SF 965

as introduced - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to financing higher education; providing that 
  1.3             interest does not accrue on certain loans while the 
  1.4             student is in school; providing an income tax credit 
  1.5             for higher education tuition; providing subtractions 
  1.6             from taxable income for certain expenditures for 
  1.7             higher education; appropriating money; amending 
  1.8             Minnesota Statutes 1996, sections 136A.1701, 
  1.9             subdivision 6; 289A.12, by adding a subdivision; and 
  1.10            290.01, subdivision 19b; proposing coding for new law 
  1.11            in Minnesota Statutes, chapter 290. 
  1.12  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.13     Section 1.  Minnesota Statutes 1996, section 136A.1701, 
  1.14  subdivision 6, is amended to read: 
  1.15     Subd. 6.  [RATE OF INTEREST.] The office shall determine 
  1.16  the rate of interest to be charged on loans.  Interest shall not 
  1.17  accrue on the loans during the in-school period plus a period of 
  1.18  six months after the student ceases to pursue a course of 
  1.19  study.  The rate of interest on student loans however computed, 
  1.20  shall not be subject to any provision of state law limiting the 
  1.21  rate of interest to be charged for a loan of money.  
  1.22     Sec. 2.  Minnesota Statutes 1996, section 289A.12, is 
  1.23  amended by adding a subdivision to read: 
  1.24     Subd. 15.  [RETURNS RELATING TO EDUCATION LOAN 
  1.25  INTEREST.] (a) A person who, in the course of being engaged in a 
  1.26  trade or business, receives from an individual interest 
  1.27  aggregating $600 or more for a calendar year on one or more 
  1.28  qualified education loans, shall make a return with respect to 
  2.1   each individual from whom the interest was received at the time 
  2.2   and in the form prescribed by the commissioner.  The return must 
  2.3   contain the name, address, and taxpayer identification number of 
  2.4   the individual from whom the interest was received, the amount 
  2.5   of interest received for the calendar year, and other 
  2.6   information prescribed by the commissioner.  As used in this 
  2.7   subdivision, "person" includes any governmental unit and any 
  2.8   agency or instrumentality without regard to the trade or 
  2.9   business requirement, and "qualified education loan" has the 
  2.10  meaning given in section 290.0804, subdivision 1. 
  2.11     (b) Every person required to make a return under paragraph 
  2.12  (a) shall furnish to each individual whose name is required to 
  2.13  be set forth in the return a written statement showing the name 
  2.14  and address of the person required to make the return, and the 
  2.15  amount of interest received.  This statement must be furnished 
  2.16  by January 31 of the year following the calendar year for which 
  2.17  the return under paragraph (a) was required to be made. 
  2.18     Sec. 3.  Minnesota Statutes 1996, section 290.01, 
  2.19  subdivision 19b, is amended to read: 
  2.20     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  2.21  individuals, estates, and trusts, there shall be subtracted from 
  2.22  federal taxable income: 
  2.23     (1) interest income on obligations of any authority, 
  2.24  commission, or instrumentality of the United States to the 
  2.25  extent includable in taxable income for federal income tax 
  2.26  purposes but exempt from state income tax under the laws of the 
  2.27  United States; 
  2.28     (2) if included in federal taxable income, the amount of 
  2.29  any overpayment of income tax to Minnesota or to any other 
  2.30  state, for any previous taxable year, whether the amount is 
  2.31  received as a refund or as a credit to another taxable year's 
  2.32  income tax liability; 
  2.33     (3) the amount paid to others not to exceed $650 for each 
  2.34  dependent in grades kindergarten to 6 and $1,000 for each 
  2.35  dependent in grades 7 to 12, for tuition, textbooks, and 
  2.36  transportation of each dependent in attending an elementary or 
  3.1   secondary school situated in Minnesota, North Dakota, South 
  3.2   Dakota, Iowa, or Wisconsin, wherein a resident of this state may 
  3.3   legally fulfill the state's compulsory attendance laws, which is 
  3.4   not operated for profit, and which adheres to the provisions of 
  3.5   the Civil Rights Act of 1964 and chapter 363.  As used in this 
  3.6   clause, "textbooks" includes books and other instructional 
  3.7   materials and equipment used in elementary and secondary schools 
  3.8   in teaching only those subjects legally and commonly taught in 
  3.9   public elementary and secondary schools in this state.  
