Bill Text: MN SF1974 | 2013-2014 | 88th Legislature | Introduced
Bill Title: Income tax active trade or business income maximum rate authorization
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2014-02-27 - Referred to Taxes [SF1974 Detail]
Download: Minnesota-2013-SF1974-Introduced.html
1.2relating to taxation; individual income; providing for a maximum rate of 7.85
1.3percent on active trade or business income;amending Minnesota Statutes 2012,
1.4section 290.0675, subdivision 1; Minnesota Statutes 2013 Supplement, section
1.5290.06, subdivisions 2c, 2d.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7 Section 1. Minnesota Statutes 2013 Supplement, section 290.06, subdivision 2c,
1.8is amended to read:
1.9 Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income
1.10taxes imposed by this chapter upon married individuals filing joint returns and surviving
1.11spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
1.12applyingto their taxable net income the following schedule of rates:
1.13 (1) On the first$35,480 $36,080 of their taxable net income, 5.35 percent;
1.14 (2) On all of their taxable net income over$35,480 $36,080, but not over $140,960
1.15 $143,350, 7.05 percent;
1.16 (3) On all of their taxable net income over$140,960, but not over $250,000
1.17 $143,350, 7.85 percent; and
1.18(4)On all over $250,000, 9.85 percent By applying an additional rate of 2.0 percent
1.19to the amount of taxable net income, after excluding active trade or business income,
1.20over $254,240.
1.21 Married individuals filing separate returns, estates, and trusts must compute their
1.22income tax by applying the above rates to their taxable income, except that the income
1.23brackets will be one-half of the above amounts.
1.24 (b) The income taxes imposed by this chapter upon unmarried individuals must be
1.25computed by applyingto taxable net income the following schedule of rates:
2.1 (1) On the first$24,270 $24,680 of their taxable net income, 5.35 percent;
2.2 (2) On all of their taxable net income over$24,270 $24,680, but not over $79,730
2.3 $81,080, 7.05 percent;
2.4 (3) On all of their taxable net income over$79,730, but not over $150,000 $81,080,
2.57.85 percent; and
2.6(4)On all over $150,000, 9.85 percent By applying an additional rate of 2.0 percent
2.7to the amount of taxable net income, after excluding active trade or business income,
2.8over $152,540.
2.9 (c) The income taxes imposed by this chapter upon unmarried individuals qualifying
2.10as a head of household as defined in section 2(b) of the Internal Revenue Code must be
2.11computed by applyingto taxable net income the following schedule of rates:
2.12 (1) On the first$29,880 $30,390 of their taxable net income, 5.35 percent;
2.13 (2) On all of their taxable net income over$29,880 $30,390, but not over $120,070
2.14 $122,110, 7.05 percent;
2.15 (3) On all of their taxable net income over$120,070, but not over $200,000
2.16 $122,110, 7.85 percent; and
2.17(4)On all over $200,000, 9.85 percent By applying an additional rate of 2.0 percent
2.18to the amount of taxable net income, after excluding active trade or business income,
2.19over $200,000.
2.20 (d) In lieu of a tax computed according to the rates set forth in this subdivision, the
2.21tax of any individual taxpayer whose taxable net income for the taxable year is less than
2.22an amount determined by the commissioner must be computed in accordance with tables
2.23prepared and issued by the commissioner of revenue based on income brackets of not
2.24more than $100. The amount of tax for each bracket shall be computed at the rates set
2.25forth in this subdivision, provided that the commissioner may disregard a fractional part of
2.26a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
2.27 (e) An individual who is not a Minnesota resident for the entire year must compute
2.28the individual's Minnesota income tax as provided in this subdivision. After the
2.29application of the nonrefundable credits provided in this chapter, the tax liability must
2.30then be multiplied by a fraction in which:
2.31 (1) the numerator is the individual's Minnesota source federal adjusted gross income
2.32as defined in section 62 of the Internal Revenue Code and increased by the additions
2.33required under section290.01, subdivision 19a , clauses (1), (5), (6), (7), (8), (9), (12),
2.34(13), and (16) to (18), and reduced by the Minnesota assignable portion of the subtraction
2.35for United States government interest under section290.01, subdivision 19b , clause
2.36(1), and the subtractions under section290.01, subdivision 19b , clauses (8), (9), (13),
3.1(14), (16), and (17), after applying the allocation and assignability provisions of section
3.2290.081
, clause (a), or
290.17 ; and
3.3 (2) the denominator is the individual's federal adjusted gross income as defined in
3.4section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
3.5section290.01, subdivision 19a , clauses (1), (5), (6), (7), (8), (9), (12), (13), and (16) to
3.6(18), and reduced by the amounts specified in section290.01, subdivision 19b , clauses (1),
3.7(8), (9), (13), (14), (16), and (17).
3.8(f) For purposes of this subdivision, "active trade or business income" means income
3.9derived in the ordinary course of business and not included in net investment income as
3.10defined in section 1411(c) of the Internal Revenue Code, but including income from
3.11certain active interests in partnerships and S corporations as defined under section
3.121411(c)(4) of the Internal Revenue Code.
