SF 654

as introduced - 91st Legislature (2019 - 2020) Posted on 01/31/2019 02:50pm

A bill for an act
relating to taxation; individual income; allowing taxpayers to make certain elections
for state tax filing purposes; amending Minnesota Statutes 2018, section 290.01,
subdivision 19; proposing coding for new law in Minnesota Statutes, chapter 290.

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

Section 1.

Minnesota Statutes 2018, section 290.01, subdivision 19, is amended to read:

Subd. 19.

Net income.

The term "net income" means the federal taxable income, as
defined in section 63 of the Internal Revenue Code of 1986, as amended through the date
named in this subdivision, incorporating the federal effective dates of changes to the Internal
Revenue Code and any elections made by the taxpayer in accordance with the Internal
Revenue Code in determining federal taxable income for federal income tax purposes, and
with the modifications provided in sections 290.0131 to 290.0136.

In the case of a regulated investment company or a fund thereof, as defined in section
851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
except that:

(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
Revenue Code does not apply;

(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal Revenue
Code must be applied by allowing a deduction for capital gain dividends and exempt-interest
dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal Revenue Code;
and

(3) the deduction for dividends paid must also be applied in the amount of any
undistributed capital gains which the regulated investment company elects to have treated
as provided in section 852(b)(3)(D) of the Internal Revenue Code.

The net income of a real estate investment trust as defined and limited by section 856(a),
(b), and (c) of the Internal Revenue Code means the real estate investment trust taxable
income as defined in section 857(b)(2) of the Internal Revenue Code.

The net income of a designated settlement fund as defined in section 468B(d) of the
Internal Revenue Code means the gross income as defined in section 468B(b) of the Internal
Revenue Code.

The Internal Revenue Code of 1986, as amended through December 16, 2016, shall be
in effect for taxable years beginning after December 31, 1996.

Except as otherwise provided, references to the Internal Revenue Code in this subdivision
and sections 290.0131 to 290.0136 mean the code in effect for purposes of determining net
income for the applicable year.

new text begin If Congress makes changes to the standard deduction or to itemized deductions under
section 63 of the Internal Revenue Code, as amended through March 31, 2018, that affect
the calculation of net income for state income tax purposes, Minnesota taxpayers may
calculate net income for state income tax purposes using the Internal Revenue Code, as
amended through December 16, 2016, as provided in section 290.016.
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, 2018.
new text end

Sec. 2.

new text begin [290.016] TAXPAYER ELECTION FOR ITEMIZED OR STANDARD
DEDUCTION.
new text end

new text begin Subdivision 1. new text end

new text begin Legislative purpose. new text end

new text begin The legislature intends this section to provide an
ongoing mechanism to allow taxpayers to choose between claiming the standard deduction
and itemizing deductions on their Minnesota tax returns, regardless of the election made
on their federal returns. Changes made to the standard and itemized deductions in the Tax
Cuts and Jobs Act may cause taxpayers to make different choices in the type of deduction
they claim for federal purposes prior to passage of the act. The legislature does not intend
for taxpayers to be bound by a choice made at the federal level that they would not choose
to make at the state level, absent legislative action to address federal changes through
Minnesota additions and subtractions. By expressing its intent regarding allowing a different
election than claimed under federal law, the legislature is exercising its legislative power
and is not delegating its authority to determine Minnesota tax law. The legislature believes
that this section is consistent with the Minnesota Supreme Court's ruling in Wallace v.
Commissioner of Taxation, 289 Minn. 220 (1971).
new text end

new text begin Subd. 2. new text end

new text begin Election allowed. new text end

new text begin Taxpayers may elect to claim the standard deduction or to
itemize deductions as allowed in section 63 of the Internal Revenue Code, as amended
through December 16, 2016, for purposes of calculating net income for a taxable year
regardless of their election made for federal income tax purposes. This section applies only
to election of the standard deduction or itemizing deductions and does not apply to any
other election the taxpayer makes on their federal income tax return.
new text end

new text begin Subd. 3. new text end

new text begin Application of chapter. new text end

new text begin For purposes of determining tax and credits under this
chapter, including the taxes under section 290.091 and household income under chapter
290A, the election allowed under subdivision 2 applies for the taxable year and all provisions
of this chapter apply as if net income were calculated using the standard or itemized deduction
allowed under section 63 of the Internal Revenue Code, as amended through December 16,
2016.
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, 2018.
new text end