as introduced - 93rd Legislature (2023 - 2024) Posted on 03/07/2023 09:15am
A bill for an act
relating to taxation; individual income; expanding the dependent care credit;
establishing the great start child care credit; amending Minnesota Statutes 2022,
sections 290.0131, by adding a subdivision; 290.067.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Minnesota Statutes 2022, section 290.0131, is amended by adding a subdivision
to read:
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For a taxpayer who claims the credit
under section 290.067, or for a married taxpayer filing a separate return whose spouse claims
the credit under that section, the amount of dependent care assistance that is excluded from
gross income under section 129 of the Internal Revenue Code is an addition.
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This section is effective for taxable years beginning after December
31, 2022.
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Minnesota Statutes 2022, section 290.067, is amended to read:
(a) A taxpayer may take as a credit against the tax
due from the taxpayer and a spouse, if any, under this chapter an amount equal to deleted text begin the
dependent care credit for which the taxpayer is eligible pursuant to the provisions of section
21 of the Internal Revenue Code except that in determining whether the child qualified as
a dependent, income received as a Minnesota family investment program grant or allowance
to or on behalf of the child must not be taken into account in determining whether the child
received more than half of the child's support from the taxpayerdeleted text end new text begin the taxpayer's eligible
dependent care expenses, as determined under subdivision 1a, multiplied by the taxpayer's
credit percentage, as determined under subdivision 1bnew text end .
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(b) If a child who has not attained the age of six years at the close of the taxable year is
cared for at a licensed family day care home operated by the child's parent, the taxpayer is
deemed to have paid employment-related expenses. If the child is 16 months old or younger
at the close of the taxable year, the amount of expenses deemed to have been paid equals
the maximum limit for one qualified individual under section 21(c) and (d) of the Internal
Revenue Code. If the child is older than 16 months of age but has not attained the age of
six years at the close of the taxable year, the amount of expenses deemed to have been paid
equals the amount the licensee would charge for the care of a child of the same age for the
same number of hours of care.
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(c) If a married couple:
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(1) has a child who has not attained the age of one year at the close of the taxable year;
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(2) files a joint tax return for the taxable year; and
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(3) does not participate in a dependent care assistance program as defined in section 129
of the Internal Revenue Code, in lieu of the actual employment related expenses paid for
that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of (i)
the combined earned income of the couple or (ii) the amount of the maximum limit for one
qualified individual under section 21(c) and (d) of the Internal Revenue Code will be deemed
to be the employment related expense paid for that child. The earned income limitation of
section 21(d) of the Internal Revenue Code shall not apply to this deemed amount. These
deemed amounts apply regardless of whether any employment-related expenses have been
paid.
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(d) If the taxpayer is not required and does not file a federal individual income tax return
for the tax year, no credit is allowed for any amount paid to any person unless:
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(1) the name, address, and taxpayer identification number of the person are included on
the return claiming the credit; or
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(2) if the person is an organization described in section 501(c)(3) of the Internal Revenue
Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name
and address of the person are included on the return claiming the credit.
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In the case of a failure to provide the information required under the preceding sentence,
the preceding sentence does not apply if it is shown that the taxpayer exercised due diligence
in attempting to provide the information required.
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deleted text begin (e)deleted text end new text begin (b)new text end In the case of a nonresident, part-year resident, or a person who has earned income
not subject to tax under this chapter deleted text begin including earned income excluded pursuant to section
290.0132, subdivision 10,deleted text end the credit determined under deleted text begin section 21 of the Internal Revenue
Codedeleted text end new text begin this sectionnew text end must be allocated deleted text begin based on the ratio by which the earned income of the
claimant and the claimant's spouse from Minnesota sources bears to the total earned income
of the claimant and the claimant's spousedeleted text end new text begin using the percentage calculated in section 290.06,
subdivision 2c, paragraph (e)new text end .
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(c) For the purposes of this section, the following terms have the meanings given:
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(1) "employment-related expenses" has the meaning given in section 21(b)(2) of the
Internal Revenue Code;
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(2) "qualifying individual" has the meaning given in section 21(b)(1) of the Internal
Revenue Code, except that in determining whether the child qualified as a dependent, income
received as a Minnesota family investment program grant or allowance to or on behalf of
the child must not be taken into account in determining whether the child received more
than half of the child's support from the taxpayer; and
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(3) "young child" means a qualifying individual who had not attained the age of five by
December 31 of the taxable year.
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(f) For residents of Minnesota, the subtractions for military pay under section 290.0132,
subdivisions 11 and 12, are not considered "earned income not subject to tax under this
chapter."
