Bill Text: MN HF1773 | 2013-2014 | 88th Legislature | Introduced
Bill Title: Individual income tax rate 7.05 percent maximum on active trade or business income provided.
Spectrum: Partisan Bill (Republican 7-0)
Status: (Introduced - Dead) 2013-04-15 - Introduction and first reading, referred to Taxes [HF1773 Detail]
Download: Minnesota-2013-HF1773-Introduced.html
1.2relating to taxation; individual income; providing for a maximum rate of 7.05
1.3percent on active trade or business income;amending Minnesota Statutes 2012,
1.4sections 290.06, subdivision 2c; 290.0675, subdivisions 1, 3.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2012, section 290.06, subdivision 2c, is amended to read:
1.7 Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income
1.8taxes imposed by this chapter upon married individuals filing joint returns and surviving
1.9spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
1.10applying to their taxable net income the following schedule of rates:
1.11 (1) On the first $25,680, 5.35 percent;
1.12 (2) On all over $25,680,but not over $102,030, 7.05 percent; and
1.13 (3)On all over $102,030, 7.85 percent By applying the rate of 0.8 percent to the
1.14amount of taxable net income, after subtracting active trade or business income, over
1.15$102,030.
1.16 Married individuals filing separate returns, estates, and trusts must compute their
1.17income tax by applying the above rates to their taxable income, except that the income
1.18brackets will be one-half of the above amounts.
1.19 (b) The income taxes imposed by this chapter upon unmarried individuals must be
1.20computed by applying to taxable net income the following schedule of rates:
1.21 (1) On the first $17,570, 5.35 percent;
1.22 (2) On all over $17,570,but not over $57,710, 7.05 percent; and
1.23 (3)On all over $57,710, 7.85 percent By applying the rate of 0.8 percent to the amount
1.24of taxable net income, after subtracting active trade or business income, over $57,710.
2.1 (c) The income taxes imposed by this chapter upon unmarried individuals qualifying
2.2as a head of household as defined in section 2(b) of the Internal Revenue Code must be
2.3computed by applying to taxable net income the following schedule of rates:
2.4 (1) On the first $21,630, 5.35 percent;
2.5 (2) On all over $21,630,but not over $86,910, 7.05 percent; and
2.6 (3)On all over $86,910, 7.85 percent By applying the rate of 0.8 percent to the amount
2.7of taxable net income, after subtracting active trade or business income, over $86,910.
2.8 (d) In lieu of a tax computed according to the rates set forth in this subdivision, the
2.9tax of any individual taxpayer whose taxable net income for the taxable year is less than
2.10an amount determined by the commissioner must be computed in accordance with tables
2.11prepared and issued by the commissioner of revenue based on income brackets of not
2.12more than $100. The amount of tax for each bracket shall be computed at the rates set
2.13forth in this subdivision, provided that the commissioner may disregard a fractional part of
2.14a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
2.15 (e) An individual who is not a Minnesota resident for the entire year must compute
2.16the individual's Minnesota income tax as provided in this subdivision. After the
2.17application of the nonrefundable credits provided in this chapter, the tax liability must
2.18then be multiplied by a fraction in which:
2.19 (1) the numerator is the individual's Minnesota source federal adjusted gross income
2.20as defined in section 62 of the Internal Revenue Code and increased by the additions
2.21required under section290.01, subdivision 19a , clauses (1), (5), (6), (7), (8), (9), (12),
2.22(13), and (16) to (18), and reduced by the Minnesota assignable portion of the subtraction
2.23for United States government interest under section290.01, subdivision 19b , clause
2.24(1), and the subtractions under section290.01, subdivision 19b , clauses (8), (9), (13),
2.25(14), (16), and (17), after applying the allocation and assignability provisions of section
2.26290.081
, clause (a), or
290.17 ; and
2.27 (2) the denominator is the individual's federal adjusted gross income as defined in
2.28section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
2.29section290.01, subdivision 19a , clauses (1), (5), (6), (7), (8), (9), (12), (13), and (16) to
2.30(18), and reduced by the amounts specified in section290.01, subdivision 19b , clauses (1),
2.31(8), (9), (13), (14), (16), and (17).
