57-38-30.3. Individual, estate, and trust income tax

57-38-30.3. Individual, estate, and trust income tax 1. A tax is hereby imposed for each taxable year upon income earned or received in that taxable year by every resident and nonresident individual, estate, and trust. A taxpayer computing the tax under this section is only eligible for those adjustments or credits that are specifically provided for in this section. Provided, that for purposes of this section, any person required to file a state income tax return under this chapter, but who has not computed a federal taxable income figure, shall compute a federal taxable income figure using a pro forma return in order to determine a federal taxable income figure to be used as a starting point in computing state income tax under this section. The tax for individuals is equal to North Dakota taxable income multiplied by the rates in the applicable rate schedule in subdivisions a through d corresponding to an individual's filing status used for federal income tax purposes. For an estate or trust, the schedule in subdivision e must be used for purposes of this subsection. a. Single, other than head of household or surviving spouse. If North Dakota taxable income is: Over Not over The tax is equal to Of amount over $0 $44,725 $0.00 + 0.00% $0 $44,725 $225,975 $0.00 + 1.95% $44,725 $225,975 $3,534.38 + 2.50% $225,975 b. Married filing jointly and surviving spouse. If North Dakota taxable income is: Over Not over The tax is equal to Of amount over $0 $74,750 $0.00 + 0.00% $0 $74,750 $275,100 $0.00 + 1.95% $74,750 $275,100 $3,906.83 + 2.50% $275,100 c. Married filing separately. If North Dakota taxable income is: Over Not over The tax is equal to Of amount over $0 $37,375 $0.00 + 0.00% $0 $37,375 $137,550 $0.00 + 1.95% $37,375 $137,550 $1,953.41 + 2.50% $137,550 d. Head of household. If North Dakota taxable income is: Over Not over The tax is equal to Of amount over $0 $59,950 $0.00 + 0.00% $0 $59,950 $250,550 $0.00 + 1.95% $59,950 $250,550 $3,716.70 + 2.50% $250,550 e. Estates and trusts. If North Dakota taxable income is: Over Not over The tax is equal to Of amount over $0 $3,000 $0.00 + 0.00% $0 $3,000 $10,750 $0.00 + 1.95% $3,000 $10,750 $151.13 + 2.50% $10,750 f. For an individual who is not a resident of this state for the entire year, or for a nonresident estate or trust, the tax is equal to the tax otherwise computed under this subsection multiplied by a fraction in which: (1) The numerator is the federal adjusted gross income allocable and apportionable to this state; and (2) The denominator is the federal adjusted gross income from all sources reduced by the net income from the amounts specified in subdivisions a and b of subsection 2. In the case of married individuals filing a joint return, if one spouse is a resident of this state for the entire year and the other spouse is a nonresident for part or all of the tax year, the tax on the joint return must be computed under this subdivision. g. The tax commissioner shall prescribe new rate schedules that apply in lieu of the schedules set forth in subdivisions a through e. The new schedules must be determined by increasing the minimum and maximum dollar amounts for each income bracket for which a tax is imposed by the cost-of-living adjustment for the taxable year as determined by the secretary of the United States treasury for purposes of section 1(f) of the United States Internal Revenue Code of 1954, as amended. For this purpose, the rate applicable to each income bracket may not be changed, and the manner of applying the cost-of-living adjustment must be the same as that used for adjusting the income brackets for federal income tax purposes. h. The tax commissioner shall prescribe an optional simplified method of computing tax under this section that may be used by an individual taxpayer who is not entitled to claim an adjustment under subsection 2 or credit against income tax , and the manner of applying the cost-of-living adjustment must be the same as that used for adjusting the income brackets for federal income tax purposes. h. The tax commissioner shall prescribe an optional simplified method of computing tax under this section that may be used by an individual taxpayer who is not entitled to claim an adjustment under subsection 2 or credit against income tax liability under subsection 7. 