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S.F. No. 293 - Subtraction and Credit for Qualifying Contributions to 529 College Savings Plans (as proposed by the A-4 amendment)
 
Author: Senator Gregory D. Clausen
 
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
 
Date: March 10, 2015



 

This bill provides an income tax subtraction and refundable credit for contributions to a Minnesota 529 college savings plan.  Effective beginning in tax year 2015. 

Section

Provision

1

Provides a subtraction for contributions made to a Minnesota 529 plan of up to $3,000 for married joint filers and $1,500 for all other filers.  Amounts used to claim the subtraction may not also be used to claim the credit allowed under section 2. 
 

2
Subd. 1

 

Provides definitions for “Minnesota college savings plan”, “account”, “nonqualified distribution”, and “plan administrator”.  These terms have the meaning assigned in Chapter 136D, which governs Minnesota college savings plans.
 

Subd. 2

Allows a refundable credit of up to $500 for contributions made to a Minnesota 529 plan.  The credit amount for which a filer is eligible is based on a percentage of the amount of contributions made and the filer’s federal adjusted gross income (FAGI).  Requires that the credit be apportioned for part-year residents and nonresidents based on the applicable percentage of Minnesota income.  Amounts used to claim the credit may not be used to claim the subtraction under section 1.  The credit is calculated as follows:  

  • For individuals and married joint filers with FAGI less than 150% of the federal poverty guideline, 200% of the amount contributed;
  • For individuals and married joint filers with FAGI greater than 150% but less than 200% of the federal poverty guideline, 100% of the amount contributed;
  • For individuals and married joint filers with FAGI greater than 200% of the federal poverty guideline but less than $80,000, 50% of the amount contributed; and
  • For married joint filers with FAGI greater than 200% of the federal poverty guideline, 50%, and the credit is phased out by $1 for every $160 over $80,000.  For these filers, the credit would phase out at FAGI of $160,000.  The $80,000 threshold is adjusted annually for inflation.   
     

Subd. 3

Requires that the credit must be transferred to the plan administrator of the filer’s designated 529 account.  In the case of contributions to more than one account, the Commissioner of Revenue must apportion the credit based on the percentage of total contributions to all accounts.
 

Subd. 4

Requires the Commissioner of the Office of Higher Education to provide information to the Commissioner of Revenue sufficient to verify the taxpayer’s contribution amounts.
 

Subd. 5

Imposes a penalty for nonqualified distributions of ten percent of the amount of the nonqualified distribution, or the total amount of credits received over all years, whichever is less. 
 

Subd. 6

Appropriates a sufficient amount from the general fund to pay refunds authorized by the credit.

 
 
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