  3.10  "Textbooks" does not include instructional books and materials 
  3.11  used in the teaching of religious tenets, doctrines, or worship, 
  3.12  the purpose of which is to instill such tenets, doctrines, or 
  3.13  worship, nor does it include books or materials for, or 
  3.14  transportation to, extracurricular activities including sporting 
  3.15  events, musical or dramatic events, speech activities, driver's 
  3.16  education, or similar programs.  In order to qualify for the 
  3.17  subtraction under this clause the taxpayer must elect to itemize 
  3.18  deductions under section 63(e) of the Internal Revenue Code; 
  3.19     (4) to the extent included in federal taxable income, 
  3.20  distributions from a qualified governmental pension plan, an 
  3.21  individual retirement account, simplified employee pension, or 
  3.22  qualified plan covering a self-employed person that represent a 
  3.23  return of contributions that were included in Minnesota gross 
  3.24  income in the taxable year for which the contributions were made 
  3.25  but were deducted or were not included in the computation of 
  3.26  federal adjusted gross income.  The distribution shall be 
  3.27  allocated first to return of contributions until the 
  3.28  contributions included in Minnesota gross income have been 
  3.29  exhausted.  This subtraction applies only to contributions made 
  3.30  in a taxable year prior to 1985; 
  3.31     (5) income as provided under section 290.0802; 
  3.32     (6) the amount of unrecovered accelerated cost recovery 
  3.33  system deductions allowed under subdivision 19g; 
  3.34     (7) to the extent included in federal adjusted gross 
  3.35  income, income realized on disposition of property exempt from 
  3.36  tax under section 290.491; 
  4.1      (8) to the extent not deducted in determining federal 
  4.2   taxable income, the amount paid for health insurance of 
  4.3   self-employed individuals as determined under section 162(l) of 
  4.4   the Internal Revenue Code, except that the 25 percent limit does 
  4.5   not apply.  If the taxpayer deducted insurance payments under 
  4.6   section 213 of the Internal Revenue Code of 1986, the 
  4.7   subtraction under this clause must be reduced by the lesser of: 
  4.8      (i) the total itemized deductions allowed under section 
  4.9   63(d) of the Internal Revenue Code, less state, local, and 
  4.10  foreign income taxes deductible under section 164 of the 
  4.11  Internal Revenue Code and the standard deduction under section 
  4.12  63(c) of the Internal Revenue Code; or 
  4.13     (ii) the lesser of (A) the amount of insurance qualifying 
  4.14  as "medical care" under section 213(d) of the Internal Revenue 
  4.15  Code to the extent not deducted under section 162(1) of the 
  4.16  Internal Revenue Code or excluded from income or (B) the total 
  4.17  amount deductible for medical care under section 213(a); and 
  4.18     (9) the exemption amount allowed under Laws 1995, chapter 
  4.19  255, article 3, section 2, subdivision 3; and 
  4.20     (10) to the extent included in federal taxable income, the 
  4.21  amount of the subtractions provided in sections 290.0803 and 
  4.22  290.0804. 
  4.23     Sec. 4.  [290.0672] [HIGHER EDUCATION TUITION AND FEES.] 
  4.24     Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
  4.25  section, the following terms have the meanings given in this 
  4.26  subdivision. 
  4.27     (b) "Modified adjusted gross income" means the federal 
  4.28  adjusted gross income of the taxpayer for the taxable year 
  4.29  determined without regard to section 290.0803 and increased by 
  4.30  any amount excluded from gross income under section 911, 931, or 
  4.31  933, of the Internal Revenue Code. 
