HF 2817

as introduced - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to taxation; individual income; providing an 
  1.3             income tax checkoff to fund benefits for members of 
  1.4             the National Guard and reserves; exempting benefits 
  1.5             from taxation; authorizing administration by the 
  1.6             commissioner of veterans' affairs; appropriating 
  1.7             money; amending Minnesota Statutes 2002, sections 
  1.8             196.05, subdivision 1; 290.067, subdivision 2a; 
  1.9             290A.03, subdivision 3; Minnesota Statutes 2003 
  1.10            Supplement, sections 290.01, subdivision 19b; 290.091, 
  1.11            subdivision 2; proposing coding for new law in 
  1.12            Minnesota Statutes, chapter 290. 
  1.13  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.14     Section 1.  Minnesota Statutes 2002, section 196.05, 
  1.15  subdivision 1, is amended to read: 
  1.16     Subdivision 1.  [GENERAL DUTIES.] The commissioner shall: 
  1.17     (1) act as the agent of a resident of the state having a 
  1.18  claim against the United States for benefits arising out of or 
  1.19  by reason of service in the armed forces and prosecute the claim 
  1.20  without charge; 
  1.21     (2) act as custodian of veterans' bonus records; 
  1.22     (3) administer the laws relating to the providing of bronze 
  1.23  flag holders at veterans' graves for memorial purposes; 
  1.24     (4) administer the laws relating to recreational or rest 
  1.25  camps for veterans so far as applicable to state agencies; 
  1.26     (5) administer the state soldiers' assistance fund and 
  1.27  veterans' relief fund and other funds appropriated for the 
  1.28  payment of bonuses or other benefits to veterans or for the 
  1.29  rehabilitation of veterans; 
  2.1      (6) cooperate with national, state, county, municipal, and 
  2.2   private social agencies in securing to veterans and their 
  2.3   dependents the benefits provided by national, state, and county 
  2.4   laws, municipal ordinances, or public and private social 
  2.5   agencies; 
  2.6      (7) provide necessary assistance where other adequate aid 
  2.7   is not available to the dependent family of a veteran while the 
  2.8   veteran is hospitalized and after the veteran is released for as 
  2.9   long a period as is necessary as determined by the commissioner; 
  2.10     (8) act as the guardian, conservator, or representative 
  2.11  payee of the estate for a minor or an incompetent person 
  2.12  receiving money from the United States government when requested 
  2.13  to do so by an agency of the United States of America provided 
  2.14  sufficient personnel are available; 
  2.15     (9) cooperate with United States governmental agencies 
  2.16  providing compensation, pensions, insurance, or other benefits 
  2.17  provided by federal law, by supplementing the benefits 
  2.18  prescribed therein, when conditions in an individual case make 
  2.19  it necessary; 
  2.20     (10) assist dependent family members of military personnel 
  2.21  who are called from reserve status to extended federal active 
  2.22  duty during a time of war or national emergency through the 
  2.23  state soldiers' assistance fund provided by section 197.03; 
  2.24     (11) exercise other powers as may be authorized and 
  2.25  necessary to carry out the provisions of this chapter and 
  2.26  chapter 197, consistent with that chapter; and 
  2.27     (12) provide information, referral, and counseling services 
  2.28  to those veterans who may have suffered adverse health 
  2.29  conditions as a result of possible exposure to chemical agents; 
  2.30  and 
  2.31     (13) administer the National Guard and reserves checkoff in 
  2.32  section 290.433, including the review of applications and 
  2.33  issuance of grants. 
  2.34     [EFFECTIVE DATE.] This section is effective the day 
  2.35  following final enactment.  
