1.1 	A bill for an act
1.2 	relating to taxation; property tax refund; allowing for a dependent exemption from 
1.3 	household income;amending Minnesota Statutes 2016, section 290A.04, 
1.4 	subdivision 4; Minnesota Statutes 2017 Supplement, section 290A.03, subdivisions 
1.5 	3, 15.
1.6 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.7 	Section 1. Minnesota Statutes 2017 Supplement, section 290A.03, subdivision 3, is 
1.8 	amended to read:
1.9 		Subd. 3.Income. (a) "Income" means the sum of the following:
1.10 	(1) federal adjusted gross income as defined in the Internal Revenue Code; and
1.11 	(2) the sum of the following amounts to the extent not included in clause (1):
1.12 	(i) all nontaxable income;
1.13 	(ii) the amount of a passive activity loss that is not disallowed as a result of section 469, 
1.14 	paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity loss 
1.15 	carryover allowed under section 469(b) of the Internal Revenue Code;
1.16 	(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a 
1.17 	solvent individual excluded from gross income under section 108(g) of the Internal Revenue 
1.18 	Code;
1.19 	(iv) cash public assistance and relief;
1.20 	(v) any pension or annuity (including railroad retirement benefits, all payments received 
1.21 	under the federal Social Security Act, Supplemental Security Income, and veterans benefits), 
1.22 	which was not exclusively funded by the claimant or spouse, or which was funded exclusively 
2.1 	by the claimant or spouse and which funding payments were excluded from federal adjusted 
2.2 	gross income in the years when the payments were made;
2.3 	(vi) interest received from the federal or a state government or any instrumentality or 
2.4 	political subdivision thereof;
2.5 	(vii) workers' compensation;
2.6 	(viii) nontaxable strike benefits;
2.7 	(ix) the gross amounts of payments received in the nature of disability income or sick 
2.8 	pay as a result of accident, sickness, or other disability, whether funded through insurance 
2.9 	or otherwise;
2.10 	(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 
2.11 	1986, as amended through December 31, 1995;
2.12 	(xi) contributions made by the claimant to an individual retirement account, including 
2.13 	a qualified voluntary employee contribution; simplified employee pension plan; 
2.14 	self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of 
2.15 	the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal 
2.16 	Revenue Code, to the extent the sum of amounts exceeds the retirement base amount for 
2.17 	the claimant and spouse;
2.18 	(xii) to the extent not included in federal adjusted gross income, distributions received 
2.19 	by the claimant or spouse from a traditional or Roth style retirement account or plan;
2.20 	(xiii) nontaxable scholarship or fellowship grants;
2.21 	(xiv) the amount of deduction allowed under section 199 of the Internal Revenue Code;
2.22 	(xv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue 
2.23 	Code;
2.24 	(xvi) the amount deducted for tuition expenses under section 222 of the Internal Revenue 
2.25 	Code; and
2.26 	(xvii) the amount deducted for certain expenses of elementary and secondary school 
2.27 	teachers under section 62(a)(2)(D) of the Internal Revenue Code.
2.28 	In the case of an individual who files an income tax return on a fiscal year basis, the 
2.29 	term "federal adjusted gross income" shall mean federal adjusted gross income reflected in 
2.30 	the fiscal year ending in the calendar year. Federal adjusted gross income shall not be reduced 
2.31 	by the amount of a net operating loss carryback or carryforward or a capital loss carryback 
2.32 	or carryforward allowed for the year.
3.1 	(b) "Income" does not include:
3.2 	(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;
3.3 	(2) amounts of any pension or annuity which was exclusively funded by the claimant 
3.4 	or spouse and which funding payments were not excluded from federal adjusted gross 
3.5 	income in the years when the payments were made;
3.6 	(3) to the extent included in federal adjusted gross income, amounts contributed by the 
3.7 	claimant or spouse to a traditional or Roth style retirement account or plan, but not to exceed 
3.8 	the retirement base amount reduced by the amount of contributions excluded from federal 
3.9 	adjusted gross income, but not less than zero;
3.10 	(4) surplus food or other relief in kind supplied by a governmental agency;
3.11 	(5) relief granted under this chapter;
3.12 	(6) child support payments received under a temporary or final decree of dissolution or 
3.13 	legal separation; or
3.14 	(7) restitution payments received by eligible individuals and excludable interest as 
3.15 	defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001, 
3.16 	Public Law 107-16.
3.17 	(c) The sum of the following amounts may be subtracted from income:
3.18 	(1) for the claimant's first dependent, ~~the exemption amount multiplied by 1.4~~ $5,810;
3.19 	(2) for the claimant's second dependent, ~~the exemption amount multiplied by 1.3~~ $5,395;
3.20 	(3) for the claimant's third dependent, ~~the exemption amount multiplied by 1.2~~ $4,980;
3.21 	(4) for the claimant's fourth dependent, ~~the exemption amount multiplied by 1.1~~ $4,565;
3.22 	(5) for the claimant's fifth dependent, ~~the exemption amount~~ $4,150; and
3.23 	(6) if the claimant or claimant's spouse was disabled or attained the age of 65 on or 
3.24 	before December 31 of the year for which the taxes were levied or rent paid, ~~the exemption~~ 
3.25 	~~amount~~ $4,150.
3.26 	(d) For purposes of this subdivision, the ~~"exemption amount" means the exemption~~ 
3.27 	~~amount under section 151(d) of the Internal Revenue Code for the taxable year for which~~ 
3.28 	~~the income is reported;~~ "retirement base amount" means the deductible amount for the 
3.29 	taxable year for the claimant and spouse under section 219(b)(5)(A) of the Internal Revenue 
3.30 	Code, adjusted for inflation as provided in section 219(b)(5)(C) of the Internal Revenue 
3.31 	Code, without regard to whether the claimant or spouse claimed a deduction; and "traditional 
4.1 	or Roth style retirement account or plan" means retirement plans under sections 401, 403, 
4.2 	408, 408A, and 457 of the Internal Revenue Code.
4.3 	(e) Beginning for property tax refunds payable in 2019, the commissioner shall adjust 
4.4 	the subtraction from income amounts in paragraph (c) using the Consumer Price Index for 
4.5 	All Urban Consumers. For 2019, the commissioner shall then determine the percentage 
4.6 	change from the 12 months ending on June 30, 2017, to the 12 months ending on June 30, 
4.7 	2018, and in each subsequent year, from the 12 months ending on June 30, 2017, to the 12 
4.8 	months ending on June 30 of the year preceding the taxable year. The determination of the 
4.9 	commissioner pursuant to this subdivision must not be considered a rule and is not subject 
4.10 	to the Administrative Procedure Act under chapter 14, including section 14.386. The 
4.11 	subtraction from income amounts as adjusted must be rounded to the nearest $5 amount.

