ST. PAUL – Many Minnesotans who are preparing to file their income taxes likely will see their returns improve due to legislation the House passed on Monday.
Last session, the Democrat-led legislature approved comprehensive taxes legislation that reduced standard income tax deductions, leading to tax increases for roughly 76 percent of Minnesotans.
Rep. Jeff Dotseth, R-Silver Township, voted in support of a bill which the House approved to clean up errors and prevent many from paying higher tax bills.
“We needed to fix mistakes in the tax bill to help local residents and we got it done,” Dotseth said. “It’s concerning errors occurred in the last tax bill, but it also goes to show the good we can accomplish when legislators focus on doing right by the people we represent. It’s good we took this action before we get into the upcoming tax season so residents of District 11A have clarity and aren’t having to file amended forms.”
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.
Dotseth 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 percent 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.
“It’s very disappointing Democrat chairs in the House and Senate went back on their own word after writing a letter to state officials saying they would pursue legislation at the earliest possible opportunity to correct this specific problem,” Dotseth said. “That’s the only real sore spot in what otherwise is a good bill that needed to pass.”
If the NOL 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.
The House passed the bill 128-2 and sent it to the Senate for action.
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