2.32(f) For purposes of this subdivision, "active trade or business income" means income
2.33derived in the ordinary course of a trade or business, other than income from:
2.34(1) a trade or business that is a passive activity with respect to the taxpayer, as
2.35defined in section 469 of the Internal Revenue Code; or
3.1(2) a trade or business of trading in financial instruments or commodities, as defined
3.2in section 475(e)(2) of the Internal Revenue Code.
3.3"Active trade or business income" also includes net gain or loss on disposition of certain
3.4active interests in partnerships and S corporations, as defined in section 1411(c)(4) of the
3.5Internal Revenue Code. "Active trade or business income" may not exceed the amount
3.6of such income that is exempt from taxation under section 1411 of the Internal Revenue
3.7Code, disregarding the income threshold amounts in section 1411(b) of the Internal
3.8Revenue Code.
3.9EFFECTIVE DATE.This section is effective for taxable years beginning after
3.10December 31, 2012.
3.11 Sec. 2. Minnesota Statutes 2012, section 290.0675, subdivision 1, is amended to read:
3.12 Subdivision 1. Definitions. (a) For purposes of this section the following terms
3.13have the meanings given.
3.14(b) "Earned income" means the sum of the following, to the extent included in
3.15Minnesota taxable income:
3.16(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
3.17(2) income received from a retirement pension, profit-sharing, stock bonus, or
3.18annuity plan; and
3.19(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue
3.20Code.
3.21(c) "Taxable income" means net income as defined in section290.01, subdivision 19 .
3.22(d) "Earned income of lesser-earning spouse" means the earned income of the
3.23spouse with the lesser amount of earned income as defined in paragraph (b) for the taxable
3.24year minus the sum of (i) the amount for one exemption under section 151(d) of the
3.25Internal Revenue Code and (ii) one-half the amount of the standard deduction under
3.26section 63(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition
3.27required under section290.01, subdivision 19a , clause (21), and one-half of the addition
3.28that would have been required under section290.01, subdivision 19a , clause (21), if the
3.29taxpayer had claimed the standard deduction.
3.30(e) "Active trade or business income" has the meaning given in section 290.06,
3.31subdivision 2c.
3.32EFFECTIVE DATE.This section is effective for taxable years beginning after
3.33December 31, 2012.
4.1 Sec. 3. Minnesota Statutes 2012, section 290.0675, subdivision 3, is amended to read:
4.2 Subd. 3. Credit amount. (a) The credit amount is the difference betweenthe tax
4.3on the couple's joint Minnesota taxable income under the rates and income levels in
4.4section
290.06, subdivision 2c, paragraph (a), as adjusted for the taxable year by section
4.5290.06, subdivision 2d, and the sum of the tax under the rates and income levels of section
4.6290.06, subdivision 2c, paragraph (b), as adjusted for the taxable year by section
290.06,
4.7subdivision 2d
, on the earned income of the lesser-earning spouse, and the tax under the
4.8rates and income levels of section
290.06, subdivision 2c, paragraph (b), as adjusted for
4.9the taxable year by section
290.06, subdivision 2d, on the couple's joint Minnesota taxable
4.10income, minus the earned income of the lesser-earning spouse.:
4.11(1) the tax on the couple's joint Minnesota taxable income under the rates and
4.12income levels in section290.06, subdivision 2c , paragraph (a), as adjusted for the taxable
4.13year by section290.06, subdivision 2d , after subtracting active trade or business income in
4.14calculating the tax under section 290.06, subdivision 2c, paragraph (a), clause (3); and
4.15(2) the sum of:
4.16(i) the tax under the rates and income levels of section290.06, subdivision 2c ,
4.17paragraph (b), as adjusted for the taxable year by section290.06, subdivision 2d , on the
4.18earned income of the lesser-earning spouse, after subtracting any active trade or business
4.19income included in the earned income of the lesser-earning spouse in calculating the tax
4.20under section 290.06, subdivision 2c, paragraph (b), clause (3); and
4.21(ii) the tax under the rates and income levels of section290.06, subdivision 2c ,
4.22paragraph (b), as adjusted for the taxable year by section290.06, subdivision 2d , on the
4.23couple's joint Minnesota taxable income, minus the earned income of the lesser-earning
4.24spouse, after subtracting any active trade or business income not included in the
4.25earned income of the lesser-earning spouse in calculating the tax under section 290.06,
4.26subdivision 2c, paragraph (b), clause (3).
