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Minnesota Governor Approves Tax Relief, SALT Cap Workaround

Posted on July 7, 2021

Minnesota Gov. Tim Walz (DFL) has approved an omnibus tax bill that includes tax relief for workers and small businesses and a workaround to the state and local tax deduction cap.

Under H.F. 9, signed by Walz July 1 as part of the state’s fiscal 2021-2023 biennial budget, passthrough entities can elect to file and pay taxes at the entity level and owners can claim a refundable credit for their share of the taxes paid, allowing passthrough owners to skirt the $10,000 SALT deduction cap. 

The bill was passed by the House 69 to 55 and by the Senate 54 to 11 on June 30.

“Small businesses are the lifeblood of Minnesota, but Minnesota’s small businesses and workers have borne a large burden of the COVID-19 pandemic to protect our communities and save lives,” Walz said in a July 1 release. “Today, I am proud to sign this final piece of Minnesota’s COVID-19 Recovery Budget into law to provide direct support to businesses and working families across the state.”

H.F. 9 allows forgiven Paycheck Protection Program loans to be excluded from state gross income and allows taxpayers with federal adjusted gross income of less than $150,000 to exclude $10,200 of unemployment insurance benefits from their gross income.

The bill also allocates $5 million to the small business investment tax credit (angel credit) in 2022 and provides a one-year extension of the historic structure rehabilitation credit.

And the bill creates a new film production tax credit for up to 25 percent of eligible production costs paid in a tax year. The commissioner of employment and economic development will issue credit certificates to qualifying productions, with total credit allocations capped at $4.95 million per year. No credits can be issued after December 31, 2024.

H.F. 9 establishes a tax credit equal to 85 percent of contributions to the newly established Minnesota housing tax credit contribution account, which will help promote affordable and workforce housing. The credit is capped at $9.9 million annually.

The bill also allows taxpayers ages 19 to 20 without children to qualify for the state working family tax credit and provides a sales tax exemption for supplies and materials used to construct public safety facilities.

Walz’s office did not respond to a request for comment by press time.

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