  2.36     Sec. 2.  Minnesota Statutes 2003 Supplement, section 
  3.1   290.01, subdivision 19b, is amended to read: 
  3.2      Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  3.3   individuals, estates, and trusts, there shall be subtracted from 
  3.4   federal taxable income: 
  3.5      (1) interest income on obligations of any authority, 
  3.6   commission, or instrumentality of the United States to the 
  3.7   extent includable in taxable income for federal income tax 
  3.8   purposes but exempt from state income tax under the laws of the 
  3.9   United States; 
  3.10     (2) if included in federal taxable income, the amount of 
  3.11  any overpayment of income tax to Minnesota or to any other 
  3.12  state, for any previous taxable year, whether the amount is 
  3.13  received as a refund or as a credit to another taxable year's 
  3.14  income tax liability; 
  3.15     (3) the amount paid to others, less the amount used to 
  3.16  claim the credit allowed under section 290.0674, not to exceed 
  3.17  $1,625 for each qualifying child in grades kindergarten to 6 and 
  3.18  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
  3.19  textbooks, and transportation of each qualifying child in 
  3.20  attending an elementary or secondary school situated in 
  3.21  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
  3.22  wherein a resident of this state may legally fulfill the state's 
  3.23  compulsory attendance laws, which is not operated for profit, 
  3.24  and which adheres to the provisions of the Civil Rights Act of 
  3.25  1964 and chapter 363A.  For the purposes of this clause, 
  3.26  "tuition" includes fees or tuition as defined in section 
  3.27  290.0674, subdivision 1, clause (1).  As used in this clause, 
  3.28  "textbooks" includes books and other instructional materials and 
  3.29  equipment purchased or leased for use in elementary and 
  3.30  secondary schools in teaching only those subjects legally and 
  3.31  commonly taught in public elementary and secondary schools in 
  3.32  this state.  Equipment expenses qualifying for deduction 
  3.33  includes expenses as defined and limited in section 290.0674, 
  3.34  subdivision 1, clause (3).  "Textbooks" does not include 
  3.35  instructional books and materials used in the teaching of 
  3.36  religious tenets, doctrines, or worship, the purpose of which is 
  4.1   to instill such tenets, doctrines, or worship, nor does it 
  4.2   include books or materials for, or transportation to, 
  4.3   extracurricular activities including sporting events, musical or 
  4.4   dramatic events, speech activities, driver's education, or 
  4.5   similar programs.  For purposes of the subtraction provided by 
  4.6   this clause, "qualifying child" has the meaning given in section 
  4.7   32(c)(3) of the Internal Revenue Code; 
  4.8      (4) income as provided under section 290.0802; 
  4.9      (5) to the extent included in federal adjusted gross 
  4.10  income, income realized on disposition of property exempt from 
  4.11  tax under section 290.491; 
  4.12     (6) to the extent included in federal taxable income, 
  4.13  postservice benefits for youth community service under section 
  4.14  124D.42 for volunteer service under United States Code, title 
  4.15  42, sections 12601 to 12604; 
  4.16     (7) to the extent not deducted in determining federal 
  4.17  taxable income by an individual who does not itemize deductions 
  4.18  for federal income tax purposes for the taxable year, an amount 
  4.19  equal to 50 percent of the excess of charitable contributions 
  4.20  allowable as a deduction for the taxable year under section 
  4.21  170(a) of the Internal Revenue Code over $500; 
  4.22     (8) for taxable years beginning before January 1, 2008, the 
  4.23  amount of the federal small ethanol producer credit allowed 
  4.24  under section 40(a)(3) of the Internal Revenue Code which is 
  4.25  included in gross income under section 87 of the Internal 
  4.26  Revenue Code; 
  4.27     (9) for individuals who are allowed a federal foreign tax 
  4.28  credit for taxes that do not qualify for a credit under section 
  4.29  290.06, subdivision 22, an amount equal to the carryover of 
  4.30  subnational foreign taxes for the taxable year, but not to 
  4.31  exceed the total subnational foreign taxes reported in claiming 
  4.32  the foreign tax credit.  For purposes of this clause, "federal 
  4.33  foreign tax credit" means the credit allowed under section 27 of 
  4.34  the Internal Revenue Code, and "carryover of subnational foreign 
  4.35  taxes" equals the carryover allowed under section 904(c) of the 
  4.36  Internal Revenue Code minus national level foreign taxes to the 
  5.1   extent they exceed the federal foreign tax credit; 
  5.2      (10) in each of the five tax years immediately following 
  5.3   the tax year in which an addition is required under subdivision 
  5.4   19a, clause (7), an amount equal to one-fifth of the delayed 
  5.5   depreciation.  For purposes of this clause, "delayed 
  5.6   depreciation" means the amount of the addition made by the 
  5.7   taxpayer under subdivision 19a, clause (7), minus the positive 
  5.8   value of any net operating loss under section 172 of the 
  5.9   Internal Revenue Code generated for the tax year of the 
  5.10  addition.  The resulting delayed depreciation cannot be less 
  5.11  than zero; and 
  5.12     (11) job opportunity building zone income as provided under 
  5.13  section 469.316; and 
  5.14     (12) grants received under section 290.433. 
