N.D.C.C. § 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
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(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
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.
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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
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
57-38-01.25. The taxpayer must attach a statement from the employer in which
the employer certifies that the employer is entitled to the credit under section
57-38-01.25 and which specifically identified the type of payment and the amount
of the exemption under this section.
m. Reduced by the amount up to a maximum of five thousand dollars, or ten
thousand dollars if a joint return is filed, for contributions made under a higher
education savings plan administered by the Bank of North Dakota, pursuant to
section 6-09-38.
n. Reduced by the amount of income of a taxpayer, who resides anywhere within
the exterior boundaries of a reservation situated in this state or situated both in
this state and in an adjoining state and who is an enrolled member of a federally
recognized Indian tribe, from activities or sources anywhere within the exterior
boundaries of a reservation situated in this state or both situated in this state and
in an adjoining state.
o. For married individuals filing jointly, reduced by an amount equal to the excess of
the recomputed itemized deductions or standard deduction over the amount of
the itemized deductions or standard deduction deducted in computing federal
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taxable income. For purposes of this subdivision, "itemized deductions or
standard deduction" means the amount under section 63 of the Internal Revenue
Code that the married individuals deducted in computing their federal taxable
income and "recomputed itemized deductions or standard deduction" means an
amount determined by computing the itemized deductions or standard deduction
in a manner that replaces the basic standard deduction under section 63(c)(2) of
the Internal Revenue Code for married individuals filing jointly with an amount
equal to double the amount of the basic standard deduction under section 63(c)
(2) of the Internal Revenue Code for a single individual other than a head of
household and surviving spouse. If the married individuals elected under
section 63(e) of the Internal Revenue Code to deduct itemized deductions in
computing their federal taxable income even though the amount of the allowable
standard deduction is greater, the reduction under this subdivision is not allowed.
Married individuals filing jointly shall compute the available reduction under this
subdivision in a manner prescribed by the tax commissioner.
p. Reduced by an amount equal to four thousand one hundred fifty dollars for
taxable year 2018, for each birth resulting in stillbirth, as defined in section
23-02.1-01, for which a fetal death certificate has been filed under section
23-02.1-20. For taxable years beginning after December 31, 2018, the deduction
amount must be adjusted annually on January first of each year by the
cost-of-living adjustment. For purposes of this subdivision, "cost-of-living
adjustment" means the percentage increase in the consumer price index for all
urban consumers in the midwest region as determined by the United States
department of labor, bureau of labor statistics, for the most recent year ending
December thirty-first. The exemption may only be claimed in the taxable year in
which the stillbirth occurred.
q. Reduced by the amount of expenses incurred by an employee which are directly
related to the attainment of higher education or career and technical education
which are reimbursed by the employee's employer, but only to the extent the
amount of reimbursement is reported as federal taxable income.
r. Reduced by the amount received by a taxpayer as retired military personnel
benefits, including retired military personnel benefits paid to the surviving spouse
of a deceased retired member of the armed forces of the United States, a reserve
component of the armed forces of the United States, or the national guard, but
only to the extent the amount was included in federal taxable income.
s. Reduced by the amount of social security benefits included in a taxpayer's federal
adjusted gross income under section 86 of the Internal Revenue Code.
t. Reduced by the amount of retired law enforcement personnel benefits received
by a taxpayer who has served a combined total of at least twenty years as a
peace officer or has medically retired from the taxpayer's duties as a peace
officer with a medical certificate due to a permanent mental or physical disability
that rendered the taxpayer unable to discharge the taxpayer's duties as a peace
officer, but only to the extent the amount was included in federal taxable income.
For purposes of this subdivision:
(1) "Peace officer" means a public servant authorized by law or by a
government agency or branch of the United States, a state, or a political
subdivision of a state to enforce the law and to conduct or engage in
investigations of violations of the law.
(2) "Retired law enforcement personnel benefits" means retirement income
received by a taxpayer eligible to receive retirement income attributable to
the taxpayer's employment as a peace officer from a retirement plan
maintained by or through the employer from which the taxpayer retired as a
peace officer.
3. The same filing status used when filing federal income tax returns must be used when
filing state income tax returns.
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4. a. A resident individual, estate, or trust is entitled to a credit against the tax imposed
under this section for the amount of income tax paid by the taxpayer for the
taxable year by another state or territory of the United States or the District of
Columbia on income derived from sources in those jurisdictions that is also
subject to tax under this section.
b. For an individual, estate, or trust that is a resident of this state for the entire
taxable year, the credit allowed under this subsection may not exceed an amount
equal to the tax imposed under this section multiplied by a ratio equal to federal
adjusted gross income derived from sources in the other jurisdiction divided by
federal adjusted gross income less the amounts under subdivisions a and b of
subsection 2.
c. For an individual, estate, or trust that is a resident of this state for only part of the
taxable year, the credit allowed under this subsection may not exceed the lesser
of the following:
(1) The tax imposed under this chapter multiplied by a ratio equal to federal
adjusted gross income derived from sources in the other jurisdiction
received while a resident of this state divided by federal adjusted gross
income derived from North Dakota sources less the amounts under
subdivisions a and b of subsection 2.