2. For purposes of this section, "North Dakota taxable income" means the federal taxable income of an individual, estate, or trust as computed under the Internal Revenue Code of 1986, as amended, adjusted as follows: a. Reduced by interest income from obligations of the United States and income exempt from state income tax under federal statute or United States or North Dakota constitutional provisions. b. Reduced by the portion of a distribution from a qualified investment fund described in section 57-38-01 which is attributable to investments by the qualified investment fund in obligations of the United States, obligations of North Dakota or its political subdivisions, and any other obligation the interest from which is exempt from state income tax under federal statute or United States or North Dakota constitutional provisions. c. Reduced by the amount equal to the earnings that are passed through to a taxpayer in connection with an allocation and apportionment to North Dakota under section 57-38-01.35. d. Reduced by forty percent of: (1) The excess of the taxpayer's net long-term capital gain for the taxable year over the net short-term capital loss for that year, as computed for purposes of the Internal Revenue Code of 1986, as amended. The adjustment provided by this subdivision is allowed only to the extent the net long-term capital gain is allocated to this state. (2) Qualified dividends as defined under Internal Revenue Code section 1(h) (11), added by section 302(a) of the Jobs and Growth Tax Relief Reconciliation Act of 2003 [Pub. L. 108-27; 117 Stat. 752; 2 U.S.C. 963 et seq.], but only if taxed at a federal income tax rate that is lower than the regular federal income tax rates applicable to ordinary income. If, for any taxable year, qualified dividends are taxed at the regular federal income tax rates applicable to ordinary income, the reduction allowed under this subdivision is equal to thirty percent of all dividends included in federal taxable income. The adjustment provided by this subdivision is allowed only to the extent the qualified dividend income is allocated to this state. e. Increased by the amount of a lump sum distribution for which income averaging was elected under section 402 of the Internal Revenue Code of 1986 [26 U.S.C. 402], as amended. This adjustment does not apply if the taxpayer received the lump sum distribution while a nonresident of this state and the distribution is exempt from taxation by this state under federal law. f. Increased by an amount equal to the losses that are passed through to a taxpayer in connection with an allocation and apportionment to North Dakota under section 57-38-01.35. g. Reduced by the amount of military pay received by a taxpayer as a member of the armed forces of the United States on federal active duty, member of the national guard or reserve member of the armed forces of the United States, to the extent that military pay is included in North Dakota taxable income of the taxpayer. For purposes of this subdivision, "military pay" includes all federal pay for training, education, mobilization, and bonuses and state pay when called to support an emergency on state active duty. h. Reduced by income from a new and expanding business exempt from state income tax under section 40-57.1-04. i. Reduced by up to ten thousand dollars of qualified expenses that are related to a donation by a taxpayer or a taxpayer's dependent, while living, of one or more or training, education, mobilization, and bonuses and state pay when called to support an emergency on state active duty. h. Reduced by income from a new and expanding business exempt from state income tax under section 40-57.1-04. i. Reduced by up to ten thousand dollars of qualified expenses that are related to a donation by a taxpayer or a taxpayer's dependent, while living, of one or more human organs to another human being for human organ transplantation. A taxpayer may claim the reduction in this subdivision only once for each instance of organ donation during the taxable year in which the human organ donation and the human organ transplantation occurs but if qualified expenses are incurred in more than one taxable year, the reduction for those expenses must be claimed in the year in which the expenses are incurred. For purposes of this subdivision: (1) "Human organ transplantation" means the medical procedure by which transfer of a human organ is made from the body of one person to the body of another person. (2) "Organ" means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow. (3) "Qualified expenses" means lost wages not compensated by sick pay and unreimbursed medical expenses as defined for federal income tax purposes, to the extent not deducted in computing federal taxable income, whether or not the taxpayer itemizes federal income tax deductions. j. Increased by the amount of the contribution upon which the credit under section 57-38-01.21 is computed, but only to the extent that the contribution reduced federal taxable income. k. Reduced by the amount of any payment received by a veteran or beneficiary of a veteran under section 37-28-03 or 37-28-04. l. Reduced by the amount received by a taxpayer that was paid by an employer under paragraph 4 of subdivision a of subsection 2 of section 57-38-01.25 to hire the taxpayer for a hard-to-fill position under section 57-38-01.25, but only to the extent the amount received by the taxpayer is included in federal taxable income. The reduction applies only if the employer is entitled to the credit under section