290.067 DEPENDENT CARE CREDIT.
Subdivision 1. Amount of credit.
(a) A taxpayer may take as a credit against the tax due
from the taxpayer and a spouse, if any, under this chapter an amount equal to the dependent care
credit for which the taxpayer is eligible pursuant to the provisions of section 21 of the Internal
Revenue Code subject to the limitations provided in subdivision 2 except that in determining
whether the child qualified as a dependent, income received as a Minnesota family investment
program grant or allowance to or on behalf of the child must not be taken into account in
determining whether the child received more than half of the child's support from the taxpayer,
and the provisions of section 32(b)(1)(D) of the Internal Revenue Code do not apply.
(b) If a child who has not attained the age of six years at the close of the taxable year is cared
for at a licensed family day care home operated by the child's parent, the taxpayer is deemed to
have paid employment-related expenses. If the child is 16 months old or younger at the close of
the taxable year, the amount of expenses deemed to have been paid equals the maximum limit for
one qualified individual under section 21(c) and (d) of the Internal Revenue Code. If the child is
older than 16 months of age but has not attained the age of six years at the close of the taxable
year, the amount of expenses deemed to have been paid equals the amount the licensee would
charge for the care of a child of the same age for the same number of hours of care.
(c) If a married couple:
(1) has a child who has not attained the age of one year at the close of the taxable year;
(2) files a joint tax return for the taxable year; and
(3) does not participate in a dependent care assistance program as defined in section 129 of
the Internal Revenue Code, in lieu of the actual employment related expenses paid for that child
under paragraph (a) or the deemed amount under paragraph (b), the lesser of (i) the combined
earned income of the couple or (ii) the amount of the maximum limit for one qualified individual
under section 21(c) and (d) of the Internal Revenue Code will be deemed to be the employment
related expense paid for that child. The earned income limitation of section 21(d) of the Internal
Revenue Code shall not apply to this deemed amount. These deemed amounts apply regardless
of whether any employment-related expenses have been paid.
(d) If the taxpayer is not required and does not file a federal individual income tax return for
the tax year, no credit is allowed for any amount paid to any person unless:
(1) the name, address, and taxpayer identification number of the person are included on the
return claiming the credit; or
(2) if the person is an organization described in section 501(c)(3) of the Internal Revenue
Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name and
address of the person are included on the return claiming the credit.
In the case of a failure to provide the information required under the preceding sentence, the
preceding sentence does not apply if it is shown that the taxpayer exercised due diligence in
attempting to provide the information required.
In the case of a nonresident, part-year resident, or a person who has earned income not
subject to tax under this chapter including earned income excluded pursuant to section
, clause (10) or (16), the credit determined under section 21 of the Internal
Revenue Code must be allocated based on the ratio by which the earned income of the claimant
and the claimant's spouse from Minnesota sources bears to the total earned income of the claimant
and the claimant's spouse.
For residents of Minnesota, the subtractions for military pay under section
, clauses (11) and (12), are not considered "earned income not subject to tax
under this chapter."
For residents of Minnesota, the exclusion of combat pay under section 112 of the Internal
Revenue Code is not considered "earned income not subject to tax under this chapter."
Subd. 2. Limitations.
The credit for expenses incurred for the care of each dependent shall
not exceed $720 in any taxable year, and the total credit for all dependents of a claimant shall
not exceed $1,440 in a taxable year. The maximum total credit shall be reduced according to the
amount of the income of the claimant and a spouse, if any, as follows:
income up to $18,040, $720 maximum for one dependent, $1,440 for all dependents;
income over $18,040, the maximum credit for one dependent shall be reduced by $18 for
every $350 of additional income, $36 for all dependents.
The commissioner shall construct and make available to taxpayers tables showing the
amount of the credit at various levels of income and expenses. The tables shall follow the
schedule contained in this subdivision, except that the commissioner may graduate the transitions
between expenses and income brackets.
Subd. 2a. Income.
