1.1                          A bill for an act 
  1.2             relating to investment; establishing an education 
  1.3             investment fund; providing tax incentives for savings 
  1.4             for education and other purposes; amending Minnesota 
  1.5             Statutes 1994, sections 290.01, subdivision 19a; and 
  1.6             290.091, subdivisions 2 and 6; Minnesota Statutes 1995 
  1.7             Supplement, section 290.01, subdivision 19b; proposing 
  1.8             coding for new law in Minnesota Statutes, chapters 
  1.9             11A; 136A; and 290. 
  1.10  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.11                             ARTICLE 1 
  1.12                        EDUCATION INVESTMENT 
  1.13     Section 1.  [11A.165] [EDUCATION INVESTMENT FUND.] 
  1.14     Subdivision 1.  [ESTABLISHMENT.] A fund called the 
  1.15  education investment fund is established in the state treasury 
  1.16  for the purpose of investing money for grants to post-secondary 
  1.17  students under section 136A.123. 
  1.18     Subd. 2.  [ASSETS.] The assets of the education investment 
  1.19  fund shall consist of money contributed by private corporations, 
  1.20  foundations, or individuals, and all income from the investment 
  1.21  of contributions to the fund.  All assets of the fund are 
  1.22  appropriated for the purpose of supporting grants under section 
  1.23  136A.123. 
  1.24     Subd. 3.  [MANAGEMENT.] The education investment fund shall 
  1.25  be managed by the board. 
  1.26     Subd. 4.  [INVESTMENTS.] The education investment fund 
  1.27  shall be invested subject to the provisions of section 11A.24. 
  2.1      Subd. 5.  [DISTRIBUTION OF ASSETS.] The board shall 
  2.2   annually transfer appropriations from the fund to the higher 
  2.3   education services office for distribution to eligible students 
  2.4   under section 136A.123.  Appropriations transferred to the 
  2.5   higher education services office which are not spent do not 
  2.6   cancel but are available for grants in the following fiscal year.
  2.7      Sec. 2.  [136A.123] [EDUCATION INVESTMENT GRANT PROGRAM.] 
  2.8      Subdivision 1.  [ESTABLISHMENT.] An education investment 
  2.9   grant program is established to provide grants to low-income 
  2.10  students who withdraw funds from a qualified savings plan to pay 
  2.11  for their post-secondary education. 
  2.12     Subd. 2.  [ELIGIBILITY.] To be eligible to receive a grant, 
  2.13  a student must be: 
  2.14     (1) a resident of the state of Minnesota; 
  2.15     (2) enrolled at least half time in an undergraduate program 
  2.16  of instruction at a public or private post-secondary 
  2.17  institution; and 
  2.18     (3) expend funds withdrawn from a savings plan under 
  2.19  section 290.0803 to pay for post-secondary education expenses in 
  2.20  the award year. 
  2.21     Subd. 3.  [ALLOCATION; AWARDS.] Grants must be awarded on a 
  2.22  funds available basis from appropriations transferred to the 
  2.23  office by the state board of investment under section 11A.165.  
  2.24  The office shall establish rules to govern the size and 
  2.25  distribution of grant awards.  If insufficient funds are 
  2.26  available to award grants to all eligible applicants, the office 
  2.27  shall give priority to applicants who demonstrate the greatest 
  2.28  savings effort relative to income.  A grant awarded under this 
  2.29  section does not affect a recipient's eligibility for a state 
  2.30  grant under section 136A.121. 