  4.32     (c) "Qualified higher education expenses" means tuition and 
  4.33  fees required for the enrollment or attendance of the taxpayer, 
  4.34  the taxpayer's spouse, or any dependent of the taxpayer with 
  4.35  respect to whom the taxpayer is allowed a deduction under 
  4.36  section 151 of the Internal Revenue Code as an eligible student 
  5.1   at an institution of higher education.  The term does not 
  5.2   include expenses with respect to any course or other education 
  5.3   involving sports, games, or hobbies, unless the course or other 
  5.4   education is part of the student's degree program.  The term 
  5.5   does not include student activity fees, athletic fees, insurance 
  5.6   expenses, or other expenses unrelated to a student's academic 
  5.7   course of instruction. 
  5.8      (d) "Eligible student" means a student who:  
  5.9      (1) with respect to any academic period, meets the 
  5.10  requirements of section 484(a)(1) of the Higher Education Act of 
  5.11  1965, United States Code, title 20, section 1091(a)(1), as in 
  5.12  effect on the date of the enactment of this section; 
  5.13     (2) is carrying at least one-half the normal full-time work 
  5.14  load for the course of study the student is pursuing, as 
  5.15  reasonably determined by the institution of higher education; 
  5.16  and 
  5.17     (3) had a grade-point average of at least 2.75 on a 
  5.18  four-point scale, or met a substantially similar measure of 
  5.19  achievement, for the student's high school education or 
  5.20  equivalent. 
  5.21     (e) "Institution of higher education" means an institution 
  5.22  located in Minnesota which is described in section 481 of the 
  5.23  Higher Education Act of 1965, United States Code, title 20, 
  5.24  section 1088, as in effect on the date of the enactment of this 
  5.25  section, and which is eligible to participate in programs under 
  5.26  title IV of that act. 
  5.27     (f) "Full-time student" means any student who is carrying 
  5.28  at least the normal full-time work load for the course of study 
  5.29  the student is pursuing, as reasonably determined by the 
  5.30  institution of higher education. 
  5.31     (g) "Qualified academic period" means any academic period 
  5.32  for which the student is an eligible student if the period, when 
  5.33  added to prior periods when the student was an eligible student, 
  5.34  does not exceed two full-time academic years or the equivalent 
  5.35  of two full-time academic years. 
  5.36     (h) "Cost-of-living adjustment" means the adjustment 
  6.1   determined under section 1(f)(3) of the Internal Revenue Code 
  6.2   for the calendar year in which the taxable year begins, 
  6.3   determined by substituting calendar year 1999 for calendar year 
  6.4   1992 in subparagraph (B) of that section. 
  6.5      Subd. 2.  [CREDIT ALLOWED.] An individual is allowed a 
  6.6   credit against the tax imposed by this chapter for the taxable 
  6.7   year the amount of qualified higher education expenses paid by 
  6.8   the taxpayer during the taxable year. 
  6.9      Subd. 3.  [AMOUNT OF CREDIT.] (a) The amount allowed as a 
  6.10  credit under this section for any taxable year with respect to 
  6.11  an eligible student shall not exceed the sum of the credit 
  6.12  amounts for qualified academic periods beginning during the 
  6.13  taxable year or the first three months of the next taxable year, 
  6.14  provided that a qualified academic period may not be taken into 
  6.15  account under this subdivision more than once. 
  6.16     (b) The credit amount for any academic period is the amount 
  6.17  equal to $1,500, divided by the number of academic periods 
  6.18  during the academic year.  In the case of an eligible student 
  6.19  who is not a full-time student for an academic period, the 
  6.20  credit amount for the period shall be one-half the amount 
  6.21  determined under the preceding sentence. 
