ST. PAUL – Many Minnesotans who are preparing to file their income taxes will likely see their returns improve due to legislation that is expected to be signed into law.
Last session, the Democrat-led legislature approved comprehensive taxes legislation that reduced standard income tax deductions, leading to tax increases for roughly 76% of Minnesotans.
On February 19, State Representative Greg Davids (R-Preston) helped approve legislation that will cleanup these errors and prevent many from paying higher tax bills.
“It was important to approve this bill early in session, as many are getting a head start on their income taxes,” Davids said. “The goal is to prevent Minnesotans from having to file amended returns if they can avoid it.”
Specifically, the bill correctly inflates the statutory amounts for the standard deduction, additional standard deduction for seniors and blind taxpayers, and standard deduction amounts for dependents. Without this correction, the Department of Revenue (DOR) estimates that an additional $352 million in general fund tax revenue would be raised starting in tax year 2024.
Davids said he was disappointed the bill did not include agreed-upon language that would provide a technical fix to the Net Operating Loss (NOL) provision. This provision reduced the NOL deduction from 80% to 70% of taxable income for corporations. The legislative intent was to make this provision effective for tax year 2024. However, the 2023 Tax Bill contained an effective date of tax year 2023.
“I’m disappointed that, despite the support of both Democrat tax chairs to fix this problem at their earliest possible opportunity, they are choosing to ignore it,” Davids said. “Tax provisions that benefit small business owners in rural Minnesota are few and far between, and now these folks are at risk of either paying higher taxes or paying for an amended tax return at their own cost if the provision is eventually fixed.”
If the error is not fixed, tax year 2023 filers will be liable for additional tax revenue with a general fund revenue gain of an estimated $14.8 million.