HF 2642

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

A bill for an act
relating to taxes; individual income, sales, and excise taxes; education finance
levies; reducing the operating capital levy; reducing the equity levy; conforming
to federal marriage penalty relief and reducing state marriage penalties; allowing
tuition as a qualifying expense for the K-12 education credit; modifying the credit
phaseout; reducing the June accelerated tax payments; amending Minnesota
Statutes 2004, sections 126C.10, subdivision 29; 289A.60, subdivision 15;
290.091, subdivision 3; 297F.09, subdivision 10; Minnesota Statutes 2005
Supplement, sections 126C.10, subdivision 13a; 289A.20, subdivision 4; 290.01,
subdivisions 19a, 19b; 290.067, subdivision 2a; 290.0671, subdivision 1;
290.0674, subdivisions 1, 2.

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

Section 1.

Minnesota Statutes 2005 Supplement, section 126C.10, subdivision 13a,
is amended to read:

Subd. 13a.

Operating capital levy.

To obtain operating capital revenue deleted text begin for fiscal
year 2007 and later deleted text end , a district may levy an amount not more than the product of its
operating capital revenue for the fiscal year times the lesser of one or the ratio of its
adjusted net tax capacity per adjusted marginal cost pupil unit to the operating capital
equalizing factor. The operating capital equalizing factor equals $22,222 for fiscal year
2006, and $10,700 for fiscal year 2007 new text begin , and $22,222 for fiscal year 2008 new text end and later.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for revenue for fiscal year 2008.
new text end

Sec. 2.

Minnesota Statutes 2004, section 126C.10, subdivision 29, is amended to read:

Subd. 29.

Equity levy.

To obtain equity revenue deleted text begin for fiscal year 2005 and later deleted text end ,
a district may levy an amount not more than the product of its equity revenue for the
fiscal year times the lesser of one or the ratio of its referendum market value per resident
marginal cost pupil unit to deleted text begin $476,000 deleted text end new text begin the equity equalizing factor. The equity equalizing
factor equals $476,000 for fiscal year 2007 and $1,150,000 for fiscal year 2008 and later new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for revenue for fiscal year 2008.
new text end

Sec. 3.

Minnesota Statutes 2005 Supplement, section 289A.20, subdivision 4, is
amended to read:

Subd. 4.

Sales and use tax.

(a) The taxes imposed by chapter 297A are due and
payable to the commissioner monthly on or before the 20th day of the month following the
month in which the taxable event occurred, or following another reporting period as the
commissioner prescribes or as allowed under section 289A.18, subdivision 4, paragraph
(f) or (g), except that use taxes due on an annual use tax return as provided under section
289A.11, subdivision 1, are payable by April 15 following the close of the calendar year.

(b) A vendor having a liability of $120,000 or more during a fiscal year ending June
30 must remit the June liability for the next year in the following manner:

(1) Two business days before June 30 of the year, the vendor must remit deleted text begin 85
percent deleted text end new text begin the percent, calculated under paragraph (d), new text end of the estimated June liability to
the commissioner.

(2) On or before August 20 of the year, the vendor must pay any additional amount
of tax not remitted in June.

(c) A vendor having a liability of:

(1) $20,000 or more in the fiscal year ending June 30, 2005; or

(2) $10,000 or more in the fiscal year ending June 30, 2006, and fiscal years
thereafter,

must remit all liabilities on returns due for periods beginning in the subsequent calendar
year by electronic means on or before the 20th day of the month following the month in
which the taxable event occurred, or on or before the 20th day of the month following the
month in which the sale is reported under section 289A.18, subdivision 4, except for 85
percent of the estimated June liability, which is due two business days before June 30. The
remaining amount of the June liability is due on August 20.

new text begin (d) On or before January 1, 2007, the commissioner of revenue must calculate and
publish a rate to the nearest whole percent, of the percent of the estimated June liability
which must be remitted to the commissioner, beginning with the June 2006 remittance.
The percentage shall be set such that the estimated difference between (1) the revenue that
would be submitted in June 2007 under paragraph (b) of this section and under sections
297F.09, subdivision 10, and 297G.09, subdivision 9, if the percentage remained at 85
percent; and (2) the revenue that is estimated to be submitted under those provisions in
June 2007 under the calculated percentage, does not exceed $203,200,000.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after final enactment for sales
tax payments in June 2007 and thereafter.
new text end

Sec. 4.

