21.0445.01000
Sixty-seventh
Legislative Assembly HOUSE BILL NO. 1479
of North Dakota
Introduced by
Representatives K. Koppelman, Dockter, B. Koppelman, Toman
1 A BILL for an Act to amend and reenact section 57-38-30.3 of the North Dakota Century Code,
2 relating to replacement of the individual, estate, and trust income tax rate schedule with a
3 flat-rate income tax; and to provide an effective date.
4 BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA:
5 SECTION 1. AMENDMENT. Section 57-38-30.3 of the North Dakota Century Code is
6 amended and reenacted as follows:
7 57-38-30.3. Individual, estate, and trust income tax.
8 1. A tax is hereby imposed for each taxable year upon income earned or received in that
9 taxable year by every resident and nonresident individual, estate, and trust. A taxpayer
10 computing the tax under this section is only eligible for those adjustments or credits
11 that are specifically provided for in this section. Provided, that for purposes of this
12 section, any person required to file a state income tax return under this chapter, but
13 who has not computed a federal taxable income figure, shall compute a federal
14 taxable income figure using a pro forma return in order to determine a federal taxable
15 income figure to be used as a starting point in computing state income tax under this
16 section. The tax for individuals, estates, and trusts is equal to two percent of North
17 Dakota taxable income multiplied by the rates in the applicable rate schedule in
18 subdivisions a through d corresponding to an individual's filing status used for federal
19 income tax purposes. For an estate or trust, the schedule in subdivision e must be
20 used for purposes of this subsection. North Dakota taxable income must be reduced
21 by the amounts under subdivisions a through e, based on a taxpayer's filing status
22 used for federal income tax purposes.
23 a. Single, other than head of household or surviving spouse, $18,725.
24 If North Dakota taxable income is:
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1 Over Not over The tax is equal to Of amount over
2 $0 $37,450 1.10% $0
3 $37,450 $90,750 $411.95 + 2.04% $37,450
4 $90,750 $189,300 $1,499.27 + 2.27% $90,750
5 $189,300 $411,500 $3,736.36 + 2.64% $189,300
6 $411,500 $9,602.44 + 2.90% $411,500
7 b. Married filing jointly and surviving spouse, $37,450.
8 If North Dakota taxable income is:
9 Over Not over The tax is equal to Of amount over
10 $0 $62,600 1.10% $0
11 $62,600 $151,200 $688.60 + 2.04% $62,600
12 $151,200 $230,450 $2,496.04 + 2.27% $151,200
13 $230,450 $411,500 $4,295.02 + 2.64% $230,450
14 $411,500 $9,074.74 + 2.90% $411,500
15 c. Married filing separately, $18,725.
16 If North Dakota taxable income is:
17 Over Not over The tax is equal to Of amount over
18 $0 $31,300 1.10% $0
19 $31,300 $75,600 $344.30 + 2.04% $31,300
20 $75,600 $115,225 $1,248.02 + 2.27% $75,600
21 $115,225 $205,750 $2,147.51 + 2.64% $115,225
22 $205,750 $4,537.37 + 2.90% $205,750
23 d. Head of household, $25,100.
24 If North Dakota taxable income is:
25 Over Not over The tax is equal to Of amount over
26 $0 $50,200 1.10% $0
27 $50,200 $129,600 $552.20 + 2.04% $50,200
28 $129,600 $209,850 $2,171.96 + 2.27% $129,600
29 $209,850 $411,500 $3,993.64 + 2.64% $209,850
30 $411,500 $9,317.20 + 2.90% $411,500
31 e. Estates and trusts, $1,250.
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1 If North Dakota taxable income is:
2 Over Not over The tax is equal to Of amount over
3 $0 $2,500 1.10% $0
4 $2,500 $5,900 $27.50 + 2.04% $2,500
5 $5,900 $9,050 $96.86 + 2.27% $5,900
6 $9,050 $12,300 $168.37 + 2.64% $9,050
7 $12,300 $254.17 + 2.90% $12,300
8 f. For an individual who is not a resident of this state for the entire year, or for a
9 nonresident estate or trust, the tax is equal to the tax otherwise computed under
10 this subsection multiplied by a fraction in which:
11 (1) The numerator is the federal adjusted gross income allocable and
12 apportionable to this state; and
13 (2) The denominator is the federal adjusted gross income from all sources
14 reduced by the net income from the amounts specified in subdivisions a and
15 b of subsection 2.