3.13EFFECTIVE DATE.This section is effective for taxable years beginning after
3.14December 31, 2013.
3.15 Sec. 2. Minnesota Statutes 2013 Supplement, section 290.06, subdivision 2d, is
3.16amended to read:
3.17 Subd. 2d. Inflation adjustment of brackets. (a) For taxable years beginning after
3.18December 31, 2013, the minimum and maximum dollar amounts for each rate bracket for
3.19which a tax is imposed in subdivision 2c shall be adjusted for inflation by the percentage
3.20determined under paragraph (b). For the purpose of making the adjustment as provided
3.21in this subdivision all of the rate brackets provided in subdivision 2c shall be the rate
3.22brackets as they existed for taxable years beginning after December 31,2012 2013, and
3.23before January 1,2014 2015. The rate applicable to any rate bracket must not be changed.
3.24The dollar amounts setting forth the tax shall be adjusted to reflect the changes in the rate
3.25brackets. The rate brackets as adjusted must be rounded to the nearest $10 amount. If the
3.26rate bracket ends in $5, it must be rounded up to the nearest $10 amount.
3.27(b) The commissioner shall adjust the rate brackets and by the percentage determined
3.28pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in
3.29section 1(f)(3)(B) the word "2012" shall be substituted for the word "1992." For2014
3.30 2015, the commissioner shall then determine the percent change from the 12 months
3.31ending on August 31,2012 2013, to the 12 months ending on August 31, 2013 2014, and
3.32in each subsequent year, from the 12 months ending on August 31,2012 2013, to the 12
3.33months ending on August 31 of the year preceding the taxable year. The determination of
3.34the commissioner pursuant to this subdivision shall not be considered a "rule" and shall
3.35not be subject to the Administrative Procedure Act contained in chapter 14.
4.1No later than December 15 of each year, the commissioner shall announce the
4.2specific percentage that will be used to adjust the tax rate brackets.
4.3EFFECTIVE DATE.This section is effective for taxable years beginning after
4.4December 31, 2013.
4.5 Sec. 3. Minnesota Statutes 2012, section 290.0675, subdivision 1, is amended to read:
4.6 Subdivision 1. Definitions. (a) For purposes of this section the following terms
4.7have the meanings given.
4.8(b) "Earned income" means the sum of the following, to the extent included in
4.9Minnesota taxable income:
4.10(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
4.11(2) income received from a retirement pension, profit-sharing, stock bonus, or
4.12annuity plan; and
4.13(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue
4.14Code.
4.15(c) "Taxable income" means net income as defined in section290.01, subdivision 19 .
4.16(d) "Earned income of lesser-earning spouse" means the earned income of the
4.17spouse with the lesser amount of earned income as defined in paragraph (b) for the taxable
4.18year minus the sum of (i) the amount for one exemption under section 151(d) of the
4.19Internal Revenue Code and (ii) one-half the amount of the standard deduction under
4.20section 63(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition
4.21required under section290.01, subdivision 19a , clause (21), and one-half of the addition
4.22that would have been required under section290.01, subdivision 19a , clause (21), if the
4.23taxpayer had claimed the standard deduction.
4.24(e) "Active trade or business income" has the meaning given in section 290.06,
4.25subdivision 2c.
4.26EFFECTIVE DATE.This section is effective for taxable years beginning after
4.27December 31, 2013.
1.3percent on active trade or business income;amending Minnesota Statutes 2012,
1.4section 290.0675, subdivision 1; Minnesota Statutes 2013 Supplement, section
1.5290.06, subdivisions 2c, 2d.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7 Section 1. Minnesota Statutes 2013 Supplement, section 290.06, subdivision 2c,
1.8is amended to read:
1.9 Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income
1.10taxes imposed by this chapter upon married individuals filing joint returns and surviving
1.11spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
1.12applying
1.13 (1) On the first
1.14 (2) On all of their taxable net income over
1.15 $143,350, 7.05 percent;
1.16 (3) On all of their taxable net income over
1.17 $143,350, 7.85 percent; and
1.18(4)
1.19to the amount of taxable net income, after excluding active trade or business income,
1.20over $254,240.
1.21 Married individuals filing separate returns, estates, and trusts must compute their
1.22income tax by applying the above rates to their taxable income, except that the income
1.23brackets will be one-half of the above amounts.
1.24 (b) The income taxes imposed by this chapter upon unmarried individuals must be
1.25computed by applying
2.1 (1) On the first
2.2 (2) On all of their taxable net income over
2.3 $81,080, 7.05 percent;
2.4 (3) On all of their taxable net income over
2.57.85 percent; and
2.6(4)
2.7to the amount of taxable net income, after excluding active trade or business income,
2.8over $152,540.
