1.1 A bill for an act
1.2 relating to taxation; individual income; expanding the dependent care credit;
1.3 establishing the Great Start child care credit; amending Minnesota Statutes 2024,
1.4 sections 290.0131, by adding a subdivision; 290.067, subdivisions 1, 2b, by adding
1.5 subdivisions.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7 Section 1. Minnesota Statutes 2024, section 290.0131, is amended by adding a subdivision
1.8to read:
1.9 Subd. 21.Dependent flexible spending accounts.For a taxpayer who claims the credit
1.10under section 290.067, or for a married taxpayer filing a separate return whose spouse claims
1.11the credit under that section, the amount of dependent care assistance that is excluded from
1.12gross income under section 129 of the Internal Revenue Code is an addition.
1.13 EFFECTIVE DATE.This section is effective for taxable years beginning after December
1.1431, 2024.
1.15 Sec. 2. Minnesota Statutes 2024, section 290.067, subdivision 1, is amended to read:
1.16 Subdivision 1.Amount of credit.(a) A taxpayer may take as a credit against the tax
1.17due from the taxpayer and a spouse, if any, under this chapter an amount equal to the
1.18dependent care credit for which the taxpayer is eligible pursuant to the provisions of section
1.1921 of the Internal Revenue Code except that in determining whether the child qualified as
1.20a dependent, income received as a Minnesota family investment program grant or allowance
1.21to or on behalf of the child must not be taken into account in determining whether the child
1.22received more than half of the child's support from the taxpayer the taxpayer's eligible
1Sec. 2.
REVISOR EAP/DG 25-0256401/31/25
State of Minnesota
This Document can be made available
in alternative formats upon request
HOUSE OF REPRESENTATIVES
H. F. No. 1384
NINETY-FOURTH SESSION 2.1dependent care expenses, as determined under subdivisions 1a and 1b, multiplied by the
2.2taxpayer's credit percentage, as determined under subdivision 1c.
2.3 (b) If a child who has not attained the age of six years at the close of the taxable year is
2.4cared for at a licensed family day care home operated by the child's parent, the taxpayer is
2.5deemed to have paid employment-related expenses. If the child is 16 months old or younger
2.6at the close of the taxable year, the amount of expenses deemed to have been paid equals
2.7the maximum limit for one qualifying individual under section 21(c) and (d) of the Internal
2.8Revenue Code. If the child is older than 16 months of age but has not attained the age of
2.9six years at the close of the taxable year, the amount of expenses deemed to have been paid
2.10equals the amount the licensee would charge for the care of a child of the same age for the
2.11same number of hours of care.
2.12 (c) If a taxpayer:
2.13 (1) has a child who has not attained the age of one year at the close of the taxable year;
2.14and
2.15 (2) does not participate in a dependent care assistance program as defined in section 129
2.16of the Internal Revenue Code, in lieu of the actual employment related expenses paid for
2.17that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of (i)
2.18the earned income of the taxpayer or (ii) the amount of the maximum limit for one qualifying
2.19individual under section 21(c) and (d) of the Internal Revenue Code will be deemed to be
2.20the employment related expense paid for that child. The earned income limitation of section
2.2121(d) of the Internal Revenue Code shall not apply to this deemed amount. These deemed
2.22amounts apply regardless of whether any employment-related expenses have been paid.
2.23 (d) If the taxpayer is not required and does not file a federal individual income tax return
2.24for the tax year, no credit is allowed for any amount paid to any person unless:
2.25 (1) the name, address, and taxpayer identification number of the person are included on
2.26the return claiming the credit; or
2.27 (2) if the person is an organization described in section 501(c)(3) of the Internal Revenue
2.28Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name
2.29and address of the person are included on the return claiming the credit.
2.30In the case of a failure to provide the information required under the preceding sentence,
2.31the preceding sentence does not apply if it is shown that the taxpayer exercised due diligence
2.32in attempting to provide the information required.
2Sec. 2.
