HF 1553

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to taxation; income; allowing a credit for
contributions to scholarship granting organizations;
amending Minnesota Statutes 2004, sections 13.32, by
adding a subdivision; 290.01, subdivisions 19a, 19b;
proposing coding for new law in Minnesota Statutes,
chapter 290.

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

Section 1.

Minnesota Statutes 2004, section 13.32, is
amended by adding a subdivision to read:

new text begin Subd. 4b. new text end

new text begin Nonpublic school students receiving scholarship
grants. new text end

new text begin Notwithstanding other law to the contrary, data
collected for and reported to the education commissioner by a
qualified school under section 290.0676 are private data on
individuals that shall not be disclosed except when an eligible
student or a parent or guardian of a student consents in writing
to the release of the data or subdivision 3, paragraph (a), (b),
(c), or (f) applies.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment and applies to the 2005-2006 school
year and later.
new text end

Sec. 2.

Minnesota Statutes 2004, section 290.01,
subdivision 19a, is amended to read:

Subd. 19a.

Additions to federal taxable income.

For
individuals, estates, and trusts, there shall be added to
federal taxable income:

(1)(i) interest income on obligations of any state other
than Minnesota or a political or governmental subdivision,
municipality, or governmental agency or instrumentality of any
state other than Minnesota exempt from federal income taxes
under the Internal Revenue Code or any other federal statute;
and

(ii) exempt-interest dividends as defined in section
852(b)(5) of the Internal Revenue Code, except the portion of
the exempt-interest dividends derived from interest income on
obligations of the state of Minnesota or its political or
governmental subdivisions, municipalities, governmental agencies
or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to
all shareholders represents 95 percent or more of the
exempt-interest dividends that are paid by the regulated
investment company as defined in section 851(a) of the Internal
Revenue Code, or the fund of the regulated investment company as
defined in section 851(g) of the Internal Revenue Code, making
the payment; and

(iii) for the purposes of items (i) and (ii), interest on
obligations of an Indian tribal government described in section
7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe
is located;

(2) the amount of income taxes paid or accrued within the
taxable year under this chapter and income taxes paid to any
other state or to any province or territory of Canada, to the
extent allowed as a deduction under section 63(d) of the
Internal Revenue Code, but the addition may not be more than the
amount by which the itemized deductions as allowed under section
63(d) of the Internal Revenue Code exceeds the amount of the
standard deduction as defined in section 63(c) of the Internal
Revenue Code. For the purpose of this paragraph, the
disallowance of itemized deductions under section 68 of the
Internal Revenue Code of 1986, income tax is the last itemized
deduction disallowed;

(3) the capital gain amount of a lump sum distribution to
which the special tax under section 1122(h)(3)(B)(ii) of the Tax
Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the
taxable year under this chapter and income taxes paid to any
other state or any province or territory of Canada, to the
extent allowed as a deduction in determining federal adjusted
gross income. For the purpose of this paragraph, income taxes
do not include the taxes imposed by sections 290.0922,
subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed
pursuant to section 290.10;

(6) the amount of a partner's pro rata share of net income
which does not flow through to the partner because the
partnership elected to pay the tax on the income under section
6242(a)(2) of the Internal Revenue Code; deleted text begin and
deleted text end

(7) 80 percent of the depreciation deduction allowed under
section 168(k) of the Internal Revenue Code. For purposes of
this clause, if the taxpayer has an activity that in the taxable
year generates a deduction for depreciation under section 168(k)
and the activity generates a loss for the taxable year that the
taxpayer is not allowed to claim for the taxable year, "the
depreciation allowed under section 168(k)" for the taxable year
is limited to excess of the depreciation claimed by the activity
under section 168(k) over the amount of the loss from the
activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year
are allowed, the depreciation under section 168(k) is allowed new text begin ;
and
new text end

new text begin (8) the amount of the deduction under section 170 of the
Internal Revenue Code that represents contributions to a
scholarship granting organization for which a credit is claimed
under section 290.0676 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, 2004.
new text end

Sec. 3.

