HF 4138

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to taxation; providing a rate reduction for individual income tax to offset
state transportation tax increases; amending Minnesota Statutes 2006, sections
290.06, subdivision 2c; 290.091, subdivisions 1, 2, 6.

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

Section 1. new text begin PURPOSE.
new text end

new text begin In order to avoid increasing the risk of economic recession in Minnesota while
still meeting the state's significant transportation and transit needs, the legislature finds
it necessary to implement individual income tax rate reductions to offset the state
transportation tax increases enacted in Laws 2008, chapter 152.
new text end

Sec. 2.

Minnesota Statutes 2006, section 290.06, subdivision 2c, is amended to read:

Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

(a) The income
taxes imposed by this chapter upon married individuals filing joint returns and surviving
spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
applying to their taxable net income the following schedule of rates:

(1) On the first $25,680, percent;

(2) On all over $25,680, but not over $102,030, percent;

(3) On all over $102,030, percent.

Married individuals filing separate returns, estates, and trusts must compute their
income tax by applying the above rates to their taxable income, except that the income
brackets will be one-half of the above amounts.

(b) The income taxes imposed by this chapter upon unmarried individuals must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $17,570, percent;

(2) On all over $17,570, but not over $57,710, deleted text begin 7.05 deleted text end new text begin 7 new text end percent;

(3) On all over $57,710, percent.

(c) The income taxes imposed by this chapter upon unmarried individuals qualifying
as a head of household as defined in section 2(b) of the Internal Revenue Code must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $21,630, deleted text begin 5.35 deleted text end new text begin 5.3 new text end percent;

(2) On all over $21,630, but not over $86,910, percent;

(3) On all over $86,910, percent.

new text begin For taxable years beginning after December 31, 2008, and before January 1, 2011,
all of the percentage rates in this section are reduced by two-tenths of one percent, to 5.15,
6.85, and 7.65 percent. For taxable years beginning after December 31, 2010, all of the
percentage rates in this section are reduced by .35 of one percent, to 5, 6.7, and 7.5 percent.
new text end

(d) In lieu of a tax computed according to the rates set forth in this subdivision, the
tax of any individual taxpayer whose taxable net income for the taxable year is less than
an amount determined by the commissioner must be computed in accordance with tables
prepared and issued by the commissioner of revenue based on income brackets of not
more than $100. The amount of tax for each bracket shall be computed at the rates set
forth in this subdivision, provided that the commissioner may disregard a fractional part of
a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the entire year must compute
the individual's Minnesota income tax as provided in this subdivision. After the
application of the nonrefundable credits provided in this chapter, the tax liability must
then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income
as defined in section 62 of the Internal Revenue Code and increased by the additions
required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), and (9),
and reduced by the Minnesota assignable portion of the subtraction for United States
government interest under section 290.01, subdivision 19b, clause (1), and the subtractions
under section 290.01, subdivision 19b, clauses (9), (10), (14), (15), and (16), after applying
the allocation and assignability provisions of section 290.081, clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted gross income as defined in
section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), and (9), and reduced by the
amounts specified in section 290.01, subdivision 19b, clauses (1), (9), (10), (14), (15),
and (16).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2007.
new text end

Sec. 3.

Minnesota Statutes 2006, section 290.091, subdivision 1, is amended to read:

Subdivision 1.

Imposition of tax.

In addition to all other taxes imposed by this
chapter a tax is imposed on individuals, estates, and trusts equal to the excess (if any) of

(a) an amount equal to deleted text begin 6.4 deleted text end new text begin 6.2 new text end percent of alternative minimum taxable income after
subtracting the exemption amount, over

(b) the regular tax for the taxable year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2008.
new text end

Sec. 4.

Minnesota Statutes 2006, section 290.091, subdivision 2, is amended to read:

Subd. 2.

Definitions.

For purposes of the tax imposed by this section, the following
terms have the meanings given:

(a) "Alternative minimum taxable income" means the sum of the following for
the taxable year:

(1) the taxpayer's federal alternative minimum taxable income as defined in section
55(b)(2) of the Internal Revenue Code;

(2) the taxpayer's itemized deductions allowed in computing federal alternative
minimum taxable income, but excluding:

(i) the charitable contribution deduction under section 170 of the Internal Revenue
Code:

(A) for taxable years beginning before January 1, 2006, to the extent that the
deduction exceeds 1.0 percent of adjusted gross income;

(B) for taxable years beginning after December 31, 2005, to the full extent of the
deduction.