  5.15     [EFFECTIVE DATE.] This section is effective for taxable 
  5.16  years beginning after December 31, 2004. 
  5.17     Sec. 3.  Minnesota Statutes 2002, section 290.067, 
  5.18  subdivision 2a, is amended to read: 
  5.19     Subd. 2a.  [INCOME.] (a) For purposes of this section, 
  5.20  "income" means the sum of the following: 
  5.21     (1) federal adjusted gross income as defined in section 62 
  5.22  of the Internal Revenue Code; and 
  5.23     (2) the sum of the following amounts to the extent not 
  5.24  included in clause (1): 
  5.25     (i) all nontaxable income; 
  5.26     (ii) the amount of a passive activity loss that is not 
  5.27  disallowed as a result of section 469, paragraph (i) or (m) of 
  5.28  the Internal Revenue Code and the amount of passive activity 
  5.29  loss carryover allowed under section 469(b) of the Internal 
  5.30  Revenue Code; 
  5.31     (iii) an amount equal to the total of any discharge of 
  5.32  qualified farm indebtedness of a solvent individual excluded 
  5.33  from gross income under section 108(g) of the Internal Revenue 
  5.34  Code; 
  5.35     (iv) cash public assistance and relief; 
  5.36     (v) any pension or annuity (including railroad retirement 
  6.1   benefits, all payments received under the federal Social 
  6.2   Security Act, supplemental security income, and veterans 
  6.3   benefits), which was not exclusively funded by the claimant or 
  6.4   spouse, or which was funded exclusively by the claimant or 
  6.5   spouse and which funding payments were excluded from federal 
  6.6   adjusted gross income in the years when the payments were made; 
  6.7      (vi) interest received from the federal or a state 
  6.8   government or any instrumentality or political subdivision 
  6.9   thereof; 
  6.10     (vii) workers' compensation; 
  6.11     (viii) nontaxable strike benefits; 
  6.12     (ix) the gross amounts of payments received in the nature 
  6.13  of disability income or sick pay as a result of accident, 
  6.14  sickness, or other disability, whether funded through insurance 
  6.15  or otherwise; 
  6.16     (x) a lump sum distribution under section 402(e)(3) of the 
  6.17  Internal Revenue Code; 
  6.18     (xi) contributions made by the claimant to an individual 
  6.19  retirement account, including a qualified voluntary employee 
  6.20  contribution; simplified employee pension plan; self-employed 
  6.21  retirement plan; cash or deferred arrangement plan under section 
  6.22  401(k) of the Internal Revenue Code; or deferred compensation 
  6.23  plan under section 457 of the Internal Revenue Code; and 
  6.24     (xii) nontaxable scholarship or fellowship grants. 
  6.25     In the case of an individual who files an income tax return 
  6.26  on a fiscal year basis, the term "federal adjusted gross income" 
  6.27  means federal adjusted gross income reflected in the fiscal year 
  6.28  ending in the next calendar year.  Federal adjusted gross income 
  6.29  may not be reduced by the amount of a net operating loss 
  6.30  carryback or carryforward or a capital loss carryback or 
  6.31  carryforward allowed for the year. 
