House passes Rep. Lislegard’s Net Operating Loss correction bill

SAINT PAUL, Minn. – Today, the Minnesota House passed HF 3769 – legislation authored by Rep. Dave Lislegard (DFL – Aurora) – to modify an effective date for changes the Legislature made last year to the state’s treatment of corporate net operating losses (NOLs). The bill the House passed today – on a bipartisan vote of 130-0 – makes these changes effective in tax year 2024 instead of tax year 2023. 

“With businesses filing their taxes for 2023, there’s some urgency getting this important correction signed into law,” Rep. Lislegard said. “The House, Senate, and Walz administration are all on board and I’m proud we were able to work across the aisle to expedite passage of this bill.”

A NOL occurs when a business has deductions exceeding its taxable income within a year. This negative taxable income may be applied or carried over to reduce tax liability in other years, smoothing out their income over time, especially for businesses that are cyclical in nature. 

Since 2019, the corporate net operating loss deduction has been limited to 80 percent of a corporation’s taxable income. The Legislature changed this limit from 80 percent to 70 percent in the 2023 Tax bill, with the intention for the change to become effective in tax year 2024. Due to a drafting error, the original legislation inadvertently made it effective a year early.

The bill results in a $14.8 million one-time cost to the general fund. It now goes to the Senate for its consideration.