MN HF2870

Establishes a maximum income tax rate of 7.85 percent on active trade or business income for all individual taxpayers in Minnesota, effectively exempting such income from the higher 9.85 percent rate on income over $250,000 (married filing jointly).

Updates income tax brackets for married filing jointly, single, and head of household filers, with bracket thresholds adjusted upward to $36,080/$143,350 (married), $24,680/$81,080 (single), and $30,390/$122,110 (head of household).

Replaces the former fourth tax bracket (9.85 percent on income over $250,000) with a 2.0 percent additional rate applied only to non-active business taxable income over specified thresholds ($254,240 for married, $152,540 for single, $200,000 for head of household).

Defines "active trade or business income" as income derived in the ordinary course of business, excluding net investment income as defined in Internal Revenue Code section 1411(c), but including certain active interests in partnerships and S corporations.

Applies to taxable years beginning after December 31, 2013, with inflation adjustments to tax brackets determined annually based on the percentage change in the Consumer Price Index from August 31, 2013 forward.