The first bill legislators are poised to pass this year would change Minnesota tax rules to align with federal code, granting belated tax breaks to restaurants, student loan borrowers and others.
"This is a major priority for Governor Walz and Lieutenant Governor Flanagan to get this done quickly, to get overdue tax cuts to individuals and families and businesses, and hopefully also make the filing for 2022 simpler and less costly for taxpayers," Department of Revenue Commissioner Paul Marquart told House Tax Committee members during their initial hearing.
The bill contains dozens of changes to individual income taxes and corporate taxes. In total, the state is estimated to lose $99.8 million in tax revenue over fiscal years 2024 and 2025 due to the adjustments, and $3.2 million over the following two years.
DFL leaders said they expect the tax conformity legislation to land on the governor's desk in the next week. If Gov. Tim Walz can sign the changes into law by Friday, then state officials and tax preparers have enough time to update forms and programs, preventing disruption and delays this tax season, Marquart said.
Even if lawmakers act fast, the measure would trigger a flurry of retroactive work for tax preparers and state officials.
There have been numerous federal acts in recent years that affect individuals' and businesses' taxes, many tied to the COVID-19 pandemic. While some states automatically update their rules in response to federal tax code changes, Minnesota requires legislative signoff.
The conformity bill would retroactively line up state and federal rules in response to many changes in the CARES Act, American Rescue Plan, Infrastructure Investment and Jobs Act, Inflation Reduction Act and other federal measures.
That means affected Minnesota taxpayers may have to go back and file amended returns for 2018, 2019, 2020 or 2021. If state leaders don't act quickly enough on the conformity bill, people will also have to amend returns for 2022.
