A Rumor is Floating: Did our Whippersnapper Legislators in St Paul Decide to Conform to Federal Tax Law?

In 2017, Congress and President Trump passed the Tax Cuts and Jobs Act of 2017 (TCJA). It dramatically changed the definition of taxable income for federal tax purposes. Minnesota’s Legislature and Governor needed to act to reconcile Minnesota tax system with the federal changes. They didn’t.

To the chagrin of tax preparers, the spring 2018 Minnesota legislative session ended badly, with Governor Dayton vetoing the omnibus bills presented to him by the Republican Legislature with the reconciliation provisions. The Governor alleged (correctly) that the Republican Legislature jammed a bunch of appropriations cuts with the reconciling tax bill in an effort to force him to sign them. Dayton vetoed that bill.

A tax preparation mess unfolded.

The voters saw fit to change the Minnesota House of Representatives’ party majority to DFL in the November 2018 elections.

Fortunately, the recently ended 2019 legislature and the Governor both made concessions to reach agreement on reconciliation of the Minnesota and federal tax systems, but only accomplished this feat with Governor Walz in a short special session conducted four days after the regular session adjourned.

The 2019 Legislature opened with a state surplus to divvy up. The DFL, the DOT and the Governor were pushing tax and spending increases and a 20-cent per gallon gas tax increase. The gas tax increase did not get too far, despite a strong PR campaign educating us about potholes. Despite hard bargaining and considerable movement towards the middle, the parties could not grasp agreement, and the regular session again closed with little accomplished.

It was apparent, however, that the voters were expecting more this year. With nearly total inaction again in the regular session, the Legislature entered into negotiations with the Governor to pass a bunch of bills in a special session of one day. In the early morning hours of May 24, the Governor and the legislature succeeded in passing a pre-agreed-upon bill that mostly conforms Minnesota tax law to Federal law. The conformity is not complete, but it is a decent and reasonable move for Minnesota. It will make our future tax filings simpler, with less brain damage to tax preparers, tax examiners and taxpayers.

For those who have interest in a summary of the Bill, see the attached.