Minnesota Statutes 2004, section 289A.60, subdivision 15, is amended to read:

Subd. 15.

Accelerated payment of June sales tax liability; penalty for
underpayment.

(a) For payments made after December 31, 2002, and before January 1,
2004, if a vendor is required by law to submit an estimation of June sales tax liabilities
and 75 percent payment by a certain date, the vendor shall pay a penalty equal to ten
percent of the amount of actual June liability required to be paid in June less the amount
remitted in June. The penalty must not be imposed, however, if the amount remitted in
June equals the lesser of 75 percent of the preceding May's liability or 75 percent of the
average monthly liability for the previous calendar year.

(b) For payments made after December 31, deleted text begin 2003 deleted text end new text begin 2006 new text end , if a vendor is required by
law to submit an estimation of June sales tax liabilities and deleted text begin 85 percent deleted text end payment new text begin of a
certain percent new text end by a certain date, the vendor shall pay a penalty equal to ten percent of
the amount of actual June liability required to be paid in June less the amount remitted in
June. The penalty must not be imposed, however, if the amount remitted in June equals
the lesser of deleted text begin 85 percent deleted text end new text begin the percent, calculated under section 289A.20, subdivision 4,
paragraph (d), new text end of the preceding May's liability or deleted text begin 85 percent deleted text end new text begin the percent, calculated under
section 289A.20, subdivision 4, paragraph (d), new text end of the average monthly liability for the
previous calendar year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for payments after December 31,
2006.
new text end

Sec. 5.

Minnesota Statutes 2005 Supplement, 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 or sales and use taxes paid or accrued within the taxable
year under this chapter and the amount of taxes based on net income paid or sales and
use 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 minus the addition which would
have been required under clause (10) if the taxpayer had claimed the standard deduction.
For the purpose of this paragraph, the disallowance of itemized deductions under section
68 of the Internal Revenue Code of 1986, income or sales and use 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 taxes based on net income 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
other than expenses or interest used in computing net interest income for the subtraction
allowed under subdivision 19b, clause (1);

(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;

(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;

(8) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;

(9) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code;

(10) for tax years beginning after December 31, 2004, new text begin and before January 1, 2006,
new text end to the extent deducted in computing federal taxable income, the amount by which the
standard deduction allowed under section 63(c) of the Internal Revenue Code exceeds the
standard deduction allowable under section 63(c) of the Internal Revenue Code of 1986,
as amended through December 31, 2003; and

(11) the exclusion allowed under section 139A of the Internal Revenue Code for
federal subsidies for prescription drug plans.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2005.
new text end

Sec. 6.

Minnesota Statutes 2005 Supplement, 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) net 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 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 over $500 allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and
under the provisions of Public Law 109-1;

(7) 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;

(8) 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;

(9) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
of a shareholder of a corporation that is an S corporation, 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), or
subdivision 19c, clause (15), in the case of a shareholder of an S corporation, 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;

(10) job opportunity building zone income as provided under section 469.316;

(11) the amount of compensation paid to members of the Minnesota National Guard
or other reserve components of the United States military for active service performed
in Minnesota, excluding compensation for services performed under the Active Guard
Reserve (AGR) program. For purposes of this clause, "active service" means (i) state
active service as defined in section 190.05, subdivision 5a, clause (1); (ii) federally
funded state active service as defined in section 190.05, subdivision 5b; or (iii) federal
active service as defined in section 190.05, subdivision 5c, but "active service" excludes
services performed exclusively for purposes of basic combat training, advanced individual
training, annual training, and periodic inactive duty training; special training periodically
made available to reserve members; and service performed in accordance with section
190.08, subdivision 3;

