Minnesota 2025-2026 Regular Session

Minnesota House Bill HF1384 Compare Versions

Only one version of the bill is available at this time.

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1	1	1.1 A bill for an act
2	2	1.2 relating to taxation; individual income; expanding the dependent care credit;
3	3	1.3 establishing the Great Start child care credit; amending Minnesota Statutes 2024,
4	4	1.4 sections 290.0131, by adding a subdivision; 290.067, subdivisions 1, 2b, by adding
5	5	1.5 subdivisions.
6	6	1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
7	7	1.7 Section 1. Minnesota Statutes 2024, section 290.0131, is amended by adding a subdivision
8	8	1.8to read:
9	9	1.9 Subd. 21.Dependent flexible spending accounts.For a taxpayer who claims the credit
10	10	1.10under section 290.067, or for a married taxpayer filing a separate return whose spouse claims
11	11	1.11the credit under that section, the amount of dependent care assistance that is excluded from
12	12	1.12gross income under section 129 of the Internal Revenue Code is an addition.
13	13	1.13 EFFECTIVE DATE.This section is effective for taxable years beginning after December
14	14	1.1431, 2024.
15	15	1.15 Sec. 2. Minnesota Statutes 2024, section 290.067, subdivision 1, is amended to read:
16	16	1.16 Subdivision 1.Amount of credit.(a) A taxpayer may take as a credit against the tax
17	17	1.17due from the taxpayer and a spouse, if any, under this chapter an amount equal to the
18	18	1.18dependent care credit for which the taxpayer is eligible pursuant to the provisions of section
19	19	1.1921 of the Internal Revenue Code except that in determining whether the child qualified as
20	20	1.20a dependent, income received as a Minnesota family investment program grant or allowance
21	21	1.21to or on behalf of the child must not be taken into account in determining whether the child
22	22	1.22received more than half of the child's support from the taxpayer the taxpayer's eligible
23	23	1Sec. 2.
24	24	REVISOR EAP/DG 25-0256401/31/25
25	25	State of Minnesota
26	26	This Document can be made available
27	27	in alternative formats upon request
28	28	HOUSE OF REPRESENTATIVES
29	29	H. F. No. 1384
30	30	NINETY-FOURTH SESSION 2.1dependent care expenses, as determined under subdivisions 1a and 1b, multiplied by the
31	31	2.2taxpayer's credit percentage, as determined under subdivision 1c.
32	32	2.3 (b) If a child who has not attained the age of six years at the close of the taxable year is
33	33	2.4cared for at a licensed family day care home operated by the child's parent, the taxpayer is
34	34	2.5deemed to have paid employment-related expenses. If the child is 16 months old or younger
35	35	2.6at the close of the taxable year, the amount of expenses deemed to have been paid equals
36	36	2.7the maximum limit for one qualifying individual under section 21(c) and (d) of the Internal
37	37	2.8Revenue Code. If the child is older than 16 months of age but has not attained the age of
38	38	2.9six years at the close of the taxable year, the amount of expenses deemed to have been paid
39	39	2.10equals the amount the licensee would charge for the care of a child of the same age for the
40	40	2.11same number of hours of care.
41	41	2.12 (c) If a taxpayer:
42	42	2.13 (1) has a child who has not attained the age of one year at the close of the taxable year;
43	43	2.14and
44	44	2.15 (2) does not participate in a dependent care assistance program as defined in section 129
45	45	2.16of the Internal Revenue Code, in lieu of the actual employment related expenses paid for
46	46	2.17that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of (i)
47	47	2.18the earned income of the taxpayer or (ii) the amount of the maximum limit for one qualifying
48	48	2.19individual under section 21(c) and (d) of the Internal Revenue Code will be deemed to be
49	49	2.20the employment related expense paid for that child. The earned income limitation of section
50	50	2.2121(d) of the Internal Revenue Code shall not apply to this deemed amount. These deemed
51	51	2.22amounts apply regardless of whether any employment-related expenses have been paid.
52	52	2.23 (d) If the taxpayer is not required and does not file a federal individual income tax return
53	53	2.24for the tax year, no credit is allowed for any amount paid to any person unless:
54	54	2.25 (1) the name, address, and taxpayer identification number of the person are included on
55	55	2.26the return claiming the credit; or
56	56	2.27 (2) if the person is an organization described in section 501(c)(3) of the Internal Revenue
57	57	2.28Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name
58	58	2.29and address of the person are included on the return claiming the credit.
59	59	2.30In the case of a failure to provide the information required under the preceding sentence,
60	60	2.31the preceding sentence does not apply if it is shown that the taxpayer exercised due diligence
61	61	2.32in attempting to provide the information required.
62	62	2Sec. 2.
