1.1 A bill for an act
1.2 relating to taxation; individual income; providing a subtraction for certain
1.3 discharges of indebtedness; excluding certain discharges of indebtedness from
1.4 income for purposes of the property tax refund and the renter's income tax credit;
1.5 amending Minnesota Statutes 2024, sections 290.0132, by adding a subdivision;
1.6 290.0693, subdivision 1; 290A.03, subdivision 3.
1.7BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.8 Section 1. Minnesota Statutes 2024, section 290.0132, is amended by adding a subdivision
1.9to read:
1.10 Subd. 36.Discharges of indebtedness; coerced debt.The amount of discharge of
1.11indebtedness awarded to a claimant under section 332.74, subdivision 3, is a subtraction.
1.12 EFFECTIVE DATE.This section is effective for taxable years beginning after December
1.1331, 2024.
1.14 Sec. 2. Minnesota Statutes 2024, section 290.0693, subdivision 1, is amended to read:
1.15 Subdivision 1.Definitions.(a) For the purposes of this section, the following terms have
1.16the meanings given.
1.17 (b) "Combined exemption amount" means the sum of:
1.18 (1) for the taxpayer's first dependent, the exemption amount multiplied by 1.4;
1.19 (2) for the taxpayer's second dependent, the exemption amount multiplied by 1.3;
1.20 (3) for the taxpayer's third dependent, the exemption amount multiplied by 1.2;
1.21 (4) for the taxpayer's fourth dependent, the exemption amount multiplied by 1.1;
1Sec. 2.
25-01097 as introduced12/18/24 REVISOR EAP/RC
SENATE
STATE OF MINNESOTA
S.F. No. 860NINETY-FOURTH SESSION
(SENATE AUTHORS: GUSTAFSON and Duckworth)
OFFICIAL STATUSD-PGDATE
Introduction and first reading02/03/2025
Referred to Taxes 2.1 (5) for the taxpayer's fifth dependent, the exemption amount; and
2.2 (6) if the taxpayer or taxpayer's spouse had a disability or attained the age of 65 on or
2.3before the close of the taxable year, the exemption amount.
2.4 (b) (c) "Dependent" means any individual who is considered a dependent under sections
2.5151 and 152 of the Internal Revenue Code.
2.6 (c) (d) "Disability" has the meaning given in section 290A.03, subdivision 10.
2.7 (d) (e) "Exemption amount" means the exemption amount under section 290.0121,
2.8subdivision 1, paragraph (b).
2.9 (e) (f) "Gross rent" means rent paid for the right of occupancy, at arm's length, of a
2.10homestead, exclusive of charges for any medical services furnished by the landlord as a
2.11part of the rental agreement, whether expressly set out in the rental agreement or not. The
2.12gross rent of a resident of a nursing home or intermediate care facility is $600 per month.
2.13The gross rent of a resident of an adult foster care home is $930 per month. The commissioner
2.14shall annually adjust the amounts in this paragraph as provided in section 270C.22. The
2.15statutory year is 2023. If the landlord and tenant have not dealt with each other at arm's
2.16length and the commissioner determines that the gross rent charged was excessive, the
2.17commissioner may adjust the gross rent to a reasonable amount for purposes of this section.
2.18 (f) (g) "Homestead" has the meaning given in section 290A.03, subdivision 6.
2.19 (g) (h) "Household" has the meaning given in section 290A.03, subdivision 4.
2.20 (h) (i) "Household income" means all income received by all persons of a household in
2.21a taxable year while members of the household, other than income of a dependent.
2.22 (i) (j) "Income" means adjusted gross income, minus:
2.23 (1) for the taxpayer's first dependent, the exemption amount multiplied by 1.4 the
2.24taxpayer's combined exemption amount; and
2.25 (2) for the taxpayer's second dependent, the exemption amount multiplied by 1.3; the
2.26amount of discharge of indebtedness subtracted under section 290.0132, subdivision 36.
2.27 (3) for the taxpayer's third dependent, the exemption amount multiplied by 1.2;
2.28 (4) for the taxpayer's fourth dependent, the exemption amount multiplied by 1.1;
2.29 (5) for the taxpayer's fifth dependent, the exemption amount; and
2.30 (6) if the taxpayer or taxpayer's spouse had a disability or attained the age of 65 on or
2.31before the close of the taxable year, the exemption amount.
2Sec. 2.
25-01097 as introduced12/18/24 REVISOR EAP/RC 3.1 (j) (k) "Rent constituting property taxes" means 17 percent of the gross rent actually
3.2paid in cash, or its equivalent, or the portion of rent paid in lieu of property taxes, in any
3.3taxable year by a claimant for the right of occupancy of the claimant's Minnesota homestead
3.4in the taxable year, and which rent constitutes the basis, in the succeeding taxable year of
3.5a claim for a credit under this section by the claimant. If an individual occupies a homestead
3.6with another person or persons not related to the individual as the individual's spouse or as
3.7dependents, and the other person or persons are residing at the homestead under a rental or
3.8lease agreement with the individual, the amount of rent constituting property tax for the
3.9individual equals that portion not covered by the rental agreement.
3.10 EFFECTIVE DATE.This section is effective for taxable years beginning after December
3.1131, 2024.
