HF 1848

as introduced - 82nd Legislature (2001 - 2002) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to taxation; individual income; reducing 
  1.3             marriage penalties; amending Minnesota Statutes 2000, 
  1.4             sections 290.067, subdivision 2a; 290.0671, 
  1.5             subdivisions 1, 1a; 290.0802, subdivisions 1, 2; 
  1.6             290.091, subdivision 3. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 2000, section 290.067, 
  1.9   subdivision 2a, is amended to read: 
  1.10     Subd. 2a.  [INCOME.] (a) For purposes of this section, 
  1.11  "income" means the sum of the following: 
  1.12     (1) federal adjusted gross income as defined in section 62 
  1.13  of the Internal Revenue Code; and 
  1.14     (2) the sum of the following amounts to the extent not 
  1.15  included in clause (1): 
  1.16     (i) all nontaxable income; 
  1.17     (ii) the amount of a passive activity loss that is not 
  1.18  disallowed as a result of section 469, paragraph (i) or (m) of 
  1.19  the Internal Revenue Code and the amount of passive activity 
  1.20  loss carryover allowed under section 469(b) of the Internal 
  1.21  Revenue Code; 
  1.22     (iii) an amount equal to the total of any discharge of 
  1.23  qualified farm indebtedness of a solvent individual excluded 
  1.24  from gross income under section 108(g) of the Internal Revenue 
  1.25  Code; 
  1.26     (iv) cash public assistance and relief; 
  2.1      (v) any pension or annuity (including railroad retirement 
  2.2   benefits, all payments received under the federal Social 
  2.3   Security Act, supplemental security income, and veterans 
  2.4   benefits), which was not exclusively funded by the claimant or 
  2.5   spouse, or which was funded exclusively by the claimant or 
  2.6   spouse and which funding payments were excluded from federal 
  2.7   adjusted gross income in the years when the payments were made; 
  2.8      (vi) interest received from the federal or a state 
  2.9   government or any instrumentality or political subdivision 
  2.10  thereof; 
  2.11     (vii) workers' compensation; 
  2.12     (viii) nontaxable strike benefits; 
  2.13     (ix) the gross amounts of payments received in the nature 
  2.14  of disability income or sick pay as a result of accident, 
  2.15  sickness, or other disability, whether funded through insurance 
  2.16  or otherwise; 
  2.17     (x) a lump sum distribution under section 402(e)(3) of the 
  2.18  Internal Revenue Code; 
  2.19     (xi) contributions made by the claimant to an individual 
  2.20  retirement account, including a qualified voluntary employee 
  2.21  contribution; simplified employee pension plan; self-employed 
  2.22  retirement plan; cash or deferred arrangement plan under section 
  2.23  401(k) of the Internal Revenue Code; or deferred compensation 
  2.24  plan under section 457 of the Internal Revenue Code; and 
  2.25     (xii) nontaxable scholarship or fellowship grants; less 
  2.26     (3) in the case of a married couple filing a joint return, 
  2.27  the earned income of the lesser-earning spouse, as defined in 
  2.28  section 290.0675, subdivision 1, paragraph (d). 
  2.29     In the case of an individual who files an income tax return 
  2.30  on a fiscal year basis, the term "federal adjusted gross income" 
  2.31  means federal adjusted gross income reflected in the fiscal year 
  2.32  ending in the next calendar year.  Federal adjusted gross income 
  2.33  may not be reduced by the amount of a net operating loss 
  2.34  carryback or carryforward or a capital loss carryback or 
  2.35  carryforward allowed for the year. 
  2.36     (b) "Income" does not include: 
  3.1      (1) amounts excluded pursuant to the Internal Revenue Code, 
  3.2   sections 101(a) and 102; 
  3.3      (2) amounts of any pension or annuity that were exclusively 
  3.4   funded by the claimant or spouse if the funding payments were 
  3.5   not excluded from federal adjusted gross income in the years 
  3.6   when the payments were made; 
  3.7      (3) surplus food or other relief in kind supplied by a 
  3.8   governmental agency; 
  3.9      (4) relief granted under chapter 290A; and 
  3.10     (5) child support payments received under a temporary or 
  3.11  final decree of dissolution or legal separation. 
  3.12     [EFFECTIVE DATE.] This section is effective for taxable 
  3.13  years beginning after December 31, 2000. 
