SF 3043

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

A bill for an act
relating to taxation; providing an equity and opportunity in education tax credit;
amending Minnesota Statutes 2006, section 290.01, subdivisions 19a, 19c;
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 2006, section 290.01, subdivision 19a, is amended to
read:

Subd. 19a.

Additions to federal taxable income.

For individuals, estates, and
trusts, there shall be added to federal taxable income:

(1)(i) interest income on obligations of any state other than Minnesota or a political
or governmental subdivision, municipality, or governmental agency or instrumentality
of any state other than Minnesota exempt from federal income taxes under the Internal
Revenue Code or any other federal statute; and

(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
Code, except the portion of the exempt-interest dividends derived from interest income
on obligations of the state of Minnesota or its political or governmental subdivisions,
municipalities, governmental agencies or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to all shareholders represents
95 percent or more of the exempt-interest dividends that are paid by the regulated
investment company as defined in section 851(a) of the Internal Revenue Code, or the
fund of the regulated investment company as defined in section 851(g) of the Internal
Revenue Code, making the payment; and

(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
government described in section 7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe is located;

(2) the amount of income or sales and use taxes paid or accrued within the taxable
year under this chapter and the amount of taxes based on net income paid or sales and use
taxes paid to any other state or to any province or territory of Canada, to the extent allowed
as a deduction under section 63(d) of the Internal Revenue Code, but the addition may not
be more than the amount by which the itemized deductions as allowed under section 63(d)
of the Internal Revenue Code exceeds the amount of the standard deduction as defined
in section 63(c) of the Internal Revenue Code. For the purpose of this paragraph, the
disallowance of itemized deductions under section 68 of the Internal Revenue Code of
1986, income or sales and use tax is the last itemized deduction disallowed;

(3) the capital gain amount of a lump sum distribution to which the special tax under
section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the taxable year under this
chapter and taxes based on net income paid to any other state or any province or territory
of Canada, to the extent allowed as a deduction in determining federal adjusted gross
income. For the purpose of this paragraph, income taxes do not include the taxes imposed
by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
other than expenses or interest used in computing net interest income for the subtraction
allowed under subdivision 19b, clause (1);

(6) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(7) 80 percent of the depreciation deduction allowed under section 168(k) of the
Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
in the taxable year generates a deduction for depreciation under section 168(k) and the
activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
limited to excess of the depreciation claimed by the activity under section 168(k) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k) is allowed;

(8) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;

(9) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code; deleted text begin and
deleted text end

(10) the exclusion allowed under section 139A of the Internal Revenue Code for
federal subsidies for prescription drug plans new text begin ; and
new text end

new text begin (11) the amount of the deduction under section 170 of the Internal Revenue Code
that represents contributions to a qualified foundation under section 290.0678 new text end .

Sec. 2.

Minnesota Statutes 2006, section 290.01, subdivision 19c, is amended to read:

Subd. 19c.

Corporations; additions to federal taxable income.

For corporations,
there shall be added to federal taxable income:

(1) the amount of any deduction taken for federal income tax purposes for income,
excise, or franchise taxes based on net income or related minimum taxes, including but not
limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
another state, a political subdivision of another state, the District of Columbia, or any
foreign country or possession of the United States;

(2) interest not subject to federal tax upon obligations of: the United States, its
possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
state, any of its political or governmental subdivisions, any of its municipalities, or any
of its governmental agencies or instrumentalities; the District of Columbia; or Indian
tribal governments;

(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
Revenue Code;

(4) the amount of any net operating loss deduction taken for federal income tax
purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
deduction under section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal income tax purposes
under sections 241 to 247 and 965 of the Internal Revenue Code;

(6) losses from the business of mining, as defined in section 290.05, subdivision 1,
clause (a), that are not subject to Minnesota income tax;

(7) the amount of any capital losses deducted for federal income tax purposes under
sections 1211 and 1212 of the Internal Revenue Code;

(8) the exempt foreign trade income of a foreign sales corporation under sections
921(a) and 291 of the Internal Revenue Code;

(9) the amount of percentage depletion deducted under sections 611 through 614 and
291 of the Internal Revenue Code;

(10) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, the amount of the amortization deduction allowed in computing federal taxable
income for those facilities;

(11) the amount of any deemed dividend from a foreign operating corporation
determined pursuant to section 290.17, subdivision 4, paragraph (g);

(12) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(13) the amount of net income excluded under section 114 of the Internal Revenue
Code;

(14) any increase in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard
to the provisions of section 103 of Public Law 109-222;

(15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A)
and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer
has an activity that in the taxable year generates a deduction for depreciation under
section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year
that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed
under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the
depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k)(1)(A) and (k)(4)(A) is allowed;

(16) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;

(17) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code; deleted text begin and
deleted text end

(18) the exclusion allowed under section 139A of the Internal Revenue Code for
federal subsidies for prescription drug plans new text begin ; and
new text end

new text begin (19) the amount of the deduction under section 170 of the Internal Revenue Code
that represents contributions to a qualified foundation under section 290.0678 new text end .

