1.1                          A bill for an act 
  1.2             relating to taxation; conforming certain tax 
  1.3             provisions to changes in the Internal Revenue Code; 
  1.4             amending Minnesota Statutes 2000, section 290.067, 
  1.5             subdivision 1; Minnesota Statutes 2001 Supplement, 
  1.6             sections 289A.02, subdivision 7; 290.01, subdivisions 
  1.7             19, 31; 290A.03, subdivision 15. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 2001 Supplement, section 
  1.10  289A.02, subdivision 7, is amended to read: 
  1.11     Subd. 7.  [INTERNAL REVENUE CODE.] Unless specifically 
  1.12  defined otherwise, "Internal Revenue Code" means the Internal 
  1.13  Revenue Code of 1986, as amended through June 15, 2001 February 
  1.14  1, 2002. 
  1.15     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  1.16  following final enactment. 
  1.17     Sec. 2.  Minnesota Statutes 2001 Supplement, section 
  1.18  290.01, subdivision 19, is amended to read: 
  1.19     Subd. 19.  [NET INCOME.] The term "net income" means the 
  1.20  federal taxable income, as defined in section 63 of the Internal 
  1.21  Revenue Code of 1986, as amended through the date named in this 
  1.22  subdivision, incorporating any elections made by the taxpayer in 
  1.23  accordance with the Internal Revenue Code in determining federal 
  1.24  taxable income for federal income tax purposes, and with the 
  1.25  modifications provided in subdivisions 19a to 19f. 
  1.26     In the case of a regulated investment company or a fund 
  2.1   thereof, as defined in section 851(a) or 851(g) of the Internal 
  2.2   Revenue Code, federal taxable income means investment company 
  2.3   taxable income as defined in section 852(b)(2) of the Internal 
  2.4   Revenue Code, except that:  
  2.5      (1) the exclusion of net capital gain provided in section 
  2.6   852(b)(2)(A) of the Internal Revenue Code does not apply; 
  2.7      (2) the deduction for dividends paid under section 
  2.8   852(b)(2)(D) of the Internal Revenue Code must be applied by 
  2.9   allowing a deduction for capital gain dividends and 
  2.10  exempt-interest dividends as defined in sections 852(b)(3)(C) 
  2.11  and 852(b)(5) of the Internal Revenue Code; and 
  2.12     (3) the deduction for dividends paid must also be applied 
  2.13  in the amount of any undistributed capital gains which the 
  2.14  regulated investment company elects to have treated as provided 
  2.15  in section 852(b)(3)(D) of the Internal Revenue Code.  
  2.16     The net income of a real estate investment trust as defined 
  2.17  and limited by section 856(a), (b), and (c) of the Internal 
  2.18  Revenue Code means the real estate investment trust taxable 
  2.19  income as defined in section 857(b)(2) of the Internal Revenue 
  2.20  Code.  
  2.21     The net income of a designated settlement fund as defined 
  2.22  in section 468B(d) of the Internal Revenue Code means the gross 
  2.23  income as defined in section 468B(b) of the Internal Revenue 
  2.24  Code. 
  2.25     The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 
  2.26  1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 
  2.27  1616, 1617, 1704(l), and 1704(m) of the Small Business Job 
  2.28  Protection Act, Public Law Number 104-188, the provisions of 
  2.29  Public Law Number 104-117, the provisions of sections 313(a) and 
  2.30  (b)(1), 602(a), 913(b), 941, 961, 971, 1001(a) and (b), 1002, 
  2.31  1003, 1012, 1013, 1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 
  2.32  1111(a), 1131(b) and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) 
  2.33  and (h), and 1604(d)(1) of the Taxpayer Relief Act of 1997, 
  2.34  Public Law Number 105-34, the provisions of section 6010 of the 
  2.35  Internal Revenue Service Restructuring and Reform Act of 1998, 
  2.36  Public Law Number 105-206, the provisions of section 4003 of the 
  3.1   Omnibus Consolidated and Emergency Supplemental Appropriations 
  3.2   Act, 1999, Public Law Number 105-277, and the provisions of 
  3.3   section 318 of the Consolidated Appropriation Act of 2001, 
  3.4   Public Law Number 106-554, shall become effective at the time 
  3.5   they become effective for federal purposes. 
  3.6      The Internal Revenue Code of 1986, as amended through 
  3.7   December 31, 1996, shall be in effect for taxable years 
  3.8   beginning after December 31, 1996. 