  3.14     Sec. 2.  Minnesota Statutes 2000, section 290.0671, 
  3.15  subdivision 1, is amended to read: 
  3.16     Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
  3.17  allowed a credit against the tax imposed by this chapter equal 
  3.18  to a percentage of earned income.  To receive a credit, a 
  3.19  taxpayer must be eligible for a credit under section 32 of the 
  3.20  Internal Revenue Code.  
  3.21     (b) For individuals with no qualifying children, the credit 
  3.22  equals 1.9125 percent of the first $4,460 of earned income.  The 
  3.23  credit is reduced by 1.9125 percent of earned income or modified 
  3.24  adjusted gross income, whichever is greater, minus the earned 
  3.25  income of the lesser-earning spouse, in excess of $5,570, but in 
  3.26  no case is the credit less than zero. 
  3.27     (c) For individuals with one qualifying child, the credit 
  3.28  equals 8.5 percent of the first $6,680 of earned income and 8.5 
  3.29  percent of earned income over $11,650 but less than $12,990. The 
  3.30  credit is reduced by 5.73 percent of earned income or modified 
  3.31  adjusted gross income, whichever is greater, minus the earned 
  3.32  income of the lesser-earning spouse, in excess of $14,560, but 
  3.33  in no case is the credit less than zero. 
  3.34     (d) For individuals with two or more qualifying children, 
  3.35  the credit equals ten percent of the first $9,390 of earned 
  3.36  income and 20 percent of earned income over $14,350 but less 
  4.1   than $16,230.  The credit is reduced by 10.3 percent of earned 
  4.2   income or modified adjusted gross income, whichever is greater, 
  4.3   minus the earned income of the lesser-earning spouse, in excess 
  4.4   of $17,280, but in no case is the credit less than zero. 
  4.5      (e) For a nonresident or part-year resident, the credit 
  4.6   must be allocated based on the percentage calculated under 
  4.7   section 290.06, subdivision 2c, paragraph (e). 
  4.8      (f) For a person who was a resident for the entire tax year 
  4.9   and has earned income not subject to tax under this chapter, the 
  4.10  credit must be allocated based on the ratio of federal adjusted 
  4.11  gross income reduced by the earned income not subject to tax 
  4.12  under this chapter over federal adjusted gross income. 
  4.13     (g) The commissioner shall construct tables showing the 
  4.14  amount of the credit at various income levels and make them 
  4.15  available to taxpayers.  The tables shall follow the schedule 
  4.16  contained in this subdivision, except that the commissioner may 
  4.17  graduate the transition between income brackets. 
  4.18     [EFFECTIVE DATE.] This section is effective for taxable 
  4.19  years beginning after December 31, 2000. 
  4.20     Sec. 3.  Minnesota Statutes 2000, section 290.0671, 
  4.21  subdivision 1a, is amended to read: 
  4.22     Subd. 1a.  [DEFINITIONS.] For purposes of this section, the 
  4.23  terms "qualifying child," "earned income," and "modified 
  4.24  adjusted gross income" have the meanings given in section 32(c) 
  4.25  of the Internal Revenue Code.  "Earned income of the 
  4.26  lesser-earning spouse" has the meaning given in section 
  4.27  290.0675, subdivision 1, paragraph (d). 
  4.28     [EFFECTIVE DATE.] This section is effective for taxable 
  4.29  years beginning after December 31, 2000. 
  4.30     Sec. 4.  Minnesota Statutes 2000, section 290.0802, 
  4.31  subdivision 1, is amended to read: 
  4.32     Subdivision 1.  [DEFINITIONS.] For purposes of this 
  4.33  section, the following terms have the meanings given. 
  4.34     (a) "Adjusted gross income" means federal adjusted gross 
  4.35  income as used in section 22(d) of the Internal Revenue Code for 
  4.36  the taxable year, plus a lump sum distribution as defined in 
  5.1   section 402(e)(3) of the Internal Revenue Code, and less any 
  5.2   pension, annuity, or disability benefits included in federal 
  5.3   gross income but not subject to state taxation other than the 
  5.4   subtraction allowed under section 290.01, subdivision 19b, 
  5.5   clause (4). 
  5.6      (b) "Disability income" means disability income as defined 
  5.7   in section 22(c)(2)(B)(iii) of the Internal Revenue Code. 
  5.8      (c) "Nontaxable retirement and disability benefits" means 
  5.9   the amount of pension, annuity, or disability benefits that 
  5.10  would be included in the reduction under section 22(c)(3) of the 
  5.11  Internal Revenue Code and pension, annuity, or disability 
  5.12  benefits included in federal gross income but not subject to 
  5.13  state taxation other than the subtraction allowed under section 
  5.14  290.01, subdivision 19b, clause (4). 
  5.15     (d) "Qualified individual" means a qualified individual as 
  5.16  defined in section 22(b) of the Internal Revenue Code. 