(12) the amount of compensation paid to Minnesota residents who are members
of the armed forces of the United States or United Nations for active duty performed
outside Minnesota;

(13) an amount, not to exceed $10,000, equal to qualified expenses related to a
qualified donor's donation, while living, of one or more of the qualified donor's organs
to another person for human organ transplantation. For purposes of this clause, "organ"
means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
"human organ transplantation" means the medical procedure by which transfer of a human
organ is made from the body of one person to the body of another person; "qualified
expenses" means unreimbursed expenses for both the individual and the qualified donor
for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
may be subtracted under this clause only once; and "qualified donor" means the individual
or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
individual may claim the subtraction in this clause for each instance of organ donation for
transplantation during the taxable year in which the qualified expenses occur;

(14) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
case of a shareholder of a corporation that is an S corporation, 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. If the net operating loss exceeds the addition for the tax year, a
subtraction is not allowed under this clause;

(15) to the extent included in federal taxable income, compensation paid to a
nonresident who is a service member as defined in United States Code, title 10, section
101(a)(5), for military service as defined in the Service Member Civil Relief Act, Public
Law 108-189, section 101(2); deleted text begin and
deleted text end

(16) international economic development zone income as provided under section
469.325 new text begin ; and
new text end

new text begin (17) for tax years beginning after December 31, 2005, and before January 1, 2007,
the amount included in taxable income for tax years beginning after December 31, 2004,
and before January 1, 2006, if any, as required by section 290.01, subdivision 19a, clause
(10) 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, 2005.
new text end

Sec. 7.

Minnesota Statutes 2005 Supplement, 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 of
1986, as amended through December 31, 1995;

(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;

(xii) nontaxable scholarship or fellowship grants;

(xiii) the amount of deduction allowed under section 199 of the Internal Revenue
Code; and

(xiv) the amount of deduction allowed under section 220 or 223 of the Internal
Revenue Code 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, 2005.
new text end

Sec. 8.

Minnesota Statutes 2005 Supplement, 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 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 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 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 (10) or (16), 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. For purposes of this paragraph, the
subtractions for military pay under section 290.01, subdivision 19b, clauses (11) and (12),
are not considered "earned income not subject to tax under this chapter."

For the purposes of this paragraph, the exclusion of combat pay under section 112
of the Internal Revenue Code is not considered "earned income not subject to tax under
this chapter."

(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, 2005.
new text end

Sec. 9.

Minnesota Statutes 2005 Supplement, section 290.0674, subdivision 1, is
amended to read:

Subdivision 1.

Credit allowed.

An individual is allowed a credit against the
tax imposed by this chapter in an amount equal to 75 percent of the amount paid for
education-related expenses for a qualifying child in kindergarten through grade 12. For
purposes of this section, "education-related expenses" means:

(1) fees or tuition for instruction by an instructor under section 120A.22, subdivision
10, clause (1), (2), (3), (4), or (5), or a member of the Minnesota Music Teachers
Association, and who is not a lineal ancestor or sibling of the dependent for instruction
outside the regular school day or school year, including tutoring, driver's education
offered as part of school curriculum, regardless of whether it is taken from a public or
private entity or summer camps, in grade or age appropriate curricula that supplement
curricula and instruction available during the regular school year, that assists a dependent
to improve knowledge of core curriculum areas or to expand knowledge and skills under
the required academic standards under section 120B.021, subdivision 1, and the elective
standard under section 120B.022, subdivision 1, clause (2), and that do not include the
teaching of religious tenets, doctrines, or worship, the purpose of which is to instill such
tenets, doctrines, or worship;

(2) expenses for textbooks, including 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. "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
extracurricular activities including sporting events, musical or dramatic events, speech
activities, driver's education, or similar programs;

(3) a maximum expense of $200 per family for personal computer hardware,
excluding single purpose processors, and educational software that assists a dependent to
improve knowledge of core curriculum areas or to expand knowledge and skills under
the required academic standards under section 120B.021, subdivision 1, and the elective
standard under section 120B.022, subdivision 1, clause (2), purchased for use in the
taxpayer's home and not used in a trade or business regardless of whether the computer is
required by the dependent's school; and

(4) the amount paid to others for new text begin tuition and new text end transportation of a qualifying child
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 purposes of this section, "qualifying child" has the meaning given in section
32(c)(3) of the Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2005.
new text end

Sec. 10.

