HF 1843

as introduced - 87th Legislature (2011 - 2012) Posted on 02/01/2012 06:45pm

A bill for an act
relating to taxation; individual income; restructuring the individual income tax;
eliminating subtractions, applying a single tax rate, modifying the working
family credit, and repealing the alternative minimum tax and various credits;
amending Minnesota Statutes 2010, section 290.091, subdivision 6; Minnesota
Statutes 2011 Supplement, sections 290.01, subdivisions 19a, 19b; 290.06,
subdivision 2c; 290.0671, subdivision 1; 290.0675, subdivision 1; repealing
Minnesota Statutes 2010, sections 290.067, subdivisions 1, 2, 2a, 2b, 3, 4;
290.0672; 290.0674; 290.0675, subdivisions 2, 3, 4; 290.0679; 290.0802;
290.091, subdivisions 1, 3, 4, 5, 6; Minnesota Statutes 2011 Supplement, sections
290.0675, subdivision 1; 290.091, subdivision 2.

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

Section 1.

Minnesota Statutes 2011 Supplement, 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:

(A) the portion of the exempt-interest dividends exempt from state taxation under
the laws of the United States; and

(B) 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, including any dividends exempt
under subitem (A), 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 deleted text begin income, sales and use, motor vehicle sales, or excise taxes paid or
accrued within the taxable year under this chapter and the amount of taxes based on net
income paid, sales and use, motor vehicle sales, or excise taxes paid to any other state
or to any province or territory of Canada deleted text end new text begin itemized deductions new text end , to the extent allowed as
deleted text begin a deduction deleted text end new text begin deductions new text end 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, disregarding the amounts
allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code, minus
any addition that would have been required under clause deleted text begin (21) deleted text end new text begin (20) new text end if the taxpayer had
claimed the standard deduction deleted text begin . For the purpose of this paragraph, the disallowance of
itemized deductions under section 68 of the Internal Revenue Code of 1986, income, sales
and use, motor vehicle sales, or excise taxes are the last itemized deductions disallowed deleted text end ;

(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;

(10) for taxable years beginning before January 1, 2013, the exclusion allowed
under section 139A of the Internal Revenue Code for federal subsidies for prescription
drug plans;

(11) the amount of expenses disallowed under section 290.10, subdivision 2;

(12) for taxable years beginning before January 1, 2010, the amount deducted for
qualified tuition and related expenses under section 222 of the Internal Revenue Code, to
the extent deducted from gross income;

(13) for taxable years beginning before January 1, 2010, the amount deducted for
certain expenses of elementary and secondary school teachers under section 62(a)(2)(D)
of the Internal Revenue Code, to the extent deducted from gross income;

(14) the additional standard deduction for property taxes payable that is allowable
under section 63(c)(1)(C) of the Internal Revenue Code;

(15) the additional standard deduction for qualified motor vehicle sales taxes
allowable under section 63(c)(1)(E) of the Internal Revenue Code;

(16) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code;

(17) the amount of unemployment compensation exempt from tax under section
85(c) of the Internal Revenue Code;

(18) changes to federal taxable income attributable to a net operating loss that the
taxpayer elected to carry back for more than two years for federal purposes but for which
the losses can be carried back for only two years under section 290.095, subdivision
11, paragraph (c);

deleted text begin (19) to the extent included in the computation of federal taxable income in taxable
years beginning after December 31, 2010, the amount of disallowed itemized deductions,
but the amount of disallowed itemized deductions plus the addition required under clause
(2) 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, disregarding the amounts
allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code, and
reduced by any addition that would have been required under clause (21) if the taxpayer
had claimed the standard deduction:
deleted text end

deleted text begin (i) the amount of disallowed itemized deductions is equal to the lesser of:
deleted text end

deleted text begin (A) three percent of the excess of the taxpayer's federal adjusted gross income
over the applicable amount; or
deleted text end

deleted text begin (B) 80 percent of the amount of the itemized deductions otherwise allowable to the
taxpayer under the Internal Revenue Code for the taxable year;
deleted text end