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
3.2section 21 of the Internal Revenue Code this section must be allocated based on the ratio
3.3by which the earned income of the claimant and the claimant's spouse from Minnesota
3.4sources bears to the total earned income of the claimant and the claimant's spouse using the
3.5percentage calculated in section 290.06, subdivision 2c, paragraph (e).
3.6 (f) For residents of Minnesota, the subtractions for military pay under section 290.0132,
3.7subdivisions 11 and 12, are not considered "earned income not subject to tax under this
3.8chapter."
3.9 (g) For residents of Minnesota, the exclusion of combat pay under section 112 of the
3.10Internal Revenue Code is not considered "earned income not subject to tax under this
3.11chapter."
3.12 (h) For taxpayers with federal adjusted gross income in excess of $52,230, the credit is
3.13equal to the lesser of the credit otherwise calculated under this subdivision, or the amount
3.14equal to $600 minus five percent of federal adjusted gross income in excess of $52,230 for
3.15taxpayers with one qualifying individual, or $1,200 minus five percent of federal adjusted
3.16gross income in excess of $52,230 for taxpayers with two or more qualifying individuals,
3.17but in no case is the credit less than zero.
3.18 (c) For the purposes of this section, the following terms have the meanings given:
3.19 (1) "employment-related expenses" has the meaning given in section 21(b)(2) of the
3.20Internal Revenue Code;
3.21 (2) "qualifying individual" has the meaning given in section 21(b)(1) of the Internal
3.22Revenue Code, except that in determining whether the child qualified as a dependent, income
3.23received as a Minnesota family investment program grant or allowance to or on behalf of
3.24the child must not be taken into account in determining whether the child received more
3.25than half of the child's support from the taxpayer; and
3.26 (3) "young child" means a qualifying individual who had not attained the age of five by
3.27December 31 of the taxable year.
3.28 EFFECTIVE DATE.This section is effective for taxable years beginning after December
3.2931, 2024.
3Sec. 2.
REVISOR EAP/DG 25-0256401/31/25 4.1 Sec. 3. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision to
4.2read:
4.3 Subd. 1a.Eligible dependent care expenses.(a) A taxpayer's eligible dependent care
4.4expenses equals the amount of employment-related expenses incurred by the taxable year,
4.5subject to the limitations in paragraphs (b) and (c).
4.6 (b) Except as provided in subdivision 1b, a taxpayer's eligible dependent care expenses
4.7are limited to:
4.8 (1) $3,000 if there was one qualifying individual with respect to the taxpayer; or
4.9 (2) $6,000 if there were two or more qualifying individuals with respect to the taxpayer.
4.10 EFFECTIVE DATE.This section is effective for taxable years beginning after December
4.1131, 2024.
4.12 Sec. 4. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision to
4.13read:
4.14 Subd. 1b.Eligible expenses for taxpayers with young children.For a taxpayer with
4.15a young child, the limit in paragraph (b) is increased as follows:
4.16 (1) for a taxpayer with one young child with respect to the taxpayer, the limit is increased
4.17by $7,000;
4.18 (2) for a taxpayer with two young children with respect to the taxpayer, the limit is
4.19increased by $14,000; and
4.20 (3) for a taxpayer with three or more young children with respect to the taxpayer, the
4.21limit is increased by $19,000.
4.22 EFFECTIVE DATE.This section is effective for taxable years beginning after December
4.2331, 2024.
4.24 Sec. 5. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision to
4.25read:
4.26 Subd. 1c.Credit percentage.(a) The credit percentage equals 50 percent, subject to
4.27the reductions in paragraphs (b) and (c).
4.28 (b) A taxpayer's credit percentage is reduced by one percentage point for each $2,000,
4.29or fraction thereof, by which the taxpayer's adjusted gross income exceeds $125,000, until
4.30the credit percentage equals 20 percent.
4Sec. 5.
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
5.2equals 20 percent, reduced by two percentage points for each $2,000, or fraction thereof,
5.3by which the taxpayer's adjusted gross income exceeds $400,000.