  6.32     (b) "Income" does not include: 
  6.33     (1) amounts excluded pursuant to the Internal Revenue Code, 
  6.34  sections 101(a) and 102; 
  6.35     (2) amounts of any pension or annuity that were exclusively 
  6.36  funded by the claimant or spouse if the funding payments were 
  7.1   not excluded from federal adjusted gross income in the years 
  7.2   when the payments were made; 
  7.3      (3) surplus food or other relief in kind supplied by a 
  7.4   governmental agency; 
  7.5      (4) relief granted under chapter 290A; 
  7.6      (5) child support payments received under a temporary or 
  7.7   final decree of dissolution or legal separation; and 
  7.8      (6) restitution payments received by eligible individuals 
  7.9   and excludable interest as defined in section 803 of the 
  7.10  Economic Growth and Tax Relief Reconciliation Act of 2001, 
  7.11  Public Law 107-16; and 
  7.12     (7) grants received under section 290.433. 
  7.13     [EFFECTIVE DATE.] This section is effective for taxable 
  7.14  years beginning after December 31, 2004. 
  7.15     Sec. 4.  Minnesota Statutes 2003 Supplement, section 
  7.16  290.091, subdivision 2, is amended to read: 
  7.17     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
  7.18  this section, the following terms have the meanings given: 
  7.19     (a) "Alternative minimum taxable income" means the sum of 
  7.20  the following for the taxable year: 
  7.21     (1) the taxpayer's federal alternative minimum taxable 
  7.22  income as defined in section 55(b)(2) of the Internal Revenue 
  7.23  Code; 
  7.24     (2) the taxpayer's itemized deductions allowed in computing 
  7.25  federal alternative minimum taxable income, but excluding: 
  7.26     (i) the charitable contribution deduction under section 170 
  7.27  of the Internal Revenue Code to the extent that the deduction 
  7.28  exceeds 1.0 percent of adjusted gross income, as defined in 
  7.29  section 62 of the Internal Revenue Code; 
  7.30     (ii) the medical expense deduction; 
  7.31     (iii) the casualty, theft, and disaster loss deduction; and 
  7.32     (iv) the impairment-related work expenses of a disabled 
  7.33  person; 
  7.34     (3) for depletion allowances computed under section 613A(c) 
  7.35  of the Internal Revenue Code, with respect to each property (as 
  7.36  defined in section 614 of the Internal Revenue Code), to the 
  8.1   extent not included in federal alternative minimum taxable 
  8.2   income, the excess of the deduction for depletion allowable 
  8.3   under section 611 of the Internal Revenue Code for the taxable 
  8.4   year over the adjusted basis of the property at the end of the 
  8.5   taxable year (determined without regard to the depletion 
  8.6   deduction for the taxable year); 
  8.7      (4) to the extent not included in federal alternative 
  8.8   minimum taxable income, the amount of the tax preference for 
  8.9   intangible drilling cost under section 57(a)(2) of the Internal 
  8.10  Revenue Code determined without regard to subparagraph (E); 
  8.11     (5) to the extent not included in federal alternative 
  8.12  minimum taxable income, the amount of interest income as 
  8.13  provided by section 290.01, subdivision 19a, clause (1); and 
  8.14     (6) the amount of addition required by section 290.01, 
  8.15  subdivision 19a, clause (7); 
  8.16     less the sum of the amounts determined under the following: 
  8.17     (1) interest income as defined in section 290.01, 
  8.18  subdivision 19b, clause (1); 
  8.19     (2) an overpayment of state income tax as provided by 
  8.20  section 290.01, subdivision 19b, clause (2), to the extent 
  8.21  included in federal alternative minimum taxable income; 
  8.22     (3) the amount of investment interest paid or accrued 
  8.23  within the taxable year on indebtedness to the extent that the 
  8.24  amount does not exceed net investment income, as defined in 
  8.25  section 163(d)(4) of the Internal Revenue Code.  Interest does 
  8.26  not include amounts deducted in computing federal adjusted gross 
  8.27  income; and 
  8.28     (4) amounts subtracted from federal taxable income as 
  8.29  provided by section 290.01, subdivision 19b, clauses (10) and 
  8.30  (11) to (12). 
  8.31     In the case of an estate or trust, alternative minimum 
  8.32  taxable income must be computed as provided in section 59(c) of 
  8.33  the Internal Revenue Code. 
