Minnesota SF 496: Public pension benefit income tax subtraction establishment

Bill Text

1.1 A bill for an act​
1.2 relating to taxation; individual income; establishing a public pension benefit​
1.3 subtraction; amending Minnesota Statutes 2022, sections 290.0132, by adding a​
1.4 subdivision; 290.091, subdivision 2.​
1.5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:​
1.6 Section 1. Minnesota Statutes 2022, section 290.0132, is amended by adding a subdivision​
1.7 to read:​
1.8 Subd. 31.Public pension income subtraction.(a) The amount of a taxpayer's public​
1.9 pension exclusion is a subtraction.​
1.10 (b) The amount of a taxpayer's federal exclusion is determined as follows:​
1.11 (1) for a taxpayer whose provisional income is less than or equal to the base amount,​
1.12 the federal exclusion equals 100 percent of qualified benefits received during the taxable​
1.13 year;​
1.14 (2) for a taxpayer whose provisional income exceeds the base amount, but is less than​
1.15 or equal to the adjusted base amount, the federal exclusion equals the greater of:​
1.16 (i) 50 percent of qualified benefits received during the taxable year; or​
1.17 (ii) the amount of qualified benefits minus 50 percent of the difference between​
1.18 provisional income and the base amount; and​
1.19 (3) for a taxpayer whose provisional income exceeds the adjusted base amount, the​
1.20 federal exclusion equals the greater of:​
1.21 (i) qualified benefits minus:​
1​Section 1.​
23-01729 as introduced​01/10/23 REVISOR EAP/CH​
SENATE​
STATE OF MINNESOTA​
S.F. No. 496​NINETY-THIRD SESSION​
(SENATE AUTHORS: FRENTZ, Rest, Howe, Nelson and Gustafson)​
OFFICIAL STATUS​D-PG​DATE​
Introduction and first reading​327​01/23/2023​
Referred to Taxes​
Author added Gustafson​574​02/01/2023​

2.1 (A) 85 percent of provisional income in excess of the adjusted base amount; plus​
2.2 (B) 50 percent of the difference between the base amount and the adjusted base amount;​
2.3 or​
2.4 (ii) 15 percent of qualified benefits received during the taxable year.​
2.5 (c) The amount of a taxpayer's state exclusion equals the lesser of:​
2.6 (1) the amount of qualified benefits in excess of the taxpayer's federal exclusion; or​
2.7 (2) the maximum exclusion for a taxpayer determined under paragraph (d).​
2.8 (d) The maximum state exclusion equals $5,450 for a joint return, half that amount for​
2.9 a married taxpayer filing a separate return, and $4,260 for all other taxpayers. The maximum​
2.10 subtraction is reduced by 20 percent of provisional income in excess of:​
2.11 (1) $82,770 for a joint return;​
2.12 (2) half the amount in clause (1) for a married taxpayer filing a separate return; and​
2.13 (3) $64,670 for all other filers.​
2.14 (e) For the purposes of this subdivision:​
2.15 (1) "base amount" has the meaning given in section 86(c)(1) of the Internal Revenue​
2.16 Code and "adjusted base amount" has the meaning given in section 86(c)(2) of the Internal​
2.17 Revenue Code;​
2.18 (2) "provisional income" has the meaning given in section 290.0132, subdivision 26,​
2.19 paragraph (e);​
2.20 (3) "public pension exclusion" means the sum of the federal exclusion calculated under​
2.21 paragraph (b) and the state exclusion calculated under paragraphs (c) and (d); and​
2.22 (4) "qualified benefits" means any amount received:​
2.23 (i) by a basic member of any pension plan governed by chapter 3A, 352B, 353, 354, or​
2.24 354A, or the basic member's survivor, provided that the annuity or benefit is based on service​
2.25 for which the member or survivor is not also receiving Social Security benefits;​
2.26 (ii) from any retirement system administered by the federal government that is based on​
2.27 service for which the recipient or the recipient's survivor is not also receiving Social Security​
2.28 benefits; or​
2.29 (iii) from a public retirement system of or created by another state or any of its political​
2.30 subdivisions if the income tax laws of the other state permit a similar deduction or exemption​
2​Section 1.​
23-01729 as introduced​01/10/23 REVISOR EAP/CH​

3.1 or a reciprocal deduction or exemption of a retirement or pension benefit received from a​
3.2 public retirement system of or created by this state or any political subdivision of this state.​
3.3 (f) The commissioner must adjust the maximum exclusion and phaseout threshold​
3.4 amounts in paragraph (d) as provided in section 270C.22. The statutory year is taxable year​
3.5 2022. The maximum subtraction and threshold amounts as adjusted must be rounded to the​
3.6 nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10​
3.7 amount.​
3.8 EFFECTIVE DATE.This section is effective for taxable years beginning after December​
3.9 31, 2022.​
3.10 Sec. 2. Minnesota Statutes 2022, section 290.091, subdivision 2, is amended to read:​
3.11 Subd. 2.Definitions.For purposes of the tax imposed by this section, the following​
3.12 terms have the meanings given.​
3.13 (a) "Alternative minimum taxable income" means the sum of the following for the taxab