1.1                          A bill for an act
  1.2             relating to income taxation; expanding the dependent 
  1.3             care credit; amending Minnesota Statutes 1996, section 
  1.4             290.067, subdivision 2; Minnesota Statutes 1997 
  1.5             Supplement, section 290.067, subdivision 1. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  Minnesota Statutes 1997 Supplement, section 
  1.8   290.067, subdivision 1, is amended to read: 
  1.9      Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer ~~may take~~ 
  1.10  ~~as a credit against the tax due from the taxpayer and a spouse,~~ 
  1.11  ~~if any, under this chapter an amount equal to the dependent care~~ 
  1.12  ~~credit for which the taxpayer is eligible pursuant to~~ who has 
  1.13  expenses related to the care of dependents may claim a credit 
  1.14  against the tax due under this chapter.  To receive a credit, a 
  1.15  taxpayer must be eligible for a dependent care credit under the 
  1.16  provisions of section 21 of the Internal Revenue Code ~~subject to~~ 
  1.17  ~~the limitations provided in subdivision 2~~ except that in 
  1.18  determining whether the child qualified as a dependent, income 
  1.19  received as an aid to families with dependent children grant or 
  1.20  allowance to or on behalf of the child, or as a grant or 
  1.21  allowance to or on behalf of the child under the successor 
  1.22  program pursuant to Public Law 104-193, must not be taken into 
  1.23  account in determining whether the child received more than half 
  1.24  of the child's support from the taxpayer, and the provisions of 
  1.25  section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
  2.1      (b) The maximum credit for one dependent shall equal 30 
  2.2   percent of employment-related expenses up to $4,800.  The 
  2.3   maximum credit for two or more dependents shall equal 30 percent 
  2.4   of employment-related expenses up to $9,600.  The credit is 
  2.5   subject to the limitations provided in subdivision 2.  For 
  2.6   purposes of this subdivision, "employment-related expenses" 
  2.7   means employment-related expenses as defined in section 21 of 
  2.8   the Internal Revenue Code.  
  2.9      (c) If a child who has not attained the age of six years at 
  2.10  the close of the taxable year is cared for at a licensed family 
  2.11  day care home operated by the child's parent, the taxpayer is 
  2.12  deemed to have paid employment-related expenses.  If the child 
  2.13  is 16 months old or younger at the close of the taxable year, 
  2.14  the amount of expenses deemed to have been paid equals the 
  2.15  maximum limit for one qualified individual under section 21(c) 
  2.16  and (d) of the Internal Revenue Code.  If the child is older 
  2.17  than 16 months of age but has not attained the age of six years 
  2.18  at the close of the taxable year, the amount of expenses deemed 
  2.19  to have been paid equals the amount the licensee would charge 
  2.20  for the care of a child of the same age for the same number of 
  2.21  hours of care.  
  2.22     ~~(c)~~ (d) If a married couple: 
  2.23     (1) has a child who has not attained the age of one year at 
  2.24  the close of the taxable year; 
  2.25     (2) files a joint tax return for the taxable year; and 
  2.26     (3) does not participate in a dependent care assistance 
  2.27  program as defined in section 129 of the Internal Revenue Code, 
  2.28  in lieu of the actual employment related expenses paid for that 
  2.29  child under paragraph ~~(a)~~ (b) or the deemed amount under 
  2.30  paragraph ~~(b)~~ (c), the lesser of (i) the combined earned income 
  2.31  of the couple or (ii) $2,400 will be deemed to be the employment 
  2.32  related expense paid for that child.  The earned income 
  2.33  limitation of section 21(d) of the Internal Revenue Code shall 
  2.34  not apply to this deemed amount.  These deemed amounts apply 
  2.35  regardless of whether any employment-related expenses have been 
  2.36  paid.  
  3.1      ~~(d)~~ (e) If the taxpayer is not required and does not file a 
  3.2   federal individual income tax return for the tax year, no credit 
  3.3   is allowed for any amount paid to any person unless: 
  3.4      (1) the name, address, and taxpayer identification number 
  3.5   of the person are included on the return claiming the credit; or 
  3.6      (2) if the person is an organization described in section 
  3.7   501(c)(3) of the Internal Revenue Code and exempt from tax under 
  3.8   section 501(a) of the Internal Revenue Code, the name and 
  3.9   address of the person are included on the return claiming the 
  3.10  credit.  
  3.11  In the case of a failure to provide the information required 
  3.12  under the preceding sentence, the preceding sentence does not 
  3.13  apply if it is shown that the taxpayer exercised due diligence 
  3.14  in attempting to provide the information required. 
  3.15     In the case of a nonresident, part-year resident, or a 
  3.16  person who has earned income not subject to tax under this 
  3.17  chapter, the credit determined under section 21 of the Internal 
  3.18  Revenue Code must be allocated based on the ratio by which the 
  3.19  earned income of the claimant and the claimant's spouse from 
  3.20  Minnesota sources bears to the total earned income of the 
  3.21  claimant and the claimant's spouse. 
  3.22     Sec. 2.  Minnesota Statutes 1996, section 290.067, 
  3.23  subdivision 2, is amended to read: 
  3.24     Subd. 2.  [LIMITATIONS.] The credit for expenses incurred 
  3.25  for the care of each dependent shall not exceed ~~$720~~ $1,440 in 
  3.26  any taxable year, and the total credit for all dependents of a 
  3.27  claimant shall not exceed ~~$1,440~~ $2,880 in a taxable year.  The 
  3.28  maximum total credit shall be reduced according to the amount of 
  3.29  the income of the claimant and a spouse, if any, as follows:  
  3.30     income up to ~~$13,350~~ $17,430, ~~$720~~ $1,440 maximum for one 
  3.31  dependent, ~~$1,440~~ $2,880 for all dependents; 
  3.32     income over ~~$13,350~~ $17,430, the maximum credit for one 
  3.33  dependent shall be reduced by ~~$18~~ $36 for every $350 of 
  3.34  additional income, ~~$36~~ $72 for all dependents. 
  3.35     The commissioner shall construct and make available to 
  3.36  taxpayers tables showing the amount of the credit at various 
  4.1   levels of income and expenses.  The tables shall follow the 
  4.2   schedule contained in this subdivision, except that the 
  4.3   commissioner may graduate the transitions between expenses and 
  4.4   income brackets. 
  4.5      Sec. 3.  [EFFECTIVE DATE.] 
  4.6      Sections 1 and 2 are effective for tax years beginning 
  4.7   after December 31, 1997.