16 In the case of married individuals filing a joint return, if one spouse is a resident
17 of this state for the entire year and the other spouse is a nonresident for part or
18 all of the tax year, the tax on the joint return must be computed under this
19 subdivision.
20 g. The tax commissioner shall prescribe new rate schedules that apply in lieu of the
21 schedules set forth in subdivisions a through e. The new schedules must be
22 determined by increasing the minimum and maximum dollar amounts for each
23 income bracket for which a tax is imposed by the cost-of-living adjustment for the
24 taxable year as determined by the secretary of the United States treasury for
25 purposes of section 1(f) of the United States Internal Revenue Code of 1954, as
26 amended. For this purpose, the rate applicable to each income bracket may not
27 be changed, and the manner of applying the cost-of-living adjustment must be
28 the same as that used for adjusting the income brackets for federal income tax
29 purposes.
30 h. The tax commissioner shall prescribe an optional simplified method of computing
31 tax under this section that may be used by an individual taxpayer who is not
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1 entitled to claim an adjustment under subsection 2 or credit against income tax
2 liability under subsection 7.
3 2. For purposes of this section, "North Dakota taxable income" means the federal taxable
4 income of an individual, estate, or trust as computed under the Internal Revenue Code
5 of 1986, as amended, adjusted as follows:
6 a. Reduced by interest income from obligations of the United States and income
7 exempt from state income tax under federal statute or United States or North
8 Dakota constitutional provisions.
9 b. Reduced by the portion of a distribution from a qualified investment fund
10 described in section 57-38-01 which is attributable to investments by the qualified
11 investment fund in obligations of the United States, obligations of North Dakota or
12 its political subdivisions, and any other obligation the interest from which is
13 exempt from state income tax under federal statute or United States or North
14 Dakota constitutional provisions.
15 c. Reduced by the amount equal to the earnings that are passed through to a
16 taxpayer in connection with an allocation and apportionment to North Dakota
17 under section 57-38-01.35.
18 d. Reduced by forty percent of:
19 (1) The excess of the taxpayer's net long-term capital gain for the taxable year
20 over the net short-term capital loss for that year, as computed for purposes
21 of the Internal Revenue Code of 1986, as amended. The adjustment
22 provided by this subdivision is allowed only to the extent the net long-term
23 capital gain is allocated to this state.
24 (2) Qualified dividends as defined under Internal Revenue Code section 1(h)
25 (11), added by section 302(a) of the Jobs and Growth Tax Relief
26 Reconciliation Act of 2003 [Pub. L. 108-27; 117 Stat. 752; 2 U.S.C. 963
27 et seq.], but only if taxed at a federal income tax rate that is lower than the
28 regular federal income tax rates applicable to ordinary income. If, for any
29 taxable year, qualified dividends are taxed at the regular federal income tax
30 rates applicable to ordinary income, the reduction allowed under this
31 subdivision is equal to thirty percent of all dividends included in federal
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1 taxable income. The adjustment provided by this subdivision is allowed only
2 to the extent the qualified dividend income is allocated to this state.
3 e. Increased by the amount of a lump sum distribution for which income averaging
4 was elected under section 402 of the Internal Revenue Code of 1986 [26 U.S.C.
5 402], as amended. This adjustment does not apply if the taxpayer received the
6 lump sum distribution while a nonresident of this state and the distribution is
7 exempt from taxation by this state under federal law.
8 f. Increased by an amount equal to the losses that are passed through to a
9 taxpayer in connection with an allocation and apportionment to North Dakota
10 under section 57-38-01.35.
11 g. Reduced by the amount received by the taxpayer as payment for services
12 performed when mobilized under title 10 United States Code federal service as a
13 member of the national guard or reserve member of the armed forces of the
14 United States. This subdivision does not apply to federal service while attending
15 annual training, basic military training, or professional military education.