  6.22     (c) The amount of qualified higher education expenses shall 
  6.23  be reduced by the sum of: 
  6.24     (1) the amounts received with respect to the individual 
  6.25  which are allocable to the period as: 
  6.26     (i) a qualified scholarship which under section 117 of the 
  6.27  Internal Revenue Code is not includable in gross income; 
  6.28     (ii) an educational assistance allowance under United 
  6.29  States Code, title 38, chapter 30, 31, 32, 34, or 35; or 
  6.30     (iii) a payment, other than a gift, bequest, devise, or 
  6.31  inheritance within the meaning of section 102(a) of the Internal 
  6.32  Revenue Code for educational expenses, or attributable to 
  6.33  enrollment at an eligible educational institution, which is 
  6.34  exempt from income taxation by any law of the United States; and 
  6.35     (2) the amount excludable from gross income under section 
  6.36  135 of the Internal Revenue Code which is allocable to such 
  7.1   expenses with respect to the individual for the period. 
  7.2      Subd. 4.  [INFLATION ADJUSTMENT.] In the case of a taxable 
  7.3   year beginning after 1998, the $1,500 amount in subdivision 3, 
  7.4   paragraph (b), shall be increased by an amount equal to that 
  7.5   dollar amount, multiplied by the cost-of-living adjustment. 
  7.6      Subd. 5.  [LIMITATION BASED ON MODIFIED ADJUSTED GROSS 
  7.7   INCOME.] The amount of the credit determined under subdivision 3 
  7.8   for the taxable year shall be reduced, but not below zero, by 
  7.9   the amount determined under this subdivision.  The amount of the 
  7.10  reduction is the amount which bears the same ratio to the amount 
  7.11  determined under subdivision 3 as: 
  7.12     (1) the excess of the taxpayer's modified adjusted gross 
  7.13  income for such taxable year; over 
  7.14     (2) $50,000 or $80,000 in the case of a joint return, bears 
  7.15  to $20,000. 
  7.16     For taxable years beginning after 2000, the $50,000 and 
  7.17  $80,000 amounts shall each be increased by an amount equal to 
  7.18  those dollar amounts, multiplied by the cost-of-living 
  7.19  adjustment, provided that if the amount as adjusted is not a 
  7.20  multiple of $5,000, the amount shall be rounded to the next 
  7.21  lowest multiple of $5,000.  
  7.22     Subd. 6.  [DENIAL OF CREDIT IF STUDENT CONVICTED OF DRUG 
  7.23  OFFENSE OR FELONY.] No credit shall be allowed under this 
  7.24  section for qualified higher education expenses for the 
  7.25  enrollment or attendance of a student for any academic period if 
  7.26  the student has been convicted of a federal or state offense 
  7.27  consisting of the possession or distribution of a controlled 
  7.28  substance or of any other federal or state felony before the end 
  7.29  of the taxable year with or within which the period ends. 
  7.30     Subd. 7.  [NO DOUBLE BENEFITS.] (a) No credit shall be 
  7.31  allowed under this section for qualified higher education 
  7.32  expenses if the expense is allowed as: 
  7.33     (1) a subtraction to the taxpayer under any other provision 
  7.34  of this chapter; or 
  7.35     (2) a credit against the taxpayer's federal income tax 
  7.36  under any provision of federal law. 
  8.1      (b) No credit shall be allowed under this section to any 
  8.2   individual for whom a deduction under section 151 of the 
  8.3   Internal Revenue Code is allowable to another taxpayer for a 
  8.4   taxable year beginning in the calendar year in which the 
  8.5   individual's taxable year begins. 
  8.6      (c) No credit shall be allowed under this section to a 
  8.7   taxpayer with respect to an eligible student other than the 
  8.8   taxpayer unless the taxpayer includes the name and taxpayer 
  8.9   identification number of the eligible student on the return of 
  8.10  tax for the taxable year. 
  8.11     Subd. 8.  [MARRIED TAXPAYERS; JOINT RETURNS REQUIRED.] If 
  8.12  the taxpayer is a married individual, this section shall apply 
  8.13  only if the taxpayer and the taxpayer's spouse file a joint 
  8.14  return for the taxable year. 
