1.1                          A bill for an act
  1.2             relating to taxation; individual income; modifying the 
  1.3             tax brackets and the alternative minimum tax exemption 
  1.4             amount to reduce marriage penalties; amending 
  1.5             Minnesota Statutes 1996, sections 290.06, subdivisions 
  1.6             2c and 2d; and 290.091, subdivision 3. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 1996, section 290.06, 
  1.9   subdivision 2c, is amended to read: 
  1.10     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
  1.11  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
  1.12  married individuals filing joint returns and surviving spouses 
  1.13  as defined in section 2(a) of the Internal Revenue Code must be 
  1.14  computed by applying to their taxable net income the following 
  1.15  schedule of rates: 
  1.16     (1) on the first ~~$19,910~~ $33,920, 6 percent; 
  1.17     (2) on all over ~~$19,910~~ $33,920, but not 
  1.18  over ~~$79,120~~ $111,460, 8 percent; 
  1.19     (3) on all over ~~$79,120~~ $111,460, 8.5 percent. 
  1.20     Married individuals filing separate returns, estates, and 
  1.21  trusts must compute their income tax by applying the above rates 
  1.22  to their taxable income, except that the income brackets will be 
  1.23  one-half of the above amounts.  
  1.24     (b) The income taxes imposed by this chapter upon unmarried 
  1.25  individuals must be computed by applying to taxable net income 
  1.26  the following schedule of rates: 
  2.1      (1) on the first ~~$13,620~~ $16,960, 6 percent; 
  2.2      (2) on all over ~~$13,620~~ $16,960, but not 
  2.3   over ~~$44,750~~ $55,730, 8 percent; 
  2.4      (3) on all over ~~$44,750~~ $55,730, 8.5 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 ~~$16,770~~ $20,890, 6 percent; 
  2.10     (2) on all over ~~$16,770~~ $20,890, but not 
  2.11  over ~~$67,390~~ $83,930, 8 percent; 
  2.12     (3) on all over ~~$67,390~~ $83,930, 8.5 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 increased by the addition required for 
  2.31  interest income from non-Minnesota state and municipal bonds 
  2.32  under section 290.01, subdivision 19a, clause (1), after 
  2.33  applying the allocation and assignability provisions of section 
  2.34  290.081, clause (a), or 290.17; and 
  2.35     (2) the denominator is the individual's federal adjusted 
  2.36  gross income as defined in section 62 of the Internal Revenue 
  3.1   Code of 1986, as amended through April 15, 1995, increased by 
  3.2   the addition required for interest income from non-Minnesota 
  3.3   state and municipal bonds under section 290.01, subdivision 19a, 
  3.4   clause (1). 
  3.5      Sec. 2.  Minnesota Statutes 1996, section 290.06, 
  3.6   subdivision 2d, is amended to read: 
  3.7      Subd. 2d.  [INFLATION ADJUSTMENT OF BRACKETS.] (a) For 
  3.8   taxable years beginning after December 31, ~~1991~~ 1998, the 
  3.9   minimum and maximum dollar amounts for each rate bracket for 
  3.10  which a tax is imposed in subdivision 2c shall be adjusted for 
  3.11  inflation by the percentage determined under paragraph (b).  For 
  3.12  the purpose of making the adjustment as provided in this 
  3.13  subdivision all of the rate brackets provided in subdivision 2c 
  3.14  shall be the rate brackets as they existed for taxable years 
  3.15  beginning after December 31, ~~1990~~ 1997, and before January 
  3.16  1, ~~1992~~ 1999.  The rate applicable to any rate bracket must not 
  3.17  be changed.  The dollar amounts setting forth the tax shall be 
  3.18  adjusted to reflect the changes in the rate brackets.  The rate 
  3.19  brackets as adjusted must be rounded to the nearest $10 amount.  
  3.20  If the rate bracket ends in $5, it must be rounded up to the 
  3.21  nearest $10 amount.  
  3.22     (b) The commissioner shall adjust the rate brackets and by 
  3.23  the percentage determined pursuant to the provisions of section 
  3.24  1(f) of the Internal Revenue Code, except that in section 
  3.25  1(f)(3)(B) the word ~~"1990"~~ "1998" shall be substituted for the 
  3.26  word "~~1987~~ 1992."  For ~~1991~~ 1999, the commissioner shall then 
  3.27  determine the percent change from the 12 months ending on August 
  3.28  31, ~~1990~~ 1998, to the 12 months ending on August 31, ~~1991~~ 1999, 
  3.29  and in each subsequent year, from the 12 months ending on August 
  3.30  31, ~~1990~~ 1998, to the 12 months ending on August 31 of the year 
  3.31  preceding the taxable year.  The determination of the 
  3.32  commissioner pursuant to this subdivision shall not be 
  3.33  considered a "rule" and shall not be subject to the 
  3.34  administrative procedure act contained in chapter 14.  
  3.35     No later than December 15 of each year, the commissioner 
  3.36  shall announce the specific percentage that will be used to 
  4.1   adjust the tax rate brackets. 
  4.2      Sec. 3.  Minnesota Statutes 1996, section 290.091, 
  4.3   subdivision 3, is amended to read: 
  4.4      Subd. 3.  [EXEMPTION AMOUNT.] (a) For purposes of computing 
  4.5   the alternative minimum tax, the initial exemption amount ~~is the~~ 
  4.6   ~~exemption determined under section 55(d) of the Internal Revenue~~ 
  4.7   ~~Code, as amended through December 31, 1992, except that~~ 
  4.8   ~~alternative minimum taxable income as determined under this~~ 
  4.9   ~~section must be substituted in the computation of the phase out~~ 
  4.10  ~~under section 55(d)(3).~~ equals the following amounts: 
  4.11     (1) for an individual who is not a married individual and 
  4.12  is not a surviving spouse, $30,000; 
  4.13     (2) for a married individual filing a separate return or an 
  4.14  estate or a trust, one-half of the amount determined under 
  4.15  clause (3) for joint returns; 
  4.16     (3) for an individual filing a joint return or a surviving 
  4.17  spouse, $60,000. 
  4.18     (b) The exemption amount is determined by reducing the 
  4.19  initial exemption amount, as determined under paragraph (a), by 
  4.20  25 percent of the amount of alternative minimum taxable income 
  4.21  of the taxpayer that exceeds: 
  4.22     (1) for an individual who is not a married individual and 
  4.23  is not a surviving spouse, $112,500; 
  4.24     (2) for a married individual filing a separate return or an 
  4.25  estate or a trust, one-half of the amount determined under 
  4.26  clause (3); 
  4.27     (3) for an individual filing a joint return or a surviving 
  4.28  spouse, $225,000. 
  4.29     Sec. 4.  [EFFECTIVE DATE.] 
  4.30     Sections 1 to 3 are effective for taxable years beginning 
  4.31  after December 31, 1997.