HF 1858

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 school tuition organizations;
amending Minnesota Statutes 2004, section 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 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 school
tuition organization for which a credit is claimed under section
290.0676 new text end .

Sec. 2.

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 school tuition 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.

Sec. 3.

new text begin [290.0676] CREDIT FOR CONTRIBUTIONS TO SCHOOL
TUITION 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) "School tuition organization" means a charitable
nonprofit organization that is exempt from federal taxation
under section 501(c)(3) of the Internal Revenue Code, maintains
funds separate from funding for other activities for the
distinct purpose of providing tuition assistance to low-income
students in kindergarten through grade 12, and certified by the
commissioner of education as meeting the criteria of this
section. The commissioner of education must maintain a list of
school tuition organizations, and make the list available on the
Department of Education's Web site and by other means. To
qualify as a school tuition organization, the charitable
organization:
new text end

new text begin (1) must allocate at least 85 percent of its annual revenue
for education scholarships or tuition grants to children to
allow them to attend any qualified school of their parents'
choosing;
new text end

new text begin (2) may only award scholarships or grants to students from
families with incomes less than the statewide median family
income for their family size;
new text end

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

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

new text begin (c) "Statewide median family income" means median income
determined by the commissioner for the calendar year preceding
the beginning of the school year for which the scholarships or
grants are made.
new text end

new text begin (d) "Liability for tax" means the tax imposed under this
chapter for the taxable year reduced by the sum of the
nonrefundable credits allowed under this chapter.
new text end

new text begin (e) "Qualified school" means a kindergarten, elementary, or
secondary school, wherein a resident of this state may legally
fulfill the state's compulsory attendance laws, and which is not
operated for profit.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed. new text end

new text begin A taxpayer is allowed a credit
against the tax due under this chapter equal to 75 percent of
the amount contributed to a school tuition organization. The
maximum credit allowed in a taxable year is the lesser of $1,000
or the taxpayer's liability for tax for the taxable year. The
credit may not be claimed for contributions designated for the
use of a specific student.
new text end

new text begin Subd. 3. 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, 2003.
new text end