Minnesota Statutes 2004, section 290.01,
subdivision 19b, is amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For
individuals, estates, and trusts, there shall be subtracted from
federal taxable income:

(1) interest income on obligations of any authority,
commission, or instrumentality of the United States to the
extent includable in taxable income for federal income tax
purposes but exempt from state income tax under the laws of the
United States;

(2) if included in federal taxable income, the amount of
any overpayment of income tax to Minnesota or to any other
state, for any previous taxable year, whether the amount is
received as a refund or as a credit to another taxable year's
income tax liability;

(3) the amount paid to others, less the amount used to
claim the credit allowed under section 290.0674, not to exceed
$1,625 for each qualifying child in grades kindergarten to 6 and
$2,500 for each qualifying child in grades 7 to 12, for tuition,
textbooks, and transportation of each qualifying child in
attending an elementary or secondary school situated in
Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin,
wherein a resident of this state may legally fulfill the state's
compulsory attendance laws, which is not operated for profit,
and which adheres to the provisions of the Civil Rights Act of
1964 and chapter 363A. For the purposes of this clause,
"tuition" includes fees or tuition as defined in section
290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and
equipment purchased or leased for use in elementary and
secondary schools in teaching only those subjects legally and
commonly taught in public elementary and secondary schools in
this state. Equipment expenses qualifying for deduction
includes expenses as defined and limited in section 290.0674,
subdivision 1, clause (3). "Textbooks" does not include
instructional books and materials used in the teaching of
religious tenets, doctrines, or worship, the purpose of which is
to instill such tenets, doctrines, or worship, nor does it
include books or materials for, or transportation to,
extracurricular activities including sporting events, musical or
dramatic events, speech activities, driver's education, or
similar programs. For purposes of the subtraction provided by
this clause, "qualifying child" has the meaning given in section
32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross
income, income realized on disposition of property exempt from
tax under section 290.491;

(6) to the extent included in federal taxable income,
postservice benefits for youth community service under section
124D.42 for volunteer service under United States Code, title
42, sections 12601 to 12604;

(7) to the extent not deducted in determining federal
taxable income by an individual who does not itemize deductions
for federal income tax purposes for the taxable year, an amount
equal to 50 percent of the excess of charitable contributions
allowable as a deduction for the taxable year under section
170(a) of the Internal Revenue Code over $500 new text begin , but excluding
contributions to a scholarship granting organization in excess
of $500 that are used to claim the credit allowed in section
290.0676 new text end ;

(8) for taxable years beginning before January 1, 2008, the
amount of the federal small ethanol producer credit allowed
under section 40(a)(3) of the Internal Revenue Code which is
included in gross income under section 87 of the Internal
Revenue Code;

(9) for individuals who are allowed a federal foreign tax
credit for taxes that do not qualify for a credit under section
290.06, subdivision 22, an amount equal to the carryover of
subnational foreign taxes for the taxable year, but not to
exceed the total subnational foreign taxes reported in claiming
the foreign tax credit. For purposes of this clause, "federal
foreign tax credit" means the credit allowed under section 27 of
the Internal Revenue Code, and "carryover of subnational foreign
taxes" equals the carryover allowed under section 904(c) of the
Internal Revenue Code minus national level foreign taxes to the
extent they exceed the federal foreign tax credit;

(10) in each of the five tax years immediately following
the tax year in which an addition is required under subdivision
19a, clause (7), an amount equal to one-fifth of the delayed
depreciation. For purposes of this clause, "delayed
depreciation" means the amount of the addition made by the
taxpayer under subdivision 19a, clause (7), minus the positive
value of any net operating loss under section 172 of the
Internal Revenue Code generated for the tax year of the
addition. The resulting delayed depreciation cannot be less
than zero; and

(11) job opportunity building zone income as provided under
section 469.316.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2004.
new text end

Sec. 4.

