Plus: Gov. Dayton delivers his last State of the State address
MNCPA
MINNESOTA SOCIETY of
CERTIFIED PUBLIC ACCOUNTANTS
Legislative Digest
MARCH 20, 2018
Taxes, taxes and taxes top the list of 2018 legislative priorities
Less than one month into the 2018 session and federal conformity continues to be a top priority for legislators. The federal changes have created opportunity for Minnesota to conform its tax code, but legislators are still trying to understand the complexity of the changes. What does it mean to conform? What does it mean to not conform? What would partial conformity look like and how would it be implemented?

It was clear from our speakers at CPA Day at the Capitol that federal conformity and taxes are going to be front and center this session. Legislators want to hear from you.

"You understand the consequences of the tax policy we're considering," Sen. Paul Gazelka told CPA Day at the Capitol attendees.

The House and Senate have held four hearings to learn more about conformity. None of these hearings have been to discuss specific legislation. Legislators have instead focused on learning more about conformity's effect on Minnesota from the perspective of the Minnesota Department of Revenue, taxpayers and tax preparers.

Topics included in those conversations are:
  • Advantages and disadvantages of using adjusted gross income or federal taxable income as a basis for the Minnesota tax return
  • Consistent elections for state and federal filing
  • Depreciation (including Section 179 and Bonus)
  • Cash-basis filing versus accrual-basis filing
  • Overall cost and complexity of nonconformity
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Gov. Dayton delivers his last state of the state address
Gov. Mark Dayton will not run for re-election this year, so last week marked his final state of the state address. He outlined his administration's priorities for his final year in office, looking at this session as an opportunity to make changes that will be remembered as part of his legacy.

Included on the list are maintaining Minnesota's sound fiscal position, state infrastructure including roads and bridges, cybersecurity and water quality.
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Dayton releases his 2018 supplemental budget recommendations
On Friday, Dayton set the stage for what to expect for the remainder of the session by releasing his 2018 budget and tax plan.

Dayton's administration estimates his tax plan will reduce taxes for more than two million Minnesotans and will reduce filing complexity. Republican legislative leaders have indicated taxes top the 2018 priority list, but their list differs from the plan presented by the governor. Legislators and Gov. Dayton have two months to reconcile priority differences if they want to pass a tax bill during the 2018 session and avoid a special session later this year.

A few highlights from the proposal include full Section 179 conformity, a new Minnesota personal and dependent credit, shifting Minnesota's federal income definition away from federal taxable income (FTI) and moving to adjusted gross income (AGI), and allow taxpayers to claim the standard deduction on their federal return and claim itemized deductions on the state return.

The governor's proposal also includes revisiting estate tax changes passed in 2017 that moved Minnesota closer to conformity. Dayton wants to freeze the estate tax exemption at $2.4 million and eliminate the annual increases scheduled to move the exemption to $3 million.

Read the full summary
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CPAs at the Capitol
Dan Kidney and Stepanie Markert MNCPA members Dan Kidney (center) and Stephanie Markert meet with Rep. Dave Pinto to discuss tax reform, among other issues.
Doug Pilot and Becky Keran MNCPA members Doug Pilot (left) and Becky Keran meet with Sen. Matt Klein.
MNCPA members spent March 7 at the State Capitol meeting with legislators and hearing legislative leaders discuss their 2018 priorities. Leaders discussed topics ranging from health care reform to MNLARS and workforce development, but tax conformity topped the list for all.

“We will have missed an opportunity to transform our economy if we don't take action on a tax bill,” Sen. Michelle Benson, a CPA, paraphrased from her peer, Sen. Roger Chamberlain.

Legislators view CPAs as trusted business advisers and value the insight you bring to discussions about tax reform.

"When you call us, it matters," said Rep. Ron Kresha.

Even if you couldn't join your colleagues on March 7, there is still an opportunity for you to shape the final tax debate in Minnesota. Contact your legislators to let them know your thoughts.
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Committee passes legislation for guidelines for OSA reviews of county audits performed by CPA firms
Legislation has been introduced to address findings in a recent OLA report about the procedures used by the Office of the State Auditor (OSA) when issuing a public report on county audits performed by CPA firms.

The OLA report was critical of the lack of due process the OSA afforded the CPA firms whose work was being reviewed. The report was also critical of the OSA for not thoroughly supporting its findings.

Read the report

The MNCPA supports SF 2978 and HF 3376 that would create operating procedures the OSA must follow when reviewing county audits done by CPA firms. It would also create a structure to provide due process.

SF 2978 will next be heard in the Senate Local Government Committee. HF 3376 is expected to receive a hearing within the next three weeks in the House.

Summary of SF 2978
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Geno Fragnito Your Lobbyist
Geno Fragnito
Geno Fragnito, director of government relations, is the MNCPA's registered lobbyist working full time on behalf of the membership. For more information or to get involved, contact Geno at 952-885-5550 or gfragnito@mncpa.org.
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