(a) For purposes of this section, "income" means the sum of the following:
(1) federal adjusted gross income as defined in section 62 of the Internal Revenue Code; and
(2) the sum of the following amounts to the extent not included in clause (1):
(i) all nontaxable income;
(ii) the amount of a passive activity loss that is not disallowed as a result of section 469,
paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity loss
carryover allowed under section 469(b) of the Internal Revenue Code;
(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a solvent
individual excluded from gross income under section 108(g) of the Internal Revenue Code;
(iv) cash public assistance and relief;
(v) any pension or annuity (including railroad retirement benefits, all payments received
under the federal Social Security Act, supplemental security income, and veterans benefits),
which was not exclusively funded by the claimant or spouse, or which was funded exclusively by
the claimant or spouse and which funding payments were excluded from federal adjusted gross
income in the years when the payments were made;
(vi) interest received from the federal or a state government or any instrumentality or
political subdivision thereof;
(vii) workers' compensation;
(viii) nontaxable strike benefits;
(ix) the gross amounts of payments received in the nature of disability income or sick pay as
a result of accident, sickness, or other disability, whether funded through insurance or otherwise;
(x) a lump sum distribution under section 402(e)(3) of the Internal Revenue Code of 1986, as
amended through December 31, 1995;
(xi) contributions made by the claimant to an individual retirement account, including a
qualified voluntary employee contribution; simplified employee pension plan; self-employed
retirement plan; cash or deferred arrangement plan under section 401(k) of the Internal Revenue
Code; or deferred compensation plan under section 457 of the Internal Revenue Code;
(xii) nontaxable scholarship or fellowship grants;
(xiii) the amount of deduction allowed under section 199 of the Internal Revenue Code; and
(xiv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue
In the case of an individual who files an income tax return on a fiscal year basis, the term
"federal adjusted gross income" means federal adjusted gross income reflected in the fiscal year
ending in the next calendar year. Federal adjusted gross income may not be reduced by the amount
of a net operating loss carryback or carryforward or a capital loss carryback or carryforward
allowed for the year.
(b) "Income" does not include:
(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;
(2) amounts of any pension or annuity that were exclusively funded by the claimant or
spouse if the funding payments were not excluded from federal adjusted gross income in the
years when the payments were made;
(3) surplus food or other relief in kind supplied by a governmental agency;
(4) relief granted under chapter 290A;
(5) child support payments received under a temporary or final decree of dissolution or
legal separation; and
(6) restitution payments received by eligible individuals and excludable interest as defined
in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law
Subd. 2b. Inflation adjustment.
The dollar amount of the income threshold at which the
maximum credit begins to be reduced under subdivision 2 must be adjusted for inflation. The
commissioner shall make the inflation adjustments in accordance with section 1(f) of the Internal
Revenue Code except that for the purposes of this subdivision the percentage increase must be
determined from the year starting September 1, 1999, and ending August 31, 2000, as the base year
for adjusting for inflation for the tax year beginning after December 31, 2000. The determination
of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.
Subd. 3. Credit to be refundable.
If the amount of credit which a claimant would be eligible
to receive pursuant to this subdivision exceeds the claimant's tax liability under chapter 290, the
excess amount of the credit shall be refunded to the claimant by the commissioner of revenue.
Subd. 4. Right to file claim.
The right to file a claim under this section shall be personal to the
claimant and shall not survive death, but such right may be exercised on behalf of a claimant by
the claimant's legal guardian or attorney-in-fact. When a claimant dies after having filed a timely
claim the amount thereof shall be disbursed to another member of the household as determined by
the commissioner of revenue. If the claimant was the only member of a household, the claim may
be paid to the claimant's personal representative, but if neither is appointed and qualified within
two years of the filing of the claim, the amount of the claim shall escheat to the state.
Subd. 5.[Repealed, 1990 c 480 art 1 s 45
Subd. 6.[Repealed, 1994 c 587 art 1 s 25
History: 1977 c 423 art 7 s 1,2; 1979 c 303 art 1 s 11; 1980 c 607 art 1 s 11,12; 1981 c
343 s 4; 1Sp1981 c 2 s 22; 1982 c 523 art 40 s 3,14; 1983 c 342 art 1 s 12,13; 1984 c 514 art 2
s 15,16; 1Sp1985 c 14 art 21 s 4,49; 1986 c 444; 1Sp1986 c 1 art 1 s 9; art 3 s 3; 1987 c 268
art 1 s 35-38; 1988 c 719 art 1 s 9; art 3 s 12; 1989 c 28 s 12,25; 1Sp1989 c 1 art 10 s 17,18;
1990 c 604 art 2 s 16; 1991 c 291 art 6 s 25,26,46; 1992 c 511 art 6 s 19; 1994 c 587 art 1 s
13; 1995 c 1 s 4; 1995 c 264 art 10 s 8; 1997 c 231 art 5 s 6; 1998 c 389 art 7 s 7; 1999 c 159
s 127; 1Sp2001 c 5 art 7 s 36,37; 2002 c 377 art 2 s 9; art 10 s 11; 1Sp2003 c 21 art 1 s 7;
1Sp2005 c 3 art 3 s 8; art 4 s 11,12; art 10 s 6
NOTE: The amendment to subdivision 1 by Laws 2005, First Special Session chapter 3,
article 10, section 6, is effective for tax years beginning after December 31, 2006. Laws 2005,
First Special Session chapter 3, article 10, section 6, the effective date.