  2.31                             ARTICLE 2 
  2.32                           TAX INCENTIVES 
  2.33     Section 1.  Minnesota Statutes 1994, section 290.01, 
  2.34  subdivision 19a, is amended to read: 
  2.35     Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
  2.36  individuals, estates, and trusts, there shall be added to 
  3.1   federal taxable income: 
  3.2      (1)(i) interest income on obligations of any state other 
  3.3   than Minnesota or a political or governmental subdivision, 
  3.4   municipality, or governmental agency or instrumentality of any 
  3.5   state other than Minnesota exempt from federal income taxes 
  3.6   under the Internal Revenue Code or any other federal statute, 
  3.7   and 
  3.8      (ii) exempt-interest dividends as defined in section 
  3.9   852(b)(5) of the Internal Revenue Code, except the portion of 
  3.10  the exempt-interest dividends derived from interest income on 
  3.11  obligations of the state of Minnesota or its political or 
  3.12  governmental subdivisions, municipalities, governmental agencies 
  3.13  or instrumentalities, but only if the portion of the 
  3.14  exempt-interest dividends from such Minnesota sources paid to 
  3.15  all shareholders represents 95 percent or more of the 
  3.16  exempt-interest dividends that are paid by the regulated 
  3.17  investment company as defined in section 851(a) of the Internal 
  3.18  Revenue Code, or the fund of the regulated investment company as 
  3.19  defined in section 851(h) of the Internal Revenue Code, making 
  3.20  the payment; and 
  3.21     (iii) for the purposes of items (i) and (ii), interest on 
  3.22  obligations of an Indian tribal government described in section 
  3.23  7871(c) of the Internal Revenue Code shall be treated as 
  3.24  interest income on obligations of the state in which the tribe 
  3.25  is located; 
  3.26     (2) the amount of income taxes paid or accrued within the 
  3.27  taxable year under this chapter and income taxes paid to any 
  3.28  other state or to any province or territory of Canada, to the 
  3.29  extent allowed as a deduction under section 63(d) of the 
  3.30  Internal Revenue Code, but the addition may not be more than the 
  3.31  amount by which the itemized deductions as allowed under section 
  3.32  63(d) of the Internal Revenue Code exceeds the amount of the 
  3.33  standard deduction as defined in section 63(c) of the Internal 
  3.34  Revenue Code.  For the purpose of this paragraph, the 
  3.35  disallowance of itemized deductions under section 68 of the 
  3.36  Internal Revenue Code of 1986, income tax is the last itemized 
  4.1   deduction disallowed; 
  4.2      (3) the capital gain amount of a lump sum distribution to 
  4.3   which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
  4.4   Reform Act of 1986, Public Law Number 99-514, applies; and 
  4.5      (4) the amount of income taxes paid or accrued within the 
  4.6   taxable year under this chapter and income taxes paid to any 
  4.7   other state or any province or territory of Canada, to the 
  4.8   extent allowed as a deduction in determining federal adjusted 
  4.9   gross income.  For the purpose of this paragraph, income taxes 
  4.10  do not include the taxes imposed by sections 290.0922, 
  4.11  subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 
  4.12  and 
  4.13     (5) the amount provided by section 290.0803, subdivision 3. 
  4.14     Sec. 2.  Minnesota Statutes 1995 Supplement, section 
  4.15  290.01, subdivision 19b, is amended to read: 
  4.16     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  4.17  individuals, estates, and trusts, there shall be subtracted from 
  4.18  federal taxable income: 
  4.19     (1) interest income on obligations of any authority, 
  4.20  commission, or instrumentality of the United States to the 
  4.21  extent includable in taxable income for federal income tax 
  4.22  purposes but exempt from state income tax under the laws of the 
  4.23  United States; 
  4.24     (2) if included in federal taxable income, the amount of 
  4.25  any overpayment of income tax to Minnesota or to any other 
  4.26  state, for any previous taxable year, whether the amount is 
  4.27  received as a refund or as a credit to another taxable year's 
  4.28  income tax liability; 
  4.29     (3) the amount paid to others not to exceed $650 for each 
  4.30  dependent in grades kindergarten to 6 and $1,000 for each 
  4.31  dependent in grades 7 to 12, for tuition, textbooks, and 
  4.32  transportation of each dependent in attending an elementary or 
  4.33  secondary school situated in Minnesota, North Dakota, South 
  4.34  Dakota, Iowa, or Wisconsin, wherein a resident of this state may 
  4.35  legally fulfill the state's compulsory attendance laws, which is 
  4.36  not operated for profit, and which adheres to the provisions of 
  5.1   the Civil Rights Act of 1964 and chapter 363.  As used in this 
  5.2   clause, "textbooks" includes books and other instructional 
  5.3   materials and equipment used in elementary and secondary schools 
  5.4   in teaching only those subjects legally and commonly taught in 
  5.5   public elementary and secondary schools in this state.  