  3.9      The provisions of sections 202(a) and (b), 221(a), 225, 
  3.10  312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 
  3.11  (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 
  3.12  1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 
  3.13  1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 
  3.14  of the Taxpayer Relief Act of 1997, Public Law Number 105-34, 
  3.15  the provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 
  3.16  7002, and 7003 of the Internal Revenue Service Restructuring and 
  3.17  Reform Act of 1998, Public Law Number 105-206, the provisions of 
  3.18  section 3001 of the Omnibus Consolidated and Emergency 
  3.19  Supplemental Appropriations Act, 1999, Public Law Number 
  3.20  105-277, the provisions of section 3001 of the Miscellaneous 
  3.21  Trade and Technical Corrections Act of 1999, Public Law Number 
  3.22  106-36, and the provisions of section 316 of the Consolidated 
  3.23  Appropriation Act of 2001, Public Law Number 106-554, shall 
  3.24  become effective at the time they become effective for federal 
  3.25  purposes. 
  3.26     The Internal Revenue Code of 1986, as amended through 
  3.27  December 31, 1997, shall be in effect for taxable years 
  3.28  beginning after December 31, 1997. 
  3.29     The provisions of sections 5002, 6009, 6011, and 7001 of 
  3.30  the Internal Revenue Service Restructuring and Reform Act of 
  3.31  1998, Public Law Number 105-206, the provisions of section 9010 
  3.32  of the Transportation Equity Act for the 21st Century, Public 
  3.33  Law Number 105-178, the provisions of sections 1004, 4002, and 
  3.34  5301 of the Omnibus Consolidation and Emergency Supplemental 
  3.35  Appropriations Act, 1999, Public Law Number 105-277, the 
  3.36  provision of section 303 of the Ricky Ray Hemophilia Relief Fund 
  4.1   Act of 1998, Public Law Number 105-369, the provisions of 
  4.2   sections 532, 534, 536, 537, and 538 of the Ticket to Work and 
  4.3   Work Incentives Improvement Act of 1999, Public Law Number 
  4.4   106-170, the provisions of the Installment Tax Correction Act of 
  4.5   2000, Public Law Number 106-573, and the provisions of section 
  4.6   309 of the Consolidated Appropriation Act of 2001, Public Law 
  4.7   Number 106-554, shall become effective at the time they become 
  4.8   effective for federal purposes. 
  4.9      The Internal Revenue Code of 1986, as amended through 
  4.10  December 31, 1998, shall be in effect for taxable years 
  4.11  beginning after December 31, 1998.  
  4.12     The provisions of the FSC Repeal and Extraterritorial 
  4.13  Income Exclusion Act of 2000, Public Law Number 106-519, shall 
  4.14  become effective at the time it became effective for federal 
  4.15  purposes. 
  4.16     The Internal Revenue Code of 1986, as amended through 
  4.17  December 31, 1999, shall be in effect for taxable years 
  4.18  beginning after December 31, 1999.  The provisions of sections 
  4.19  306 and 401 of the Consolidated Appropriation Act of 2001, 
  4.20  Public Law Number 106-554, and the provision of section 
  4.21  632(b)(2)(A) of the Economic Growth and Tax Relief 
  4.22  Reconciliation Act of 2001, Public Law Number 107-16, shall 
  4.23  become effective at the same time it became effective for 
  4.24  federal purposes. 
  4.25     The Internal Revenue Code of 1986, as amended through 
  4.26  December 31, 2000, shall be in effect for taxable years 
  4.27  beginning after December 31, 2000.  The provisions of sections 
  4.28  659a and 671 of the Economic Growth and Tax Relief 
  4.29  Reconciliation Act of 2001, Public Law Number 107-16, and the 
  4.30  provisions of sections 104, 105, and 111 of the Victims of 
  4.31  Terrorism Tax Relief Act of 2001, Public Law Number 107-134, 
  4.32  shall become effective at the same time it became effective for 
  4.33  federal purposes. 
  4.34     The Internal Revenue Code of 1986, as amended through June 
  4.35  15, 2001 February 1, 2002, shall be in effect for taxable years 
  4.36  beginning after December 31, 2001. 
  5.1      The provisions of sections 101 and 102 of the Victims of 
  5.2   Terrorism Tax Relief Act of 2001, Public Law Number 107-134, 
  5.3   shall become effective at the same time it becomes effective for 
  5.4   federal purposes. 
  5.5      Except as otherwise provided, references to the Internal 
  5.6   Revenue Code in subdivisions 19a to 19g mean the code in effect 
  5.7   for purposes of determining net income for the applicable year. 
  5.8      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  5.9   following final enactment. 
