SF 1634

as introduced - 90th Legislature (2017 - 2018) Posted on 03/02/2017 10:02am

A bill for an act
relating to taxation; income; allowing a subtraction and establishing a refundable
credit for certain contributions for higher education expenses; appropriating money;
amending Minnesota Statutes 2016, section 290.0132, by adding a subdivision;
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 2016, section 290.0132, is amended by adding a subdivision
to read:

Subd. 23.

Contributions to 529 plan.

(a) The amount equal to the contributions made
during the taxable year to an account in a plan qualifying under section 529 of the Internal
Revenue Code, reduced by any withdrawals from the account during the taxable year, is a
subtraction.

(b) The subtraction under this subdivision does not include:

(1) amounts rolled over from other college savings plan accounts; or

(2) any amount used to claim the credit allowed under section 290.0684.

(c) The subtraction under this subdivision must not exceed $3,000 for married couples
filing joint returns and $1,500 for all other filers, and is limited to individuals who do not
claim the credit under section 290.0684.

EFFECTIVE DATE.

This section is effective for taxable years beginning after December
31, 2016.

Sec. 2.

[290.0684] SECTION 529 COLLEGE SAVINGS PLAN CREDIT.

Subdivision 1.

Definitions.

For purposes of this section, the term "federal adjusted gross
income" has the meaning given under section 62(a) of the Internal Revenue Code, and
"nonqualified distribution" means any distribution that is includable in gross income under
section 529 of the Internal Revenue Code.

Subd. 2.

Credit allowed.

(a) A credit of up to $500 is allowed to a resident individual
against the tax imposed by this chapter, subject to the limitations in paragraph (b). The
credit is not allowed to an individual who is eligible to be claimed as a dependent, as defined
in sections 151 and 152 of the Internal Revenue Code.

(b) The credit allowed must be calculated by applying the following rates to the amount
contributed to an account in a plan qualifying under section 529 of the Internal Revenue
Code, in a taxable year, reduced by any withdrawals from the account made during the
taxable year:

(1) 50 percent for individual filers and married couples filing a joint return who have
federal adjusted gross income of not more than $80,000;

(2) 25 percent for married couples filing a joint return who have federal adjusted gross
income over $80,000, but not more than $100,000;

(3) ten percent for married couples filing a joint return who have federal adjusted gross
income over $100,000, but not more than $120,000; and

(4) five percent for married couples filing a joint return who have federal adjusted gross
income over $120,000, but not more than $160,000.

(c) The income thresholds in paragraph (b), clauses (1) to (4), used to calculate the credit,
must be adjusted for inflation. The commissioner shall adjust by the percentage determined
under the provisions of section 1(f) of the Internal Revenue Code, except that in section
1(f)(3)(B) the word "2016" is substituted for the word "1992." For 2018, the commissioner
shall then determine the percent change from the 12 months ending on August 31, 2016, to
the 12 months ending on August 31, 2017, and in each subsequent year, from the 12 months
ending on August 31, 2016, to the 12 months ending on August 31 of the year preceding
the taxable year. The income thresholds as adjusted for inflation must be rounded to the
nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10
amount. The determination of the commissioner under this subdivision is not subject to
chapter 14, including section 14.386.

Subd. 3.

Credit refundable.

If the amount of credit that an individual is eligible to
receive under this section exceeds the individual's tax liability under this chapter, the
commissioner shall refund the excess to the individual.

Subd. 4.

Allocation.

For a part-year resident, the credit must be allocated based on the
percentage calculated under section 290.06, subdivision 2c, paragraph (e).

Subd. 5.

Recapture of credit.

In the case of a nonqualified distribution, the taxpayer is
liable to the commissioner for the lesser of: ten percent of the amount of the nonqualified
distribution, or the sum of credits received under this section for all years.

Subd. 6.

Appropriation.

An amount sufficient to pay the refunds required by this section
is appropriated to the commissioner from the general fund.

EFFECTIVE DATE.

This section is effective for taxable years beginning after December
31, 2016.