Earlier this month, Minnesota tax code changes were signed into law with a focus on unemployment compensation, Paycheck Protection Program (PPP) loan forgiveness, and other retroactive provisions affecting tax years 2018 through 2020.
What you need to know:
- The long-awaited new tax bill conforms to Federal tax laws related to PPP forgiveness (businesses may fully deduct the amount on their state income taxes), economic injury disaster loans, Small Business Administration loan payments, and the unemployment insurance compensation exclusion (workers who collected UI payments may deduct them up to $10,200).
- For those that filed a 2020 income tax return that included UI compensation or PPP loan forgiveness: the Minnesota Department of Revenue (MDOR) will either adjust your return and issue a refund or ask you to amend your return. MDOR expects to communicate these findings later this summer.
- The bill also contains a new provision to work around the $10,000 State and Local Tax cap. With 2021 tax returns, a Qualifying Partnership or S Corporation may make an election to pay tax to Minnesota at the entity level. To qualify, the partnership cannot have another partnership or corporation as an owner. The tax paid at the entity level would be a credit on the individual’s income tax return. Note: We are awaiting further information for this provision; more to come on this soon.
- MDOR is updating its Minnesota tax forms and working with tax software providers to update their systems to reflect these tax law changes.
What you need to do:
While we want to be sure our clients are aware of the changes, there is no action for taxpayers to take at this time. In fact, MDOR has asked that taxpayers do not proactively file amended returns relating to retroactive provisions in the tax bill.
In the meantime, if you have any questions, please feel free to contact your Lurie advisor.
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