1.1                          A bill for an act 
  1.2             relating to taxation; individual income; requiring the 
  1.3             commissioner of revenue to adjust rate brackets under 
  1.4             certain conditions; amending Minnesota Statutes 2002, 
  1.5             section 290.06, subdivision 2c. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  Minnesota Statutes 2002, section 290.06, 
  1.8   subdivision 2c, is amended to read: 
  1.9      Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
  1.10  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
  1.11  married individuals filing joint returns and surviving spouses 
  1.12  as defined in section 2(a) of the Internal Revenue Code must be 
  1.13  computed by applying to their taxable net income the following 
  1.14  schedule of rates: 
  1.15     (1) On the first $25,680, 5.35 percent; 
  1.16     (2) On all over $25,680, but not over $102,030, 7.05 
  1.17  percent; 
  1.18     (3) On all over $102,030, 7.85 percent. 
  1.19     Married individuals filing separate returns, estates, and 
  1.20  trusts must compute their income tax by applying the above rates 
  1.21  to their taxable income, except that the income brackets will be 
  1.22  one-half of the above amounts.  
  1.23     (b) The income taxes imposed by this chapter upon unmarried 
  1.24  individuals must be computed by applying to taxable net income 
  1.25  the following schedule of rates: 
  2.1      (1) On the first $17,570, 5.35 percent; 
  2.2      (2) On all over $17,570, but not over $57,710, 7.05 
  2.3   percent; 
  2.4      (3) On all over $57,710, 7.85 percent. 
  2.5      (c) The income taxes imposed by this chapter upon unmarried 
  2.6   individuals qualifying as a head of household as defined in 
  2.7   section 2(b) of the Internal Revenue Code must be computed by 
  2.8   applying to taxable net income the following schedule of rates: 
  2.9      (1) On the first $21,630, 5.35 percent; 
  2.10     (2) On all over $21,630, but not over $86,910, 7.05 
  2.11  percent; 
  2.12     (3) On all over $86,910, 7.85 percent. 
  2.13     (d) In lieu of a tax computed according to the rates set 
  2.14  forth in this subdivision, the tax of any individual taxpayer 
  2.15  whose taxable net income for the taxable year is less than an 
  2.16  amount determined by the commissioner must be computed in 
  2.17  accordance with tables prepared and issued by the commissioner 
  2.18  of revenue based on income brackets of not more than $100.  The 
  2.19  amount of tax for each bracket shall be computed at the rates 
  2.20  set forth in this subdivision, provided that the commissioner 
  2.21  may disregard a fractional part of a dollar unless it amounts to 
  2.22  50 cents or more, in which case it may be increased to $1. 
  2.23     (e) An individual who is not a Minnesota resident for the 
  2.24  entire year must compute the individual's Minnesota income tax 
  2.25  as provided in this subdivision.  After the application of the 
  2.26  nonrefundable credits provided in this chapter, the tax 
  2.27  liability must then be multiplied by a fraction in which:  
  2.28     (1) the numerator is the individual's Minnesota source 
  2.29  federal adjusted gross income as defined in section 62 of the 
  2.30  Internal Revenue Code and increased by the additions required 
  2.31  under section 290.01, subdivision 19a, clauses (1) and (6), and 
  2.32  reduced by the Minnesota assignable portion of the subtraction 
  2.33  for United States government interest under section 290.01, 
  2.34  subdivision 19b, clause (1), after applying the allocation and 
  2.35  assignability provisions of section 290.081, clause (a), or 
  2.36  290.17; and 
  3.1      (2) the denominator is the individual's federal adjusted 
  3.2   gross income as defined in section 62 of the Internal Revenue 
  3.3   Code of 1986, increased by the amounts specified in section 
  3.4   290.01, subdivision 19a, clauses (1) and (6), and reduced by the 
  3.5   amounts specified in section 290.01, subdivision 19b, clause (1).
  3.6      (f) If the commissioner determines that the effective tax 
  3.7   rate for the tenth income decile is lower than any of the first 
  3.8   nine income deciles, according to a tax incidence report under 
  3.9   section 270.0682, the commissioner shall adjust the schedule of 
  3.10  rates provided by this subdivision, as follows.  The 
  3.11  commissioner shall establish an inflation-adjusted income tax 
  3.12  rate and tax rate bracket for the taxable year, for taxpayers in 
  3.13  the tenth income decile.  The rate established under this 
  3.14  paragraph must be at a sufficient percentage to ensure that the 
  3.15  effective tax rate according to the most recent tax incidence 
  3.16  report, is no higher for taxpayers in any of the first nine 
  3.17  income deciles than it is for the taxpayers in the tenth income 
  3.18  decile.  The rate bracket under this paragraph must be rounded 
  3.19  to the nearest $10 amount.  The determination of the 
  3.20  commissioner under this paragraph is not a rule and is not 
  3.21  subject to the Administrative Procedure Act in chapter 14.  The 
  3.22  commissioner shall notify committees of the legislature with 
  3.23  jurisdiction over taxation of adjustments made under this 
  3.24  paragraph and shall report on the adjustments in subsequent tax 
  3.25  incidence reports.