  8.34     (b) "Investment interest" means investment interest as 
  8.35  defined in section 163(d)(3) of the Internal Revenue Code. 
  8.36     (c) "Tentative minimum tax" equals 6.4 percent of 
  9.1   alternative minimum taxable income after subtracting the 
  9.2   exemption amount determined under subdivision 3. 
  9.3      (d) "Regular tax" means the tax that would be imposed under 
  9.4   this chapter (without regard to this section and section 
  9.5   290.032), reduced by the sum of the nonrefundable credits 
  9.6   allowed under this chapter.  
  9.7      (e) "Net minimum tax" means the minimum tax imposed by this 
  9.8   section. 
  9.9      [EFFECTIVE DATE.] This section is effective for taxable 
  9.10  years beginning after December 31, 2004. 
  9.11     Sec. 5.  [290.433] [NATIONAL GUARD AND RESERVES CHECKOFF.] 
  9.12     Subdivision 1.  [CHECKOFF ESTABLISHED.] (a) Every 
  9.13  individual who files an income tax return may designate on their 
  9.14  original return that $1 or more shall be added to the tax or 
  9.15  deducted from the refund that would otherwise be payable by or 
  9.16  to that individual and paid into a National Guard and reserves 
  9.17  account in the special revenue fund.  The commissioner of 
  9.18  revenue shall, on the income tax return, notify filers of their 
  9.19  right to designate that a portion of their tax or refund shall 
  9.20  be paid into the National Guard and reserves account.  Amounts 
  9.21  so designated to be paid shall be credited to the account as 
  9.22  returns are processed, in as timely a manner as practical.  All 
  9.23  interest earned on money accrued, gifts to the program, 
  9.24  contributions to the program, and reimbursements of expenditures 
  9.25  shall be credited to the account.  All money in the account is 
  9.26  appropriated to the commissioner of veterans' affairs, for 
  9.27  purposes of making grants to members of the National Guard and 
  9.28  other United States armed forces reserves who are ordered to 
  9.29  active service and their survivors. 
  9.30     (b) The state pledges and agrees with all contributors to 
  9.31  the account to use the funds contributed solely for the purpose 
  9.32  of providing assistance to members of the National Guard and 
  9.33  other United States armed forces reserves ordered to active 
  9.34  service and their survivors, with the exception that: 
  9.35     (1) in fiscal year 2005 $....... is transferred to the 
  9.36  general fund to offset the appropriation provided in section 7; 
 10.1   and 
 10.2      (2) in fiscal year 2005 and each following year the lesser 
 10.3   of 
 10.4      (i) $.......; or 
 10.5      (ii) three percent of the amount appropriated may be used 
 10.6   by the commissioner of veterans' affairs for administrative 
 10.7   expenses.  
 10.8   The state further agrees that it will not impose additional 
 10.9   conditions or restrictions that will limit or otherwise restrict 
 10.10  the ability of the commissioner to award grants under this 
 10.11  section. 
 10.12     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 10.13  the following terms have the meanings given. 
 10.14     (b) "Active service" has the meaning given in section 
 10.15  190.05, subdivision 5, but excludes service performed 
 10.16  exclusively for purposes of: 
 10.17     (1) basic combat training, advanced individual training, 
 10.18  annual training, and periodic inactive duty training; 
 10.19     (2) special training periodically made available to reserve 
 10.20  members; and 
 10.21     (3) service performed in accordance with section 190.08, 
 10.22  subdivision 3. 
 10.23     (c) "Commissioner" means the commissioner of veterans' 
 10.24  affairs. 
 10.25     (d) "Basic grant" means the monthly grant amount awarded to 
 10.26  an individual ordered to active service. 
 10.27     (e) "Spousal grant" equals one-half the basic grant. 
 10.28     (f) "Dependent grant" equals one-half the basic grant for 
 10.29  each of the first two dependents and one-fourth the basic grant 
 10.30  amount for each additional dependent. 