Sec. 3.

new text begin [290.0678] EQUITY AND OPPORTUNITY IN EDUCATION TAX
CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

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

new text begin (b) "Eligible student" means a student who:
new text end

new text begin (1) is a member of a household whose total annual income during the year, without
consideration of the benefits under this program, does not exceed an amount equal to two
times the federal poverty guideline. Once a student is eligible under this program, the
student remains eligible regardless of household income until the student graduates from
high school or reaches 21 years of age, whichever occurs first;
new text end

new text begin (2) was eligible to attend a public school in the preceding semester or is starting
school in Minnesota for the first time; and
new text end

new text begin (3) resides in Minnesota.
new text end

new text begin (c) "Equity and opportunity in education donation" means a donation to a qualified
foundation that makes qualified grants.
new text end

new text begin (d) "Qualified school" means a school operated in Minnesota that is:
new text end

new text begin (1) either a public or charter elementary or secondary school or a nonpublic
elementary or secondary school in Minnesota wherein a resident may legally fulfill the
state's compulsory attendance laws, which is not operated for profit, and which adheres to
the provisions of chapter 363A and the Civil Rights Act of 1964; and
new text end

new text begin (2) has at least 15 percent of its enrollment on October 1 of each year comprised
of eligible students.
new text end

new text begin (e) "Qualified foundation" means a nonprofit organization granted an exemption
from the federal income tax described in section 501(c)(3) of the Internal Revenue Code
which complies with the requirements of the equity and opportunity in education tax credit
program in this section.
new text end

new text begin (f) "Qualified grant" means a grant from a qualified foundation to:
new text end

new text begin (1) a qualified school;
new text end

new text begin (2) the parents or guardians of an eligible student in support of that student's
activities at a qualified school; or
new text end

new text begin (3) a program in support of a qualified school's mission of educating eligible students
in academics, arts, or athletics, including transportation.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed. new text end

new text begin An individual or corporate taxpayer is allowed a
credit against the tax due under this chapter equal to the amount donated to a qualified
foundation during the taxable year. The maximum credit allowed is $20,000 for married
joint filers, $10,000 for other individual filers, and $100,000 for corporate filers. A
taxpayer must provide a copy of the receipt provided by the qualified foundation when
claiming the credit for the donation.
new text end

new text begin Subd. 3. new text end

new text begin Application for credit certificate. new text end

new text begin A taxpayer must apply to the
commissioner for an equity and opportunity in education tax credit certificate. Tax credit
certificates under this section must be made available on a first-come, first-served basis
until the maximum statewide credit amount has been reached. The statewide credit
maximum amount is $10,000,000 per taxable year. The commissioner must not issue a tax
credit certificate for an amount greater than the limits under subdivision 2.
new text end

new text begin Subd. 4. new text end

new text begin Responsibilities of qualified foundations. new text end

new text begin (a) Each qualified foundation
that receives donations directly from taxpayers under this section must:
new text end

new text begin (1) notify the commissioner of its intent to participate in this program;
new text end

new text begin (2) demonstrate to the commissioner that it has been granted an exemption from
the federal income tax as an organization described in section 501(c)(3) of the Internal
Revenue Code;
new text end

new text begin (3) provide a receipt on a form approved by the commissioner to taxpayers for
donations made to qualified foundations;
new text end

new text begin (4) conduct criminal background checks on all of its employees and board members
and exclude from employment or governance any individuals that might reasonably pose a
risk to the appropriate use of contributed funds;
new text end

new text begin (5) demonstrate its financial accountability by:
new text end

new text begin (i) submitting a financial information report for the organization that complies with
uniform financial accounting standards established by the commissioner and conducted by
a certified public accountant; and
new text end

new text begin (ii) having the auditor certify that the report is free of material misstatements;
new text end

