Other Tax Bills that Did Not Pass

Corporate franchise tax transfers

A bill was heard by the Senate Tax Committee to encourage entrepreneurs by providing Minnesota start-ups with cash to help offset their initial costs. Under this bill, corporations can purchase unused Minnesota Net Operating Loss carryovers from emerging technology and biotech start-up businesses. Purchasing companies would receive tax credits equal to the amount of the tax benefits being transferred, and smaller companies would receive cash to help offset initial start-up costs. This bill allows small start-ups to have some cash flow during their early stages, while providing tax benefits to larger corporations also settled in Minnesota. (S.F. 1253)

Angel Investment Tax Credit

The Small Business Investment Tax Credit – commonly known as the Angel Investment Tax Credit – was enacted in 2010 and is another mechanism to help start-up businesses in Minnesota. The current credit is set to sunset after 2016. The Tax Reform Division heard three bills that would extend that deadline as well as adjust the annual appropriation, timeline, and business targets.(S.F. 119/S.F. 185/S.F. 186)

Scholarship and Fellowship Grants

Scholarships and fellowship grants are currently two of several nontaxable items that must be added back into household income in order to determine Minnesota property tax refund eligibility. A Tax Committee proposal would remove that requirement and reduce the reported household income for filers with scholarships or fellowship grant income. This would expand the number of people who qualify and could increase the amount of refunds for which they qualify. (S.F. 226)

This Old House and This Old Shop

A proposal to resurrect and add to a property tax exclusion first enacted in 1993 – commonly referred to as “This Old House” – would allow certain improvements to be fully or partially excluded from a home or commercial property’s value for assessment purposes. The credits were originally created as an incentive for owners of older homes to renovate them and preserve or revitalize older neighborhoods. The exclusions would exist for 10 years or until the property is sold. (S.F. 208/S.F. 319)

Estate Taxes

In 2014, the Minnesota Legislature made the first substantive changes to the estate tax brackets since 2001. As a result, Minnesota’s estate tax exclusion is currently increasing in $200,000 increments every tax year through 2018, up to a maximum exclusion of $2 million. While a significant increase, that is still about $3 million less than the total estate value subject to the federal estate tax. The Department of Revenue estimates about 800 people – those with total estates valued at more than $1.4 million for 2015 – will be subject to the Minnesota estate tax this year. If the state matched the federal exclusion, about 100 taxpayers would still owe tax. Three bills heard by the Senate Tax Committee would adjust the state’s policy to conform to the federal estate tax exclusion – currently $5.43 million and indexed for inflation.(S.F. 1623/S.F. 743/S.F. 198)

Social Security Income Taxes

The Tax Reform Division considered four bills that would allow Social Security income included in federal taxable income to be subtracted for Minnesota tax purposes. Called the “Retire in Minnesota Act,” authors claim the bills will save senior citizens an average of $600 a year and discourage them from moving to other states. Minnesota is already foregoing $489 million this biennium to fund the Social Security tax exemptions that currently exist. Right now, only seniors reaching certain income levels are subject to tax on their Social Security benefits. Extending a complete subtraction to all Minnesota seniors would cost more than $400 million every year. (S.F. 123/S.F 256/S.F. 124/S.F. 254)

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