  8.15     Subd. 9.  [NONRESIDENT ALIENS.] If the taxpayer is a 
  8.16  nonresident alien for any portion of the taxable year, this 
  8.17  section applies only if the individual is treated as a resident 
  8.18  alien of the United States for purposes of federal income 
  8.19  taxation by reason of an election under subsection (g) or (h) of 
  8.20  section 6013 of the Internal Revenue Code. 
  8.21     Sec. 5.  [290.0803] [SUBTRACTION FOR HIGHER EDUCATION 
  8.22  TUITION AND FEES.] 
  8.23     Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
  8.24  section, the following terms have the meanings given in this 
  8.25  subdivision.  Except as provided in paragraphs (b) and (c), 
  8.26  terms used in this section which are also used in section 
  8.27  290.0672 have the meanings given in section 290.0672. 
  8.28     (b) For purposes of applying this section, the requirement 
  8.29  of section 290.0672, subdivision 1, paragraph (d), clause (3), 
  8.30  shall be treated as met if the student is enrolled in a course 
  8.31  which enables the student to improve the student's job skills or 
  8.32  to acquire new job skills. 
  8.33     (c) For purposes of this section, "institution of higher 
  8.34  education" is not limited to institutions located in Minnesota. 
  8.35     Subd. 2.  [SUBTRACTION.] For an individual, there shall be 
  8.36  allowed as a subtraction from federal taxable income the amount 
  9.1   of qualified higher education expenses paid by the taxpayer 
  9.2   during the taxable year, not to exceed $10,000 for taxable years 
  9.3   beginning after December 31, 1999, or, in the case of taxable 
  9.4   years beginning in 1998 or 1999, not to exceed $5,000. 
  9.5      Subd. 3.  [LIMITATION BASED ON MODIFIED ADJUSTED GROSS 
  9.6   INCOME.] The amount allowed as a subtraction under this section 
  9.7   shall be reduced, but not below zero, by the amount which bears 
  9.8   the same ratio to the deduction determined without regard to 
  9.9   this subdivision as the excess of: 
  9.10     (1) the taxpayer's modified adjusted gross income for the 
  9.11  taxable year, over 
  9.12     (2) $50,000 or $80,000 in the case of a joint return, bears 
  9.13  to $20,000. 
  9.14     For purposes of this subdivision, "modified adjusted gross 
  9.15  income" means the federal adjusted gross income of the taxpayer 
  9.16  for the taxable year determined: 
  9.17     (i) without regard to this section and sections 911, 931, 
  9.18  and 933 of the Internal Revenue Code; and 
  9.19     (ii) after the application of sections 86, 135, 219, 221, 
  9.20  and 469 of the Internal Revenue Code. 
  9.21     The $50,000 and $80,000 amounts must be adjusted for 
  9.22  inflation as provided in section 290.0672, subdivision 4. 
  9.23     Subd. 4.  [SPECIAL RULES.] (a) No subtraction is allowed 
  9.24  under this section for qualified higher education expenses for 
  9.25  which the taxpayer takes a credit or subtraction under any other 
  9.26  provision of this chapter. 
  9.27     (b) A subtraction is allowed under this section for any 
  9.28  taxable year only to the extent the qualified higher education 
  9.29  expenses are in connection with enrollment at an institution of 
  9.30  higher education during the taxable year or in connection with 
  9.31  an academic term beginning during the taxable year or during the 
  9.32  first three months of the next taxable year.  
  9.33     (c) The provisions of section 290.0672, subdivisions 3, 
  9.34  paragraph (c), 7, paragraphs (b) and (c), 8, and 9, apply for 
  9.35  purposes of this section.  
  9.36     Sec. 6.  [290.0804] [SUBTRACTION FOR INTEREST ON EDUCATION 
 10.1   LOANS.] 
 10.2      Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
 10.3   section, the following terms have the meanings given in this 
 10.4   subdivision. 
