SF 3796

as introduced - 90th Legislature (2017 - 2018) Posted on 03/27/2018 08:50am

A bill for an act
relating to taxation; property tax refund; allowing for a dependent exemption from
household income; amending Minnesota Statutes 2016, section 290A.04,
subdivision 4; Minnesota Statutes 2017 Supplement, section 290A.03, subdivisions
3, 15.

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

Section 1.

Minnesota Statutes 2017 Supplement, section 290A.03, subdivision 3, is
amended to read:

Subd. 3.

Income.

(a) "Income" means the sum of the following:

(1) federal adjusted gross income as defined in the Internal Revenue Code; and

(2) the sum of the following amounts to the extent not included in clause (1):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not disallowed as a result of section 469,
paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity loss
carryover allowed under section 469(b) of the Internal Revenue Code;

(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a
solvent individual excluded from gross income under section 108(g) of the Internal Revenue
Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement benefits, all payments received
under the federal Social Security Act, Supplemental Security Income, and veterans benefits),
which was not exclusively funded by the claimant or spouse, or which was funded exclusively
by the claimant or spouse and which funding payments were excluded from federal adjusted
gross income in the years when the payments were made;

(vi) interest received from the federal or a state government or any instrumentality or
political subdivision thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature of disability income or sick
pay as a result of accident, sickness, or other disability, whether funded through insurance
or otherwise;

(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of
1986, as amended through December 31, 1995;

(xi) contributions made by the claimant to an individual retirement account, including
a qualified voluntary employee contribution; simplified employee pension plan;
self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of
the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal
Revenue Code, to the extent the sum of amounts exceeds the retirement base amount for
the claimant and spouse;

(xii) to the extent not included in federal adjusted gross income, distributions received
by the claimant or spouse from a traditional or Roth style retirement account or plan;

(xiii) nontaxable scholarship or fellowship grants;

(xiv) the amount of deduction allowed under section 199 of the Internal Revenue Code;

(xv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue
Code;

(xvi) the amount deducted for tuition expenses under section 222 of the Internal Revenue
Code; and

(xvii) the amount deducted for certain expenses of elementary and secondary school
teachers under section 62(a)(2)(D) of the Internal Revenue Code.

In the case of an individual who files an income tax return on a fiscal year basis, the
term "federal adjusted gross income" shall mean federal adjusted gross income reflected in
the fiscal year ending in the calendar year. Federal adjusted gross income shall not be reduced
by the amount of a net operating loss carryback or carryforward or a capital loss carryback
or carryforward allowed for the year.

(b) "Income" does not include:

(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;

(2) amounts of any pension or annuity which was exclusively funded by the claimant
or spouse and which funding payments were not excluded from federal adjusted gross
income in the years when the payments were made;

(3) to the extent included in federal adjusted gross income, amounts contributed by the
claimant or spouse to a traditional or Roth style retirement account or plan, but not to exceed
the retirement base amount reduced by the amount of contributions excluded from federal
adjusted gross income, but not less than zero;

(4) surplus food or other relief in kind supplied by a governmental agency;

(5) relief granted under this chapter;

(6) child support payments received under a temporary or final decree of dissolution or
legal separation; or

(7) restitution payments received by eligible individuals and excludable interest as
defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001,
Public Law 107-16.

(c) The sum of the following amounts may be subtracted from income:

(1) for the claimant's first dependent, deleted text begin the exemption amount multiplied by 1.4 deleted text end new text begin $5,810 new text end ;

(2) for the claimant's second dependent, deleted text begin the exemption amount multiplied by 1.3 deleted text end new text begin $5,395 new text end ;

(3) for the claimant's third dependent, deleted text begin the exemption amount multiplied by 1.2 deleted text end new text begin $4,980 new text end ;

(4) for the claimant's fourth dependent, deleted text begin the exemption amount multiplied by 1.1 deleted text end new text begin $4,565 new text end ;

(5) for the claimant's fifth dependent, deleted text begin the exemption amount deleted text end new text begin $4,150 new text end ; and

(6) if the claimant or claimant's spouse was disabled or attained the age of 65 on or
before December 31 of the year for which the taxes were levied or rent paid, deleted text begin the exemption
amount deleted text end new text begin $4,150 new text end .

