HF 2972

as introduced - 89th Legislature (2015 - 2016) Posted on 03/22/2016 08:08am

A bill for an act
relating to taxation; individual income; clarifying the definition of resident;
making conforming changes; amending Minnesota Statutes 2014, sections
290.01, subdivision 7; 290.06, subdivision 22.

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

Section 1.

Minnesota Statutes 2014, section 290.01, subdivision 7, is amended to read:

Subd. 7.

Resident.

(a) The term "resident" means any individual new text begin who: new text end

new text begin (1) is new text end domiciled in Minnesota deleted text begin , except that deleted text end new text begin ; or
new text end

new text begin (2) spends in the aggregate more than one-half of the taxable year in Minnesota
during which time the individual both is domiciled outside the state and maintains an
abode in the state.
new text end

new text begin (b) new text end An individual is not a "resident" for the period of time that the individual is a
"qualified individual" as defined in section 911(d)(1) of the Internal Revenue Code, if the
qualified individual notifies the county within three months of moving out of the country
that homestead status be revoked for the Minnesota residence of the qualified individual,
and the property is not classified as a homestead while the individual remains a qualified
individual.

deleted text begin (b) "Resident" also means any individual domiciled outside the state who maintains
a place of abode in the state and spends in the aggregate more than one-half of the tax year
in Minnesota, unless deleted text end new text begin (c) Paragraph (a), clause (2), does not apply if new text end :

(1) the individual or the spouse of the individual is in the armed forces of the United
States; or

(2) the individual is covered under the reciprocity provisions in section 290.081.

For purposes of this subdivision, presence within the state for any part of a calendar
day constitutes a day spent in the state. Individuals shall keep adequate records to
substantiate the days spent outside the state.

The term "abode" means a dwelling maintained by an individual, whether or not
owned by the individual and whether or not occupied by the individual, and includes a
dwelling place owned or leased by the individual's spouse.

deleted text begin (c) deleted text end new text begin (d) new text end Neither the commissioner nor any court shall consider charitable contributions
made by an individual within or without the state in determining if the individual is
domiciled in Minnesota.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 2.

Minnesota Statutes 2014, section 290.06, subdivision 22, is amended to read:

Subd. 22.

Credit for taxes paid to another state.

(a) A taxpayer who is liable for
taxes based on net income to another state, as provided in paragraphs (b) through (f),
upon income allocated or apportioned to Minnesota, is entitled to a credit for the tax paid
to another state if the tax is actually paid in the taxable year or a subsequent taxable
year. A taxpayer who is a resident of this state pursuant to section 290.01, subdivision
7, paragraph deleted text begin (b) deleted text end new text begin (a), clause (2) new text end , and who is subject to income tax as a resident in the
state of the individual's domicile is not allowed this credit unless the state of domicile
does not allow a similar credit.

(b) For an individual, estate, or trust, the credit is determined by multiplying the tax
payable under this chapter by the ratio derived by dividing the income subject to tax in the
other state that is also subject to tax in Minnesota while a resident of Minnesota by the
taxpayer's federal adjusted gross income, as defined in section 62 of the Internal Revenue
Code, modified by the addition required by section 290.01, subdivision 19a, clause (1),
and the subtraction allowed by section 290.01, subdivision 19b, clause (1), to the extent
the income is allocated or assigned to Minnesota under sections 290.081 and 290.17.

(c) If the taxpayer is an athletic team that apportions all of its income under section
290.17, subdivision 5, the credit is determined by multiplying the tax payable under this
chapter by the ratio derived from dividing the total net income subject to tax in the other
state by the taxpayer's Minnesota taxable income.

(d) The credit determined under paragraph (b) or (c) shall not exceed the amount of
tax so paid to the other state on the gross income earned within the other state subject to
tax under this chapter, nor shall the allowance of the credit reduce the taxes paid under
this chapter to an amount less than what would be assessed if such income amount was
excluded from taxable net income.

(e) In the case of the tax assessed on a lump-sum distribution under section
290.032, the credit allowed under paragraph (a) is the tax assessed by the other state on
the lump-sum distribution that is also subject to tax under section 290.032, and shall
not exceed the tax assessed under section 290.032. To the extent the total lump-sum
distribution defined in section 290.032, subdivision 1, includes lump-sum distributions
received in prior years or is all or in part an annuity contract, the reduction to the tax on
the lump-sum distribution allowed under section 290.032, subdivision 2, includes tax paid
to another state that is properly apportioned to that distribution.

(f) If a Minnesota resident reported an item of income to Minnesota and is assessed
tax in such other state on that same income after the Minnesota statute of limitations
has expired, the taxpayer shall receive a credit for that year under paragraph (a),
notwithstanding any statute of limitations to the contrary. The claim for the credit must
be submitted within one year from the date the taxes were paid to the other state. The
taxpayer must submit sufficient proof to show entitlement to a credit.

(g) For the purposes of this subdivision, a resident shareholder of a corporation
treated as an "S" corporation under section 290.9725, must be considered to have paid
a tax imposed on the shareholder in an amount equal to the shareholder's pro rata share
of any net income tax paid by the S corporation to another state. For the purposes of the
preceding sentence, the term "net income tax" means any tax imposed on or measured by
a corporation's net income.

(h) For the purposes of this subdivision, a resident partner of an entity taxed as a
partnership under the Internal Revenue Code must be considered to have paid a tax imposed
on the partner in an amount equal to the partner's pro rata share of any net income tax paid
by the partnership to another state. For purposes of the preceding sentence, the term "net
income" tax means any tax imposed on or measured by a partnership's net income.

(i) For the purposes of this subdivision, "another state":

(1) includes:

(i) the District of Columbia; and

(ii) a province or territory of Canada; but

(2) excludes Puerto Rico and the several territories organized by Congress.

(j) The limitations on the credit in paragraphs (b), (c), and (d), are imposed on a
state by state basis.

(k) For a tax imposed by a province or territory of Canada, the tax for purposes of
this subdivision is the excess of the tax over the amount of the foreign tax credit allowed
under section 27 of the Internal Revenue Code. In determining the amount of the foreign
tax credit allowed, the net income taxes imposed by Canada on the income are deducted
first. Any remaining amount of the allowable foreign tax credit reduces the provincial or
territorial tax that qualifies for the credit under this subdivision.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 3. new text begin RULE CHANGE.
new text end

new text begin The commissioner of revenue shall amend Minnesota Rules, part 8001.0300,
subparts 8 and 10, so that the provisions therein reflect the changes enacted under sections
1 and 2. The commissioner shall use the good cause exemption under Minnesota Statutes,
section 14.388, in adopting the amendments. The provisions of Minnesota Statutes,
section 14.386, do not apply except as provided in Minnesota Statutes, section 14.388.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end