new text begin (6) demonstrate its financial viability, if they are to receive donations of $150,000 or
more during the school year, by:
new text end

new text begin (i) filing with the commissioner prior to the start of the school year a surety
bond payable to the state of Minnesota in an amount equal to the aggregate amount of
contributions expected to be received during the school year; or
new text end

new text begin (ii) filing with the commissioner prior to September 1 of each year financial
information that demonstrates the financial viability of the qualified foundation; and
new text end

new text begin (7) ensure that qualified schools that receive qualified grants or enroll eligible
students:
new text end

new text begin (i) comply with all health and safety laws or codes that apply to nonpublic schools;
new text end

new text begin (ii) hold a valid occupancy permit if required by its municipality;
new text end

new text begin (iii) certify that it will not discriminate in admissions on the basis of race, color,
national origin, religion, or disability; and
new text end

new text begin (iv) provide academic accountability to parents of students in the program by
regularly reporting to the parent on the student's progress.
new text end

new text begin (b) A qualified foundation that receives donations directly from taxpayers under this
program must report to the commissioner by June 1 of each year the following information
prepared by a certified public accountant regarding its grants in the previous calendar year:
new text end

new text begin (1) the total number and total dollar amount of donations from taxpayers received
during the previous calendar year; and
new text end

new text begin (2) the total number and total dollar amount of qualified grants awarded during the
previous calendar year.
new text end

new text begin (c) If the commissioner decides to bar a qualified foundation from the program for
failure to comply with the requirements in paragraph (a), clauses (1) to (7), the qualified
foundation must notify taxpayers who have donated to the qualified foundation in writing
within 30 days.
new text end

new text begin Subd. 5. new text end

new text begin Responsibilities of commissioner. new text end

new text begin (a) The commissioner must prescribe a
standardized format for a receipt to be issued by a qualified foundation to a taxpayer to
indicate the value of a donation received.
new text end

new text begin (b) The commissioner must prescribe a standardized format for qualified foundations
to report the information required under subdivision 3.
new text end

new text begin (c) The commissioner must post on the department's Web site the names and
addresses of qualified foundations and regularly update the names and addresses of any
qualified foundations that have been barred from participating in the program.
new text end

new text begin (d) The commissioner may conduct either a financial review or audit of a qualified
foundation upon finding evidence of fraud or intentional misreporting.
new text end

new text begin (e) The commissioner may bar a qualified foundation from participating in the
program if the commissioner establishes that the qualified foundation has intentionally and
substantially failed to comply with the requirements in subdivision 4. If the commissioner
determines that a qualified foundation should be barred from the program, the
commissioner must notify the qualified foundation within 60 days of that determination.
new text end

new text begin Subd. 6. new text end

new text begin Evaluation of equity and opportunity in education tax credit program.
new text end

new text begin (a) The legislature may authorize the legislative auditor to perform or to contract with one
or more qualified researchers who have previous experience evaluating school choice
programs to conduct a study of the program.
new text end

new text begin (b) The study must assess the following criteria:
new text end

new text begin (1) the level of parental satisfaction with the program;
new text end

new text begin (2) the level of participating students' satisfaction with the program;
new text end

new text begin (3) the impact of the program and the resulting change in use of nonpublic schools
on the resident school districts, public school students, and quality of life in a community;
new text end

new text begin (4) the impact of the program on public and nonpublic school capacity, availability,
and quality; and
new text end

new text begin (5) participating students' academic performance and graduation rates.
new text end

new text begin (c) The researchers who conduct the study must:
new text end

new text begin (1) apply appropriate analytical and behavioral science methodologies to ensure
public confidence in the study;
new text end

new text begin (2) protect the identity of participating schools and students by, among other things,
keeping anonymous all disaggregated data other than that for the categories of grade
level, gender, and race and ethnicity; and
new text end

new text begin (3) provide the legislature with a final copy of the evaluation of the program.
new text end

new text begin (d) The relevant public and participating nonpublic schools must cooperate with the
research effort by providing student assessment results and any other data necessary to
complete the study.
new text end

new text begin (e) The legislative auditor may accept donations to assist in funding the study.
new text end

new text begin (f) The study may cover a period of up to 13 years. The legislature may require
periodic reports from the researchers. After publishing their results, the researchers shall
make their data and methodology available for public review while complying with the
requirements of United States Code, title 20, section 1232g.
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, 2007, and before January 1, 2013.
new text end