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(g) For residents of Minnesota, the exclusion of combat pay under section 112 of the
Internal Revenue Code is not considered "earned income not subject to tax under this
chapter."
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(h) For taxpayers with federal adjusted gross income in excess of $52,230, the credit is
equal to the lesser of the credit otherwise calculated under this subdivision, or the amount
equal to $600 minus five percent of federal adjusted gross income in excess of $52,230 for
taxpayers with one qualified individual, or $1,200 minus five percent of federal adjusted
gross income in excess of $52,230 for taxpayers with two or more qualified individuals,
but in no case is the credit less than zero.
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(a) A taxpayer's eligible dependent care
expenses equals the amount of employment-related expenses incurred by the taxable year,
subject to the limitations in paragraphs (b) and (c).
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(b) Except as provided in paragraph (c), a taxpayer's eligible dependent care expenses
are limited to:
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(1) $3,000 if there was one qualifying individual with respect to the taxpayer; or
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(2) $6,000 if there were two or more qualifying individuals with respect to the taxpayer.
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(c) For a taxpayer with a young child, the limit in paragraph (b) is increased as follows:
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(1) for a taxpayer with one young child with respect to the taxpayer, the limit is increased
by $7,000;
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(2) for a taxpayer with two young children with respect to the taxpayer, the limit is
increased by $14,000; or
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(3) for a taxpayer with three or more young children with respect to the taxpayer, the
limit is increased by $19,000.
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(a) The credit percentage equals 50 percent, subject to
the reductions in paragraphs (b) and (c).
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(b) A taxpayer's credit percentage is reduced by one percentage point for each $2,000,
or fraction thereof, by which the taxpayer's adjusted gross income exceeds $125,000, until
the credit percentage equals 20 percent.
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(c) For a taxpayer with adjusted gross income in excess of $400,000, the credit percentage
equals 20 percent, reduced by one percentage point for each $2,000, or fraction thereof, by
which the taxpayer's adjusted gross income exceeds $400,000.
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The commissioner shall annually adjust the dollar
amount of the income threshold at which the deleted text begin maximumdeleted text end credit new text begin percentage new text end begins to be
reduced under subdivision deleted text begin 1deleted text end new text begin 1bnew text end as provided in section 270C.22. The statutory year is taxable
year 2019.
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(a) If a child who has not attained the age of six years at
the close of the taxable year is cared for at a licensed family day care home operated by the
child's parent, the taxpayer is deemed to have paid employment-related expenses. The
amount of expenses deemed to have been paid equals the amount the licensee would charge
for the care of a child of the same age for the same number of hours of care.
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(b) If a married couple:
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(1) has a child who has not attained the age of one year at the close of the taxable year;
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(2) does not participate in a dependent care assistance program as defined in section 129
of the Internal Revenue Code, in lieu of the actual employment-related expenses paid for
that child under or the deemed amount under paragraph (a), the amount deemed to be the
employment-related expense paid for that child equals the lesser of:
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(i) the combined earned income of the couple; or
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(ii) the amount of the maximum limit for one qualified individual under subdivision 1a,
paragraph (b), as increased by paragraph (c).
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The earned income limitation of section 21(d) of the Internal Revenue Code shall not apply
to this deemed amount. These deemed amounts apply regardless of whether any
employment-related expenses have been paid.
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If the taxpayer is not required and
does not file a federal individual income tax return for the tax year, no credit is allowed for
any amount paid to any person unless:
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(1) the name, address, and taxpayer identification number of the person are included on
the return claiming the credit; or
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(2) if the person is an organization described in section 501(c)(3) of the Internal Revenue
Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name
and address of the person are included on the return claiming the credit.
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If the amount of credit which a claimant would be
eligible to receive pursuant to this subdivision exceeds the claimant's tax liability under
chapter 290, the excess amount of the credit shall be refunded to the claimant by the
commissioner of revenue.new text begin An amount sufficient to pay the refunds required by this section
is appropriated to the commissioner from the general fund.
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The right to file a claim under this section shall be personal
to the claimant and shall not survive death, but such right may be exercised on behalf of a
claimant by the claimant's legal guardian or attorney-in-fact. When a claimant dies after
having filed a timely claim the amount thereof shall be disbursed to another member of the
household as determined by the commissioner of revenue. If the claimant was the only
member of a household, the claim may be paid to the claimant's personal representative,
but if neither is appointed and qualified within two years of the filing of the claim, the
amount of the claim shall escheat to the state.
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For the purposes of determining employment
related expenses, the provisions of the Internal Revenue Code, section 21(d) apply.
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For a married couple filing
separate returns, only one spouse may claim the credit allowed under this section.
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This section is effective for taxable years beginning after December
31, 2022.
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