Minnesota Statutes 2005 Supplement, section 290.0674, subdivision 2,
is amended to read:

Subd. 2.

Limitations.

(a) For claimants with income not greater than new text begin the greater
of (1) new text end $33,500 new text begin or (2) 185 percent of the federal poverty guidelines new text end , the maximum
credit allowed for a family is $1,000 multiplied by the number of qualifying children
in kindergarten through grade 12 in the family. The maximum credit for families with
one qualifying child in kindergarten through grade 12 is reduced by $1 for each $4 of
household income over new text begin the greater of (1) new text end $33,500 deleted text begin , and the maximum credit for families
with two or more qualifying children in kindergarten through grade 12 is reduced by $2
for each $4 of household income over $33,500 deleted text end new text begin or (2) 185 percent of the federal poverty
guidelines new text end , but in no case is the credit less than zero.

For purposes of this section "income" has the meaning given in section 290.067,
subdivision 2a new text begin , but disregarding the subtraction in clause (3); "federal poverty guidelines"
means the guidelines published in the federal register in the tax year for which the credit is
claimed, adjusted for family size; and "family size" is calculated as the taxpayer, spouse, if
any, and total number of dependents claimed by the taxpayer new text end . In the case of a married
claimant, a credit is not allowed unless a joint income tax return is filed.

(b) For a nonresident or part-year resident, the credit determined under subdivision 1
and the maximum credit amount in paragraph (a) must be allocated using the percentage
calculated in section 290.06, subdivision 2c, paragraph (e).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2005.
new text end

Sec. 11.

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, new text begin and the phaseout threshold is
the amount provided in section 55(d) of the Internal Revenue Code, as amended through
December 31, 1992, new text end 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; and (2) for married couples filing separate returns,
the exemption amount and the phaseout threshold equal one-half the amounts provided for
married couples filing joint returns. For all 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, 2005.
new text end

Sec. 12.

Minnesota Statutes 2004, section 297F.09, subdivision 10, is amended to read:

Subd. 10.

Accelerated tax payment; cigarette or tobacco products distributor.

A cigarette or tobacco products distributor having a liability of $120,000 or more during a
fiscal year ending June 30, shall remit the June liability for the next year in the following
manner:

(a) Two business days before June 30 of the year, the distributor shall remit the actual
May liability and deleted text begin 85 percent deleted text end new text begin the percent, calculated under section 289A.20, subdivision
4, paragraph (d), new text end of the estimated June liability to the commissioner and file the return
in the form and manner prescribed by the commissioner.

(b) On or before August 18 of the year, the distributor shall submit a return showing
the actual June liability and pay any additional amount of tax not remitted in June. A
penalty is imposed equal to ten percent of the amount of June liability required to be paid
in June, less the amount remitted in June. However, the penalty is not imposed if the
amount remitted in June equals the lesser of:

(1) deleted text begin 85 percent deleted text end new text begin the percent, calculated under section 289A.20, subdivision 4,
paragraph (d), new text end of the actual June liability; or

(2) deleted text begin 85 percent deleted text end new text begin the percent, calculated under section 289A.20, subdivision 4,
paragraph (d), new text end of the preceding May's liability.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax payments in June 2007 and
thereafter.
new text end

Sec. 13. new text begin TRANSFER.
new text end

new text begin In fiscal year 2006, the balance in the tax relief account in Minnesota Statutes, section
16A.1522, subdivision 4, estimated to be $316,716,000, is canceled to the general fund.
new text end