Minnesota 2025-2026 Regular Session

Minnesota House Bill HF310 Compare Versions

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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 amending Minnesota Statutes 2024, sections 290.0131, by adding a subdivision;
4	4	1.4 290.067.
5	5	1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
6	6	1.6 Section 1. Minnesota Statutes 2024, section 290.0131, is amended by adding a subdivision
7	7	1.7to read:
8	8	1.8 Subd. 21.Dependent flexible spending accounts.For a taxpayer who claims the credit
9	9	1.9under section 290.067, or for a married taxpayer filing a separate return whose spouse claims
10	10	1.10the credit under that section, the amount of dependent care assistance that is excluded from
11	11	1.11gross income under section 129 of the Internal Revenue Code is an addition.
12	12	1.12 EFFECTIVE DATE.This section is effective for taxable years beginning after December
13	13	1.1331, 2024.
14	14	1.14 Sec. 2. Minnesota Statutes 2024, section 290.067, is amended to read:
15	15	1.15 290.067 DEPENDENT CARE CREDIT.
16	16	1.16 Subdivision 1.Definitions; credit allowed; amount of credit.(a) For the purposes of
17	17	1.17this section, the following terms have the meanings given:
18	18	1.18 (1) "employment-related expenses" has the meaning given in section 21(b)(2) of the
19	19	1.19Internal Revenue Code; and
20	20	1.20 (2) "qualifying individual" has the meaning given in section 21(b)(1) of the Internal
21	21	1.21Revenue Code, except that in determining whether the child qualified as a dependent, income
22	22	1Sec. 2.
23	23	REVISOR EAP/BM 25-0196401/22/25
24	24	State of Minnesota
25	25	This Document can be made available
26	26	in alternative formats upon request
27	27	HOUSE OF REPRESENTATIVES
28	28	H. F. No. 310
29	29	NINETY-FOURTH SESSION
30	30	Authored by Nadeau and Myers02/13/2025
31	31	The bill was read for the first time and referred to the Committee on Taxes 2.1received as a Minnesota family investment program grant or allowance to or on behalf of
32	32	2.2the child must not be taken into account in determining whether the child received more
33	33	2.3than half of the child's support from the taxpayer.
34	34	2.4 (b) A taxpayer may take as a credit against the tax due from the taxpayer and a spouse,
35	35	2.5if any, under this chapter an amount equal to the dependent care credit for which the taxpayer
36	36	2.6is eligible pursuant to the provisions of section 21 of the Internal Revenue Code except that
37	37	2.7in determining whether the child qualified as a dependent, income received as a Minnesota
38	38	2.8family investment program grant or allowance to or on behalf of the child must not be taken
39	39	2.9into account in determining whether the child received more than half of the child's support
40	40	2.10from the taxpayer the taxpayer's eligible dependent care expenses, as determined under
41	41	2.11subdivision 1a, multiplied by the taxpayer's credit percentage, as determined under
42	42	2.12subdivision 1b.
43	43	2.13 (b) If a child who has not attained the age of six years at the close of the taxable year is
44	44	2.14cared for at a licensed family day care home operated by the child's parent, the taxpayer is
45	45	2.15deemed to have paid employment-related expenses. If the child is 16 months old or younger
46	46	2.16at the close of the taxable year, the amount of expenses deemed to have been paid equals
47	47	2.17the maximum limit for one qualifying individual under section 21(c) and (d) of the Internal
48	48	2.18Revenue Code. If the child is older than 16 months of age but has not attained the age of
49	49	2.19six years at the close of the taxable year, the amount of expenses deemed to have been paid
50	50	2.20equals the amount the licensee would charge for the care of a child of the same age for the
51	51	2.21same number of hours of care.