(2) The tax paid to the other jurisdiction multiplied by a ratio equal to federal
adjusted gross income derived from sources in the other jurisdiction
received while a resident of this state divided by federal adjusted gross
income derived from sources in the other states.
d. The tax commissioner may require written proof of the tax paid to another state.
The required proof must be provided in a form and manner as determined by the
tax commissioner.
5. Individuals, estates, or trusts that file an amended federal income tax return changing
their federal taxable income figure for a year for which an election to file state income
tax returns has been made under this section shall file an amended state income tax
return to reflect the changes on the federal income tax return.
6. The tax commissioner may prescribe procedures and guidelines to prevent requiring
income that had been previously taxed under this chapter from becoming taxed again
because of the provisions of this section and may prescribe procedures and guidelines
to prevent any income from becoming exempt from taxation because of the provisions
of this section if it would otherwise have been subject to taxation under the provisions
of this chapter.
7. A taxpayer filing a return under this section is entitled to the following tax credits:
a. Family care tax credit under section 57-38-01.20.
b. Renaissance zone tax credits under sections 40-63-04, 40-63-06, and 40-63-07.
c. Agricultural business investment tax credit under section 57-38.6-03.
d. Seed capital investment tax credit under section 57-38.5-03.
e. Planned gift tax credit under section 57-38-01.21.
f. Biodiesel fuel or green diesel fuel tax credits under sections 57-38-01.22 and
57-38-01.23.
g. Internship employment tax credit under section 57-38-01.24.
h. Workforce recruitment credit under section 57-38-01.25.
i. Marriage penalty credit under section 57-38-01.28.
j. Research and experimental expenditures under section 57-38-30.5.
k. Geothermal energy device installation credit under section 57-38-01.8.
l. Long-term care partnership plan premiums income tax credit under section
57-38-29.3.
m. Employer tax credit for salary and related retirement plan contributions of
mobilized employees under section 57-38-01.31.
n. Income tax credit for passthrough entity contributions to private education
institutions under section 57-38-01.7.
o. Angel investor tax credit under section 57-38-01.26.
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p. Income tax credit for employment of individuals with developmental disabilities or
severe mental illness under section 57-38-01.16.
q. Adoption tax credit under section 57-38-01.38.
r. Tax credit for contributions to a maternity home, child-placing agency, or
pregnancy help center under section 57-38-01.39.
s. Apprenticeship tax credit under section 57-38-01.40.
t. Twenty-first century manufacturing and animal agricultural workforce incentive
under section 57-38-01.41.
u. Child care contribution credit under section 57-38-01.42.
8. A taxpayer filing a return under this section is entitled to the exemption provided under
section 40-63-04.
9. a. If an individual taxpayer engaged in a farming business elects to average farm
income under section 1301 of the Internal Revenue Code [26 U.S.C. 1301], the
taxpayer may elect to compute tax under this subsection. If an election to
compute tax under this subsection is made, the tax imposed by subsection 1 for
the taxable year must be equal to the sum of the following:
(1) The tax computed under subsection 1 on North Dakota taxable income
reduced by elected farm income.
(2) The increase in tax imposed by subsection 1 which would result if North
Dakota taxable income for each of the three prior taxable years were
increased by an amount equal to one -third of the elected farm income.
However, if other provisions of this chapter other than this section were used
to compute the tax for any of the three prior years, the same provisions in
effect for that prior tax year must be used to compute the increase in tax
under this paragraph. For purposes of applying this paragraph to taxable
years beginning before January 1, 2001, the increase in tax must be
determined by recomputing the tax in the manner prescribed by the tax
commissioner.
b. For purposes of this subsection, "elected farm income" means that portion of
North Dakota taxable income for the taxable year which is elected farm income
as defined in section 1301 of the Internal Revenue Code of 1986 [26 U.S.C.
1301], as amended, reduced by the portion of an exclusion claimed under
subdivision d of subsection 2 that is attributable to a net long -term capital gain
included in elected farm income.
c. The reduction in North Dakota taxable income under this subsection must be
taken into account for purposes of making an election under this subsection for
any subsequent taxable year.
d. The tax commissioner may prescribe rules, procedures, or guidelines necessary
to administer this subsection.
10. The tax commissioner may prescribe tax tables, to be used in computing the tax
according to subsection 1, if the amounts of the tax tables are based on the tax rates
set forth in subsection 1. If prescribed by the tax commissioner, the tables must be
followed by every individual, estate, or trust determining a tax under this section.