HF 3802

as introduced - 86th Legislature (2009 - 2010) Posted on 04/26/2010 11:24am

A bill for an act
relating to taxation; individual income; allowing a mortgage interest credit in
lieu of the mortgage interest deduction for itemizers and nonitemizers; amending
Minnesota Statutes 2008, section 290.06, by adding a subdivision; Minnesota
Statutes 2009 Supplement, section 290.01, subdivision 19a.

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

Section 1.

Minnesota Statutes 2009 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) new text begin (i) new text end the amount of income, sales and use, motor vehicle sales, or excise taxes paid
or accrued within the taxable year under this chapter and the amount of taxes based on net
income paid, sales and use, motor vehicle sales, or excise taxes paid to any other state or
to any province or territory of Canada deleted text begin , deleted text end new text begin ; and
new text end

new text begin (ii) for individuals who claim the mortgage interest credit in lieu of deduction under
section 290.06, subdivision 36, qualified residence interest, as defined in section 163(h) of
the Internal Revenue Code;
new text end

to the extent allowed as deleted text begin a deduction deleted text end new text begin deductions new text end under section 63(d) of the Internal
Revenue Code, but the deleted text begin addition deleted text end new text begin sum of the additions made under items (i) and (ii) new text end 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, disregarding the amounts allowed under
sections 63(c)(1)(C) and 63(c)(1)(E) 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, sales and use, motor vehicle sales, or excise taxes new text begin , and
qualified residence interest new text end are the last itemized deductions 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) the exclusion allowed under section 139A of the Internal Revenue Code for
federal subsidies for prescription drug plans;

(11) the amount of expenses disallowed under section 290.10, subdivision 2;

(12) the amount deducted for qualified tuition and related expenses under section
222 of the Internal Revenue Code, to the extent deducted from gross income;

(13) the amount deducted for certain expenses of elementary and secondary school
teachers under section 62(a)(2)(D) of the Internal Revenue Code, to the extent deducted
from gross income;

(14) the additional standard deduction for property taxes payable that is allowable
under section 63(c)(1)(C) of the Internal Revenue Code;

(15) the additional standard deduction for qualified motor vehicle sales taxes
allowable under section 63(c)(1)(E) of the Internal Revenue Code;

(16) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code; and

(17) the amount of unemployment compensation exempt from tax under section
85(c) 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, 2009.
new text end

Sec. 2.

Minnesota Statutes 2008, section 290.06, is amended by adding a subdivision
to read:

new text begin Subd. 36. new text end

new text begin Mortgage interest credit in lieu of deduction for itemizers and
nonitemizers. new text end

new text begin (a) An individual may claim a credit under this subdivision for qualified
residence interest defined under section 163 of the Internal Revenue Code and allowable
as a deduction in determining net income. An individual who claims the credit in this
subdivision and who itemizes deductions for federal income tax purposes for the taxable
year must include qualified residence interest in taxable income, as provided in section
290.01, subdivision 19a.
new text end

new text begin (b) An individual is allowed a credit against the tax imposed by this chapter equal
to seven percent of the lesser of:
new text end

new text begin (1) $6,000; or
new text end

new text begin (2) qualified residence interest deduction for which the individual is eligible under
section 63(d) of the Internal Revenue Code, minus $4,000.
new text end

new text begin (c) The amount of the credit allowed must be reduced by the amount of the
taxpayer's liability under section 290.091, determined before the credit allowed by this
section is subtracted from regular tax liability.
new text end

new text begin (d) For a nonresident or part-year resident, the credit must be allocated based on the
percentage calculated under 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, 2009.
new text end