Tax Savings

Corrections from 2023 tax bill

Standard deduction: The 2023 tax bill inadvertently referenced 2019 standard deduction amounts rather than the inflation-adjusted amounts that should exist for tax year 2024. As a result, Minnesota taxpayers in Tax Year 2024 were originally subject to standard deduction limits of $24,400 married-joint / $12,200 single. The correct, inflation-adjusted amounts should have been $27,650 married-joint / $13,825 single. On Feb. 22, the Senate passed HF 2757 to correct those numbers, saving an estimated 2.3 million Minnesotans from additional taxes.

Net operating loss: The 2023 omnibus tax bill raised $58 million by reducing the corporate Net Operating Loss (NOL) deduction from 80% of taxable income to 70% of taxable income. This change was intended to begin with Tax Year 2024, but the year 2023 was inadvertently inserted. On April 2, the Senate passed HF 3769, which reinstated the legislative intent to make reduced NOL deduction rates effective retroactive for Tax Year 2024 and thereafter. As a result, businesses are now able to file amended returns to recoup any additional taxes owed for TY 2023.

EMS Aid

The Senate passed $24 million in statewide Emergency Medical Services Aid on May 18 (HF 4738). The original bill includes reforms to the Emergency Medical Services Board and establishes a Sprint Medic pilot program in two Greater Minnesota regions (see HHS Section for more information). The aid portion of the bill was amended from SF 3886 and appropriates $24 million in FY 2025 to the commissioner of Revenue to make aid payments to eligible licensed ambulance service providers by Dec. 26, 2024. Most eligible providers are in Greater Minnesota, where ambulance service runs cover a greater area, the reliance on low federal Medicare and Medicaid reimbursement rates is higher, and license-holders are often local governments rather than private providers that can better absorb financial stressors.

Items in final Omnibus Tax Bill (included in HF 5247)

Child Tax Credit advanced payments

The Tax conference adopted a Governor/House/Senate session priority to develop a system for making advanced Child Tax Credit payments throughout the year, rather than only receiving the refund at tax time, for taxpayers who apply. The bill also makes the program permanent, eliminating a 2028 sunset. It does not open eligibility to 18-year-olds, which was a House position.

As a reminder, the Child Tax Credit passed in 2023 is equal to up to $1,750 per child for married filers earning up to $52,500 with one child. Amounts increase depending on household status and number of children – find more information here: Child Tax Credit.

  • Advanced payments will be equal to 50% of credit received in previous year paid out between July 1 and the end of the year (exact payment timing TBD). The remaining credit owed would be paid at tax time once eligibility for the tax year has been determined.
  • If a taxpayer opts into the advance payment system, there is no requirement to repay excess credits paid out if they no longer qualify for the same amount in the following year (helps prevent unintended penalties for taking another job or increasing income during the tax year.)
  • Taxpayers must file an income tax return and opt in to receive advanced payments

Messaging the Child Tax Credit: Reducing child poverty by one-third

  • Last year’s nation-leading Child Tax Credit supported 414,000 children in Minnesota with an average tax credit of $2,500 per family, building on the program’s goal to reduce child poverty by one-third.
  • This year, we’re creating a system to help those families meet their basic needs throughout the year, not just at tax time.
  • Allowing advanced payments will allow Minnesota families living in the most volatile financial situations to pay for food, housing, and other necessities on a reliable schedule, reducing financial stress and insecurity.
  • This proposal would make Minnesota the first state in the nation to implement advanced periodic payments.
  • Researchers have found links between these kinds of tax credits and improvements in child wellbeing including increases to test scores, attendance and academic performance; increases to recipients’ work efforts; and reductions in low birth weight and premature birth. Additionally, children in low-income families that benefit from expended state tax credits are more likely to go to college and earn more as adults. This is an investment in Minnesota’s future.

Iron Range property tax relief and capital investment

The Minerals article (Article 69) repurposes taconite taxes collected on the Iron Range to deliver property tax relief and targeted capital investments in the region. A 65% increase in the taconite homestead credit will result in property tax cuts for 35,000 homeowners, and $80 million in targeted bonding authority, with oversight by the IRRRB, will support developments in dozens of Range communities, from Chisholm to Silver Bay (projects listed beginning on line 1346.15 of the bill).

Taxpayer Assistance and Outreach Grants

The final tax bill invests in two different taxpayer assistance products:

  • Taxpayer assistance grants: $1 million for grants provided to nonprofit organizations to provide tax prep services to low-income, elderly, and disadvantaged Minnesota residents. The services must be used to file state and federal taxes.
  • Tax credit outreach grants: $1 million to distribute grants for taxpayer assistance, or to nonprofit organizations or federally recognized Tribes to promote tax preferences for low- income Minnesotans. Organizations receiving outreach grants would have to have experience serving demographic groups or geographic areas with low rates of participation in tax programs targeting low-income Minnesotans.

Tax forfeited land (“Tyler Settlement”) The U.S. Supreme Court ruled in May 2023 in Tyler v. Hennepin County that the state’s practice of allowing counties to retain surpluses gained by selling tax-forfeited lands was unconstitutional. Two class-action lawsuits were then filed against the state. The Attorney General’s office and plaintiffs in those cases reached an agreement on settlement terms on February 28, 2024.