63	63	REVISOR EAP/DG 25-0256401/31/25 3.1 (e) (b) In the case of a nonresident or part-year resident, the credit determined under
64	64	3.2section 21 of the Internal Revenue Code this section must be allocated based on the ratio
65	65	3.3by which the earned income of the claimant and the claimant's spouse from Minnesota
66	66	3.4sources bears to the total earned income of the claimant and the claimant's spouse using the
67	67	3.5percentage calculated in section 290.06, subdivision 2c, paragraph (e).
68	68	3.6 (f) For residents of Minnesota, the subtractions for military pay under section 290.0132,
69	69	3.7subdivisions 11 and 12, are not considered "earned income not subject to tax under this
70	70	3.8chapter."
71	71	3.9 (g) For residents of Minnesota, the exclusion of combat pay under section 112 of the
72	72	3.10Internal Revenue Code is not considered "earned income not subject to tax under this
73	73	3.11chapter."
74	74	3.12 (h) For taxpayers with federal adjusted gross income in excess of $52,230, the credit is
75	75	3.13equal to the lesser of the credit otherwise calculated under this subdivision, or the amount
76	76	3.14equal to $600 minus five percent of federal adjusted gross income in excess of $52,230 for
77	77	3.15taxpayers with one qualifying individual, or $1,200 minus five percent of federal adjusted
78	78	3.16gross income in excess of $52,230 for taxpayers with two or more qualifying individuals,
79	79	3.17but in no case is the credit less than zero.
80	80	3.18 (c) For the purposes of this section, the following terms have the meanings given:
81	81	3.19 (1) "employment-related expenses" has the meaning given in section 21(b)(2) of the
82	82	3.20Internal Revenue Code;
83	83	3.21 (2) "qualifying individual" has the meaning given in section 21(b)(1) of the Internal
84	84	3.22Revenue Code, except that in determining whether the child qualified as a dependent, income
85	85	3.23received as a Minnesota family investment program grant or allowance to or on behalf of
86	86	3.24the child must not be taken into account in determining whether the child received more
87	87	3.25than half of the child's support from the taxpayer; and
88	88	3.26 (3) "young child" means a qualifying individual who had not attained the age of five by
89	89	3.27December 31 of the taxable year.
90	90	3.28 EFFECTIVE DATE.This section is effective for taxable years beginning after December
91	91	3.2931, 2024.
92	92	3Sec. 2.
93	93	REVISOR EAP/DG 25-0256401/31/25 4.1 Sec. 3. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision to
94	94	4.2read:
95	95	4.3 Subd. 1a.Eligible dependent care expenses.(a) A taxpayer's eligible dependent care
96	96	4.4expenses equals the amount of employment-related expenses incurred by the taxable year,
97	97	4.5subject to the limitations in paragraphs (b) and (c).
98	98	4.6 (b) Except as provided in subdivision 1b, a taxpayer's eligible dependent care expenses
99	99	4.7are limited to:
100	100	4.8 (1) $3,000 if there was one qualifying individual with respect to the taxpayer; or
101	101	4.9 (2) $6,000 if there were two or more qualifying individuals with respect to the taxpayer.
102	102	4.10 EFFECTIVE DATE.This section is effective for taxable years beginning after December
103	103	4.1131, 2024.
104	104	4.12 Sec. 4. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision to
105	105	4.13read:
106	106	4.14 Subd. 1b.Eligible expenses for taxpayers with young children.For a taxpayer with
107	107	4.15a young child, the limit in paragraph (b) is increased as follows:
108	108	4.16 (1) for a taxpayer with one young child with respect to the taxpayer, the limit is increased
109	109	4.17by $7,000;
110	110	4.18 (2) for a taxpayer with two young children with respect to the taxpayer, the limit is
111	111	4.19increased by $14,000; and
112	112	4.20 (3) for a taxpayer with three or more young children with respect to the taxpayer, the
113	113	4.21limit is increased by $19,000.
114	114	4.22 EFFECTIVE DATE.This section is effective for taxable years beginning after December
115	115	4.2331, 2024.
116	116	4.24 Sec. 5. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision to
117	117	4.25read:
118	118	4.26 Subd. 1c.Credit percentage.(a) The credit percentage equals 50 percent, subject to
119	119	4.27the reductions in paragraphs (b) and (c).
120	120	4.28 (b) A taxpayer's credit percentage is reduced by one percentage point for each $2,000,
121	121	4.29or fraction thereof, by which the taxpayer's adjusted gross income exceeds $125,000, until
122	122	4.30the credit percentage equals 20 percent.
123	123	4Sec. 5.
124	124	REVISOR EAP/DG 25-0256401/31/25 5.1 (c) For a taxpayer with adjusted gross income in excess of $400,000, the credit percentage
125	125	5.2equals 20 percent, reduced by two percentage points for each $2,000, or fraction thereof,
126	126	5.3by which the taxpayer's adjusted gross income exceeds $400,000.
