1.1                          A bill for an act 
  1.2             relating to taxation; changing income tax rates and 
  1.3             brackets; repealing the property tax reform account; 
  1.4             appropriating money; amending Minnesota Statutes 1996, 
  1.5             section 290.06, subdivisions 2c and 2d; Minnesota 
  1.6             Statutes 1997 Supplement, section 16A.152, subdivision 
  1.7             2.  
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 1997 Supplement, section 
  1.10  16A.152, subdivision 2, is amended to read: 
  1.11     Subd. 2.  [ADDITIONAL REVENUES; PRIORITY.] If on the basis 
  1.12  of a forecast of general fund revenues and expenditures after 
  1.13  November 1 in an odd-numbered year, the commissioner of finance 
  1.14  determines that there will be a positive unrestricted budgetary 
  1.15  general fund balance at the close of the biennium, the 
  1.16  commissioner of finance must allocate money as follows: 
  1.17     (a) first, to the budget reserve until the total amount in 
  1.18  the account equals $522,000,000; ~~then~~ and 
  1.19     (b) ~~60 percent to the property tax reform account~~ 
  1.20  ~~established in section 16A.1521; and~~ 
  1.21     ~~(c) 40 percent~~ the balance is an unrestricted balance in 
  1.22  the general fund. 
  1.23     The amounts necessary to meet the requirements of this 
  1.24  section are appropriated from the general fund within two weeks 
  1.25  after the forecast is released. 
  1.26     Sec. 2.  Minnesota Statutes 1996, section 290.06, 
  2.1   subdivision 2c, is amended to read: 
  2.2      Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
  2.3   AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
  2.4   married individuals filing joint returns and surviving spouses 
  2.5   as defined in section 2(a) of the Internal Revenue Code must be 
  2.6   computed by applying to their taxable net income the following 
  2.7   schedule of rates: 
  2.8      (1) On the first ~~$19,910, 6~~ $40,000, 5.5 percent; 
  2.9      (2) On all over ~~$19,910~~ $40,000, but not over ~~$79,120,~~ 
  2.10  ~~8~~ $98,000, 7 percent; 
  2.11     (3) On all over ~~$79,120~~ $98,000, 8.5 percent. 
  2.12     Married individuals filing separate returns, estates, and 
  2.13  trusts must compute their income tax by applying the above rates 
  2.14  to their taxable income, except that the income brackets will be 
  2.15  one-half of the above amounts.  
  2.16     (b) The income taxes imposed by this chapter upon unmarried 
  2.17  individuals must be computed by applying to taxable net income 
  2.18  the following schedule of rates: 
  2.19     (1) On the first ~~$13,620, 6~~ $27,370, 5 percent; 
  2.20     (2) On all over ~~$13,620~~ $27,370, but not over ~~$44,750,~~ 
  2.21  ~~8~~ $55,430, 7 percent; 
  2.22     (3) On all over ~~$44,750~~ $55,430, 8.5 percent. 
  2.23     (c) The income taxes imposed by this chapter upon unmarried 
  2.24  individuals qualifying as a head of household as defined in 
  2.25  section 2(b) of the Internal Revenue Code must be computed by 
  2.26  applying to taxable net income the following schedule of rates: 
  2.27     (1) On the first ~~$16,770, 6~~ $33,632, 5 percent; 
  2.28     (2) On all over ~~$16,770~~ $33,632, but not over ~~$67,390,~~ 
  2.29  ~~8~~ $67,053, 7 percent; 
  2.30     (3) On all over ~~$67,390~~ $67,053, 8.5 percent. 
  2.31     (d) In lieu of a tax computed according to the rates set 
  2.32  forth in this subdivision, the tax of any individual taxpayer 
  2.33  whose taxable net income for the taxable year is less than an 
  2.34  amount determined by the commissioner must be computed in 
  2.35  accordance with tables prepared and issued by the commissioner 
  2.36  of revenue based on income brackets of not more than $100.  The 
  3.1   amount of tax for each bracket shall be computed at the rates 
  3.2   set forth in this subdivision, provided that the commissioner 
  3.3   may disregard a fractional part of a dollar unless it amounts to 
  3.4   50 cents or more, in which case it may be increased to $1. 