4.27(b) The commissioner of revenue shall prepare and make available to taxpayers a
4.28comprehensive table showing the credit under this section at brackets of earnings of the
4.29lesser-earning spouse and joint taxable income. The brackets of earnings shall not be
4.30more than $2,000.
4.31EFFECTIVE DATE.This section is effective for taxable years beginning after
4.32December 31, 2012.
1.3percent on active trade or business income;amending Minnesota Statutes 2012,
1.4sections 290.06, subdivision 2c; 290.0675, subdivisions 1, 3.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2012, section 290.06, subdivision 2c, is amended to read:
1.7 Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income
1.8taxes imposed by this chapter upon married individuals filing joint returns and surviving
1.9spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
1.10applying to their taxable net income the following schedule of rates:
1.11 (1) On the first $25,680, 5.35 percent;
1.12 (2) On all over $25,680,
1.13 (3)
1.14amount of taxable net income, after subtracting active trade or business income, over
1.15$102,030.
1.16 Married individuals filing separate returns, estates, and trusts must compute their
1.17income tax by applying the above rates to their taxable income, except that the income
1.18brackets will be one-half of the above amounts.
1.19 (b) The income taxes imposed by this chapter upon unmarried individuals must be
1.20computed by applying to taxable net income the following schedule of rates:
1.21 (1) On the first $17,570, 5.35 percent;
1.22 (2) On all over $17,570,
1.23 (3)
1.24of taxable net income, after subtracting active trade or business income, over $57,710.
2.1 (c) The income taxes imposed by this chapter upon unmarried individuals qualifying
2.2as a head of household as defined in section 2(b) of the Internal Revenue Code must be
2.3computed by applying to taxable net income the following schedule of rates:
2.4 (1) On the first $21,630, 5.35 percent;
2.5 (2) On all over $21,630,
2.6 (3)
2.7of taxable net income, after subtracting active trade or business income, over $86,910.
2.8 (d) In lieu of a tax computed according to the rates set forth in this subdivision, the
2.9tax of any individual taxpayer whose taxable net income for the taxable year is less than
2.10an amount determined by the commissioner must be computed in accordance with tables
2.11prepared and issued by the commissioner of revenue based on income brackets of not
2.12more than $100. The amount of tax for each bracket shall be computed at the rates set
2.13forth in this subdivision, provided that the commissioner may disregard a fractional part of
2.14a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
2.15 (e) An individual who is not a Minnesota resident for the entire year must compute
2.16the individual's Minnesota income tax as provided in this subdivision. After the
2.17application of the nonrefundable credits provided in this chapter, the tax liability must
2.18then be multiplied by a fraction in which:
2.19 (1) the numerator is the individual's Minnesota source federal adjusted gross income
2.20as defined in section 62 of the Internal Revenue Code and increased by the additions
2.21required under section
2.22(13), and (16) to (18), and reduced by the Minnesota assignable portion of the subtraction
2.23for United States government interest under section
2.24(1), and the subtractions under section
2.25(14), (16), and (17), after applying the allocation and assignability provisions of section
2.27 (2) the denominator is the individual's federal adjusted gross income as defined in
2.28section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
2.29section
2.30(18), and reduced by the amounts specified in section
2.31(8), (9), (13), (14), (16), and (17).