4.12 	EFFECTIVE DATE. This section is effective for property tax refunds based on property 
4.13 	taxes payable after December 31, 2017, and rent paid after December 31, 2016.

4.14 	Sec. 2. Minnesota Statutes 2017 Supplement, section 290A.03, subdivision 15, is amended 
4.15 	to read:
4.16 		Subd. 15.Internal Revenue Code.  "Internal Revenue Code" means the Internal Revenue 
4.17 	Code of 1986, as amended through December ~~16, 2016~~ 31, 2017, except as otherwise 
4.18 	provided in subdivision 3, paragraph (d), to calculate the exemption amount.

4.19 	EFFECTIVE DATE. This section is effective for property tax refunds based on property 
4.20 	taxes payable after December 31, 2017, and rent paid after December 31, 2016.

4.21 	Sec. 3. Minnesota Statutes 2016, section 290A.04, subdivision 4, is amended to read:
4.22 		Subd. 4.Inflation adjustment. (a) Beginning for property tax refunds payable in calendar 
4.23 	year 2002, the commissioner shall annually adjust the dollar amounts of the income thresholds 
4.24 	and the maximum refunds under subdivisions 2 and 2a for inflation. The commissioner 
4.25 	shall make the inflation adjustments ~~in accordance with section 1(f) of the Internal Revenue~~ 
4.26 	~~Code~~ using the Consumer Price Index for All Urban Consumers, except that for purposes 
4.27 	of this subdivision the percentage increase shall be determined as provided in this subdivision.
4.28 	(b) In adjusting the dollar amounts of the income thresholds and the maximum refunds 
4.29 	under subdivision 2 for inflation, the percentage increase shall be determined from the year 
4.30 	ending on June 30, 2013, to the year ending on June 30 of the year preceding that in which 
4.31 	the refund is payable.
5.1 	(c) In adjusting the dollar amounts of the income thresholds and the maximum refunds 
5.2 	under subdivision 2a for inflation, the percentage increase shall be determined from the 
5.3 	year ending on June 30, 2013, to the year ending on June 30 of the year preceding that in 
5.4 	which the refund is payable.
5.5 	(d) The commissioner shall use the appropriate percentage increase to annually adjust 
5.6 	the income thresholds and maximum refunds under subdivisions 2 and 2a for inflation 
5.7 	without regard to whether or not the income tax brackets are adjusted for inflation in that 
5.8 	year. The commissioner shall round the thresholds and the maximum amounts, as adjusted 
5.9 	to the nearest $10 amount. If the amount ends in $5, the commissioner shall round it up to 
5.10 	the next $10 amount.
5.11 	(e) The commissioner shall annually announce the adjusted refund schedule at the same 
5.12 	time provided under section 290.06. The determination of the commissioner under this 
5.13 	subdivision is not a rule under the Administrative Procedure Act.