HF3814

Purpose

To align Minnesota’s tax rules with federal changes by updating how the Internal Revenue Code is defined for Minnesota tax purposes, with a focus on how Section 179 expensing is treated.

Main Provisions

• Redefines “Internal Revenue Code” in Minnesota law to mean the Internal Revenue Code of 1986 as amended through May 1, 2023.
• Specifically includes section 70306 of Public Law 119-21, which relates to Section 179 expensing.
• Also includes any uncodified (not written into codified statutes) federal provisions that relate to provisions of the Internal Revenue Code that Minnesota law uses.
• These changes are framed within Minnesota Statutes 2024, section 290.01, subdivision 31 (Internal Revenue Code).

Significant Changes to Existing Law

• The definition of the Internal Revenue Code is expanded to incorporate federal changes up to May 1, 2023.
• Adds explicit inclusion of a specific federal provision (section 70306 of Public Law 119-21) related to Section 179 expensing.
• Requires that uncodified federal provisions connected to the IRC, which Minnesota law incorporates, be treated as part of Minnesota law.

Implications

• Minnesota’s treatment of deductions and allowances under Section 179 expensing in both individual income and corporate franchise taxes will align with recent federal changes.
• Tax compliance for Minnesota taxpayers may be simplified by using federal definitions and provisions that match federal rules.

Potential Considerations

• Taxpayers planning purchases of eligible property may experience changes in how Section 179 expensing is calculated for Minnesota taxes.
• Businesses with Minnesota tax obligations should monitor how uncodified federal provisions related to the IRC are implemented in practice.

Relevant Terms

Internal Revenue Code Section 179 expensing May 1, 2023 Public Law 119-21 uncodified federal provisions Minnesota Statutes 2024 section 290.01 subdivision 31 conforming to federal changes individual income tax corporate franchise tax