16 h. Reduced by income from a new and expanding business exempt from state
17 income tax under section 40-57.1-04.
18 i. Reduced by interest and income from bonds issued under chapter 11-37.
19 j. Reduced by up to ten thousand dollars of qualified expenses that are related to a
20 donation by a taxpayer or a taxpayer's dependent, while living, of one or more
21 human organs to another human being for human organ transplantation. A
22 taxpayer may claim the reduction in this subdivision only once for each instance
23 of organ donation during the taxable year in which the human organ donation and
24 the human organ transplantation occurs but if qualified expenses are incurred in
25 more than one taxable year, the reduction for those expenses must be claimed in
26 the year in which the expenses are incurred. For purposes of this subdivision:
27 (1) "Human organ transplantation" means the medical procedure by which
28 transfer of a human organ is made from the body of one person to the body
29 of another person.
30 (2) "Organ" means all or part of an individual's liver, pancreas, kidney, intestine,
31 lung, or bone marrow.
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1 (3) "Qualified expenses" means lost wages not compensated by sick pay and
2 unreimbursed medical expenses as defined for federal income tax
3 purposes, to the extent not deducted in computing federal taxable income,
4 whether or not the taxpayer itemizes federal income tax deductions.
5 k.j. Increased by the amount of the contribution upon which the credit under section
6 57-38-01.21 is computed, but only to the extent that the contribution reduced
7 federal taxable income.
8 l.k. Reduced by the amount of any payment received by a veteran or beneficiary of a
9 veteran under section 37-28-03 or 37-28-04.
10 m.l. Reduced by the amount received by a taxpayer that was paid by an employer
11 under paragraph 4 of subdivision a of subsection 2 of section 57-38-01.25 to hire
12 the taxpayer for a hard-to-fill position under section 57-38-01.25, but only to the
13 extent the amount received by the taxpayer is included in federal taxable income.
14 The reduction applies only if the employer is entitled to the credit under section
15 57-38-01.25. The taxpayer must attach a statement from the employer in which
16 the employer certifies that the employer is entitled to the credit under section
17 57-38-01.25 and which specifically identified the type of payment and the amount
18 of the exemption under this section.
19 n.m. Reduced by the amount up to a maximum of five thousand dollars, or ten
20 thousand dollars if a joint return is filed, for contributions made under a higher
21 education savings plan administered by the Bank of North Dakota, pursuant to
22 section 6-09-38.
23 o.n. Reduced by the amount of income of a taxpayer, who resides anywhere within
24 the exterior boundaries of a reservation situated in this state or situated both in
25 this state and in an adjoining state and who is an enrolled member of a federally
26 recognized Indian tribe, from activities or sources anywhere within the exterior
27 boundaries of a reservation situated in this state or both situated in this state and
28 in an adjoining state.
29 p.o. For married individuals filing jointly, reduced by an amount equal to the excess of
30 the recomputed itemized deductions or standard deduction over the amount of
31 the itemized deductions or standard deduction deducted in computing federal
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1 taxable income. For purposes of this subdivision, "itemized deductions or
2 standard deduction" means the amount under section 63 of the Internal Revenue
3 Code that the married individuals deducted in computing their federal taxable
4 income and "recomputed itemized deductions or standard deduction" means an
5 amount determined by computing the itemized deductions or standard deduction
6 in a manner that replaces the basic standard deduction under section 63(c)(2) of
7 the Internal Revenue Code for married individuals filing jointly with an amount
8 equal to double the amount of the basic standard deduction under section 63(c)
9 (2) of the Internal Revenue Code for a single individual other than a head of
10 household and surviving spouse. If the married individuals elected under
11 section 63(e) of the Internal Revenue Code to deduct itemized deductions in
12 computing their federal taxable income even though the amount of the allowable
13 standard deduction is greater, the reduction under this subdivision is not allowed.
14 Married individuals filing jointly shall compute the available reduction under this
15 subdivision in a manner prescribed by the tax commissioner.
16 q.p. Reduced by an amount equal to four thousand one hundred fifty dollars for
17 taxable year 2018, for each birth resulting in stillbirth, as defined in s