5.4 (d) For a married taxpayer filing a separate return, the credit percentage must be calculated
5.5under paragraphs (a), (b), and (c), except the adjusted gross income thresholds are one-half
5.6the amounts for other filers, as adjusted for inflation under subdivision 2b.
5.7 EFFECTIVE DATE.This section is effective for taxable years beginning after December
5.831, 2024.
5.9 Sec. 6. Minnesota Statutes 2024, section 290.067, subdivision 2b, is amended to read:
5.10 Subd. 2b.Inflation adjustment.The commissioner shall annually adjust the dollar
5.11amount of the income threshold at which the maximum credit percentage begins to be
5.12reduced under subdivision 1 1c as provided in section 270C.22. The statutory year is taxable
5.13year 2019 2025.
5.14 EFFECTIVE DATE.This section is effective for taxable years beginning after December
5.1531, 2025.
5.16 Sec. 7. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision to
5.17read:
5.18 Subd. 2c.Deemed expenses.(a) If a child who has not attained the age of six years at
5.19the close of the taxable year is cared for at a licensed family day care home operated by the
5.20child's parent, the taxpayer is deemed to have paid employment-related expenses. The
5.21amount of expenses deemed to have been paid equals the amount the licensee would charge
5.22for the care of a child of the same age for the same number of hours of care.
5.23 (b) A married couple may use a deemed employment expenses amount for a child as
5.24calculated under paragraph (c) in lieu of the actual employment-related expenses paid for
5.25that child or the deemed employment-related expenses under paragraph (a) if the married
5.26couple:
5.27 (1) has a child who has not attained the age of one year at the close of the taxable year;
5.28and
5.29 (2) does not participate in a dependent care assistance program as defined in section 129
5.30of the Internal Revenue Code.
5Sec. 7.
REVISOR EAP/DG 25-0256401/31/25 6.1 (c) A married couple's deemed employment-related expenses amount under paragraph
6.2(b) equals the lesser of:
6.3 (1) the combined earned income of the couple; or
6.4 (2) the amount of the maximum limit for one qualified individual under subdivision 1a,
6.5as increased by subdivision 1b.
6.6 (d) The earned income limitation of section 21(d) of the Internal Revenue Code does
6.7not apply to deemed employment-related expenses under this subdivision. The deemed
6.8employment-related expenses amount applies regardless of whether any employment-related
6.9expenses have been paid.
6.10 EFFECTIVE DATE.This section is effective for taxable years beginning after December
6.1131, 2024.
6.12 Sec. 8. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision to
6.13read:
6.14 Subd. 2d.Identifying information required.(a) No credit is allowed for any amount
6.15paid to any person unless:
6.16 (1) the name, address, and taxpayer identification number of the person are included on
6.17the return claiming the credit; or
6.18 (2) if the person is an organization described in section 501(c)(3) of the Internal Revenue
6.19Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name
6.20and address of the person are included on the return claiming the credit.
6.21 (b) The rule in section 21(e)(10) of the Internal Revenue Code applies for the credit
6.22under this section.
6.23 EFFECTIVE DATE.This section is effective for taxable years beginning after December
6.2431, 2024.
6.25 Sec. 9. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision to
6.26read:
6.27 Subd. 7.Employment-related expenses.For the purposes of determining
6.28employment-related expenses, the provisions of sections 21(d) and 21(e)(6) of the Internal
6.29Revenue Code apply.
6.30 EFFECTIVE DATE.This section is effective for taxable years beginning after December
6.3131, 2024.
6Sec. 9.
REVISOR EAP/DG 25-0256401/31/25 7.1 Sec. 10. Minnesota Statutes 2024, section 290.067, is amended by adding a subdivision
7.2to read:
7.3 Subd. 8.Rules for married couples filing separate returns.A married taxpayer filing
7.4a separate return may claim the credit under this section, but only one spouse may claim
7.5the credit.
7.6 EFFECTIVE DATE.This section is effective for taxable years beginning after December
7.731, 2024.
7Sec. 10.
REVISOR EAP/DG 25-0256401/31/25