  5.6   "Textbooks" does not include instructional books and materials 
  5.7   used in the teaching of religious tenets, doctrines, or worship, 
  5.8   the purpose of which is to instill such tenets, doctrines, or 
  5.9   worship, nor does it include books or materials for, or 
  5.10  transportation to, extracurricular activities including sporting 
  5.11  events, musical or dramatic events, speech activities, driver's 
  5.12  education, or similar programs.  In order to qualify for the 
  5.13  subtraction under this clause the taxpayer must elect to itemize 
  5.14  deductions under section 63(e) of the Internal Revenue Code; 
  5.15     (4) to the extent included in federal taxable income, 
  5.16  distributions from a qualified governmental pension plan, an 
  5.17  individual retirement account, simplified employee pension, or 
  5.18  qualified plan covering a self-employed person that represent a 
  5.19  return of contributions that were included in Minnesota gross 
  5.20  income in the taxable year for which the contributions were made 
  5.21  but were deducted or were not included in the computation of 
  5.22  federal adjusted gross income.  The distribution shall be 
  5.23  allocated first to return of contributions until the 
  5.24  contributions included in Minnesota gross income have been 
  5.25  exhausted.  This subtraction applies only to contributions made 
  5.26  in a taxable year prior to 1985; 
  5.27     (5) income as provided under section 290.0802; 
  5.28     (6) the amount of unrecovered accelerated cost recovery 
  5.29  system deductions allowed under subdivision 19g; 
  5.30     (7) to the extent included in federal adjusted gross 
  5.31  income, income realized on disposition of property exempt from 
  5.32  tax under section 290.491; 
  5.33     (8) to the extent not deducted in determining federal 
  5.34  taxable income, the amount paid for health insurance of 
  5.35  self-employed individuals as determined under section 162(l) of 
  5.36  the Internal Revenue Code, except that the 25 percent limit does 
  6.1   not apply.  If the taxpayer deducted insurance payments under 
  6.2   section 213 of the Internal Revenue Code of 1986, the 
  6.3   subtraction under this clause must be reduced by the lesser of: 
  6.4      (i) the total itemized deductions allowed under section 
  6.5   63(d) of the Internal Revenue Code, less state, local, and 
  6.6   foreign income taxes deductible under section 164 of the 
  6.7   Internal Revenue Code and the standard deduction under section 
  6.8   63(c) of the Internal Revenue Code; or 
  6.9      (ii) the lesser of (A) the amount of insurance qualifying 
  6.10  as "medical care" under section 213(d) of the Internal Revenue 
  6.11  Code to the extent not deducted under section 162(1) of the 
  6.12  Internal Revenue Code or excluded from income or (B) the total 
  6.13  amount deductible for medical care under section 213(a); and 
  6.14     (9) the exemption amount allowed under Laws 1995, chapter 
  6.15  255, article 3, section 2, subdivision 3; and 
  6.16     (10) the subtraction provided by section 290.0803, 
  6.17  subdivision 2. 
  6.18     Sec. 3.  [290.0803] [HIGHER EDUCATION TRUSTS.] 
  6.19     Subdivision 1.  [DEFINITIONS.] (a) For the purposes of this 
  6.20  section, the following terms have the meanings given them.  
  6.21     (b) "Higher education trust" means a grantor trust created 
  6.22  or organized in Minnesota for the purpose of funding the 
  6.23  qualified education expenses of the grantor, but only if the 
  6.24  written governing instrument creating the trust meets the 
  6.25  following requirements: 
  6.26     (1) No contributions shall be accepted unless it is in 
  6.27  cash, and contributions shall not be accepted for the taxable 
  6.28  year in excess of $2,000. 
  6.29     (2) The trustee is a bank or other person who demonstrates 
  6.30  to the satisfaction of the commissioner that the manner in which 
  6.31  the other person will administer the trust will be consistent 
  6.32  with the requirements of this section. 
  6.33     (3) No part of the trust funds shall be invested in life 
  6.34  insurance contracts. 
  6.35     (4) The interest of an individual in the balance of the 
  6.36  individual's account is nonforfeitable. 
  7.1      (5) The assets of the trust shall not be commingled with 
  7.2   other property except in a common trust fund or common 
  7.3   investment fund. 