(d) For purposes of this subdivision, the deleted text begin "exemption amount" means the exemption
amount under section 151(d) of the Internal Revenue Code for the taxable year for which
the income is reported; deleted text end "retirement base amount" means the deductible amount for the
taxable year for the claimant and spouse under section 219(b)(5)(A) of the Internal Revenue
Code, adjusted for inflation as provided in section 219(b)(5)(C) of the Internal Revenue
Code, without regard to whether the claimant or spouse claimed a deduction; and "traditional
or Roth style retirement account or plan" means retirement plans under sections 401, 403,
408, 408A, and 457 of the Internal Revenue Code.

new text begin (e) Beginning for property tax refunds payable in 2019, the commissioner shall adjust
the subtraction from income amounts in paragraph (c) using the Consumer Price Index for
All Urban Consumers. For 2019, the commissioner shall then determine the percentage
change from the 12 months ending on June 30, 2017, to the 12 months ending on June 30,
2018, and in each subsequent year, from the 12 months ending on June 30, 2017, to the 12
months ending on June 30 of the year preceding the taxable year. The determination of the
commissioner pursuant to this subdivision must not be considered a rule and is not subject
to the Administrative Procedure Act under chapter 14, including section 14.386. The
subtraction from income amounts as adjusted must be rounded to the nearest $5 amount.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property tax refunds based on property
taxes payable after December 31, 2017, and rent paid after December 31, 2016.
new text end

Sec. 2.

Minnesota Statutes 2017 Supplement, section 290A.03, subdivision 15, is amended
to read:

Subd. 15.

Internal Revenue Code.

"Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended through December deleted text begin 16, 2016 deleted text end new text begin 31, 2017, except as otherwise
provided in subdivision 3, paragraph (d), to calculate the exemption amount new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property tax refunds based on property
taxes payable after December 31, 2017, and rent paid after December 31, 2016.
new text end

Sec. 3.

Minnesota Statutes 2016, section 290A.04, subdivision 4, is amended to read:

Subd. 4.

Inflation adjustment.

(a) Beginning for property tax refunds payable in calendar
year 2002, the commissioner shall annually adjust the dollar amounts of the income thresholds
and the maximum refunds under subdivisions 2 and 2a for inflation. The commissioner
shall make the inflation adjustments deleted text begin in accordance with section 1(f) of the Internal Revenue
Code deleted text end new text begin using the Consumer Price Index for All Urban Consumers new text end , except that for purposes
of this subdivision the percentage increase shall be determined as provided in this subdivision.

(b) In adjusting the dollar amounts of the income thresholds and the maximum refunds
under subdivision 2 for inflation, the percentage increase shall be determined from the year
ending on June 30, 2013, to the year ending on June 30 of the year preceding that in which
the refund is payable.

(c) In adjusting the dollar amounts of the income thresholds and the maximum refunds
under subdivision 2a for inflation, the percentage increase shall be determined from the
year ending on June 30, 2013, to the year ending on June 30 of the year preceding that in
which the refund is payable.

(d) The commissioner shall use the appropriate percentage increase to annually adjust
the income thresholds and maximum refunds under subdivisions 2 and 2a for inflation
without regard to whether or not the income tax brackets are adjusted for inflation in that
year. The commissioner shall round the thresholds and the maximum amounts, as adjusted
to the nearest $10 amount. If the amount ends in $5, the commissioner shall round it up to
the next $10 amount.

(e) The commissioner shall annually announce the adjusted refund schedule at the same
time provided under section 290.06. The determination of the commissioner under this
subdivision is not a rule under the Administrative Procedure Act.