1.1 	A bill for an act
1.2 	relating to taxation; providing an income tax credit
1.3 	for expenditures for postsecondary tuition and related
1.4 	expenses; appropriating money; amending Minnesota
1.5 	Statutes 2004, section 290.06, by adding a subdivision.
1.6 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.7 	Section 1. Minnesota Statutes 2004, section 290.06, is
1.8 	amended by adding a subdivision to read:
1.9 		Subd. 32.Higher education tuition tax credit. (a) In
1.10 	this subdivision, the following terms have the meanings given in
1.11 	this paragraph.
1.12 	(1) "Eligible student" includes the taxpayer, spouse, or
1.13 	person claimed as a dependent of the taxpayer under section 151
1.14 	of the Internal Revenue Code.  An eligible student must be:
1.15 	(i) a resident of Minnesota;
1.16 	(ii) a graduate of a Minnesota high school or recipient of
1.17 	a Minnesota general education development diploma in 2005 or
1.18 	later; and 
1.19 	(iii) an enrolled full-time student at an eligible
1.20 	Minnesota postsecondary institution.
1.21 	(2) An "eligible institution" has the meaning given in
1.22 	section 136A.101, subdivision 4, provided that the institution
1.23 	has a physical presence in Minnesota.
1.24 	(3) "Qualifying higher education expenses" means tuition
1.25 	and fees actually paid during the taxable year to an eligible
2.1 	institution by a taxpayer on behalf of an eligible student for
2.2 	the student's first two years of postsecondary education,
2.3 	reduced by:
2.4 	(i) refunds of tuition and fees received from the
2.5 	institution; and 
2.6 	(ii) the amount of any Hope Scholarship Credit or Lifetime
2.7 	Learning Credit received with respect to the student under
2.8 	section 25A of the Internal Revenue Code for the same taxable
2.9 	year.
2.10 	(b) An individual is allowed a credit against the tax
2.11 	imposed by this chapter equal to the amount of qualified higher
2.12 	education expenses for an eligible student.  The maximum credit
2.13 	allowed for each eligible student is $500 in each of the first
2.14 	two years of postsecondary education.
2.15 	(c) The amount of the credit otherwise payable under this
2.16 	subdivision must be reduced as follows:
2.17 	(1) for single taxpayers, by ten percent for every $500 by
2.18 	which the taxpayer's federal adjusted gross income exceeds
2.19 	$25,000; and 
2.20 	(2) for married taxpayers, by ten percent for every $1,000
2.21 	by which the taxpayer's federal adjusted gross income exceeds
2.22 	$50,000.
2.23 	(d) If the amount of the credit exceeds the taxpayer's
2.24 	liability under this chapter, the excess is refundable.  The
2.25 	amount necessary to pay the refunds is appropriated annually
2.26 	from the general fund to the commissioner.
2.27 	
EFFECTIVE DATE. This section is effective for taxable
2.28 	years beginning after December 31, 2004.