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2019 tax law reveals significant issues for some taxpayers

December 18, 2019  |  Geno Fragnito

2019 tax law reveals significant issues for some taxpayers Earlier this year, I wrote about how your expertise can help clarify Minnesota's 2019 tax law changes. This post ran shortly after the 2019 tax bill had been signed, and the effects of the retroactive and partial conformity within that new law remained unknown.

Fast forward a few months and we’re beginning to see some problems. One of those is the interaction of Minnesota’s rules for Section 179, bonus depreciation and like-kind exchanges.

Historically, Minnesota’s 80% addback approach for bonus depreciation hadn’t affected like-kind exchanges significantly; any realized gain from the like-kind exchange was tax-deferred and no bonus depreciation was needed to produce a zero federal and state tax effect. However, the 2019 tax law retroactively conforms to the federal government’s disqualification of tangible personal property from the like-kind exchange treatment, yet it retains Minnesota’s 80% addback approach for bonus depreciation. The unfortunate outcome is a major tax increase/acceleration for companies who have historically relied heavily upon the deferral treatment.

Legislators on both sides of the aisle have been in the media talking about this issue. I expect it will receive significant debate when session starts on Feb. 11. But, we need your help to keep messages like this at the forefront.

CPAs’ insights provide clarity and guidance to the legislators debating the future of tax policy. One effective way you can shape the debate is by sharing stories of how certain policies affect you, your company or your clients. Some examples:
  • How retroactive conformity has impacted your ability to properly tax plan and strategize.
  • Identify issues in current law that are unclear and causing multiple questions.
  • How partial conformity makes preparing taxes more difficult and/or complex.
If you want to play a part in these conversations, the MNCPA has an event for you. Join us for CPA Day at the Capitol Feb. 26 to help us educate lawmakers and increase CPAs’ status as a trusted adviser. You and your peers will hear about session priorities from government leaders and have a chance to meet with your state legislators.

Can’t make CPA Day at the Capitol? I strongly recommend contacting your state senator and representative between now and the start of session (Feb. 11). Legislators appreciate meeting with constituents, and the takeaways from your conversation can help them better prioritize the issues they want to work on. Here are some tips for reaching out to lawmakers to help get you started.

Remember: Legislators set the rules the CPA profession must follow. You can help them better understand the rules and make informed decisions. I can’t think of a better group of people to include in your professional network.

Topics: Legislative & Government Affairs, Taxation-Business

Geno Fragnito

Geno Fragnito is the MNCPA government relations director, advocating on behalf of the CPA profession. His days consist of last-minute meeting changes, building relationships with lawmakers, helping CPAs navigate state government, and putting in more than 15,000 steps per day walking the halls of the Capitol. Geno unwinds with a little golf and traveling with his family. If he weren’t a lobbyist, Geno would perfect his cast and be a professional fisherman. Geno can be reached at 952-885-5550 or gfragnito@mncpa.org.

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