52	52	2.22 (c) If a taxpayer:
53	53	2.23 (1) has a child who has not attained the age of one year at the close of the taxable year;
54	54	2.24and
55	55	2.25 (2) does not participate in a dependent care assistance program as defined in section 129
56	56	2.26of the Internal Revenue Code, in lieu of the actual employment related expenses paid for
57	57	2.27that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of (i)
58	58	2.28the earned income of the taxpayer or (ii) the amount of the maximum limit for one qualifying
59	59	2.29individual under section 21(c) and (d) of the Internal Revenue Code will be deemed to be
60	60	2.30the employment related expense paid for that child. The earned income limitation of section
61	61	2.3121(d) of the Internal Revenue Code shall not apply to this deemed amount. These deemed
62	62	2.32amounts apply regardless of whether any employment-related expenses have been paid.
63	63	2.33 (d) If the taxpayer is not required and does not file a federal individual income tax return
64	64	2.34for the tax year, no credit is allowed for any amount paid to any person unless:
65	65	2Sec. 2.
66	66	REVISOR EAP/BM 25-0196401/22/25 3.1 (1) the name, address, and taxpayer identification number of the person are included on
67	67	3.2the return claiming the credit; or
68	68	3.3 (2) if the person is an organization described in section 501(c)(3) of the Internal Revenue
69	69	3.4Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name
70	70	3.5and address of the person are included on the return claiming the credit.
71	71	3.6In the case of a failure to provide the information required under the preceding sentence,
72	72	3.7the preceding sentence does not apply if it is shown that the taxpayer exercised due diligence
73	73	3.8in attempting to provide the information required.
74	74	3.9 (e) (c) In the case of a nonresident or part-year resident, the credit determined under
75	75	3.10section 21 of the Internal Revenue Code this section must be allocated based on the ratio
76	76	3.11by which the earned income of the claimant and the claimant's spouse from Minnesota
77	77	3.12sources bears to the total earned income of the claimant and the claimant's spouse using the
78	78	3.13percentage calculated in section 290.06, subdivision 2c, paragraph (e).
79	79	3.14 (f) For residents of Minnesota, the subtractions for military pay under section 290.0132,
80	80	3.15subdivisions 11 and 12, are not considered "earned income not subject to tax under this
81	81	3.16chapter."
82	82	3.17 (g) For residents of Minnesota, the exclusion of combat pay under section 112 of the
83	83	3.18Internal Revenue Code is not considered "earned income not subject to tax under this
84	84	3.19chapter."
85	85	3.20 (h) For taxpayers with federal adjusted gross income in excess of $52,230, the credit is
86	86	3.21equal to the lesser of the credit otherwise calculated under this subdivision, or the amount
87	87	3.22equal to $600 minus five percent of federal adjusted gross income in excess of $52,230 for
88	88	3.23taxpayers with one qualifying individual, or $1,200 minus five percent of federal adjusted
89	89	3.24gross income in excess of $52,230 for taxpayers with two or more qualifying individuals,
90	90	3.25but in no case is the credit less than zero.
91	91	3.26 Subd. 1a.Eligible dependent care expenses.A taxpayer's eligible dependent care
92	92	3.27expenses equals the amount of employment-related expenses incurred by the taxable year,
93	93	3.28but is limited to:
94	94	3.29 (1) $12,000 if there was one qualifying individual with respect to the taxpayer; or
95	95	3.30 (2) $24,000 if there were two or more qualifying individuals with respect to the taxpayer.
96	96	3.31 Subd. 1b.Credit percentage.(a) The credit percentage equals 50 percent, subject to
97	97	3.32the reduction in paragraphs (b) and (c).
98	98	3Sec. 2.
99	99	REVISOR EAP/BM 25-0196401/22/25 4.1 (b) A taxpayer's credit percentage is reduced by one percentage point for each $1,000,
100	100	4.2or fraction thereof, by which the taxpayer's adjusted gross income exceeds $150,000.
101	101	4.3 (c) For a married taxpayer filing a separate return, the credit percentage is the amount
102	102	4.4determined under paragraphs (a) and (b), except the income limit used to calculate the
103	103	4.5reduction under paragraph (b) must be half the amount used for other filers, after adjusting
104	104	4.6for inflation.