2.32(f) For purposes of this subdivision, "active trade or business income" means income
2.33derived in the ordinary course of a trade or business, other than income from:
2.34(1) a trade or business that is a passive activity with respect to the taxpayer, as
2.35defined in section 469 of the Internal Revenue Code; or
3.1(2) a trade or business of trading in financial instruments or commodities, as defined
3.2in section 475(e)(2) of the Internal Revenue Code.
3.3"Active trade or business income" also includes net gain or loss on disposition of certain
3.4active interests in partnerships and S corporations, as defined in section 1411(c)(4) of the
3.5Internal Revenue Code. "Active trade or business income" may not exceed the amount
3.6of such income that is exempt from taxation under section 1411 of the Internal Revenue
3.7Code, disregarding the income threshold amounts in section 1411(b) of the Internal
3.8Revenue Code.
3.9EFFECTIVE DATE.This section is effective for taxable years beginning after
3.10December 31, 2012.
3.11 Sec. 2. Minnesota Statutes 2012, section 290.0675, subdivision 1, is amended to read:
3.12 Subdivision 1. Definitions. (a) For purposes of this section the following terms
3.13have the meanings given.
3.14(b) "Earned income" means the sum of the following, to the extent included in
3.15Minnesota taxable income:
3.16(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
3.17(2) income received from a retirement pension, profit-sharing, stock bonus, or
3.18annuity plan; and
3.19(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue
3.20Code.
3.21(c) "Taxable income" means net income as defined in section
3.22(d) "Earned income of lesser-earning spouse" means the earned income of the
3.23spouse with the lesser amount of earned income as defined in paragraph (b) for the taxable
3.24year minus the sum of (i) the amount for one exemption under section 151(d) of the
3.25Internal Revenue Code and (ii) one-half the amount of the standard deduction under
3.26section 63(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition
3.27required under section
3.28that would have been required under section
3.29taxpayer had claimed the standard deduction.
3.30(e) "Active trade or business income" has the meaning given in section 290.06,
3.31subdivision 2c.
3.32EFFECTIVE DATE.This section is effective for taxable years beginning after
3.33December 31, 2012.
4.1 Sec. 3. Minnesota Statutes 2012, section 290.0675, subdivision 3, is amended to read:
4.2 Subd. 3. Credit amount. (a) The credit amount is the difference between
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11(1) the tax on the couple's joint Minnesota taxable income under the rates and
4.12income levels in section
4.13year by section
4.14calculating the tax under section 290.06, subdivision 2c, paragraph (a), clause (3); and
4.15(2) the sum of:
4.16(i) the tax under the rates and income levels of section
4.17paragraph (b), as adjusted for the taxable year by section
4.18earned income of the lesser-earning spouse, after subtracting any active trade or business
4.19income included in the earned income of the lesser-earning spouse in calculating the tax
4.20under section 290.06, subdivision 2c, paragraph (b), clause (3); and
4.21(ii) the tax under the rates and income levels of section
4.22paragraph (b), as adjusted for the taxable year by section
4.23couple's joint Minnesota taxable income, minus the earned income of the lesser-earning
4.24spouse, after subtracting any active trade or business income not included in the
4.25earned income of the lesser-earning spouse in calculating the tax under section 290.06,
4.26subdivision 2c, paragraph (b), clause (3).
4.27(b) The commissioner of revenue shall prepare and make available to taxpayers a
4.28comprehensive table showing the credit under this section at brackets of earnings of the
4.29lesser-earning spouse and joint taxable income. The brackets of earnings shall not be
4.30more than $2,000.
4.31EFFECTIVE DATE.This section is effective for taxable years beginning after
4.32December 31, 2012.
