You could get an unexpected tax bill or a refund for 2017 or 2018 from Minnesota Revenue!

Minnesota Legislature’s 2019 Special Session partially conformed Minnesota tax law to 2017 federal tax law. Retroactively!

The Minnesota legislature has a hard time getting its work done in the regular legislative sessions. It took some late night wrangling and a one-day special session for the 2019 Legislature to develop an acceptable Minnesota approach to the 2017 federal tax law changes with Governor Walz. However, there was no clean cut-off in the legislation.

You may or may not recall that the U.S. Congress and President Trump passed the Tax Cuts and Jobs Act of 2017 (TCJA) in December of 2017, which dramatically changed the federal taxation system. The 2018 Minnesota Legislature and Governor Dayton could not come to terms on Minnesota’s tax law conformity to the federal changes in the spring 2018 session. This left the Minnesota tax law pointing to outdated federal tax law, ignoring numerous federal changes and adding to complexity and confusion in completing 2018 Minnesota tax returns.

Now, in 2019, the Minnesota Legislature has moved from total TCJA nonconformity to a partial conformity, but did not do so neatly. The Legislature put in retroactive provisions, which, along with 2018 nonconformity issues, could end up confusing Minnesota taxpayers for years to come. The changes involve:

  • Partial conformity with federal law for 2019 and future years;
  • Retroactive changes to 2018 and 2017 (Really! Retroactive! )

Minnesota Revenue is working on its reaction to this legislation. They have a heavy load to pull. Per the Minnesota Revenue website on July 9, 2019, for tax years 2017 and 2018

“You do not need to take any action at this time. Do not file or amend any returns relating to provisions for Tax Year 2017 and Tax Year 2018 in this year’s legislation.

  • In early July, we plan to post updated and near final 2017 and 2018 individual and business tax forms for review.
  • In late August/early September, software vendors will have updated software available for use in filing. Minnesota Revenue will publish a list of vendors who have updated their filing software.”

Preliminary unpublished verbal guidance from a recent Minnesota Society of CPA conference indicated:

– For 2017-No action is required. Minnesota Revenue will issue a bill or refund on retroactive changes by late 2019.

– For 2018 already filed-

  • Individuals/and pass-through entity owners – Do nothing. Minnesota Revenue will issue a bill or refund for retroactive changes by July 2020.
  • C corporations – Do nothing. Minnesota will bill or refund for retroactive changes. The timing is uncertain.

– For 2018 not yet filed: wait for updated forms before filing.

– For 2019: near final forms August; final forms to be released in October

This all will presumably be clarified soon.

We can help you understand the results of this recent change. Let us know if we can help you in understanding and planning for the impact of this legislation.

Also, if you get a bill or refund from Minnesota that is of concern, please forward it to us for us to confirm its accuracy.