 10.31     (g) "Total monthly grant" means (i) the basic grant, plus 
 10.32  (ii) the spousal grant, if the claimant has a spouse, plus (iii) 
 10.33  the dependent grant, multiplied by the number of the claimant's 
 10.34  dependents, if any. 
 10.35     (h) "Number of months in active service" means the number 
 10.36  of months during the calendar year in which the claimant was in 
 11.1   active service for at least one day, except for an individual 
 11.2   who is in active service for 15 or fewer days during the 
 11.3   calendar year the number of months in active service equals one. 
 11.4      (i) "Dependent" has the meaning given in section 152 of the 
 11.5   Internal Revenue Code. 
 11.6      Subd. 3.  [ANNUAL APPLICATION.] Minnesota residents who are 
 11.7   members of the National Guard or United States armed forces 
 11.8   reserves and are ordered to active service are eligible for 
 11.9   grants under this section.  An individual must apply for a grant 
 11.10  in the form and manner prescribed by the commissioner, by April 
 11.11  30, 2005, for active service in 2004, and by April 30 of each 
 11.12  year thereafter for active service in the preceding year.  The 
 11.13  application must state the dates of active service, the names 
 11.14  and Social Security numbers of the claimant and the claimant's 
 11.15  spouse and dependents, if any, and any other information deemed 
 11.16  necessary by the commissioner.  The claimant's spouse, personal 
 11.17  representative, or a person holding a power of attorney may 
 11.18  submit an application on behalf of a claimant or a deceased 
 11.19  claimant, but a claimant or a claimant's estate may receive only 
 11.20  one grant per year.  The commissioner must review applications 
 11.21  and determine eligibility. 
 11.22     Subd. 4.  [GRANT AMOUNT.] On June 30, 2005, and each year 
 11.23  thereafter, the commissioner must determine the amount of money 
 11.24  available in the National Guard and reserves account.  The 
 11.25  commissioner must calculate the basic grant amount such that 
 11.26  adequate money is available for each eligible claimant to 
 11.27  receive the total monthly grant for the claimant multiplied by 
 11.28  the claimant's number of months in active service during the 
 11.29  calendar year. 
 11.30     Subd. 5.  [ANNUAL REPORT.] The commissioner must report by 
 11.31  January 1, 2006, and each year thereafter, to the chairs and 
 11.32  ranking minority members of the legislative committees and 
 11.33  divisions with jurisdiction over military and veterans' affairs 
 11.34  on the number, amounts, and use of grants issued from the 
 11.35  account in the previous year. 
 11.36     Subd. 6.  [EXCEPTION FROM RULEMAKING.] Actions of the 
 12.1   commissioner under this section are not rules under the 
 12.2   Administrative Procedure Act. 
 12.3      [EFFECTIVE DATE.] This section is effective for income tax 
 12.4   returns for taxable years beginning after December 31, 2003. 
 12.5      Sec. 6.  Minnesota Statutes 2002, section 290A.03, 
 12.6   subdivision 3, is amended to read: 
 12.7      Subd. 3.  [INCOME.] (1) "Income" means the sum of the 
 12.8   following:  
 12.9      (a) federal adjusted gross income as defined in the 
 12.10  Internal Revenue Code; and 
 12.11     (b) the sum of the following amounts to the extent not 
 12.12  included in clause (a):  
 12.13     (i) all nontaxable income; 
 12.14     (ii) the amount of a passive activity loss that is not 
 12.15  disallowed as a result of section 469, paragraph (i) or (m) of 
 12.16  the Internal Revenue Code and the amount of passive activity 
 12.17  loss carryover allowed under section 469(b) of the Internal 
 12.18  Revenue Code; 
 12.19     (iii) an amount equal to the total of any discharge of 
 12.20  qualified farm indebtedness of a solvent individual excluded 
 12.21  from gross income under section 108(g) of the Internal Revenue 
 12.22  Code; 
 12.23     (iv) cash public assistance and relief; 
 12.24     (v) any pension or annuity (including railroad retirement 
 12.25  benefits, all payments received under the federal Social 
 12.26  Security Act, supplemental security income, and veterans 
 12.27  benefits), which was not exclusively funded by the claimant or 
 12.28  spouse, or which was funded exclusively by the claimant or 
 12.29  spouse and which funding payments were excluded from federal 
 12.30  adjusted gross income in the years when the payments were made; 
 12.31     (vi) interest received from the federal or a state 
 12.32  government or any instrumentality or political subdivision 
 12.33  thereof; 
 12.34     (vii) workers' compensation; 
 12.35     (viii) nontaxable strike benefits; 
 12.36     (ix) the gross amounts of payments received in the nature 
 13.1   of disability income or sick pay as a result of accident, 
 13.2   sickness, or other disability, whether funded through insurance 
 13.3   or otherwise; 
 13.4      (x) a lump sum distribution under section 402(e)(3) of the 
 13.5   Internal Revenue Code; 
 13.6      (xi) contributions made by the claimant to an individual 
 13.7   retirement account, including a qualified voluntary employee 
 13.8   contribution; simplified employee pension plan; self-employed 
 13.9   retirement plan; cash or deferred arrangement plan under section 
 13.10  401(k) of the Internal Revenue Code; or deferred compensation 
 13.11  plan under section 457 of the Internal Revenue Code; and 
 13.12     (xii) nontaxable scholarship or fellowship grants.  