  5.17     (e) "Social security benefits above the second federal 
  5.18  threshold" means the amount of social security benefits included 
  5.19  in federal taxable income due to the provisions of section 13215 
  5.20  of the Omnibus Budget Reconciliation Act of 1993, Public Law 
  5.21  Number 103-66. 
  5.22     (f) "Earned income of the lesser-earning spouse" has the 
  5.23  meaning given in section 290.0675, subdivision 1, paragraph (d). 
  5.24     (g) "Nontaxable retirement and disability benefits of the 
  5.25  lesser-earning spouse" means the nontaxable retirement and 
  5.26  disability benefits of the spouse with the lesser amount of 
  5.27  nontaxable retirement and disability benefits as defined in 
  5.28  paragraph (c) for the taxable year. 
  5.29     [EFFECTIVE DATE.] This section is effective for taxable 
  5.30  years beginning after December 31, 2000. 
  5.31     Sec. 5.  Minnesota Statutes 2000, section 290.0802, 
  5.32  subdivision 2, is amended to read: 
  5.33     Subd. 2.  [SUBTRACTION.] (a) A qualified individual is 
  5.34  allowed a subtraction from federal taxable income of the 
  5.35  individual's subtraction base amount.  The excess of the 
  5.36  subtraction base amount over the taxable net income computed 
  6.1   without regard to the subtraction for the elderly or disabled 
  6.2   under section 290.01, subdivision 19b, clause (5), may be used 
  6.3   to reduce the amount of a lump sum distribution subject to tax 
  6.4   under section 290.032. 
  6.5      (b)(1) The initial subtraction base amount equals 
  6.6      (i) $12,000 for a married taxpayer filing a joint return if 
  6.7   a spouse is a qualified individual, 
  6.8      (ii) $9,600 for a single taxpayer, and 
  6.9      (iii) $6,000 for a married taxpayer filing a separate 
  6.10  federal return. 
  6.11     (2) The qualified individual's initial subtraction base 
  6.12  amount, then, must be reduced by the sum of nontaxable 
  6.13  retirement and disability benefits after, in the case of a 
  6.14  married couple filing a joint return, the subtraction of the 
  6.15  nontaxable retirement and disability benefits of the 
  6.16  lesser-earning spouse, and one-half of the amount of adjusted 
  6.17  gross income after, in the case of a married couple filing a 
  6.18  joint return, the subtraction of the earned income of the 
  6.19  lesser-earning spouse, in excess of the following thresholds: 
  6.20     (i) $18,000 for a married taxpayer filing a joint return if 
  6.21  both spouses are qualified individuals, 
  6.22     (ii) $14,500 for a single taxpayer or for a married couple 
  6.23  filing a joint return if only one spouse is a qualified 
  6.24  individual, and 
  6.25     (iii) $9,000 for a married taxpayer filing a separate 
  6.26  federal return. 
  6.27     (3) In the case of a qualified individual who is under the 
  6.28  age of 65, the maximum amount of the subtraction base may not 
  6.29  exceed the taxpayer's disability income. 
  6.30     (4) The resulting amount is the subtraction base amount. 
  6.31     [EFFECTIVE DATE.] This section is effective for taxable 
  6.32  years beginning after December 31, 2000. 
  6.33     Sec. 6.  Minnesota Statutes 2000, section 290.091, 
  6.34  subdivision 3, is amended to read: 
  6.35     Subd. 3.  [EXEMPTION AMOUNT.] For purposes of computing the 
  6.36  alternative minimum tax, the exemption amount is the exemption 
  7.1   determined under section 55(d) of the Internal Revenue Code, as 
  7.2   amended through December 31, 1992, except that (i) for married 
  7.3   couples filing joint returns, the exemption amount equals two 
  7.4   times the amount allowed in section 55(d)(1)(B) of the Internal 
  7.5   Revenue Code as amended through December 31, 1992, and the 
  7.6   phaseout threshold equals two times the amount provided in 
  7.7   section 55(d)(3)(B) of the Internal Revenue Code as amended 
  7.8   through December 31, 1992; (ii) for married couples filing 
  7.9   separate returns, the exemption amount and phaseout threshold 
  7.10  equal one-half the amounts provided for married couples filing 
  7.11  joint returns; and (iii) for all filers, alternative minimum 
  7.12  taxable income as determined under this section must be 
  7.13  substituted in the computation of the phase out under section 
  7.14  55(d)(3). 
  7.15     [EFFECTIVE DATE.] This section is effective for taxable 
  7.16  years beginning after December 31, 2000.