deleted text begin (ii) the term "applicable amount" means $100,000, or $50,000 in the case of a
married individual filing a separate return. Each dollar amount shall be increased by
an amount equal to:
deleted text end

deleted text begin (A) such dollar amount, multiplied by
deleted text end

deleted text begin (B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof;
deleted text end

deleted text begin (iii) the term "itemized deductions" does not include:
deleted text end

deleted text begin (A) the deduction for medical expenses under section 213 of the Internal Revenue
Code;
deleted text end

deleted text begin (B) any deduction for investment interest as defined in section 163(d) of the Internal
Revenue Code; and
deleted text end

deleted text begin (C) the deduction under section 165(a) of the Internal Revenue Code for casualty or
theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue
Code or for losses described in section 165(d) of the Internal Revenue Code;
deleted text end

deleted text begin (20) deleted text end new text begin (19) new text end to the extent included in federal taxable income in taxable years beginning
after December 31, 2010, the amount of disallowed personal exemptions for taxpayers
with federal adjusted gross income over the threshold amount:

(i) the disallowed personal exemption amount is equal to the dollar amount of the
personal exemptions claimed by the taxpayer in the computation of federal taxable income
multiplied by the applicable percentage;

(ii) "applicable percentage" means two percentage points for each $2,500 (or
fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable
year exceeds the threshold amount. In the case of a married individual filing a separate
return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In
no event shall the applicable percentage exceed 100 percent;

(iii) the term "threshold amount" means:

(A) $150,000 in the case of a joint return or a surviving spouse;

(B) $125,000 in the case of a head of a household;

(C) $100,000 in the case of an individual who is not married and who is not a
surviving spouse or head of a household; and

(D) $75,000 in the case of a married individual filing a separate return; and

(iv) the thresholds shall be increased by an amount equal to:

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; deleted text begin and
deleted text end

deleted text begin (21) deleted text end new text begin (20) new text end to the extent deducted in the computation of federal taxable income,
for taxable years beginning after December 31, 2010, and before January 1, 2013, the
difference between the standard deduction allowed under section 63(c) of the Internal
Revenue Code and the standard deduction allowed for 2011 and 2012 under the Internal
Revenue Code as amended through December 1, 2010 deleted text begin . deleted text end new text begin ;
new text end

new text begin (21) the amount deducted for moving expenses under section 62(a)(15) of the
Internal Revenue Code, to the extent deducted from gross income; and
new text end

new text begin (22) the amount deducted for interest on education loans under section 62(a)(17) of
the Internal Revenue Code, to the extent deducted from gross income.
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, 2011.
new text end

Sec. 2.

Minnesota Statutes 2011 Supplement, section 290.01, subdivision 19b, is
amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For individuals, estates,
and trusts, there shall be subtracted from federal taxable income:

(1) net interest income on obligations of any authority, commission, or
instrumentality of the United States to the extent includable in taxable income for federal
income tax purposes but exempt from state income tax under the laws of the United States;

(2) if included in federal taxable income, the amount of any overpayment of income
tax to Minnesota or to any other state, for any previous taxable year, whether the amount
is received as a refund or as a credit to another taxable year's income tax liability;

deleted text begin (3) the amount paid to others, less the amount used to claim the credit allowed under
section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
transportation of each qualifying child in attending an elementary or secondary school
situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
resident of this state may legally fulfill the state's compulsory attendance laws, which
is not operated for profit, and which adheres to the provisions of the Civil Rights Act
of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and equipment purchased
or leased for use in elementary and secondary schools in teaching only those subjects
legally and commonly taught in public elementary and secondary schools in this state.
Equipment expenses qualifying for deduction includes expenses as defined and limited in
section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
books and materials used in the teaching of religious tenets, doctrines, or worship, the
purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
or materials for, or transportation to, extracurricular activities including sporting events,
musical or dramatic events, speech activities, driver's education, or similar programs. No
deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
the qualifying child's vehicle to provide such transportation for a qualifying child. For
purposes of the subtraction provided by this clause, "qualifying child" has the meaning
given in section 32(c)(3) of the Internal Revenue Code;
deleted text end