127	127	5.4 (d) For a married taxpayer filing a separate return, the credit percentage must be calculated
128	128	5.5under paragraphs (a), (b), and (c), except the adjusted gross income thresholds are one-half
129	129	5.6the amounts for other filers, as adjusted for inflation under subdivision 2b.
130	130	5.7 EFFECTIVE DATE.This section is effective for taxable years beginning after December
131	131	5.831, 2024.
132	132	5.9 Sec. 6. Minnesota Statutes 2024, section 290.067, subdivision 2b, is amended to read:
133	133	5.10 Subd. 2b.Inflation adjustment.The commissioner shall annually adjust the dollar
134	134	5.11amount of the income threshold at which the maximum credit percentage begins to be
135	135	5.12reduced under subdivision 1 1c as provided in section 270C.22. The statutory year is taxable
136	136	5.13year 2019 2025.
137	137	5.14 EFFECTIVE DATE.This section is effective for taxable years beginning after December
138	138	5.1531, 2025.
139	139	5.16 Sec. 7. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision to
140	140	5.17read:
141	141	5.18 Subd. 2c.Deemed expenses.(a) If a child who has not attained the age of six years at
142	142	5.19the close of the taxable year is cared for at a licensed family day care home operated by the
143	143	5.20child's parent, the taxpayer is deemed to have paid employment-related expenses. The
144	144	5.21amount of expenses deemed to have been paid equals the amount the licensee would charge
145	145	5.22for the care of a child of the same age for the same number of hours of care.
146	146	5.23 (b) A married couple may use a deemed employment expenses amount for a child as
147	147	5.24calculated under paragraph (c) in lieu of the actual employment-related expenses paid for
148	148	5.25that child or the deemed employment-related expenses under paragraph (a) if the married
149	149	5.26couple:
150	150	5.27 (1) has a child who has not attained the age of one year at the close of the taxable year;
151	151	5.28and
152	152	5.29 (2) does not participate in a dependent care assistance program as defined in section 129
153	153	5.30of the Internal Revenue Code.
154	154	5Sec. 7.
155	155	REVISOR EAP/DG 25-0256401/31/25 6.1 (c) A married couple's deemed employment-related expenses amount under paragraph
156	156	6.2(b) equals the lesser of:
157	157	6.3 (1) the combined earned income of the couple; or
158	158	6.4 (2) the amount of the maximum limit for one qualified individual under subdivision 1a,
159	159	6.5as increased by subdivision 1b.
160	160	6.6 (d) The earned income limitation of section 21(d) of the Internal Revenue Code does
161	161	6.7not apply to deemed employment-related expenses under this subdivision. The deemed
162	162	6.8employment-related expenses amount applies regardless of whether any employment-related
163	163	6.9expenses have been paid.
164	164	6.10 EFFECTIVE DATE.This section is effective for taxable years beginning after December
165	165	6.1131, 2024.
166	166	6.12 Sec. 8. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision to
167	167	6.13read:
168	168	6.14 Subd. 2d.Identifying information required.(a) No credit is allowed for any amount
169	169	6.15paid to any person unless:
170	170	6.16 (1) the name, address, and taxpayer identification number of the person are included on
171	171	6.17the return claiming the credit; or
172	172	6.18 (2) if the person is an organization described in section 501(c)(3) of the Internal Revenue
173	173	6.19Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name
174	174	6.20and address of the person are included on the return claiming the credit.
175	175	6.21 (b) The rule in section 21(e)(10) of the Internal Revenue Code applies for the credit
176	176	6.22under this section.
177	177	6.23 EFFECTIVE DATE.This section is effective for taxable years beginning after December
178	178	6.2431, 2024.
179	179	6.25 Sec. 9. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision to
180	180	6.26read:
181	181	6.27 Subd. 7.Employment-related expenses.For the purposes of determining
182	182	6.28employment-related expenses, the provisions of sections 21(d) and 21(e)(6) of the Internal
183	183	6.29Revenue Code apply.
184	184	6.30 EFFECTIVE DATE.This section is effective for taxable years beginning after December
185	185	6.3131, 2024.
186	186	6Sec. 9.
187	187	REVISOR EAP/DG 25-0256401/31/25 7.1 Sec. 10. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision
188	188	7.2to read:
189	189	7.3 Subd. 8.Rules for married couples filing separate returns.A married taxpayer filing
190	190	7.4a separate return may claim the credit under this section, but only one spouse may claim
191	191	7.5the credit.
192	192	7.6 EFFECTIVE DATE.This section is effective for taxable years beginning after December
193	193	7.731, 2024.
194	194	7Sec. 10.
195	195	REVISOR EAP/DG 25-0256401/31/25