On May 17, the Senate passed SF 4936, which included a $109 million appropriation for payments to counties impacted by the settlement. Funds are available until June 30, 2026; after that date, remaining funds in this account will be deposited in the General Fund and the account will expire. The $109 million payments are available to counties with certain tax-forfeited lands that agree to certain terms, which are outlined in the bill. Information on tax-forfeiture policy changes passed in the final omnibus bill, HF 5247, can be found in the ‘Environment’ section of the EOS review.

Did Not Pass

PCR online contribution process A bipartisan bill to require the department of Revenue to offer an online filing option for Minnesota’s Political Contribution Refund Program did not pass. As a reminder, the PCR limit was increased last session from $50 to $75 for individuals, and from $100 to $150 for joint filers, preserving the opportunity for regular voters to have a say in election process and compete with “big money” that too often determines election outcomes.

Section 530 worker misclassification safe harbor

The Senate and House tax bill both included a provision to decouple Minnesota from Section 530 of the Internal Revenue Code, which essentially provides a safe harbor for employers that misclassify workers. The bill did not pass.

Coerced debt subtraction

Last year, the legislature passed a ‘Coerced Debt Bill’ that allows survivors of domestic abuse that can prove a debt was coerced by their abuser to petition the court for a declaratory judgement indicating the survivor no longer owes that debt. This year’s Senate tax bill established a tax subtraction for the amount of discharged debt resulting from coerced debt; the bill did not pass.

Special Education masters’ degrees qualify for tax credit:

The Senate tax bill would have allowed taxpayers obtaining a master’s degree in special education, including pedagogy or a pedagogy component, to claim the existing tax credit for master’s degree expenses. It did not pass.

Aerospace and aviation credit (HAUSCHILD)

The Senate Tax Bill created a nonrefundable tax credit for employers that provide scholarships to students in aviation-related educational programs. The credit would have been equal to 50% of the amount of tuition reimbursed by the employer in a tax year.

Attachments & appurtenances (PUTNAM)

The Senate and House tax bills included agreed-upon language to fix a long-standing issue with co-op utility property taxes. Except for substations and transmission or generation equipment, utility cooperatives’ power distribution systems would have been exempt from property taxes. This language did not pass.

Property owned by Indian Tribes

The House and Senate tax bills contained property tax exemptions for three specific Tribal- owned properties; the exemptions did not pass:

  • Red Lake College in Minneapolis
  • Grand Portage Band of Lake Superior Chippewa in Cook County
  • Leech Lake Band of Ojibwe property in Minneapolis

Public Safety Aid reporting requirement

A Senate bill to adds a reporting requirement for the $300 million in local Public Safety Aid approved in the 2023 tax bill and paid out in December 2023 failed to pass. There is no existing reporting requirement for this aid, so there is no clear mechanism to determine how cities, counties, and Tribes used this money.

Increased local government funding

The Senate Tax Bill included increased funding for Soil & Water Conservation District increased aid ($2 million in 2024) and Town Aid ($2 million in FY 2025). This did not pass. Projected Town Aid runs can be found here.

Firearm safety devices and storage units

A Senate provision to add safety devices such as trigger locks and cable locks to the existing sales tax exemption for firearm storage units did not pass.

Data centers

A bill to add large-scale data centers to eligibility for the state’s current sales and property tax incentives for data centers did not pass, nor did a provision to extend the eligibility timeline for the current exemption.

Controlled substances tax (OUMOU VERBETEN)

A House and Senate proposal to eliminate Minnesota’s Illegal Cannabis and Controlled Substance Tax and associated criminal penalties failed to pass. The tax requirement and associated penalties have been in effect since 1986 and rarely used or collected.

Sales tax refunds or exemptions on public construction projects

The Senate bill dedicated $33.9 million to a sales tax refund account to pay for sales tax exemptions on construction materials used in the following local government projects across the state. It did not pass, so the following local governments and school districts are still liable for sales tax charges on construction materials:

Tax Increment Financing changes authorizations:

The following communities had provisions in the Senate tax bill, which did not pass in the final bill:

Local Sales Tax Reforms and moratorium elimination

The recommendations to reform the local sales tax process, which also included the removal of a two-year moratorium on new local sales tax authorizations, did not pass. The items included in the Senate bill (below) were substantially different than the House’s position. This will be a main topic of discussion next session, since the moratorium expires at the end of the 2025 session and lawmakers will want new guardrails in place before that process resumes.

  • Local governments may impose, extend, or modify the use of a local sales tax of no more than 1% to finance specific capital projects without legislative authorization if regional significance of each project can be demonstrated.
  • The local government would need to hold a public hearing and adopt a resolution, and imposition of a new tax would still be subject to voter approval.
  • Requirements for laying out regional significance detailed in Subd. 4.
  • If passed, the temporary moratorium on local sales tax authorizations passed last year would be repealed as of July 1, 2024.

Hennepin County Baseball Sales Tax review The Senate tax bill included language requiring the commissioner to review the Hennepin County local sales tax dedicated to construction of the Twins ballpark to determine if it should be extended and repurposed to support Hennepin County healthcare needs, including HCMC, and ongoing infrastructure needs of the ballpark. A developing proposal at the end of session would have included funding to North Memorial Hospital in this proposal. The bill failed to pass.

Senate DFL Media