deleted text begin (4) income as provided under section 290.0802;
deleted text end

deleted text begin (5) deleted text end new text begin (3) new text end to the extent included in federal adjusted gross income, income realized on
disposition of property exempt from tax under section 290.491;

deleted text begin (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
of the Internal Revenue Code in determining federal taxable income by an individual
who does not itemize deductions for federal income tax purposes for the taxable year, an
amount equal to 50 percent of the excess of charitable contributions over $500 allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code,
under the provisions of Public Law 109-1 and Public Law 111-126;
deleted text end

deleted text begin (7) for individuals who are allowed a federal foreign tax credit for taxes that do not
qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
of subnational foreign taxes for the taxable year, but not to exceed the total subnational
foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
"federal foreign tax credit" means the credit allowed under section 27 of the Internal
Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
the extent they exceed the federal foreign tax credit;
deleted text end

deleted text begin (8) deleted text end new text begin (4) new text end in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the
positive value of any net operating loss under section 172 of the Internal Revenue Code
generated for the tax year of the addition. The resulting delayed depreciation cannot be
less than zero;

deleted text begin (9) deleted text end new text begin (5) new text end job opportunity building zone income as provided under section 469.316;

deleted text begin (10) to the extent included in federal taxable income, the amount of compensation
paid to members of the Minnesota National Guard or other reserve components of the
United States military for active service, excluding compensation for services performed
under the Active Guard Reserve (AGR) program. For purposes of this clause, "active
service" means (i) state active service as defined in section 190.05, subdivision 5a, clause
(1); or (ii) federally funded state active service as defined in section 190.05, subdivision
5b, but "active service" excludes service performed in accordance with section 190.08,
subdivision 3;
deleted text end

deleted text begin (11) to the extent included in federal taxable income, the amount of compensation
paid to Minnesota residents who are members of the armed forces of the United States
or United Nations for active duty performed under United States Code, title 10; or the
authority of the United Nations;
deleted text end

deleted text begin (12) an amount, not to exceed $10,000, equal to qualified expenses related to a
qualified donor's donation, while living, of one or more of the qualified donor's organs
to another person for human organ transplantation. For purposes of this clause, "organ"
means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
"human organ transplantation" means the medical procedure by which transfer of a human
organ is made from the body of one person to the body of another person; "qualified
expenses" means unreimbursed expenses for both the individual and the qualified donor
for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
may be subtracted under this clause only once; and "qualified donor" means the individual
or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
individual may claim the subtraction in this clause for each instance of organ donation for
transplantation during the taxable year in which the qualified expenses occur;
deleted text end

deleted text begin (13) deleted text end new text begin (6) new text end in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
case of a shareholder of a corporation that is an S corporation, minus the positive value of
any net operating loss under section 172 of the Internal Revenue Code generated for the
tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
subtraction is not allowed under this clause;

deleted text begin (14) deleted text end new text begin (7) new text end to the extent included in the federal taxable income of a nonresident of
Minnesota, compensation paid to a service member as defined in United States Code, title
10, section 101(a)(5), for military service as defined in the Servicemembers Civil Relief
Act, Public Law 108-189, section 101(2);

deleted text begin (15) deleted text end new text begin (8) new text end international economic development zone income as provided under section
469.325;

deleted text begin (16) to the extent included in federal taxable income, the amount of national service
educational awards received from the National Service Trust under United States Code,
title 42, sections 12601 to 12604, for service in an approved Americorps National Service
program;
deleted text end

deleted text begin (17) deleted text end new text begin (9) new text end to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19a, clause (16); and

deleted text begin (18) deleted text end new text begin (10) new text end the amount of the net operating loss allowed under section 290.095,
subdivision 11, paragraph (c).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2011.
new text end

Sec. 3.

