HF 1851

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

A bill for an act
relating to taxation; limiting income tax deduction
for mortgage interest; appropriating money; amending
Minnesota Statutes 2004, section 290.01, subdivision
19a.

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

Section 1.

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) to the extent deducted from federal taxable income, the
amount of mortgage interest paid on a residential home with a
market value greater than $500,000 as determined under section
273.11 that exceeds $25,000 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. 2. new text begin DISTRIBUTION.
new text end

new text begin The revenue collected under Minnesota Statutes, section
290.01, subdivision 19a, clause (8), is appropriated to each of
the listed agencies in the designated percentages and must be
used only for the following programs:
new text end

new text begin (a) Department of Human Services (1) emergency services
programs under Laws 1997, chapter 162, article 3, five percent;
(2) transitional housing operations under Minnesota Statutes,
section 119A.43, 25 percent; and (3) transitional housing
operations targeted to unaccompanied youth under Minnesota
Statutes, section 119A.43, five percent; and
new text end

new text begin (b) Minnesota Housing Finance Agency (1) Minnesota housing
trust fund under Minnesota Statutes, section 462A.201, 30
percent; (2) rental housing under Minnesota Statutes, section
462A.2097, ten percent; and (3) family homeless prevention and
assistance program under Minnesota Statutes, section 462A.204,
25 percent.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2006.
new text end