  3.5      (e) An individual who is not a Minnesota resident for the 
  3.6   entire year must compute the individual's Minnesota income tax 
  3.7   as provided in this subdivision.  After the application of the 
  3.8   nonrefundable credits provided in this chapter, the tax 
  3.9   liability must then be multiplied by a fraction in which:  
  3.10     (1) The numerator is the individual's Minnesota source 
  3.11  federal adjusted gross income as defined in section 62 of the 
  3.12  Internal Revenue Code increased by the addition required for 
  3.13  interest income from non-Minnesota state and municipal bonds 
  3.14  under section 290.01, subdivision 19a, clause (1), after 
  3.15  applying the allocation and assignability provisions of section 
  3.16  290.081, clause (a), or 290.17; and 
  3.17     (2) the denominator is the individual's federal adjusted 
  3.18  gross income as defined in section 62 of the Internal Revenue 
  3.19  Code of 1986, as amended through April 15, 1995, increased by 
  3.20  the addition required for interest income from non-Minnesota 
  3.21  state and municipal bonds under section 290.01, subdivision 19a, 
  3.22  clause (1).  
  3.23     Sec. 3.  Minnesota Statutes 1996, section 290.06, 
  3.24  subdivision 2d, is amended to read: 
  3.25     Subd. 2d.  [INFLATION ADJUSTMENT OF BRACKETS.] (a) For 
  3.26  taxable years beginning after December 31, ~~1991~~ 1998, the 
  3.27  minimum and maximum dollar amounts for each rate bracket for 
  3.28  which a tax is imposed in subdivision 2c shall be adjusted for 
  3.29  inflation by the percentage determined under paragraph (b).  For 
  3.30  the purpose of making the adjustment as provided in this 
  3.31  subdivision all of the rate brackets provided in subdivision 2c 
  3.32  shall be the rate brackets as they existed for taxable years 
  3.33  beginning after December 31, ~~1990~~ 1997, and before January 
  3.34  1, ~~1992~~ 1999.  The rate applicable to any rate bracket must not 
  3.35  be changed.  The dollar amounts setting forth the tax shall be 
  3.36  adjusted to reflect the changes in the rate brackets.  The rate 
  4.1   brackets as adjusted must be rounded to the nearest $10 amount.  
  4.2   If the rate bracket ends in $5, it must be rounded up to the 
  4.3   nearest $10 amount.  
  4.4      (b) The commissioner shall adjust the rate brackets and by 
  4.5   the percentage determined pursuant to the provisions of section 
  4.6   1(f) of the Internal Revenue Code, except that in section 
  4.7   1(f)(3)(B) the word "~~1990~~ 1997" shall be substituted for the 
  4.8   word "~~1987~~ 1992."  For ~~1991~~ 1998, the commissioner shall then 
  4.9   determine the percent change from the 12 months ending on August 
  4.10  31, ~~1990~~ 1997, to the 12 months ending on August 31, ~~1991~~ 1998, 
  4.11  and in each subsequent year, from the 12 months ending on August 
  4.12  31, ~~1990~~ 1997, to the 12 months ending on August 31 of the year 
  4.13  preceding the taxable year.  The determination of the 
  4.14  commissioner pursuant to this subdivision shall not be 
  4.15  considered a "rule" and shall not be subject to the 
  4.16  administrative procedure act contained in chapter 14.  
  4.17     No later than December 15 of each year, the commissioner 
  4.18  shall announce the specific percentage that will be used to 
  4.19  adjust the tax rate brackets. 
  4.20     Sec. 4.  [WITHHOLDING AND DECLARATION FOR 1998 TAX YEAR; 
  4.21  APPROPRIATION.] 
  4.22     (a) Notwithstanding Minnesota Statutes, section 290.92, 
  4.23  subdivision 2a, in taxable years beginning after December 31, 
  4.24  1997, but before January 1, 1999, the commissioner of revenue 
  4.25  shall adjust the withholding tables so that the entire amount of 
  4.26  the tax reduction for the taxable year is withheld and remitted 
  4.27  by employers after June 30, 1998. 
  4.28     (b) For the same period, the commissioner shall require 
  4.29  that declarations by individuals, estates, and trusts include 
  4.30  the entire amount of the tax reduction for the taxable year for 
  4.31  declarations filed after June 30, 1998. 
  4.32     (c) $....... is appropriated from the general fund to the 
  4.33  commissioner of revenue to pay the cost of preparing and 
  4.34  distributing the tables and instructions.  It is available until 
  4.35  expended. 
  4.36     Sec. 5.  [EFFECTIVE DATE.] 
  5.1      Section 1 is effective the day following final enactment.  
  5.2   The commissioner of finance shall reallocate any funds allocated 
  5.3   to the property tax reform account based on the November 1997 
  5.4   forecast to the unrestricted budgetary general fund balance.  
  5.5   Section 2 is effective for taxable years beginning after 
  5.6   December 31, 1997.  Section 4 is effective the day following 
  5.7   final enactment.