Minnesota Legislature
SF 1974
as introduced - 88th Legislature (2013 - 2014) Posted on 02/28/2014 08:51am
Current Version - as introduced
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A bill for an act
relating to taxation; individual income; providing for a maximum rate of 7.85
percent on active trade or business income; amending Minnesota Statutes 2012,
section 290.0675, subdivision 1; Minnesota Statutes 2013 Supplement, section
290.06, subdivisions 2c, 2d.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2013 Supplement, 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 deleted text begin to their taxable net incomedeleted text end the following schedule deleted text begin of ratesdeleted text end :
(1) On the first deleted text begin $35,480deleted text end new text begin $36,080 of their taxable net incomenew text end , 5.35 percent;
(2) On all new text begin of their taxable net income new text end over deleted text begin $35,480deleted text end new text begin $36,080new text end , but not over deleted text begin $140,960
deleted text end new text begin $143,350new text end , 7.05 percent;
(3) On all new text begin of their taxable net income new text end over deleted text begin $140,960, but not over $250,000
deleted text end new text begin $143,350new text end , 7.85 percent;new text begin and
new text end
(4) deleted text begin On all over $250,000, 9.85 percentdeleted text end new text begin By applying an additional rate of 2.0 percent
to the amount of taxable net income, after excluding active trade or business income,
over $254,240new text end .
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 deleted text begin to taxable net incomedeleted text end the following schedule deleted text begin of ratesdeleted text end :
(1) On the first deleted text begin $24,270deleted text end new text begin $24,680 of their taxable net incomenew text end , 5.35 percent;
(2) On all new text begin of their taxable net income new text end over deleted text begin $24,270deleted text end new text begin $24,680new text end , but not over deleted text begin $79,730
deleted text end new text begin $81,080new text end , 7.05 percent;
(3) On all new text begin of their taxable net income new text end over deleted text begin $79,730, but not over $150,000deleted text end new text begin $81,080new text end ,
7.85 percent;new text begin and
new text end
(4) deleted text begin On all over $150,000, 9.85 percentdeleted text end new text begin By applying an additional rate of 2.0 percent
to the amount of taxable net income, after excluding active trade or business income,
over $152,540new text end .
(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 deleted text begin to taxable net incomedeleted text end the following schedule deleted text begin of ratesdeleted text end :
(1) On the first deleted text begin $29,880deleted text end new text begin $30,390 of their taxable net incomenew text end , 5.35 percent;
(2) On all new text begin of their taxable net income new text end over deleted text begin $29,880deleted text end new text begin $30,390new text end , but not over deleted text begin $120,070
deleted text end new text begin $122,110new text end , 7.05 percent;
(3) On all new text begin of their taxable net income new text end over deleted text begin $120,070, but not over $200,000
deleted text end new text begin $122,110new text end , 7.85 percent;new text begin and
new text end
(4) deleted text begin On all over $200,000, 9.85 percentdeleted text end new text begin By applying an additional rate of 2.0 percent
to the amount of taxable net income, after excluding active trade or business income,
over $200,000new 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), (9), (12),
(13), and (16) to (18), 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 (8), (9), (13),
(14), (16), and (17), 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), (9), (12), (13), and (16) to
(18), and reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1),
(8), (9), (13), (14), (16), and (17).
new text begin
(f) For purposes of this subdivision, "active trade or business income" means income
derived in the ordinary course of business and not included in net investment income as
defined in section 1411(c) of the Internal Revenue Code, but including income from
certain active interests in partnerships and S corporations as defined under section
1411(c)(4) of the Internal Revenue Code.
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, 2013.
new text end
Sec. 2.
Minnesota Statutes 2013 Supplement, section 290.06, subdivision 2d, is
amended to read:
Subd. 2d.
Inflation adjustment of brackets.
(a) For taxable years beginning after
December 31, 2013, the minimum and maximum dollar amounts for each rate bracket for
which a tax is imposed in subdivision 2c shall be adjusted for inflation by the percentage
determined under paragraph (b). For the purpose of making the adjustment as provided
in this subdivision all of the rate brackets provided in subdivision 2c shall be the rate
brackets as they existed for taxable years beginning after December 31, deleted text begin 2012deleted text end new text begin 2013new text end , and
before January 1, deleted text begin 2014deleted text end new text begin 2015new text end . The rate applicable to any rate bracket must not be changed.
The dollar amounts setting forth the tax shall be adjusted to reflect the changes in the rate
brackets. The rate brackets as adjusted must be rounded to the nearest $10 amount. If the
rate bracket ends in $5, it must be rounded up to the nearest $10 amount.
(b) The commissioner shall adjust the rate brackets and by the percentage determined
pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in
section 1(f)(3)(B) the word "2012" shall be substituted for the word "1992." For deleted text begin 2014
deleted text end new text begin 2015new text end , the commissioner shall then determine the percent change from the 12 months
ending on August 31, deleted text begin 2012deleted text end new text begin 2013new text end , to the 12 months ending on August 31, deleted text begin 2013deleted text end new text begin 2014new text end , and
in each subsequent year, from the 12 months ending on August 31, deleted text begin 2012deleted text end new text begin 2013new text end , to the 12
months ending on August 31 of the year preceding the taxable year. The determination of
the commissioner pursuant to this subdivision shall not be considered a "rule" and shall
not be subject to the Administrative Procedure Act contained in chapter 14.
No later than December 15 of each year, the commissioner shall announce the
specific percentage that will be used to adjust the tax rate brackets.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after
December 31, 2013.
new text end
Sec. 3.
Minnesota Statutes 2012, section 290.0675, subdivision 1, is amended to read:
Subdivision 1.
Definitions.
(a) For purposes of this section the following terms
have the meanings given.
(b) "Earned income" means the sum of the following, to the extent included in
Minnesota taxable income:
(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
(2) income received from a retirement pension, profit-sharing, stock bonus, or
annuity plan; and
(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue
Code.
(c) "Taxable income" means net income as defined in section 290.01, subdivision 19.
(d) "Earned income of lesser-earning spouse" means the earned income of the
spouse with the lesser amount of earned income as defined in paragraph (b) for the taxable
year minus the sum of (i) the amount for one exemption under section 151(d) of the
Internal Revenue Code and (ii) one-half the amount of the standard deduction under
section 63(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition
required under section 290.01, subdivision 19a, clause (21), and one-half of the addition
that would have been required under section 290.01, subdivision 19a, clause (21), if the
taxpayer had claimed the standard deduction.
new text begin
(e) "Active trade or business income" has the meaning given in section 290.06,
subdivision 2c.
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, 2013.
new text end