2.9 (c) The income taxes imposed by this chapter upon unmarried individuals qualifying
2.10as a head of household as defined in section 2(b) of the Internal Revenue Code must be
2.11computed by applying
2.12 (1) On the first
2.13 (2) On all of their taxable net income over
2.14 $122,110, 7.05 percent;
2.15 (3) On all of their taxable net income over
2.16 $122,110, 7.85 percent; and
2.17(4)
2.18to the amount of taxable net income, after excluding active trade or business income,
2.19over $200,000.
2.20 (d) In lieu of a tax computed according to the rates set forth in this subdivision, the
2.21tax of any individual taxpayer whose taxable net income for the taxable year is less than
2.22an amount determined by the commissioner must be computed in accordance with tables
2.23prepared and issued by the commissioner of revenue based on income brackets of not
2.24more than $100. The amount of tax for each bracket shall be computed at the rates set
2.25forth in this subdivision, provided that the commissioner may disregard a fractional part of
2.26a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
2.27 (e) An individual who is not a Minnesota resident for the entire year must compute
2.28the individual's Minnesota income tax as provided in this subdivision. After the
2.29application of the nonrefundable credits provided in this chapter, the tax liability must
2.30then be multiplied by a fraction in which:
2.31 (1) the numerator is the individual's Minnesota source federal adjusted gross income
2.32as defined in section 62 of the Internal Revenue Code and increased by the additions
2.33required under section
2.34(13), and (16) to (18), and reduced by the Minnesota assignable portion of the subtraction
2.35for United States government interest under section
2.36(1), and the subtractions under section
3.1(14), (16), and (17), after applying the allocation and assignability provisions of section
3.3 (2) the denominator is the individual's federal adjusted gross income as defined in
3.4section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
3.5section
3.6(18), and reduced by the amounts specified in section
3.7(8), (9), (13), (14), (16), and (17).
3.8(f) For purposes of this subdivision, "active trade or business income" means income
3.9derived in the ordinary course of business and not included in net investment income as
3.10defined in section 1411(c) of the Internal Revenue Code, but including income from
3.11certain active interests in partnerships and S corporations as defined under section
3.121411(c)(4) of the Internal Revenue Code.
3.13EFFECTIVE DATE.This section is effective for taxable years beginning after
3.14December 31, 2013.
3.15 Sec. 2. Minnesota Statutes 2013 Supplement, section 290.06, subdivision 2d, is
3.16amended to read:
3.17 Subd. 2d. Inflation adjustment of brackets. (a) For taxable years beginning after
3.18December 31, 2013, the minimum and maximum dollar amounts for each rate bracket for
3.19which a tax is imposed in subdivision 2c shall be adjusted for inflation by the percentage
3.20determined under paragraph (b). For the purpose of making the adjustment as provided
3.21in this subdivision all of the rate brackets provided in subdivision 2c shall be the rate
3.22brackets as they existed for taxable years beginning after December 31,
3.23before January 1,
3.24The dollar amounts setting forth the tax shall be adjusted to reflect the changes in the rate
3.25brackets. The rate brackets as adjusted must be rounded to the nearest $10 amount. If the
3.26rate bracket ends in $5, it must be rounded up to the nearest $10 amount.
3.27(b) The commissioner shall adjust the rate brackets and by the percentage determined
3.28pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in
3.29section 1(f)(3)(B) the word "2012" shall be substituted for the word "1992." For
3.30 2015, the commissioner shall then determine the percent change from the 12 months
3.31ending on August 31,
3.32in each subsequent year, from the 12 months ending on August 31,
3.33months ending on August 31 of the year preceding the taxable year. The determination of
3.34the commissioner pursuant to this subdivision shall not be considered a "rule" and shall
3.35not be subject to the Administrative Procedure Act contained in chapter 14.
4.1No later than December 15 of each year, the commissioner shall announce the
4.2specific percentage that will be used to adjust the tax rate brackets.
4.3EFFECTIVE DATE.This section is effective for taxable years beginning after
4.4December 31, 2013.
4.5 Sec. 3. Minnesota Statutes 2012, section 290.0675, subdivision 1, is amended to read:
4.6 Subdivision 1. Definitions. (a) For purposes of this section the following terms
4.7have the meanings given.
4.8(b) "Earned income" means the sum of the following, to the extent included in
4.9Minnesota taxable income:
4.10(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
4.11(2) income received from a retirement pension, profit-sharing, stock bonus, or
4.12annuity plan; and
4.13(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue
4.14Code.
4.15(c) "Taxable income" means net income as defined in section
4.16(d) "Earned income of lesser-earning spouse" means the earned income of the
4.17spouse with the lesser amount of earned income as defined in paragraph (b) for the taxable
4.18year minus the sum of (i) the amount for one exemption under section 151(d) of the
4.19Internal Revenue Code and (ii) one-half the amount of the standard deduction under
4.20section 63(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition
4.21required under section
4.22that would have been required under section
4.23taxpayer had claimed the standard deduction.
4.24(e) "Active trade or business income" has the meaning given in section 290.06,
4.25subdivision 2c.
4.26EFFECTIVE DATE.This section is effective for taxable years beginning after
4.27December 31, 2013.