Minnesota Statutes 2011 Supplement, section 290.06, subdivision 2c, is
amended to read:

Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

(a) The income
taxes imposed by this chapter upon married individuals filing joint returns deleted text begin and deleted text end new text begin , new text end surviving
spouses as defined in section 2(a) of the Internal Revenue Code new text begin , married individuals
filing separate returns, estates, trusts, unmarried individuals, and unmarried individuals
qualifying as a head of household as defined in section 2(b) of the Internal Revenue Code, new text end
must be computed by applying to their taxable net income the deleted text begin following schedule of
rates: deleted text end new text begin rate of 5.96 percent.
new text end

deleted text begin (1) On the first $25,680, 5.35 percent;
deleted text end

deleted text begin (2) On all over $25,680, but not over $102,030, 7.05 percent;
deleted text end

deleted text begin (3) On all over $102,030, 7.85 percent.
deleted text end

deleted text begin Married individuals filing separate returns, estates, and trusts must compute their
income tax by applying the above rates to their taxable income, except that the income
brackets will be one-half of the above amounts.
deleted text end

deleted text begin (b) The income taxes imposed by this chapter upon unmarried individuals must be
computed by applying to taxable net income the following schedule of rates:
deleted text end

deleted text begin (1) On the first $17,570, 5.35 percent;
deleted text end

deleted text begin (2) On all over $17,570, but not over $57,710, 7.05 percent;
deleted text end

deleted text begin (3) On all over $57,710, 7.85 percent.
deleted text end

deleted text begin (c) The income taxes imposed by this chapter upon unmarried individuals qualifying
as a head of household as defined in section 2(b) of the Internal Revenue Code must be
computed by applying to taxable net income the following schedule of rates:
deleted text end

deleted text begin (1) On the first $21,630, 5.35 percent;
deleted text end

deleted text begin (2) On all over $21,630, but not over $86,910, 7.05 percent;
deleted text end

deleted text begin (3) On all over $86,910, 7.85 percent.
deleted text end

deleted text begin (d) deleted text end new text begin (b) new text end In lieu of a tax computed according to the rates set forth in this subdivision,
the tax of any individual taxpayer whose taxable net income for the taxable year is less
than an amount determined by the commissioner must be computed in accordance with
tables prepared and issued by the commissioner of revenue based on income brackets of
not more than $100. The amount of tax for each bracket shall be computed at the rates set
forth in this subdivision, provided that the commissioner may disregard a fractional part of
a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.

deleted text begin (e) deleted text end new text begin (c) new text end An individual who is not a Minnesota resident for the entire year must
compute the individual's Minnesota income tax as provided in this subdivision. After the
application of the nonrefundable credits provided in this chapter, the tax liability must
then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income
as defined in section 62 of the Internal Revenue Code and increased by the additions
required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12),
(13), and (16) to (18), and reduced by the Minnesota assignable portion of the subtraction
for United States government interest under section 290.01, subdivision 19b, clause (1),
and the subtractions under section 290.01, subdivision 19b, clauses deleted text begin (8), (9), (13), (14) deleted text end new text begin (4)
to (10) new text end , (15), (17), and (18), after applying the allocation and assignability provisions of
section 290.081, clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted gross income as defined in
section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), (13), and (16) to
(18), and reduced by the amounts specified in section 290.01, subdivision 19b, clauses
(1) deleted text begin , (8), (9), (13), (14), (15), (17), and (18) deleted text end new text begin and (4) to (10) 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, 2010.
new text end

Sec. 4.

Minnesota Statutes 2011 Supplement, section 290.0671, subdivision 1, is
amended to read:

Subdivision 1.

Credit allowed.

