Use EIC earned income in the Minnesota child and working family credits

[PavelMakarchuk]

Fixes #9917.

What changes

mn_child_and_working_families_credits (2023+) and mn_wfc (2021–2022) now use eitc_earned_income instead of filer_adjusted_earnings. Schedule M1CWFC, line 2 takes earned income from federal EIC Worksheet B: both spouses combined, a net self-employment loss subtracted, and not less than zero. filer_adjusted_earnings floors each spouse at zero, so one spouse's loss never reduced the other's wages, which raised both the WFC phase-in base and the phase-out income (line 10, the greater of AGI and earned income).

Tests

• Two new 2024 cases in mn_child_and_working_families_credits.yaml: a Schedule C loss larger than the spouse's wages ($3,500, which NBER TAXSIM-35 also gives; main gives $0), and a smaller loss ($3,494.40, the same as a wages-only return with the same earned income; main gives $1,094.40).
• Existing tests that set filer_adjusted_earnings as an input now set eitc_earned_income (same values).

All 514 Minnesota tests and 369 other tests with Minnesota households pass.

Overlap

#9883 and #9889 (MaxGhenis) add cases to mn_child_and_working_families_credits.yaml, and #9643 also edits mn_child_and_working_families_credits.py. The changes are independent; whichever PR merges second needs a small rebase.

🤖 Generated with Claude Code

[hua7450]

Approving. Reviewed against Minn. Stat. 290.0661 subd. 4, 290.0671 (current and the 2021/2022 text), IRC 32(c)(2), the 2023 to 2025 Schedule M1CWFC instructions, the 2021 Schedule M1WFC instructions and the 2024 Form 1040 EIC Worksheet B. The switch to eitc_earned_income is correct for both variables and all years.

Supporting text: 290.0661 subd. 4, "reduced by 12 percent of earned income or adjusted gross income, whichever is greater"; 2021/2022 290.0671 subd. 1a, "the terms 'qualifying child,' and 'earned income,' have the meanings given in section 32(c)"; M1CWFC line 2, "if less than zero, enter zero", and its worksheet, "enter the amount from Step 6 of EIC Worksheet B on line 2"; Worksheet B, "If you are married filing a joint return, include your spouse's amounts" and "4b. Combine lines 1e, 2c, 3, and 4a. This is your total earned income." The old filer_adjusted_earnings floored each spouse separately, which is the bug.

Both new 2024 expectations recompute by hand (0 earned income, no phase-out, 3,500; and 40,000 earned income, 3,868.80 less 374.40 = 3,494.40). The re-keyed cases are unchanged in value, and taxsim_mn_child_tax_credit_component stays consistent because both inputs switched.

Two small notes:

• The changelog and description could mention that farm and partnership self-employment earnings now count as Minnesota earned income (they were absent from filer_adjusted_earnings); this is correct under Worksheet B lines 2a and 2b.
• The new test cases use head/spouse/child1/child2 keys rather than person1-style names.

Limits: tests not run; the 2022 Schedule M1WFC could not be located, so 2022 rests on the statute text; combat-pay and clergy adjustments were not assessed.

[codecov]

Codecov Report

✅ All modified and coverable lines are covered by tests.
✅ Project coverage is 100.00%. Comparing base (909176a) to head (8ce69b3).
⚠️ Report is 257 commits behind head on main.

Additional details and impacted files

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  Coverage   100.00%   100.00%           
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  Files            4         2    -2     
  Lines           76        58   -18     
  Branches         2         0    -2     
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- Hits            76        58   -18     

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