 13.13     In the case of an individual who files an income tax return 
 13.14  on a fiscal year basis, the term "federal adjusted gross income" 
 13.15  shall mean federal adjusted gross income reflected in the fiscal 
 13.16  year ending in the calendar year.  Federal adjusted gross income 
 13.17  shall not be reduced by the amount of a net operating loss 
 13.18  carryback or carryforward or a capital loss carryback or 
 13.19  carryforward allowed for the year.  
 13.20     (2) "Income" does not include:  
 13.21     (a) amounts excluded pursuant to the Internal Revenue Code, 
 13.22  sections 101(a) and 102; 
 13.23     (b) amounts of any pension or annuity which was exclusively 
 13.24  funded by the claimant or spouse and which funding payments were 
 13.25  not excluded from federal adjusted gross income in the years 
 13.26  when the payments were made; 
 13.27     (c) surplus food or other relief in kind supplied by a 
 13.28  governmental agency; 
 13.29     (d) relief granted under this chapter; 
 13.30     (e) child support payments received under a temporary or 
 13.31  final decree of dissolution or legal separation; or 
 13.32     (f) restitution payments received by eligible individuals 
 13.33  and excludable interest as defined in section 803 of the 
 13.34  Economic Growth and Tax Relief Reconciliation Act of 2001, 
 13.35  Public Law 107-16; or 
 13.36     (g) grants received under section 290.433. 
 14.1      (3) The sum of the following amounts may be subtracted from 
 14.2   income:  
 14.3      (a) for the claimant's first dependent, the exemption 
 14.4   amount multiplied by 1.4; 
 14.5      (b) for the claimant's second dependent, the exemption 
 14.6   amount multiplied by 1.3; 
 14.7      (c) for the claimant's third dependent, the exemption 
 14.8   amount multiplied by 1.2; 
 14.9      (d) for the claimant's fourth dependent, the exemption 
 14.10  amount multiplied by 1.1; 
 14.11     (e) for the claimant's fifth dependent, the exemption 
 14.12  amount; and 
 14.13     (f) if the claimant or claimant's spouse was disabled or 
 14.14  attained the age of 65 on or before December 31 of the year for 
 14.15  which the taxes were levied or rent paid, the exemption amount.  
 14.16     For purposes of this subdivision, the "exemption amount" 
 14.17  means the exemption amount under section 151(d) of the Internal 
 14.18  Revenue Code for the taxable year for which the income is 
 14.19  reported.  
 14.20     [EFFECTIVE DATE.] This section is effective beginning for 
 14.21  refunds payable in 2006, based on taxes payable in 2006 and 
 14.22  rents paid in 2005 and thereafter. 
 14.23     Sec. 7.  [APPROPRIATION.] 
 14.24     $....... is appropriated from the general fund to the 
 14.25  commissioner of veterans' affairs in fiscal year 2004 for 
 14.26  administering grants in section 5.