105	105	4.7 Subd. 2b.Inflation adjustment.The commissioner shall annually adjust the dollar
106	106	4.8amount of the income threshold at which the maximum credit percentage begins to be
107	107	4.9reduced under subdivision 1 1b as provided in section 270C.22. The statutory year is taxable
108	108	4.10year 2019.
109	109	4.11 Subd. 2c.Deemed expenses.(a) If a child who has not attained the age of six years at
110	110	4.12the close of the taxable year is cared for at a licensed family day care home operated by the
111	111	4.13child's parent, the taxpayer is deemed to have paid employment-related expenses. The
112	112	4.14amount of expenses deemed to have been paid equals the amount the licensee would charge
113	113	4.15for the care of a child of the same age for the same number of hours of care.
114	114	4.16 (b) If a married couple:
115	115	4.17 (1) has a child who has not attained the age of one year at the close of the taxable year;
116	116	4.18 (2) does not participate in a dependent care assistance program as defined in section 129
117	117	4.19of the Internal Revenue Code, in lieu of the actual employment-related expenses paid for
118	118	4.20that child under or the deemed amount under paragraph (a), the amount deemed to be the
119	119	4.21employment-related expense paid for that child equals the lesser of:
120	120	4.22 (i) the combined earned income of the couple; or
121	121	4.23 (ii) the amount of the maximum limit for one qualified individual under subdivision 1a.
122	122	4.24 (c) The earned income limitation of section 21(d) of the Internal Revenue Code shall
123	123	4.25not apply to this deemed amount. These deemed amounts apply regardless of whether any
124	124	4.26employment-related expenses have been paid.
125	125	4.27 Subd. 2d.Identifying information required.(a) No credit is allowed for any amount
126	126	4.28paid to any person unless:
127	127	4.29 (1) the name, address, and taxpayer identification number of the person are included on
128	128	4.30the return claiming the credit; or
129	129	4Sec. 2.
130	130	REVISOR EAP/BM 25-0196401/22/25 5.1 (2) if the person is an organization described in section 501(c)(3) of the Internal Revenue
131	131	5.2Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name
132	132	5.3and address of the person are included on the return claiming the credit.
133	133	5.4 (b) The rule in section 21(e)(10) of the Internal Revenue Code applies to the credit under
134	134	5.5this section.
135	135	5.6 Subd. 3.Credit to be refundable.If the amount of credit which a claimant would be
136	136	5.7eligible to receive pursuant to this subdivision exceeds the claimant's tax liability under this
137	137	5.8chapter, the excess amount of the credit shall be refunded to the claimant by the commissioner
138	138	5.9of revenue. The amount needed to pay the refunds required by this section is appropriated
139	139	5.10to the commissioner from the general fund.
140	140	5.11 Subd. 4.Right to file claim.The right to file a claim under this section shall be personal
141	141	5.12to the claimant and shall not survive death, but such right may be exercised on behalf of a
142	142	5.13claimant by the claimant's legal guardian or attorney-in-fact. When a claimant dies after
143	143	5.14having filed a timely claim the amount thereof shall be disbursed to another member of the
144	144	5.15household as determined by the commissioner of revenue. If the claimant was the only
145	145	5.16member of a household, the claim may be paid to the claimant's personal representative,
146	146	5.17but if neither is appointed and qualified within two years of the filing of the claim, the
147	147	5.18amount of the claim shall escheat to the state.
148	148	5.19 Subd. 5.Employment-related expenses.For the purposes of determining
149	149	5.20employment-related expenses, the provisions of sections 21(d) and 21(e)(6) of the Internal
150	150	5.21Revenue Code apply.
151	151	5.22 Subd. 6.Rules for married couples filing separate returns.A married taxpayer filing
152	152	5.23a separate return may claim the credit under this section, but only one spouse may claim
153	153	5.24the credit.
154	154	5.25 EFFECTIVE DATE.This section is effective for taxable years beginning after December
155	155	5.2631, 2024.
156	156	5Sec. 2.
157	157	REVISOR EAP/BM 25-0196401/22/25