(a) An individual is allowed a credit against the tax
imposed by this chapter equal to deleted text begin a percentage of earned income. To receive a credit, a
taxpayer must be deleted text end new text begin 25 percent of the credit for which the individual is new text end eligible deleted text begin for a credit deleted text end
under section 32 of the Internal Revenue Code.

deleted text begin (b) For individuals with no qualifying children, the credit equals 1.9125 percent of
the first $4,620 of earned income. The credit is reduced by 1.9125 percent of earned
income or adjusted gross income, whichever is greater, in excess of $5,770, but in no
case is the credit less than zero.
deleted text end

deleted text begin (c) For individuals with one qualifying child, the credit equals 8.5 percent of the first
$6,920 of earned income and 8.5 percent of earned income over $12,080 but less than
$13,450. The credit is reduced by 5.73 percent of earned income or adjusted gross income,
whichever is greater, in excess of $15,080, but in no case is the credit less than zero.
deleted text end

deleted text begin (d) For individuals with two or more qualifying children, the credit equals ten
percent of the first $9,720 of earned income and 20 percent of earned income over
$14,860 but less than $16,800. The credit is reduced by 10.3 percent of earned income
or adjusted gross income, whichever is greater, in excess of $17,890, but in no case is
the credit less than zero.
deleted text end

deleted text begin (e) deleted text end new text begin (b) new text end For a nonresident or part-year resident, the credit must be allocated based on
the percentage calculated under section 290.06, subdivision 2c, paragraph deleted text begin (e) deleted text end new text begin (c) new text end .

deleted text begin (f) deleted text end new text begin (c) new text end 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 290.01,
subdivision 19b, clause deleted text begin (9) or (15) deleted text end new text begin (5) or (8) new text end , 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. deleted text begin For purposes of this paragraph, the
subtractions for military pay under section 290.01, subdivision 19b, clauses (10) and (11),
are not considered "earned income not subject to tax under this chapter."
deleted text end

For the purposes of this paragraph, 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."

deleted text begin (g) For tax years beginning after December 31, 2007, and before December 31,
2010, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in
paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by
$3,000 for married taxpayers filing joint returns. For tax years beginning after December
31, 2008, the commissioner shall annually adjust the $3,000 by the percentage determined
pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in
section 1(f)(3)(B), the word "2007" shall be substituted for the word "1992." For 2009,
the commissioner shall then determine the percent change from the 12 months ending on
August 31, 2007, to the 12 months ending on August 31, 2008, and in each subsequent
year, from the 12 months ending on August 31, 2007, to the 12 months ending on August
31 of the year preceding the taxable year. The earned income thresholds as adjusted
for inflation must be rounded to the nearest $10. If the amount ends in $5, the amount
is rounded up to the nearest $10. The determination of the commissioner under this
subdivision is not a rule under the Administrative Procedure Act.
deleted text end

deleted text begin (h) For tax years beginning after December 31, 2010, and before January 1, 2012,
the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph
(d), after being adjusted for inflation under subdivision 7, are each increased by $5,000
for married taxpayers filing joint returns. For tax years beginning after December 31,
2010, and before January 1, 2012, the commissioner shall annually adjust the $5,000
by the percentage determined pursuant to the provisions of section 1(f) of the Internal
Revenue Code, except that in section 1(f)(3)(B), the word "2008" shall be substituted for
the word "1992." For 2011, the commissioner shall then determine the percent change
from the 12 months ending on August 31, 2008, to the 12 months ending on August
31, 2010. The earned income thresholds as adjusted for inflation must be rounded to
the nearest $10. If the amount ends in $5, the amount is rounded up to the nearest $10.
The determination of the commissioner under this subdivision is not a rule under the
Administrative Procedure Act.
deleted text end

deleted text begin (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.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2011.
new text end

Sec. 5.

Minnesota Statutes 2011 Supplement, section 290.0675, subdivision 1, is
amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this section the following terms
have the meanings given.

(b) "Earned income" means the sum of the following, to the extent included in
Minnesota taxable income:

(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;

(2) income received from a retirement pension, profit-sharing, stock bonus, or
annuity plan; and

(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue
Code.

(c) "Taxable income" means net income as defined in section 290.01, subdivision 19.

(d) "Earned income of lesser-earning spouse" means the earned income of the spouse
with the lesser amount of earned income as defined in paragraph (b) for the taxable year
minus the sum of (i) the amount for one exemption under section 151(d) of the Internal
Revenue Code and (ii) one-half the amount of the standard deduction under section
63(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition required
under section 290.01, subdivision 19a, clause deleted text begin (21) deleted text end new text begin (20) new text end , and one-half of the addition that
would have been required under section 290.01, subdivision 19a, clause deleted text begin (21) deleted text end new text begin (20) new text end , if the
taxpayer had claimed the standard deduction.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2011.
new text end

Sec. 6.