new text begin [290.0676] CREDIT FOR CONTRIBUTIONS TO
SCHOLARSHIP GRANTING ORGANIZATIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this
section, the following terms have the meanings given.
new text end

new text begin (b) "Statewide median family income" means median income
for a four-person family in Minnesota used by the United States
Department of Health and Human Services in administering the Low
Income Home Energy Assistance Program, as most recently
published in the Federal Register.
new text end

new text begin (c) A "qualified student" must be:
new text end

new text begin (1) of school age and a Minnesota resident;
new text end

new text begin (2) a member of a household with an income less than 75
percent of the statewide median family income; and
new text end

new text begin (3) fully enrolled in a school under paragraph (d) in
kindergarten through grade 12 in the school year in which the
student receives the scholarship.
new text end

new text begin (d) A "qualified school" must:
new text end

new text begin (1) be a nonpublic school other than a home school under
section 120A.22, subdivision 4;
new text end

new text begin (2) accept education scholarship funds granted under this
section in payment of tuition for a qualified student under
paragraph (c) enrolled in the school;
new text end

new text begin (3) allow the education commissioner to periodically verify
the actual enrollment of all qualified students;
new text end

new text begin (4) use a performance-based accreditation system by an
accrediting agency recognized under section 123B.44; and
new text end

new text begin (5) allow qualified students to (i) participate in the
statewide testing and reporting system under section 120B.30,
(ii) annually administer a nationally norm-referenced
standardized achievement exam and transmit the exam results to
the education commissioner in the form and manner the
commissioner directs, or (iii) develop assessments that are
aligned with published performance standards and transmit the
assessment results of qualified students at least annually to
the education commissioner in the form and manner the
commissioner directs.
new text end

new text begin (e) "Scholarship granting organization" or "SGO" means a
charitable organization that is exempt from federal taxation
under section 501(c)(3) of the Internal Revenue Code, is
registered with the attorney general's office, and is certified
by the commissioner of education as meeting the criteria of this
paragraph.
new text end

new text begin To qualify as an SGO, the charitable organization:
new text end

new text begin (1) must allocate at least 85 percent of its annual revenue
for education scholarship funds to children to allow them to
attend any qualified school of their parents' choice;
new text end

new text begin (2) may only award scholarships or grants funded by
contributions qualifying for the tax credit under subdivision 3
to qualified students;
new text end

new text begin (3) must not restrict the availability of scholarships to
students of one school;
new text end

new text begin (4) may not charge a fee of any kind to students under
consideration for a scholarship;
new text end

new text begin (5) must require a qualified school receiving payment of
tuition through a scholarship grant funded by contributions
qualifying for the tax credit under subdivision 3 awarded by an
SGO to an enrolled student of the school to sign an agreement
that it will not use different admissions standards for a
student with a scholarship grant from an SGO;
new text end

new text begin (6) must agree to annually report to the Department of
Education on:
new text end

new text begin (i) the number of students awarded scholarship grants
funded by contributions under the tax credit program;
new text end

new text begin (ii) the total amount of scholarship grant dollars awarded
from contributions under the tax credit program;
new text end

new text begin (iii) the total number of schools attended by scholarship
grant recipients;
new text end

new text begin (iv) the total amount of contributions received under the
tax credit program; and
new text end

new text begin (v) the percentage of contributions received under the tax
credit program that was provided as scholarship grants to
families; and
new text end

new text begin (7) must provide the Department of Education with the same
annual report that the organization must provide the attorney
general's office under section 309.53, subdivision 1.
new text end

new text begin Subd. 2. new text end

new text begin Commissioner of education. new text end

new text begin The commissioner of
education:
new text end

new text begin (1) must maintain a list of SGO's;
new text end

new text begin (2) must make the list available on the Department of
Education's Web site and by other means;
new text end

new text begin (3) must develop an application process for SGO's to be
recorded as qualifying by the Department of Education under this
section;
new text end

new text begin (4) may remove an organization from the list of qualifying
SGO's, after notifying the organization and providing an
opportunity for a public hearing, for reasons of the
organization's financial mismanagement or violation of the law;
and
new text end

new text begin (5) must develop a process for SGO's to annually report to
the Department of Education as specified in this section.
new text end

new text begin Subd. 3. new text end

new text begin Credit allowed. new text end

new text begin An individual is allowed a
credit against the tax due under this chapter equal to 50
percent of the amount contributed to a scholarship granting
organization. The maximum credit allowed in a taxable year is
$1,000. The credit may not be claimed for contributions
designated for the use of a specific student.
new text end

new text begin Subd. 4. new text end

new text begin Nonresidents and part-year residents. new text end

new text begin For a
nonresident or part-year resident, the credit must be allocated
based on the percentage calculated under section 290.06,
subdivision 2c, paragraph (e).
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, 2004.
new text end