1.1                          A bill for an act 
  1.2             relating to taxation; providing that certain income 
  1.3             earned for service in the armed forces is exempt from 
  1.4             taxation; amending Minnesota Statutes 1994, section 
  1.5             290.01, subdivision 19b. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  Minnesota Statutes 1994, section 290.01, 
  1.8   subdivision 19b, is amended to read: 
  1.9      Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  1.10  individuals, estates, and trusts, there shall be subtracted from 
  1.11  federal taxable income: 
  1.12     (1) interest income on obligations of any authority, 
  1.13  commission, or instrumentality of the United States to the 
  1.14  extent includable in taxable income for federal income tax 
  1.15  purposes but exempt from state income tax under the laws of the 
  1.16  United States; 
  1.17     (2) if included in federal taxable income, the amount of 
  1.18  any overpayment of income tax to Minnesota or to any other 
  1.19  state, for any previous taxable year, whether the amount is 
  1.20  received as a refund or as a credit to another taxable year's 
  1.21  income tax liability; 
  1.22     (3) the amount paid to others not to exceed $650 for each 
  1.23  dependent in grades kindergarten to 6 and $1,000 for each 
  1.24  dependent in grades 7 to 12, for tuition, textbooks, and 
  1.25  transportation of each dependent in attending an elementary or 
  2.1   secondary school situated in Minnesota, North Dakota, South 
  2.2   Dakota, Iowa, or Wisconsin, wherein a resident of this state may 
  2.3   legally fulfill the state's compulsory attendance laws, which is 
  2.4   not operated for profit, and which adheres to the provisions of 
  2.5   the Civil Rights Act of 1964 and chapter 363.  As used in this 
  2.6   clause, "textbooks" includes books and other instructional 
  2.7   materials and equipment used in elementary and secondary schools 
  2.8   in teaching only those subjects legally and commonly taught in 
  2.9   public elementary and secondary schools in this state.  
  2.10  "Textbooks" does not include instructional books and materials 
  2.11  used in the teaching of religious tenets, doctrines, or worship, 
  2.12  the purpose of which is to instill such tenets, doctrines, or 
  2.13  worship, nor does it include books or materials for, or 
  2.14  transportation to, extracurricular activities including sporting 
  2.15  events, musical or dramatic events, speech activities, driver's 
  2.16  education, or similar programs.  In order to qualify for the 
  2.17  subtraction under this clause the taxpayer must elect to itemize 
  2.18  deductions under section 63(e) of the Internal Revenue Code; 
  2.19     (4) to the extent included in federal taxable income, 
  2.20  distributions from a qualified governmental pension plan, an 
  2.21  individual retirement account, simplified employee pension, or 
  2.22  qualified plan covering a self-employed person that represent a 
  2.23  return of contributions that were included in Minnesota gross 
  2.24  income in the taxable year for which the contributions were made 
  2.25  but were deducted or were not included in the computation of 
  2.26  federal adjusted gross income.  The distribution shall be 
  2.27  allocated first to return of contributions until the 
  2.28  contributions included in Minnesota gross income have been 
  2.29  exhausted.  This subtraction applies only to contributions made 
  2.30  in a taxable year prior to 1985; 
  2.31     (5) income as provided under section 290.0802; 
  2.32     (6) the amount of unrecovered accelerated cost recovery 
  2.33  system deductions allowed under subdivision 19g; 
  2.34     (7) to the extent included in federal adjusted gross 
  2.35  income, income realized on disposition of property exempt from 
  2.36  tax under section 290.491; and 
  3.1      (8) to the extent not deducted in determining federal 
  3.2   taxable income, the amount paid for health insurance of 
  3.3   self-employed individuals as determined under section 162(l) of 
  3.4   the Internal Revenue Code, except that the 25 percent limit does 
  3.5   not apply.  If the taxpayer deducted insurance payments under 
  3.6   section 213 of the Internal Revenue Code of 1986, the 
  3.7   subtraction under this clause must be reduced by the lesser of: 
  3.8      (i) the total itemized deductions allowed under section 
  3.9   63(d) of the Internal Revenue Code, less state, local, and 
  3.10  foreign income taxes deductible under section 164 of the 
  3.11  Internal Revenue Code and the standard deduction under section 
  3.12  63(c) of the Internal Revenue Code; or 
  3.13     (ii) the lesser of (A) the amount of insurance qualifying 
  3.14  as "medical care" under section 213(d) of the Internal Revenue 
  3.15  Code to the extent not deducted under section 162(1) of the 
  3.16  Internal Revenue Code or excluded from income or (B) the total 
  3.17  amount deductible for medical care under section 213(a); and 
  3.18     (9) the first $5,000 of compensation for personal services 
  3.19  in the active duty armed forces of the United States or the 
  3.20  United Nations wholly performed outside of the state of 
  3.21  Minnesota. 
  3.22     Sec. 2.  [EFFECTIVE DATE.] 
  3.23     Section 1 is effective for taxable years beginning after 
  3.24  December 31, 1994.