Minnesota's Tax Conformity Efforts Uncertain

Wednesday, April 25, 2018

The tax debate in Minnesota is heating up. Governor Dayton released his proposed tax plan in March, and the House Taxes committee released their plan on Saturday. Both plans offer a vision for how address Minnesota's state tax code given the new federal tax law. The Senate Taxes committee has yet to release their plan.

When it comes to charitable giving, the two plans are generally in alignment:

  • Both plans maintain Minnesota's non-itemizer charitable deduction, which allows Minnesotans that don't itemize their federal taxes to take a charitable deduction of 50% of all giving over $500 on their state income taxes. While MCF worked closely with MCN to try to expand this deduction this session, it is still a win that it is being maintained, as most states do not have this type of giving incentive.
  • Neither plan includes the Endow MN tax credit, which would have incentivized legacy giving to permanent endowments at community foundations. MCF members were heavily engaged in advocating for this tax credit, and MCF plans to provide opportunities reflection and strategy discussions with members on how to move this forward in a future session.

There are, however, many places where the Governor's plan diverges from the House plan, and there is a sense that the Senate must release its plan before negotiations can start in earnest. The Governor has stated he does not intend to call a special session and that he hopes tax conformity efforts will be achieved by the end of session. 

Our read is that all sides would like to end session with a tax bill, but there is still a lot of work and negotiation to be done before that point is reached. In an election year, getting to a compromise on such a big tax change in only a few short weeks isn't a guarantee.

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