As you may be aware, we have been patiently awaiting the final decision from MN on how it was going to treat the various items passed by the federal government as part of the COVID relief effort. That decision came in the early hours of July 1, both chambers of the Minnesota Legislature passed the tax bill.
Highlights from the tax bill:
- Partnership audit conformity.
- Full conformity to the Paycheck Protection Program (PPP) loan exclusion.
- Full conformity to the $10,200 unemployment insurance (UI) compensation exclusion.
- Passthrough entities are allowed to file as C Corporations as a SALT cap workaround.
- A technical fix to the Section 179 legislation passed in 2020. The fix eliminates the state addition for Section 179 carryovers for property placed into service prior to tax year 2020.
- Conformity for retirement plan distributions for tax year 2020.
- Exclusion for economic injury disaster loans (EIDL) grants.
- Exclusion for SBA loan repayment assistance.
- A formula to eliminate the June accelerated sales tax remission if certain state budget criteria are met.
- Authorization of 21 new local option sales taxes.
- A new legislative Tax Expenditure Review Commission to review current tax expenditures.
The tax bill includes 19 sections of federal law that have been enacted since Minnesota last partially conformed in December 2018. For some items, conformity includes the federal changes for the same tax years they were/are effective for federal filing. For others, conformity is only temporary for tax year 2020.
The Minnesota Department of Revenue plans to correct as many returns as possible as soon as its systems are updated automatically without the need to file an amended return.
