; 6.2 (3) the amount of investment interest paid or accrued 6.3 within the taxable year on indebtedness to the extent that the 6.4 amount does not exceed net investment income, as defined in 6.5 section 163(d)(4) of the Internal Revenue Code. Interest does 6.6 not include amounts deducted in computing federal adjusted gross 6.7 income; and 6.8 (4) amounts subtracted from federal taxable income as 6.9 provided by section 290.01, subdivision 19b, clause (12). 6.10 In the case of an estate or trust, alternative minimum 6.11 taxable income must be computed as provided in section 59(c) of 6.12 the Internal Revenue Code. 6.13 (b) "Investment interest" means investment interest as 6.14 defined in section 163(d)(3) of the Internal Revenue Code. 6.15 (c) "Tentative minimum tax" equals 6.45.0 percent of 6.16 alternative minimum taxable income after subtracting the 6.17 exemption amount determined under subdivision 3. 6.18 (d) "Regular tax" means the tax that would be imposed under 6.19 this chapter (without regard to this section and section 6.20 290.032), reduced by the sum of the nonrefundable credits 6.21 allowed under this chapter. 6.22 (e) "Net minimum tax" means the minimum tax imposed by this 6.23 section. 6.24 [EFFECTIVE DATE.] This section is effective for taxable 6.25 years beginning after December 31, 2002. 6.26 Sec. 4. Minnesota Statutes 2002, section 290.091, 6.27 subdivision 6, is amended to read: 6.28 Subd. 6. [CREDIT FOR PRIOR YEARS' LIABILITY.] (a) A credit 6.29 is allowed against the tax imposed by this chapter on 6.30 individuals, trusts, and estates equal to the minimum tax credit 6.31 for the taxable year. The minimum tax credit equals the 6.32 adjusted net minimum tax for taxable years beginning after 6.33 December 31, 1988, reduced by the minimum tax credits allowed in 6.34 a prior taxable year. The credit may not exceed the excess (if 6.35 any) for the taxable year of 6.36 (1) the regular tax, over 7.1 (2) the greater of (i) the tentative alternative minimum 7.2 tax, or (ii) zero. 7.3 (b) The adjusted net minimum tax for a taxable year equals 7.4 the lesser of the net minimum tax or the excess (if any) of 7.5 (1) the tentative minimum tax, over 7.6 (2) 6.45.0 percent of the sum of 7.7 (i) adjusted gross income as defined in section 62 of the 7.8 Internal Revenue Code, 7.9 (ii) interest income as defined in section 290.01, 7.10 subdivision 19a, clause (1), 7.11 (iii) interest on specified private activity bonds, as 7.12 defined in section 57(a)(5) of the Internal Revenue Code, to the 7.13 extent not included under clause (ii), 7.14 (iv) depletion as defined in section 57(a)(1), determined 7.15 without regard to the last sentence of paragraph (1), of the 7.16 Internal Revenue Code, less 7.17 (v) the deductions allowed in computing alternative minimum 7.18 taxable income provided in subdivision 2, paragraph (a), clause 7.19 (2) of the first series of clauses and clauses (1), (2), and (3) 7.20 of the second series of clauses, and 7.21 (vi) the exemption amount determined under subdivision 3. 7.22 In the case of an individual who is not a Minnesota 7.23 resident for the entire year, adjusted net minimum tax must be 7.24 multiplied by the fraction defined in section 290.06, 7.25 subdivision 2c, paragraph (e). In the case of a trust or 7.26 estate, adjusted net minimum tax must be multiplied by the 7.27 fraction defined under subdivision 4, paragraph (b). 7.28 [EFFECTIVE DATE.] This section is effective for taxable 7.29 years beginning after December 31, 2002.