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Unresolved issues at the Capitol and still no deal on a special session

June 6, 2022  |  Geno Fragnito

Unresolved issues at the Capitol and still no deal on a special session

The 2022 legislative session ended on time, but it did not end as most people had hoped it would end.

Legislators and Gov. Tim Walz had a budget surplus of about $9.25 billion when the session began Jan. 31, and expectations were high that they would pass a bonding bill, pass a tax bill and pass supplemental spending to fund programs like education, public safety, and health and human services.

None of those bills even received a vote, and instead, the legislative session fizzled out in the waning hours rather than end with a flurry of bills passing to provide federal conformity and other tax relief, additional funding for state programs or a bonding bill to preserve and enhance capital assets.

The Legislature entered an interim period after the session adjourned with hope that, following Memorial Day, there Walz would call back legislators to finish the work. However, unless the governor and legislative leaders can reach an agreement to hold a special session, meaning that most of the pieces are agreed to before a formal call of a special session, it will remain in an interim status until the 2023 legislative session starts in January 2023.

I am hopeful an agreement will be reached, and a special session will be called, but I’m not overly optimistic this will happen.

The agreement reached on a tax bill — but, again, was not voted on — contained many significant tax law changes, including federal conformity on many items the U.S. Congress passed since Minnesota last conformed, including many of the items contained in the federal COVID relief bills.

Highlights from the tax bill include:

  • Federal conformity, including EIDL grants, restaurant revitalization grants and shuttered venue grants.
  • Estate tax portability.
  • QIP property conformity.
  • Pass-through-entity changes to provide clarification and expand the list of entities eligible to make this election.
  • First-tier income tax rate reduction (from 5.35% to 5.10%)
  • Full exclusion for Social Security income.
  • Renters’ income tax credit to replace the renters' credit.

The closer we get to November’s election, the less likely it is we will see a special session to address many of the unresolved issues and provide certainty for CPAs as you plan for your business or work with clients on a business plan. The MNCPA continues to advocate for a special session to pass a tax bill and we will keep you updated if anything changes.

Topics: Legislative & Government Affairs, Taxation-Individual, 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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