  5.10     Sec. 3.  Minnesota Statutes 2001 Supplement, section 
  5.11  290.01, subdivision 31, is amended to read: 
  5.12     Subd. 31.  [INTERNAL REVENUE CODE.] Unless specifically 
  5.13  defined otherwise, "Internal Revenue Code" means the Internal 
  5.14  Revenue Code of 1986, as amended through June 15, 2001 February 
  5.15  1, 2002. 
  5.16     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  5.17  following final enactment. 
  5.18     Sec. 4.  Minnesota Statutes 2000, section 290.067, 
  5.19  subdivision 1, is amended to read: 
  5.20     Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
  5.21  as a credit against the tax due from the taxpayer and a spouse, 
  5.22  if any, under this chapter an amount equal to the dependent care 
  5.23  credit for which the taxpayer is eligible pursuant to the 
  5.24  provisions of section 21 of the Internal Revenue Code subject to 
  5.25  the limitations provided in subdivision 2 except that in 
  5.26  determining whether the child qualified as a dependent, income 
  5.27  received as a Minnesota family investment program grant or 
  5.28  allowance to or on behalf of the child must not be taken into 
  5.29  account in determining whether the child received more than half 
  5.30  of the child's support from the taxpayer, and the provisions of 
  5.31  section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
  5.32     (b) If a child who has not attained the age of six years at 
  5.33  the close of the taxable year is cared for at a licensed family 
  5.34  day care home operated by the child's parent, the taxpayer is 
  5.35  deemed to have paid employment-related expenses.  If the child 
  5.36  is 16 months old or younger at the close of the taxable year, 
  6.1   the amount of expenses deemed to have been paid equals the 
  6.2   maximum limit for one qualified individual under section 21(c) 
  6.3   and (d) of the Internal Revenue Code.  If the child is older 
  6.4   than 16 months of age but has not attained the age of six years 
  6.5   at the close of the taxable year, the amount of expenses deemed 
  6.6   to have been paid equals the amount the licensee would charge 
  6.7   for the care of a child of the same age for the same number of 
  6.8   hours of care.  
  6.9      (c) If a married couple: 
  6.10     (1) has a child who has not attained the age of one year at 
  6.11  the close of the taxable year; 
  6.12     (2) files a joint tax return for the taxable year; and 
  6.13     (3) does not participate in a dependent care assistance 
  6.14  program as defined in section 129 of the Internal Revenue Code, 
  6.15  in lieu of the actual employment related expenses paid for that 
  6.16  child under paragraph (a) or the deemed amount under paragraph 
  6.17  (b), the lesser of (i) the combined earned income of the couple 
  6.18  or (ii) $2,400 the amount of the maximum limit for one qualified 
  6.19  individual under section 21(c) and (d) of the Internal Revenue 
  6.20  Code will be deemed to be the employment related expense paid 
  6.21  for that child.  The earned income limitation of section 21(d) 
  6.22  of the Internal Revenue Code shall not apply to this deemed 
  6.23  amount.  These deemed amounts apply regardless of whether any 
  6.24  employment-related expenses have been paid.  
  6.25     (d) If the taxpayer is not required and does not file a 
  6.26  federal individual income tax return for the tax year, no credit 
  6.27  is allowed for any amount paid to any person unless: 
  6.28     (1) the name, address, and taxpayer identification number 
  6.29  of the person are included on the return claiming the credit; or 
  6.30     (2) if the person is an organization described in section 
  6.31  501(c)(3) of the Internal Revenue Code and exempt from tax under 
  6.32  section 501(a) of the Internal Revenue Code, the name and 
  6.33  address of the person are included on the return claiming the 
  6.34  credit.  
  6.35  In the case of a failure to provide the information required 
  6.36  under the preceding sentence, the preceding sentence does not 
  7.1   apply if it is shown that the taxpayer exercised due diligence 
  7.2   in attempting to provide the information required. 
  7.3      In the case of a nonresident, part-year resident, or a 
  7.4   person who has earned income not subject to tax under this 
  7.5   chapter, the credit determined under section 21 of the Internal 
  7.6   Revenue Code must be allocated based on the ratio by which the 
  7.7   earned income of the claimant and the claimant's spouse from 
  7.8   Minnesota sources bears to the total earned income of the 
  7.9   claimant and the claimant's spouse. 
  7.10     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
  7.11  beginning after December 31, 2002. 
  7.12     Sec. 5.  Minnesota Statutes 2001 Supplement, section 
  7.13  290A.03, subdivision 15, is amended to read: 
  7.14     Subd. 15.  [INTERNAL REVENUE CODE.] "Internal Revenue Code" 
  7.15  means the Internal Revenue Code of 1986, as amended through June 
  7.16  15, 2001 February 1, 2002. 
  7.17     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  7.18  following final enactment.