HF 1301

as introduced - 89th Legislature (2015 - 2016) Posted on 03/02/2015 01:17pm

A bill for an act
relating to taxation; individual income; modifying the child and dependent care
credit; amending Minnesota Statutes 2014, sections 290.067, subdivisions 1, 2,
2b, 3; 290.0674, subdivision 2, by adding a subdivision; repealing Minnesota
Statutes 2014, section 290.067, subdivision 2a.

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

Section 1.

Minnesota Statutes 2014, 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 deleted text begin due from the taxpayer and a spouse, if any, deleted text end new text begin imposed new text end under this chapter an amount
equal to the new text begin sum of new text end dependent care deleted text begin credit deleted text end deleted text begin 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 that deleted text end new text begin credits calculated under paragraphs (b), (d), and
(e). new text end In determining whether deleted text begin the child qualified as a dependent deleted text end new text begin expenses were paid to
care for a qualifying individual new text end , income received as a Minnesota family investment
program grant or allowance to or on behalf of the deleted text begin child deleted text end new text begin individual new text end must not be taken
into account in determining whether the deleted text begin child deleted text end new text begin individual new text end received more than half of the
deleted text begin child's deleted text end new text begin individual's new text end support from the taxpayer deleted text begin , and the provisions of section 32(b)(1)(D) of
the Internal Revenue Code do not apply deleted text end .

new text begin (b) 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 pursuant to the provisions of 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 the child for whom deemed expenses were used to claim
the credit under paragraph (d) or (e).
new text end

deleted text begin (b) 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 (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 pursuant to the provisions of section 21
of the Internal Revenue Code calculated using deemed expenses rather than actual
employment-related expenses paid. new text end If the child is 16 months old or younger at the close of
the taxable year, deleted text begin the amount of deleted text end new text begin deemed new text end expenses deleted text begin deemed to have been paid equals deleted text end new text begin are equal
to new text end the maximum deleted text begin limit deleted text end new text begin amount of employment-related expenses incurred during the taxable
year that may be taken into account new text end for one deleted text begin qualified deleted text end new text begin qualifying new 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, deleted text begin the amount of deleted text end new text begin deemed new text end
expenses deleted text begin deemed to have been paid equals deleted text end new text begin are equal to new 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 deleted text end new text begin (e) In lieu of the credit under paragraph (b), new text end a married couple new text begin may elect to
claim a credit against the tax imposed under this chapter as computed under paragraph
(f), if the married couple new 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 Code deleted 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 imposed under this chapter equal to the dependent care for which the couple
is eligible pursuant to 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 (i) the combined earned income of the couple
or (ii) 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 of section
21(d) of the Internal Revenue Code does not apply to this deemed amount. These deemed
amounts apply regardless of whether any employment-related expenses have been paid.
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 290.01, subdivision 19b, clause (9), the credit determined under new text begin this new text end section deleted text begin 21
of the Internal Revenue Code deleted 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
290.01, subdivision 19b, clauses (10) and (11), 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 the 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, 2014.
new text end

Sec. 2.

Minnesota Statutes 2014, 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
$100,000, 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 $100,000
for a taxpayer with one qualifying individual, or $1,200 minus five percent of federal
gross adjusted income in excess of $100,000 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
gross adjusted 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, 2014.
new text end

Sec. 3.

Minnesota Statutes 2014, 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 deleted text begin maximum deleted text end 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 "2014" new text end shall
be substituted for the word "1992." For deleted text begin 2001 deleted text end new text begin 2016 new text end , the commissioner shall then determine
the percent change from the 12 months ending on August 31, deleted text begin 1999 deleted text end new text begin 2014 new text end , to the 12 months
ending on August 31, deleted text begin 2000 deleted text end new text begin 2015 new text end , and in each subsequent year, from the 12 months ending
on August 31, deleted text begin 1999 deleted text end new text begin 2014 new 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, 2015.
new text end

Sec. 4.

Minnesota Statutes 2014, 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 subdivision deleted text end new text begin section new 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 revenue deleted text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2014.
new text end

Sec. 5.

Minnesota Statutes 2014, 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, 2014.
new text end

Sec. 6.

Minnesota Statutes 2014, section 290.0674, is amended by adding a subdivision
to read:

new text begin Subd. 2a. new text end

new text begin Income defined. 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 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 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, to the extent the sum of amounts exceeds the retirement base
amount for the claimant and spouse;
new text end

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

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

new text begin (xiv) the amount of the 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" shall mean federal adjusted gross income reflected
in the fiscal year ending in the calendar year. Federal adjusted gross income shall 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) For purposes of this section, "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 was exclusively funded by the claimant
or spouse and which 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; or
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, 2014.
new text end

Sec. 7. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2014, 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, 2014.
new text end