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HF 2435

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

KEY: stricken = removed, old language.
underscored = added, new language.

Bill Text Versions

Engrossments
Introduction Posted on 04/18/2005

Current Version - as introduced

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A bill for an act
relating to taxation; providing inflationary and
family size adjustments to the dependent care credit
and the working family credit; amending Minnesota
Statutes 2004, sections 290.067, subdivisions 1, 2,
2b; 290.0671, subdivision 1.

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

Section 1.

Minnesota Statutes 2004, section 290.067,
subdivision 1, is amended to read:


Subdivision 1.

deleted text begin amount of credit deleted text end new text begin eligibilitynew text end .

(a) A
taxpayer may take as a credit against the tax due from the
taxpayer and a spouse, if any, under this chapter an amount
equal to new text begin a percentage of the taxpayer's expenditures for
employment-related expenses. To receive a credit, a taxpayer
must be eligible for
new text end the dependent care credit deleted text begin for which the
taxpayer is eligible pursuant to the provisions of
deleted text end new text begin under new text end section
21 of the Internal Revenue Code deleted text begin subject to the limitations
provided in subdivision 2
deleted text end new text begin ,new text end except that in determining whether
the child qualified as a dependent, income received as a
Minnesota family investment program grant or allowance to or on
behalf of the child must not be taken into account in
determining whether the child received more than half of the
child's support from the taxpayerdeleted text begin , and the provisions of section
32(b)(1)(D) of the Internal Revenue Code do not apply
deleted text end .

(b) If a child who has not attained the age of six years at
the close of the taxable year is cared for at a licensed family
day care home operated by the child's parent, the taxpayer is
deemed to have paid employment-related expenses. If the child
is 16 months old or younger at the close of the taxable year,
the amount of expenses deemed to have been paid equals the
maximum limit for one qualified individual under deleted text begin section 21(c)
and (d) of the Internal Revenue Code
deleted text end new text begin subdivision 2new text end . If the
child is older than 16 months of age but has not attained the
age of six years at the close of the taxable year, the amount of
expenses deemed to have been paid equals the amount the licensee
would charge for the care of a child of the same age for the
same number of hours of care.

(c) If a married couple:

(1) has a child who has not attained the age of one year at
the close of the taxable year;

(2) files a joint tax return for the taxable year; and

(3) does not participate in a dependent care assistance
program as defined in section 129 of the Internal Revenue Code,
in lieu of the actual employment related expenses paid for that
child under paragraph (a) or the deemed amount under paragraph
(b), the lesser of (i) the combined earned income of the couple
or (ii) the amount of the maximum limit for one qualified
individual under section 21(c) and (d) of the Internal Revenue
Code will be deemed to be the employment related expense paid
for that child. The earned income limitation of section 21(d)
of the Internal Revenue Code shall not apply to this deemed
amount. These deemed amounts apply regardless of whether any
employment-related expenses have been paid.

(d) If the taxpayer is not required and does not file a
federal individual income tax return for the tax year, no credit
is allowed for any amount paid to any person unless:

(1) the name, address, and taxpayer identification number
of the person are included on the return claiming the credit; or

(2) if the person is an organization described in section
501(c)(3) of the Internal Revenue Code and exempt from tax under
section 501(a) of the Internal Revenue Code, the name and
address of the person are included on the return claiming the
credit.

In the case of a failure to provide the information required
under the preceding sentence, the preceding sentence does not
apply if it is shown that the taxpayer exercised due diligence
in attempting to provide the information required.

In the case of a nonresident, part-year resident, or a
person who has earned income not subject to tax under this
chapter including earned income excluded pursuant to section
290.01, subdivision 19b, clause (11), the credit determined
under new text begin this new text end section deleted text begin 21 of the Internal Revenue Code deleted text end must be
allocated based on the ratio by which the earned income of the
claimant and the claimant's spouse from Minnesota sources bears
to the total earned income of the claimant and the claimant's
spouse.

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 290.067,
subdivision 2, is amended to read:


Subd. 2.

Limitations.

new text begin (a) new text end The credit for expenses
incurred for the care of each dependent new text begin is computed as follows:
new text end

new text begin (1) the amount of qualified employment-related expenses
must be determined under section 21(b), (d), and (e) of the
Internal Revenue Code, but may not exceed $3,000 for each
qualifying individual; and
new text end

new text begin (2) the amount determined under clause (1) is multiplied by
the applicable percentage determined under section 21(a)(2) of
the Internal Revenue Code.
new text end

new text begin (b) The credit for each qualifying individual new text end shall not
exceed $720 in any taxable yeardeleted text begin , and the total credit for all
dependents of a claimant shall not exceed $1,440 in a taxable
year
deleted text end . The maximum total credit shall be reduced according to
the amount of the income of the claimant and a spouse, if any,
as follows:

new text begin (1) new text end income up to deleted text begin $18,040 deleted text end new text begin $20,420new text end , $720 maximum for deleted text begin one
deleted text end new text begin each new text end dependentdeleted text begin , $1,440 for all dependentsdeleted text end ; new text begin and
new text end

new text begin (2) new text end income over deleted text begin $18,040 deleted text end new text begin $20,420new text end , the maximum credit for deleted text begin one
deleted text end new text begin each new text end dependent shall be reduced by $18 for every $350 of
additional incomedeleted text begin , $36 for all dependentsdeleted text end .

new text begin (c) For purposes of this section "qualifying individual"
has the meaning given in section 21(b) of the Internal Revenue
Code.
new text end

new text begin (d) new text end The commissioner shall construct and make available to
taxpayers tables showing the amount of the credit at various
levels of income and expenses. The tables shall follow the
schedule contained in this subdivision, except that the
commissioner may graduate the transitions between expenses and
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 290.067,
subdivision 2b, is amended to read:


Subd. 2b.

Inflation adjustment.

The dollar amount of the
income threshold at which the maximum credit begins to be
reduced under subdivision 2 must be adjusted for inflation. new text begin For
taxable years beginning after December 31, 2004, the maximum
expenses and the maximum credit under subdivision 2 must also be
adjusted for inflation.
new text end The commissioner shall make the
inflation adjustments in accordance with section 1(f) of the
Internal Revenue Code except that for the purposes of this
subdivision the percentage increase must be determined from the
year starting September 1, deleted text begin 1999 deleted text end new text begin 2003new text end , and ending August 31, deleted text begin 2000
deleted text end new text begin 2004new text end , as the base year for adjusting for inflation for the tax
year beginning after December 31, deleted text begin 2000 deleted text end new text begin 2004new text end . The determination
of the commissioner under this subdivision is not a rule under
the Administrative Procedure Act.

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 290.0671,
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.

(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, 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, in excess
of $15,080, but in no case is the credit less than zero.

(d) For individuals with two deleted text begin or more deleted text end 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,
in excess of $17,890, but in no case is the credit less than
zero.

(e) new text begin For individuals with more than two qualifying children,
the amount of credit for which the individual would otherwise
qualify under paragraph (d) is increased by an amount equal to
the difference between the credit for which an individual with
the same income would be eligible under paragraph (c) and the
credit for which an individual with the same income would be
eligible under paragraph (d), multiplied by the number of the
individual's qualifying children in excess of two.
new text end

new text begin (f) new text end 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).

deleted text begin (f) deleted text end new text begin (g) new text end 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.

deleted text begin (g) deleted text end new text begin (h) new text end 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.

deleted text begin (h) deleted text end new text begin (i) new text end 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.

deleted text begin (i) deleted text end new text begin (j) new text end 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.

deleted text begin (j) deleted text end new text begin (k) new text end 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