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Minnesota tax law changes

Page updated May 2021

Legislative session ends without new tax laws enacted

The 2021 session adjourned May 17 before any new tax laws were enacted. A special session is needed to finalize the budget agreements reached by Gov. Walz and legislative leaders.

The broad budget agreement includes federal conformity to the tax treatment of forgiven Paycheck Protection Program (PPP) loans and unemployment compensation. Assuming these policy items are enacted into law, the Minnesota Department of Revenue will review those affected tax returns and determine if automatic adjustments can be made.

This webpage will be updated as more information about the tax agreement is released.

The American Rescue Plan Act of 2021 and its impact on Minnesota taxpayers

The American Rescue Plan Act (ARPA) includes provisions affecting individual and business taxes, stimulus checks and unemployment benefits. However, because Minnesota has a "fixed conformity" system, legislation is required for the state to conform to the ARPA's tax changes. The following resources highlight tax-related changes in the ARPA and how they interact with Minnesota's nonconforming tax code as of March 16, 2021.

Frequently asked questions

Are PPP forgiven loans and unemployment compensation taxable sources in Minnesota?

Under current law, Minnesota does not conform to the latest federal tax law changes allowing certain taxpayers to exclude from gross income unemployment insurance income or PPP loan forgiveness. A special session is required to conform Minnesota's tax law to the federal government's tax treatment of these sources.

Why can I not use 2019 earned income to calculate the Minnesota Working Family Credit?

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 allows clients to choose which year will provide a higher federal Earned Income Tax Credit. Minnesota has not adopted this provision.

What if I used 2019 earned income on my client’s Minnesota return?

If we find this error, we may correct it and recalculate the Working Family Credit. If your client does not get a corrected refund amount, amend their return using 2020 earned income.

Is amending prior years' tax returns to reduce the Section 179 addback optional?

Taxpayers are not required to reduce their addback for qualifying depreciable property. Where they choose not to reduce their addback, they may continue to claim the related one-fifth subtractions on their subsequent returns. If a return with qualifying depreciable property is audited, the addback and related subtractions will be adjusted.

What's the best way to reach the Minnesota Department of Revenue with questions concerning tax changes?

Contact Revenue at TaxLawChanges@state.mn.us.

More resources

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