Minnesota Statutes 2010, section 290.091, subdivision 6, is amended to read:

Subd. 6.

Credit for prior years' liability.

(a) A credit is allowed against the tax
imposed by this chapter on individuals, trusts, and estates equal to the minimum tax
credit for the taxable year. The minimum tax credit equals the adjusted net minimum
tax for taxable years beginning after December 31, 1988, reduced by the minimum tax
credits allowed in a prior taxable year. The credit may not exceed the excess (if any) for
the taxable year of

(1) the regular tax, over

(2) the greater of (i) the tentative alternative minimum tax, or (ii) zero.

(b) The adjusted net minimum tax for a taxable year equals the lesser of the net
minimum tax or the excess (if any) of

(1) the tentative minimum tax, over

(2) 6.4 percent of the sum of

(i) adjusted gross income as defined in section 62 of the Internal Revenue Code,

(ii) interest income as defined in section 290.01, subdivision 19a, clause (1),

(iii) interest on specified private activity bonds, as defined in section 57(a)(5) of the
Internal Revenue Code, to the extent not included under clause (ii),

(iv) depletion as defined in section 57(a)(1), determined without regard to the last
sentence of paragraph (1), of the Internal Revenue Code, less

(v) the deductions allowed in computing alternative minimum taxable income
provided in subdivision 2, paragraph (a), clause (2) of the first series of clauses and clauses
(1), (2), and (3) of the second series of clauses, and

(vi) the exemption amount determined under subdivision 3.

In the case of an individual who is not a Minnesota resident for the entire year,
adjusted net minimum tax must be multiplied by the fraction defined in section 290.06,
subdivision 2c, paragraph (e). In the case of a trust or estate, adjusted net minimum tax
must be multiplied by the fraction defined under subdivision 4, paragraph (b).

new text begin (c) For tax years beginning after December 31, 2011, and before January 1, 2014, a
credit is allowed against the tax imposed by this chapter on individuals, trusts, and estates
equal to the minimum tax credit for the taxable year. The minimum tax credit equals the
adjusted net minimum tax for taxable years beginning after December 31, 1988, and
before January 1, 2012, reduced by the minimum tax credits allowed in a prior taxable
year. The credit may not exceed the tax imposed by this chapter after the allowance of the
credits in section 290.06, subdivisions 22, 22a, 28, 29, 30, and 31.
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, 2011.
new text end

Sec. 7. new text begin REVISOR'S INSTRUCTION.
new text end

new text begin (a) The revisor of statutes shall identify and correct internal cross-references affected
by the amendments in sections 1, 2, and 3. The revisor may make changes necessary
to correct the punctuation, grammar, or structure of the remaining text and preserve its
meaning.
new text end

new text begin (b) The revisor of statutes shall identify and correct internal cross-references to
sections that are affected by section 8. The revisor may make changes necessary to correct
the punctuation, grammar, or structure of the remaining text and preserve its meaning.
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

Sec. 8. new text begin REPEALER.
new text end

new text begin (a) new text end new text begin Minnesota Statutes 2010, sections 290.067, subdivisions 1, 2, 2a, 2b, 3, and
4; 290.0672; 290.0674; 290.0675, subdivisions 2, 3, and 4; 290.0679; 290.0802; and
290.091, subdivisions 1, 3, 4, and 5, new text end new text begin and new text end new text begin Minnesota Statutes 2011 Supplement, sections
290.0675, subdivision 1; and 290.091, subdivision 2, new text end new text begin are repealed.
new text end

new text begin (b) new text end new text begin Minnesota Statutes 2010, section 290.091, subdivision 6, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Paragraph (a) is effective for taxable years beginning after
December 31, 2011, and paragraph (b) is effective for taxable years beginning after
December 31, 2013.
new text end