3.12 Sec. 3. Minnesota Statutes 2024, section 290A.03, subdivision 3, is amended to read:
3.13 Subd. 3.Income.(a) "Income" means the sum of the following:
3.14 (1) federal adjusted gross income as defined in the Internal Revenue Code; and
3.15 (2) the sum of the following amounts to the extent not included in clause (1):
3.16 (i) all nontaxable income;
3.17 (ii) the amount of a passive activity loss that is not disallowed as a result of section 469,
3.18paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity loss
3.19carryover allowed under section 469(b) of the Internal Revenue Code;
3.20 (iii) an amount equal to the total of any discharge of qualified farm indebtedness of a
3.21solvent individual excluded from gross income under section 108(g) of the Internal Revenue
3.22Code;
3.23 (iv) cash public assistance and relief;
3.24 (v) any pension or annuity (including railroad retirement benefits, all payments received
3.25under the federal Social Security Act, Supplemental Security Income, and veterans benefits),
3.26which was not exclusively funded by the claimant or spouse, or which was funded exclusively
3.27by the claimant or spouse and which funding payments were excluded from federal adjusted
3.28gross income in the years when the payments were made;
3.29 (vi) interest received from the federal or a state government or any instrumentality or
3.30political subdivision thereof;
3.31 (vii) workers' compensation;
3Sec. 3.
25-01097 as introduced12/18/24 REVISOR EAP/RC 4.1 (viii) nontaxable strike benefits;
4.2 (ix) the gross amounts of payments received in the nature of disability income or sick
4.3pay as a result of accident, sickness, or other disability, whether funded through insurance
4.4or otherwise;
4.5 (x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of
4.61986, as amended through December 31, 1995;
4.7 (xi) contributions made by the claimant to an individual retirement account, including
4.8a qualified voluntary employee contribution; simplified employee pension plan;
4.9self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of
4.10the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal
4.11Revenue Code, to the extent the sum of amounts exceeds the retirement base amount for
4.12the claimant and spouse;
4.13 (xii) to the extent not included in federal adjusted gross income, distributions received
4.14by the claimant or spouse from a traditional or Roth style retirement account or plan;
4.15 (xiii) nontaxable scholarship or fellowship grants;
4.16 (xiv) alimony received to the extent not included in the recipient's income;
4.17 (xv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue
4.18Code;
4.19 (xvi) the amount deducted for tuition expenses under section 222 of the Internal Revenue
4.20Code; and
4.21 (xvii) the amount deducted for certain expenses of elementary and secondary school
4.22teachers under section 62(a)(2)(D) of the Internal Revenue Code.
4.23 In the case of an individual who files an income tax return on a fiscal year basis, the
4.24term "federal adjusted gross income" shall mean federal adjusted gross income reflected in
4.25the fiscal year ending in the calendar year. Federal adjusted gross income shall not be reduced
4.26by the amount of a net operating loss carryback or carryforward or a capital loss carryback
4.27or carryforward allowed for the year.
4.28 (b) "Income" does not include:
4.29 (1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;
4.30 (2) amounts of any pension or annuity which was exclusively funded by the claimant
4.31or spouse and which funding payments were not excluded from federal adjusted gross
4.32income in the years when the payments were made;
4Sec. 3.
25-01097 as introduced12/18/24 REVISOR EAP/RC 5.1 (3) to the extent included in federal adjusted gross income, amounts contributed by the
5.2claimant or spouse to a traditional or Roth style retirement account or plan, but not to exceed
5.3the retirement base amount reduced by the amount of contributions excluded from federal
5.4adjusted gross income, but not less than zero;
5.5 (4) surplus food or other relief in kind supplied by a governmental agency;
5.6 (5) relief granted under this chapter;
5.7 (6) child support payments received under a temporary or final decree of dissolution or
5.8legal separation;
5.9 (7) restitution payments received by eligible individuals and excludable interest as
5.10defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001,
5.11Public Law 107-16;
5.12 (8) alimony paid; or
5.13 (9) veterans disability compensation paid under title 38 of the United States Code; or
5.14 (10) to the extent included in federal adjusted gross income, the amount of discharge of
5.15indebtedness awarded to the claimant under section 332.74, subdivision 3.
5.16 (c) The sum of the following amounts may be subtracted from income:
5.17 (1) for the claimant's first dependent, the exemption amount multiplied by 1.4;
5.18 (2) for the claimant's second dependent, the exemption amount multiplied by 1.3;
5.19 (3) for the claimant's third dependent, the exemption amount multiplied by 1.2;
5.20 (4) for the claimant's fourth dependent, the exemption amount multiplied by 1.1;
5.21 (5) for the claimant's fifth dependent, the exemption amount; and
5.22 (6) if the claimant or claimant's spouse had a disability or attained the age of 65 on or
5.23before December 31 of the year for which the taxes were levied, the exemption amount.
5.24 (d) For purposes of this subdivision, the following terms have the meanings given:
5.25 (1) "exemption amount" means the exemption amount under section 290.0121,
5.26subdivision 1, paragraph (b), for the taxable year for which the income is reported;
5.27 (2) "retirement base amount" means the deductible amount for the taxable year for the
5.28claimant and spouse under section 219(b)(5)(A) of the Internal Revenue Code, adjusted for
5.29inflation as provided in section 219(b)(5)(C) of the Internal Revenue Code, without regard
5.30to whether the claimant or spouse claimed a deduction; and
5Sec. 3.
25-01097 as introduced12/18/24 REVISOR EAP/RC 6.1 (3) "traditional or Roth style retirement account or plan" means retirement plans under
6.2sections 401, 403, 408, 408A, and 457 of the Internal Revenue Code.
6.3 EFFECTIVE DATE.This section is effective beginning with property taxes payable
6.4in 2026.
6Sec. 3.
25-01097 as introduced12/18/24 REVISOR EAP/RC