  7.4      (6) The trust is not taxed for federal tax purposes as an 
  7.5   individual retirement account under section 408 of the Internal 
  7.6   Revenue Code. 
  7.7      (c) "Qualified education expense of the grantor" means 
  7.8   tuition, books, and fees required for the enrollment or 
  7.9   attendance at an eligible education institution of the grantor; 
  7.10  the grantor's spouse; or any child, grandchild, or ancestor of 
  7.11  the grantor or grantor's spouse.  A qualified education expense 
  7.12  of the grantor does not include expenses with respect to any 
  7.13  course or other education involving sports, games, or hobbies 
  7.14  other than as part of a degree program. 
  7.15     The amount of qualified higher education expenses otherwise 
  7.16  taken into account under this paragraph with respect to the 
  7.17  education of an individual shall be reduced, before the 
  7.18  application of this paragraph, by the sum of the amounts 
  7.19  received with respect to the individual for the taxable year as: 
  7.20     (1) a qualified scholarship which under section 117 of the 
  7.21  Internal Revenue Code of 1986 is not includable in gross income; 
  7.22     (2) an educational assistance allowance under United States 
  7.23  Code, title 38, chapter 30, 31, 32, 34, or 35; 
  7.24     (3) a payment, other than a gift, bequest, devise, or 
  7.25  inheritance within the meaning of section 102(a) of the Internal 
  7.26  Revenue Code for educational expenses, or attributable to 
  7.27  attendance at an eligible educational institution, which is 
  7.28  exempt from income taxation by any law of the United States; or 
  7.29     (4) amounts excluded from federal taxable income under 
  7.30  section 135 of the Internal Revenue Code. 
  7.31     (d) For the purposes of paragraph (c), "eligible 
  7.32  educational institution" means: 
  7.33     (1) an institution described in section 1201(a) or 
  7.34  subparagraph (C) or (D) of section 481(a)(1) of the Higher 
  7.35  Education Act of 1965; or 
  7.36     (2) an area vocational education school, as defined in 
  8.1   subparagraph (C) or (D) of section 521(3) of the Carl D. 
  8.2   Perkins' Vocational Education Act, that is in any state, as 
  8.3   defined in section 521(27) of the Carl D. Perkins' Vocational 
  8.4   Education Act. 
  8.5      Subd. 2.  [SUBTRACTION.] The grantor is allowed a 
  8.6   subtraction from federal taxable income in the amount of (1) the 
  8.7   contribution made by the grantor to a higher education trust in 
  8.8   the grantor's taxable year, and (2) any net income or net 
  8.9   capital gain other than income which is excluded from Minnesota 
  8.10  tax by section 290.01, subdivision 19b, clause (1), generated by 
  8.11  the higher education trust that is included in the grantor's 
  8.12  federal taxable income for the year. 
  8.13     Subd. 3.  [ADDITION.] The net income or capital loss of a 
  8.14  higher education trust for a tax year which is included in the 
  8.15  computation of the grantor's federal taxable income must be 
  8.16  added to federal taxable income to the extent the loss is 
  8.17  included in the grantor's computation of federal taxable income. 
  8.18     Subd. 4.  [TAX ON DISTRIBUTION FROM A HIGHER EDUCATION 
  8.19  TRUST.] In the event of distribution from a higher education 
  8.20  trust within five years of the establishment of the higher 
  8.21  education trust or in a year in which the distribution exceeds 
  8.22  the qualified education expense of the grantor for the year 
  8.23  notwithstanding any provision to the contrary, there is imposed 
  8.24  on the grantor or the grantor's estate an additional tax in the 
  8.25  amount of 8.5 percent of the distribution if the distribution is 
  8.26  made within five years of the establishment of the trust or 8.5 
  8.27  percent of the distribution which exceeds the qualified 
  8.28  education expense of the grantor for the year for distributions 
  8.29  from a trust in existence for more than five years. 
  8.30     This tax applies regardless of whether the true grantor is 
  8.31  a resident or nonresident of Minnesota in the year of 
  8.32  distribution. 
