Minnesota’s 2026 tax bill: What was included, what was left out
May 18, 2026 | Geno Fragnito
The omnibus tax bill cleared the Minnesota Legislature at the last possible moment Sunday night, passing just before adjournment after three months of negotiations that began with the Feb. 17 start of the 2026 session.
Despite the late timing, the measure saw strong support, passing the House 126-8 and the Senate 52-15, and is expected to be signed into law by Gov. Tim Walz.
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Federal conformity
The bill included several provisions to align Minnesota’s tax code with the Internal Revenue Code after passage of the OBBBA. Key conformity updates include:
- Section 179 expensing
- Bonus depreciation
- Business interest limit adjustments
- Section 174 R&E expensing
- Conformity was approved only for pass-through entities.
- Minnesota remains decoupled for C Corporations.
- The MNCPA advocated for full R&E conformity.
Pass Through Entity Tax (PTET)
- PTET is extended through Dec. 31, 2027.
- The extension is retroactive to Jan. 1, 2026.
- No penalties will be assessed for not paying Q1 2026 estimates if paid with the Q2 estimate and the Q2 estimate is paid on time.
- The issue became caught up in broader legislative negotiations, and making PTET permanent will remain on the MNCPA’s list of 2027 priorities.
Other items of note the MNCPA opposed and were not included in the final bill, but are expected to return in 2027, include:
- An expansion of the sales tax to include taxing professional services (including accounting)
- A social media tax
- A digital ad tax
- A new fifth-tier income tax
- A wealth tax
The votes in both the House and Senate show the final bill is much more restrained than what some would have liked. It also indicates many of the controversial issues not included this year will be back in 2027.
Expect more from the MNCPA in the coming weeks and months to inform and educate members about changes related to this tax bill.
RELATED CPE
Minnesota Tax Update (Webinar)
June 30 | 10-10:50 a.m. central | 1 CPE (1 technical)
Explore the latest developments in Minnesota tax policy, highlighting key changes and unresolved issues from the recent legislative session.
Topics: 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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