SF 2123

as introduced - 92nd Legislature (2021 - 2022) Posted on 03/16/2021 10:57am

A bill for an act
relating to taxation; individual income; expanding eligibility for the working family
credit; amending Minnesota Statutes 2020, section 290.0671, subdivisions 1, 1a.

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

Section 1.

Minnesota Statutes 2020, section 290.0671, subdivision 1, is amended to read:

Subdivision 1.

Credit allowed.

(a) An individual who is a resident of Minnesota is
allowed a credit against the tax imposed by this chapter equal to a percentage of earned
income. To receive a credit, a taxpayer must be eligible for a credit under section 32 of the
Internal Revenue Code, except that:

(1) a taxpayer with no qualifying children who has attained the age of 21, but not attained
age 65 before the close of the taxable year and is otherwise eligible for a credit under section
32 of the Internal Revenue Code may also receive a credit; deleted text begin and
deleted text end

(2) a taxpayer who is otherwise eligible for a credit under section 32 of the Internal
Revenue Code remains eligible for the credit even if the taxpayer's earned income or adjusted
gross income exceeds the income limitation under section 32 of the Internal Revenue Code deleted text begin . deleted text end new text begin ;
and
new text end

new text begin (3) notwithstanding section 32(m) of the Internal Revenue Code, a taxpayer with an
individual taxpayer identification number other than a Social Security number who is
otherwise eligible for a credit under section 32 of the Internal Revenue Code is eligible for
the credit under this section.
new text end

(b) For individuals with no qualifying children, the credit equals 3.9 percent of the first
$7,150 of earned income. The credit is reduced by 2.0 percent of earned income or adjusted
gross income, whichever is greater, in excess of the phaseout threshold, but in no case is
the credit less than zero.

(c) For individuals with one qualifying child, the credit equals 9.35 percent of the first
$11,950 of earned income. The credit is reduced by 6.0 percent of earned income or adjusted
gross income, whichever is greater, in excess of the phaseout threshold, but in no case is
the credit less than zero.

(d) For individuals with two qualifying children, the credit equals 11 percent of the first
$19,600 of earned income. The credit is reduced by 10.5 percent of earned income or adjusted
gross income, whichever is greater, in excess of the phaseout threshold, but in no case is
the credit less than zero.

(e) For individuals with three or more qualifying children, the credit equals 12.5 percent
of the first $20,000 of earned income. The credit is reduced by 10.5 percent of earned income
or adjusted gross income, whichever is greater, in excess of the phaseout threshold, but in
no case is the credit less than zero.

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

(g) For a person who was a resident for the entire tax year and has earned income not
subject to tax under this chapter, including income excluded under section 290.0132,
subdivision 10, the credit must be allocated based on the ratio of federal adjusted gross
income reduced by the earned income not subject to tax under this chapter over federal
adjusted gross income. For purposes of this paragraph, the following clauses are not
considered "earned income not subject to tax under this chapter":

(1) the subtractions for military pay under section 290.0132, subdivisions 11 and 12;

(2) the exclusion of combat pay under section 112 of the Internal Revenue Code; and

(3) income derived from an Indian reservation by an enrolled member of the reservation
while living on the reservation.

(h) For the purposes of this section, the phaseout threshold equals:

(1) $14,570 for married taxpayers filing joint returns with no qualifying children;

(2) $8,730 for all other taxpayers with no qualifying children;

(3) $28,610 for married taxpayers filing joint returns with one qualifying child;

(4) $22,770 for all other taxpayers with one qualifying child;

(5) $32,840 for married taxpayers filing joint returns with two qualifying children;

(6) $27,000 for all other taxpayers with two qualifying children;

(7) $33,140 for married taxpayers filing joint returns with three or more qualifying
children; and

(8) $27,300 for all other taxpayers with three or more qualifying children.

(i) The commissioner shall construct tables showing the amount of the credit at various
income levels and make them available to taxpayers. The tables shall follow the schedule
contained in this subdivision, except that the commissioner may graduate the transition
between income brackets.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2020.
new text end

Sec. 2.

Minnesota Statutes 2020, section 290.0671, subdivision 1a, is amended to read:

Subd. 1a.

Definitions.

new text begin (a) new text end For purposes of this section, the new text begin following new text end terms new text begin have the
meanings given.
new text end

new text begin (b) new text end "Qualifying child," and "earned income," have the meanings given in section 32(c)
of the Internal Revenue Code, deleted text begin and the term deleted text end new text begin except that notwithstanding section 32(m) of
the Internal Revenue Code, an individual with an individual taxpayer identification number
other than a Social Security number who otherwise meets the requirements to be considered
a qualifying child under section 32 of the Internal Revenue Code is a qualifying child for
the purposes of the credit under this section.
new text end

new text begin (c) new text end "Adjusted gross income" has the meaning given in section 62 of the Internal Revenue
Code.

new text begin (d) new text end "Earned income of the lesser-earning spouse" has the meaning given in section
290.0675, subdivision 1, paragraph (d).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2020.
new text end