 10.5      (b) "Qualified education loan" means any indebtedness 
 10.6   incurred to pay qualified higher education expenses: 
 10.7      (1) which are incurred on behalf of the taxpayer or the 
 10.8   taxpayer's spouse; 
 10.9      (2) which are paid or incurred within a reasonable period 
 10.10  of time before or after the indebtedness is incurred; and 
 10.11     (3) which are attributable to education furnished during a 
 10.12  period during which the recipient was at least a half-time 
 10.13  student.  
 10.14     The term includes indebtedness used to refinance 
 10.15  indebtedness which qualifies as a qualified education loan. 
 10.16     The term "qualified education loan" shall not include any 
 10.17  indebtedness owed to a person who is related within the meaning 
 10.18  of section 267(b) or 707(b)(1) of the Internal Revenue Code to 
 10.19  the taxpayer. 
 10.20     (c) "Qualified higher education expenses" has the meaning 
 10.21  given by section 290.0672, subdivision 1, paragraph (b), without 
 10.22  regard to subdivision 1, paragraph (d), clause (3), of that 
 10.23  section, reduced by the sum of the amount excluded from gross 
 10.24  income under section 135 of the Internal Revenue Code by reason 
 10.25  of those expenses, and the amount of the reduction described in 
 10.26  section 135(d)(1); provided that the term "eligible education 
 10.27  institution" shall also include an institution conducting an 
 10.28  internship or residency program leading to a degree or 
 10.29  certificate awarded by an institution of higher education, a 
 10.30  hospital, or a health care facility which offers postgraduate 
 10.31  training, and includes institutions located outside of Minnesota.
 10.32     (d) "Half-time student" means an individual who would be a 
 10.33  student as defined in section 151(c)(4) of the Internal Revenue 
 10.34  Code if "half-time" were substituted for "full-time" each place 
 10.35  it appears in that section. 
 10.36     Subd. 2.  [SUBTRACTION.] An individual is allowed a 
 11.1   subtraction from federal taxable income equal to the interest 
 11.2   paid by the taxpayer during the taxable year on a qualified 
 11.3   education loan. 
 11.4      Subd. 3.  [LIMITATION BASED ON MODIFIED ADJUSTED GROSS 
 11.5   INCOME.] The amount allowed as a subtraction under subdivision 1 
 11.6   is subject to reduction according to the provisions of section 
 11.7   290.0803, subdivision 3. 
 11.8      Subd. 4.  [DEPENDENTS NOT ELIGIBLE FOR DEDUCTION.] No 
 11.9   subtraction is allowed under this section to an individual for 
 11.10  the taxable year if a deduction under section 151 of the 
 11.11  Internal Revenue Code, with respect to the individual is allowed 
 11.12  to another taxpayer for the taxable year beginning in the 
 11.13  calendar year in which the individual's taxable year begins. 
 11.14     Subd. 5.  [SPECIAL RULES.] (a) No subtraction is allowed 
 11.15  under this section for any amount for which the taxpayer takes a 
 11.16  credit or a subtraction under any other provision of this 
 11.17  chapter. 
 11.18     (b) If the taxpayer is married at the close of the taxable 
 11.19  year, the subtraction is allowed under this section only if the 
 11.20  taxpayer and the taxpayer's spouse file a joint return for the 
 11.21  taxable year. 
 11.22     Sec. 7.  [APPROPRIATION.] 
 11.23     $5,000,000 is appropriated from the general fund to the 
 11.24  higher education services office for the 1998-1999 biennium to 
 11.25  cover the estimated costs of the interest subsidy established by 
 11.26  section 1.  The money is available for either year of the 
 11.27  biennium. 
 11.28     Sec. 8.  [EFFECTIVE DATE.] 
 11.29     Section 1 is effective for loans made after June 30, 1997.  
 11.30  Section 2 is effective for loan interest payments due after 
 11.31  December 31, 1997.  Sections 3 to 6 are effective for taxable 
 11.32  years beginning after December 31, 1997.