Minnesota Family

Students, homeowners, businesses, and families will all benefit from this update to the state’s tax code.

Tax strategies

Minnesota Tax Conformity Law Provides Relief for Individuals and Businesses

  • Dan Kidney
  • 2/14/2017

Governor Mark Dayton signed legislation to align Minnesota’s individual income, corporate, and estate taxes to changes at the federal level, effective between January 1, 2015, and November 15, 2016.

Most Minnesota taxpayers will not need to make conformity-related adjustments when filing their 2016 Minnesota returns as long as they or their preparers are using the most up-to-date software.

The law provides $21 million in tax relief for college students and their families paying for higher education, teachers buying classroom supplies out of their own pockets, homeowners who refinance their mortgages, and new homeowners paying mortgage insurance. The bill also includes significant benefits for businesses.

Most Minnesotans who are eligible for the breaks will see their taxes automatically reduced in their 2016 filings. Although the state legislature did not enact a conformity bill last year, this legislation applies to 2016 and retroactively to 2015.

Individual tax changes

  • Expands the qualified higher education expenses under 529 plans to include computers and related equipment
  • Provides for an exclusion from gross income of discharges of indebtedness on principal residences
  • Allows for itemized deductions for mortgage insurance premiums on a principal residence
  • Allows rollovers from employer-sponsored retirement plans and traditional IRAs into SIMPLE IRAs
  • Deducts up to $250 for classroom or professional development expenses paid by K-12 teachers

Business tax changes

  • Continues the historical practice of disallowing 80 percent of federal bonus depreciation and section 179 expensing during the year those amounts are deducted federally, and requiring subtractions of one-fifth of that amount during the subsequent five tax years
  • Provides the 100 percent exclusion for the gain on sale of certain qualified small business stock held for more than five years
  • Reduces the minimum holding period to avoid the tax on built-in gains of assets of S corporations that converted from C corporations
  • Offers more generous depreciation rules for leasehold and restaurant improvements
  • Adds preferential treatment of dividends of regulated investment companies

C corporation and partnership tax returns

During a call with the Minnesota Department of Revenue (MNDOR), CLA asked whether Minnesota was planning to conform to the new March 15 federal due date for partnership tax returns for the 2016 session.

Even though conformity legislation was introduced last year in a tax bill that was not passed, the MNDOR representative explained that due date conformity is not a priority for this legislative session. As a result, the due date for both C corporation and partnership returns will likely be April 18, 2017.

What do Minnesota taxpayers need to do before filing 2016 returns?

Most Minnesota taxpayers will not need to make conformity-related adjustments when filing their 2016 Minnesota returns as long as they or their preparers are using the most up-to-date software.

For 2015 Minnesota returns affected by this legislation, some taxpayers will need to respond to MNDOR information requests, while others will need to amend their 2015 Minnesota returns if requested by the Department of Revenue. If you receive any of these information or amended return requests, CLA can help you determine how to properly respond.