State of Minnesota Passes 2021 Tax Bill

On July 1, 2021, the Minnesota Legislature passed, and Governor Tim Walz signed a 2021 tax bill. The bill includes tax changes related to unemployment compensation, Paycheck Protection Program (PPP) loan forgiveness, and other retroactive provisions affecting tax years 2018 through 2020.

Highlights from the 2021 Minnesota Tax Bill:

• Full conformity to the PPP loan exclusion.
• Full conformity to the $10,200 unemployment insurance (UI) compensation exclusion.
• Exclusion for economic injury disaster loans (EIDL) grants.
• Exclusion for SBA loan repayment assistance.
• Passthrough entities are allowed to file as C Corporations as a SALT cap workaround.
• A technical fix to the Section 179 legislation passed in 2020. The fix eliminates the state addition for Section 179 carryovers for property placed into service prior to tax year 2020.
• Conformity for retirement plan distributions for tax year 2020.
• Authorization of 21 new local option sales taxes.
• Partnership audit conformity (CPAR).

The Minnesota Department of Revenue (MDOR) has Answered the Following Important Questions:

What happens next?

• MDOR: Preparations for these tax law changes have been underway for several weeks. Now that a tax bill was signed into law, the Minnesota Department of Revenue will update tax forms and work with tax software providers on updating their systems to reflect these tax law changes. You do not need to take any action at this time and should not file any amended returns relating to retroactive provisions in the tax bill until forms are updated.

What if I received unemployment compensation or PPP loan forgiveness in a taxable year beginning in 2020?

• MDOR: Depending on your return’s complexity, we will either adjust it and issue you a refund, or we will ask you to amend your return.
• MDOR: If we can adjust your return, you will get a letter from us describing what we changed and any refund you may receive as a result. We are committed to adjusting as many returns as we can.
• MDOR: If you will need to amend, wait until you hear from us before filing. We will let you know whether your return will be adjusted or if you need to amend. Look for this communication later this summer.

Boeckermann Grafstrom & Mayer (BGM) will continue to monitor this issue and keep you apprised of any changes. You may also visit the Minnesota Department of Revenue Tax Law Changes webpage. Please feel free to contact your BGM professional if you have specific questions or concerns, or you may complete and submit the Contact Us form on our website