HF 2361

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

A bill for an act
relating to taxation; individual income; reducing marriage penalties; amending
Minnesota Statutes 2004, sections 290.067, subdivision 2a; 290.0671,
subdivisions 1, 1a; 290.091, subdivision 3.

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

Section 1.

Minnesota Statutes 2004, section 290.067, subdivision 2a, is amended to
read:

Subd. 2a.

Income.

(a) For purposes of this section, "income" means the sum of
the following:

(1) federal adjusted gross income as defined in section 62 of the Internal Revenue
Code; deleted text begin and deleted text end new text begin plus
new text end

(2) the sum of the following amounts to the extent not included in clause (1):

(i) all nontaxable income;

(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;

(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;

(iv) cash public assistance and relief;

(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;

(vi) interest received from the federal or a state government or any instrumentality
or political subdivision thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(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;

(x) a lump sum distribution under section 402(e)(3) of the Internal Revenue Code;

(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; and

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

new text begin (3) in the case of a married couple filing a joint return, the earned income of the
lesser-earning spouse, as defined in section 290.0675, subdivision 1, paragraph (d) new text end .

In the case of an individual who files an income tax return on a fiscal year basis, the
term "federal adjusted gross income" means federal adjusted gross income reflected in the
fiscal year ending in the next calendar year. Federal adjusted gross income may 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.

(b) "Income" does not include:

(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and
102;

(2) amounts of any pension or annuity that were exclusively funded by the claimant
or spouse if the funding payments were not excluded from federal adjusted gross income
in the years when the payments were made;

(3) surplus food or other relief in kind supplied by a governmental agency;

(4) relief granted under chapter 290A;

(5) child support payments received under a temporary or final decree of dissolution
or legal separation; and

(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 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.

Minnesota Statutes 2004, section 290.0671, subdivision 1, is amended to read:

Subdivision 1.

Credit allowed.

(a) An individual is allowed a credit against the
tax imposed by this chapter equal to a percentage of earned income. To receive a credit,
a taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code.
new text begin An individual who would have been eligible for a credit under section 32 of the Internal
Revenue Code if the phaseout in section 32(b) were calculated based on the income
thresholds provided in paragraphs (b) through (d) is also eligible for a credit under this
section.
new text end

(b) For individuals with no qualifying children, the credit equals 1.9125 percent of
the first $4,620 of earned income. The credit is reduced by 1.9125 percent of earned
income or modified adjusted gross income, whichever is greater, new text begin minus the earned income
of the lesser-earning spouse, new text end in excess of $5,770, but in no case is the credit less than zero.

(c) For individuals with one qualifying child, the credit equals 8.5 percent of the first
$6,920 of earned income and 8.5 percent of earned income over $12,080 but less than
$13,450. The credit is reduced by 5.73 percent of earned income or modified adjusted
gross income, whichever is greater, new text begin minus the earned income of the lesser-earning
spouse, new text end in excess of $15,080, but in no case is the credit less than zero.

(d) For individuals with two or more qualifying children, the credit equals ten
percent of the first $9,720 of earned income and 20 percent of earned income over $14,860
but less than $16,800. The credit is reduced by 10.3 percent of earned income or modified
adjusted gross income, whichever is greater, new text begin minus the earned income of the lesser-earning
spouse, new text end in excess of $17,890, but in no case is the credit less than zero.

(e) 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).

(f) For a person who was a resident for the entire tax year and has earned income
not subject to tax under this chapter, including income excluded under section 290.01,
subdivision 19b, clause (11), the credit must be allocated based on the ratio of federal
adjusted gross income reduced by the earned income not subject to tax under this chapter
over federal adjusted gross income.

(g) For tax years beginning after December 31, 2001, and before December 31,
2004, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in
paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by
$1,000 for married taxpayers filing joint returns.

(h) For tax years beginning after December 31, 2004, and before December 31,
2007, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in
paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by
$2,000 for married taxpayers filing joint returns.

(i) For tax years beginning after December 31, 2007, and before December 31, 2010,
the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph
(d), after being adjusted for inflation under subdivision 7, are each increased by $3,000 for
married taxpayers filing joint returns. For tax years beginning after December 31, 2008,
the $3,000 is adjusted annually for inflation under subdivision 7.

(j) The commissioner shall construct tables showing the amount of the credit at
various income levels and make them available to taxpayers. The tables shall follow
the schedule contained in this subdivision, except that the commissioner may graduate
the transition between income brackets.

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 290.0671, subdivision 1a, is amended to read:

Subd. 1a.

Definitions.

For purposes of this section, the terms "qualifying child,"
"earned income," and "adjusted gross income" have the meanings given in section 32(c) of
the Internal Revenue Code. new text begin "Earned income of lesser-earning spouse" has the meaning
given in section 290.0675, subdivision 1, paragraph (d).
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. 4.

Minnesota Statutes 2004, section 290.091, subdivision 3, is amended to read:

Subd. 3.

Exemption amount.

For purposes of computing the alternative minimum
tax, the exemption amount is the exemption determined under section 55(d) of the Internal
Revenue Code, as amended through December 31, 1992, except that new text begin (1) for married
couples filing joint returns, the exemption amount equals two times the amount allowed
in section 55(d)(1)(B) of the Internal Revenue Code as amended through December
31, 1992, and the phaseout threshold equals two times the amount provided in section
55(d)(3)(B) of the Internal Revenue Code as amended through December 31, 1992; (2)
for married couples filing separate returns, the exemption amount and phaseout threshold
equal one-half the amounts provided for married couples filing joint returns; and (3) for all
other filers, new text end alternative minimum taxable income as determined under this section must be
substituted in the computation of the phase out under section 55(d)(3).

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