HF3815

Purpose

This bill changes Minnesota's tax rules to align with recent federal changes about deducting business interest. It updates how the Internal Revenue Code is defined for Minnesota tax purposes and specifies which federal provisions count as part of Minnesota law.

Main Provisions

• Redefines Internal Revenue Code for Minnesota tax purposes to mean the IRC of 1986 as amended through May 1, 2023.
• Adds sections 70303, 70341, and 70342 of Public Law 119-21 as part of the Internal Revenue Code used in Minnesota law, specifically relating to the business interest deduction.
• Includes any uncodified federal provisions that relate to provisions of the Internal Revenue Code and that are incorporated into Minnesota law.

Significant Changes to Existing Law

• Minnesota Statutes 2024 section 290.01 subdivision 31 is amended to explicitly conform Minnesota’s definition of the Internal Revenue Code to the federal code changes noted above.
• The bill broadens what is treated as the Internal Revenue Code by including specific federal law sections and uncodified provisions, so Minnesota’s tax calculations will follow those federal changes for purposes related to business interest.

Potential Impacts

• The deduction for business interest under Minnesota tax calculations may be updated to reflect federal rules as of May 1, 2023 and the included Public Law 119-21 provisions.
• Taxpayers with significant business interest may see changes in deductible interest for both individual income and corporate franchise taxes, depending on how Minnesota applies the updated IRC.

Relation to Federal Law

• The Internal Revenue Code is defined to include amendments through May 1, 2023, plus specific sections from Public Law 119-21 and any related uncodified federal provisions that relate to the IRC.

Note

• The focus is on conforming Minnesota’s tax code to federal changes regarding the deduction for business interest.

Relevant Terms Internal Revenue Code; Internal Revenue Code means the Internal Revenue Code of 1986 as amended through May 1, 2023; business interest; deduction for business interest; Public Law 119-21; sections 70303, 70341, 70342; uncodified provisions; Minnesota Statutes 2024 section 290.01 subdivision 31; conforming to federal changes; corporate franchise taxes; individual income taxes.