  8.33     In no event shall the cumulative distributions subject to 
  8.34  the tax in this subdivision exceed the cumulative amount of 
  8.35  subtractions less cumulative additions claimed by the grantor on 
  8.36  the grantor's Minnesota individual income tax returns for tax 
  9.1   years prior to the year of distribution.  Notwithstanding the 
  9.2   filing requirements of section 289A.08, subdivision 1, a grantor 
  9.3   is required to file a Minnesota individual tax return for any 
  9.4   year in which the tax provided by this subdivision is imposed. 
  9.5      Subd. 5.  [RETURNS OF HIGHER EDUCATION TRUSTS.] For each 
  9.6   year a higher education trust is in existence, the grantor of 
  9.7   the trust is required to file a return with the commissioner by 
  9.8   October 15 of the year following the tax year.  The return must 
  9.9   include the social security number of the grantor, the amount of 
  9.10  the contributions made to the trust by the grantor in the year, 
  9.11  the amount of net income or loss of the trust for the year, the 
  9.12  amount of distributions made in the year, and the amount of the 
  9.13  qualified higher education expense incurred by the grantor in 
  9.14  the year. 
  9.15     Subd. 6.  [SUNSET OF THE SUBTRACTION AND ADDITION.] If the 
  9.16  federal government enacts an income tax provision providing for 
  9.17  nondeductible individual retirement accounts similar to the 
  9.18  provision proposed by Congress in section 11015 of Revenue 
  9.19  Reconciliation and Tax Simplification Provisions from Conference 
  9.20  Report on HR 2491, Seven-Year Balanced Budget Reconciliation Act 
  9.21  of 1995, filed November 16, 1995, the subtraction and additions 
  9.22  provided by subdivisions 2 and 3 will not be allowed for tax 
  9.23  years beginning after the year of federal enactment. 
  9.24     Subd. 7.  [ROLL-OVER OF DISTRIBUTIONS FROM HIGHER EDUCATION 
  9.25  TRUSTS MADE AFTER THE YEAR OF THE SUNSET OF SUBDIVISION 2.] If 
  9.26  the federal government enacts a tax provision as provided in 
  9.27  subdivision 6, the tax imposed by subdivision 4 will be reduced 
  9.28  by 8.5 percent of the amount contributed by the grantor to the 
  9.29  nondeductible individual retirement account established by the 
  9.30  grantor, other than the roll-over proceeds from an individual 
  9.31  retirement account governed by section 407 of the Internal 
  9.32  Revenue Code, in the year of distribution. 
  9.33     Sec. 4.  Minnesota Statutes 1994, section 290.091, 
  9.34  subdivision 2, is amended to read: 
  9.35     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
  9.36  this section, the following terms have the meanings given: 
 10.1      (a) "Alternative minimum taxable income" means the sum of 
 10.2   the following for the taxable year: 
 10.3      (1) the taxpayer's federal alternative minimum taxable 
 10.4   income as defined in section 55(b)(2) of the Internal Revenue 
 10.5   Code; 
 10.6      (2) the taxpayer's itemized deductions allowed in computing 
 10.7   federal alternative minimum taxable income, but excluding the 
 10.8   Minnesota charitable contribution deduction and the medical 
 10.9   expense deduction; 
 10.10     (3) for depletion allowances computed under section 613A(c) 
 10.11  of the Internal Revenue Code, with respect to each property (as 
 10.12  defined in section 614 of the Internal Revenue Code), to the 
 10.13  extent not included in federal alternative minimum taxable 
 10.14  income, the excess of the deduction for depletion allowable 
 10.15  under section 611 of the Internal Revenue Code for the taxable 
 10.16  year over the adjusted basis of the property at the end of the 
 10.17  taxable year (determined without regard to the depletion 
 10.18  deduction for the taxable year); 
 10.19     (4) to the extent not included in federal alternative 
 10.20  minimum taxable income, the amount of the tax preference for 
 10.21  intangible drilling cost under section 57(a)(2) of the Internal 
 10.22  Revenue Code determined without regard to subparagraph (E); 
 10.23     (5) to the extent not included in federal alternative 
 10.24  minimum taxable income, the amount of interest income as 
 10.25  provided by section 290.01, subdivision 19a, clause (1); 
 10.26     less the sum of the amounts determined under the following 
 10.27  clauses (1) to (3) (4): 
 10.28     (1) interest income as defined in section 290.01, 
 10.29  subdivision 19b, clause (1); 
 10.30     (2) an overpayment of state income tax as provided by 
 10.31  section 290.01, subdivision 19b, clause (2), to the extent 
 10.32  included in federal alternative minimum taxable income; and 
 10.33     (3) the amount of investment interest paid or accrued 
 10.34  within the taxable year on indebtedness to the extent that the 
 10.35  amount does not exceed net investment income, as defined in 
 10.36  section 163(d)(4) of the Internal Revenue Code.  Interest does 
 11.1   not include amounts deducted in computing federal adjusted gross 
 11.2   income; and 
 11.3      (4) the amount provided in subdivision 19b, clause (10). 
