SF 1777

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

A bill for an act
relating to taxation; income taxes; equalizing the dependent care credit for
licensed family day care providers; amending Minnesota Statutes 2006, section
290.067, subdivision 1.

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

Section 1.

Minnesota Statutes 2006, section 290.067, subdivision 1, is amended to read:

Subdivision 1.

Amount of credit.

(a) A taxpayer may take as a credit against the
tax due from the taxpayer and a spouse, if any, under this chapter an amount equal to the
dependent care credit for which the taxpayer is eligible pursuant to the provisions of
section 21 of the Internal Revenue Code subject to the limitations provided in subdivision
2 except that in determining whether the child qualified as a dependent, income received
as a Minnesota family investment program grant or allowance to or on behalf of the child
must not be taken into account in determining whether the child received more than half
of the child's support from the taxpayer, and the provisions of section 32(b)(1)(D) of
the Internal Revenue Code do not apply.

(b) If a child who has not attained the age of deleted text begin six deleted text end new text begin 13 new text end years at the close of the taxable
year is cared for at a licensed family day care home operated by the child's parent, the
taxpayer is deemed to have paid employment-related expenses. If the child is 16 months
old or younger at the close of the taxable year, the amount of expenses deemed to have
been paid equals the maximum limit for one qualified individual under section 21(c) and
(d) of the Internal Revenue Code. If the child is older than 16 months of age but has not
attained the age of deleted text begin six deleted text end new text begin 13 new text end years at the close of the taxable year, the amount of expenses
deemed to have been paid equals the amount the licensee would charge for the care of a
child of the same age for the same number of hours of care.

(c) If a married couple:

(1) has a child who has not attained the age of one year at the close of the taxable
year;

(2) files a joint tax return for the taxable year; and

(3) does not participate in a dependent care assistance program as defined in section
129 of the Internal Revenue Code, in lieu of the actual employment related expenses paid
for that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of
(i) the combined earned income of the couple or (ii) the amount of the maximum limit for
one qualified individual under section 21(c) and (d) of the Internal Revenue Code will
be deemed to be the employment related expense paid for that child. The earned income
limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed
amount. These deemed amounts apply regardless of whether any employment-related
expenses have been paid.

(d) If the taxpayer is not required and does not file a federal individual income tax
return for the tax year, no credit is allowed for any amount paid to any person unless:

(1) the name, address, and taxpayer identification number of the person are included
on the return claiming the credit; or

(2) if the person is an organization described in section 501(c)(3) of the Internal
Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code,
the name and address of the person are included on the return claiming the credit.

In the case of a failure to provide the information required under the preceding sentence,
the preceding sentence does not apply if it is shown that the taxpayer exercised due
diligence in attempting to provide the information required.

In the case of a nonresident, part-year resident, or a person who has earned income
not subject to tax under this chapter including earned income excluded pursuant to section
290.01, subdivision 19b, clause (10) or (16), the credit determined under section 21 of the
Internal Revenue Code must be allocated based on the ratio by which the earned income
of the claimant and the claimant's spouse from Minnesota sources bears to the total earned
income of the claimant and the claimant's spouse.

For residents of Minnesota, the subtractions for military pay under section 290.01,
subdivision 19b, clauses (11) and (12), are not considered "earned income not subject to
tax under this chapter."

For residents of Minnesota, the exclusion of combat pay under section 112 of the
Internal Revenue Code is not considered "earned income not subject to tax under this
chapter."

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2006.
new text end