For purposes of this clause, "adjusted gross income" has the meaning given in
section 62 of the Internal Revenue Code;

(ii) the medical expense deduction;

(iii) the casualty, theft, and disaster loss deduction; and

(iv) the impairment-related work expenses of a disabled person;

(3) for depletion allowances computed under section 613A(c) of the Internal
Revenue Code, with respect to each property (as defined in section 614 of the Internal
Revenue Code), to the extent not included in federal alternative minimum taxable income,
the excess of the deduction for depletion allowable under section 611 of the Internal
Revenue Code for the taxable year over the adjusted basis of the property at the end of the
taxable year (determined without regard to the depletion deduction for the taxable year);

(4) to the extent not included in federal alternative minimum taxable income, the
amount of the tax preference for intangible drilling cost under section 57(a)(2) of the
Internal Revenue Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative minimum taxable income, the
amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and

(6) the amount of addition required by section 290.01, subdivision 19a, clauses
(7), (8), and (9);

less the sum of the amounts determined under the following:

(1) interest income as defined in section 290.01, subdivision 19b, clause (1);

(2) an overpayment of state income tax as provided by section 290.01, subdivision
19b, clause (2), to the extent included in federal alternative minimum taxable income;

(3) the amount of investment interest paid or accrued within the taxable year on
indebtedness to the extent that the amount does not exceed net investment income, as
defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include
amounts deducted in computing federal adjusted gross income; and

(4) amounts subtracted from federal taxable income as provided by section 290.01,
subdivision 19b, clauses (9) to (16).

In the case of an estate or trust, alternative minimum taxable income must be
computed as provided in section 59(c) of the Internal Revenue Code.

(b) "Investment interest" means investment interest as defined in section 163(d)(3)
of the Internal Revenue Code.

(c) "Tentative minimum tax" equals deleted text begin 6.4 deleted text end new text begin 6.2 new text end percent of alternative minimum taxable
income after subtracting the exemption amount determined under subdivision 3.

(d) "Regular tax" means the tax that would be imposed under this chapter (without
regard to this section and section 290.032), reduced by the sum of the nonrefundable
credits allowed under this chapter.

(e) "Net minimum tax" means the minimum tax imposed by this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2008.
new text end

Sec. 5.

Minnesota Statutes 2006, section 290.091, subdivision 6, is amended to read:

Subd. 6.

Credit for prior years' liability.

(a) A credit is allowed against the tax
imposed by this chapter on individuals, trusts, and estates equal to the minimum tax
credit for the taxable year. The minimum tax credit equals the adjusted net minimum
tax for taxable years beginning after December 31, 1988, reduced by the minimum tax
credits allowed in a prior taxable year. The credit may not exceed the excess (if any) for
the taxable year of

(1) the regular tax, over

(2) the greater of (i) the tentative alternative minimum tax, or (ii) zero.

(b) The adjusted net minimum tax for a taxable year equals the lesser of the net
minimum tax or the excess (if any) of

(1) the tentative minimum tax, over

(2) deleted text begin 6.4 deleted text end new text begin 6.2 new text end percent of the sum of

(i) adjusted gross income as defined in section 62 of the Internal Revenue Code,

(ii) interest income as defined in section 290.01, subdivision 19a, clause (1),

(iii) interest on specified private activity bonds, as defined in section 57(a)(5) of the
Internal Revenue Code, to the extent not included under clause (ii),

(iv) depletion as defined in section 57(a)(1), determined without regard to the last
sentence of paragraph (1), of the Internal Revenue Code, less

(v) the deductions allowed in computing alternative minimum taxable income
provided in subdivision 2, paragraph (a), clause (2) of the first series of clauses and clauses
(1), (2), and (3) of the second series of clauses, and

(vi) the exemption amount determined under subdivision 3.

In the case of an individual who is not a Minnesota resident for the entire year,
adjusted net minimum tax must be multiplied by the fraction defined in section 290.06,
subdivision 2c, paragraph (e). In the case of a trust or estate, adjusted net minimum tax
must be multiplied by the fraction defined under subdivision 4, paragraph (b).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2008.
new text end