 11.4      In the case of an estate or trust, alternative minimum 
 11.5   taxable income must be computed as provided in section 59(c) of 
 11.6   the Internal Revenue Code. 
 11.7      (b) "Investment interest" means investment interest as 
 11.8   defined in section 163(d)(3) of the Internal Revenue Code. 
 11.9      (c) "Tentative minimum tax" equals seven percent of 
 11.10  alternative minimum taxable income after subtracting the 
 11.11  exemption amount determined under subdivision 3. 
 11.12     (d) "Regular tax" means the tax that would be imposed under 
 11.13  this chapter (without regard to this section and section 
 11.14  290.032), reduced by the sum of the nonrefundable credits 
 11.15  allowed under this chapter.  
 11.16     (e) "Net minimum tax" means the minimum tax imposed by this 
 11.17  section. 
 11.18     (f) "Minnesota charitable contribution deduction" means a 
 11.19  charitable contribution deduction under section 170 of the 
 11.20  Internal Revenue Code to or for the use of an entity described 
 11.21  in section 290.21, subdivision 3, clauses (a) to (e). 
 11.22     Sec. 5.  Minnesota Statutes 1994, section 290.091, 
 11.23  subdivision 6, is amended to read: 
 11.24     Subd. 6.  [CREDIT FOR PRIOR YEARS' LIABILITY.] (a) A credit 
 11.25  is allowed against the tax imposed by this chapter on 
 11.26  individuals, trusts, and estates equal to the minimum tax credit 
 11.27  for the taxable year.  The minimum tax credit equals the 
 11.28  adjusted net minimum tax for taxable years beginning after 
 11.29  December 31, 1988, reduced by the minimum tax credits allowed in 
 11.30  a prior taxable year.  The credit may not exceed the excess (if 
 11.31  any) for the taxable year of 
 11.32     (1) the regular tax, over 
 11.33     (2) the greater of (i) the tentative alternative minimum 
 11.34  tax, or (ii) zero. 
 11.35     (b) The adjusted net minimum tax for a taxable year equals 
 11.36  the lesser of the net minimum tax or the excess (if any) of 
 12.1      (1) the tentative minimum tax, over 
 12.2      (2) seven percent of the sum of 
 12.3      (i) adjusted gross income as defined in section 62 of the 
 12.4   Internal Revenue Code, 
 12.5      (ii) interest income as defined in section 290.01, 
 12.6   subdivision 19a, clause (1), 
 12.7      (iii) interest on specified private activity bonds, as 
 12.8   defined in section 57(a)(5) of the Internal Revenue Code, to the 
 12.9   extent not included under clause (ii), 
 12.10     (iv) depletion as defined in section 57(a)(1), determined 
 12.11  without regard to the last sentence of paragraph (1), of the 
 12.12  Internal Revenue Code, less 
 12.13     (v) the deductions provided in subdivision 2, paragraph 
 12.14  (a), clauses clause (5), items (i), (ii), and (iii) (1) to (4), 
 12.15  and 
 12.16     (vi) the exemption amount determined under subdivision 3. 
 12.17     In the case of an individual who is not a Minnesota 
 12.18  resident for the entire year, adjusted net minimum tax must be 
 12.19  multiplied by the fraction defined in section 290.06, 
 12.20  subdivision 2c, paragraph (e).  In the case of a trust or 
 12.21  estate, adjusted net minimum tax must be multiplied by the 
 12.22  fraction defined under subdivision 4, paragraph (b). 
 12.23     Sec. 6.  [EFFECTIVE DATES.] 
 12.24     Sections 1 to 5 are effective for tax years beginning after 
 12.25  December 31, 1995.