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HF385 (Legislative Session 94 (2025-2026))

Individual income tax subtraction provided for discharges of indebtedness, and certain discharges of indebtedness excluded from income.

Related bill: SF860

AI Generated Summary

Purpose

  • Create a tax benefit by allowing an income subtraction for certain discharged indebtedness that was coerced debt. This subtraction would reduce the amount of income subject to Minnesota individual income tax for people who receive a discharge of debt awarded under a specific program (section 332.74, subdivision 3). The subtraction would be treated as excluded income when calculating the property tax refund and the renters income tax credit.

Main Provisions

  • Adds a new subdivision (36) to Minnesota Statutes 2024 section 290.0132 to define “Discharges of indebtedness coerced debt.”
  • Establishes that the amount of discharge of indebtedness awarded to a claimant under section 332.74, subdivision 3, is a subtraction from income for tax purposes.
  • Ensures this subtraction affects calculations for the property tax refund and the renters income tax credit.
  • Indicates the bill also references amendments to related statutes (290A.03, subdivision 3.1.7, and 385) to implement the change across tax provisions.

Significant Changes to Existing Law

  • Introduces a new income subtraction specifically for discharge of indebtedness that is coerced debt, creating a tax exclusion for those amounts.
  • Expands the treatment of discharged debt to apply not only to general income taxes but also to the property tax refund and renters tax credit calculations.

Implementation Considerations

  • Qualification depends on the discharge being awarded under section 332.74, subdivision 3.
  • The change affects how discharge of indebtedness is treated across multiple tax-related provisions, potentially altering refunds or credits for affected claimants.

Summary of Practical Effect

  • People who receive a coerced debt discharge under the specified program could exclude that amount from taxable income, which may reduce their state income tax and increase eligibility or amounts for the property tax refund and renters credit.

Relevant Terms - discharges of indebtedness - coerced debt - subtraction - income - property tax refund - renters income tax credit - Minnesota Statutes 2024 - section 332.74 subdivision 3 - Minnesota Statutes 290.0132 - subdivision 36 - 290A.03 subdivision 3.1.7 - 385

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
February 13, 2025HouseActionIntroduction and first reading, referred toTaxes

Citations

 
[
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "This bill adds Subd. 36 to Minnesota Statutes 2024 section 290.0132, establishing that the amount of discharge of indebtedness awarded to a claimant under section 332.74, subdivision 3, is a subtraction for income purposes.",
      "modified": []
    },
    "citation": "290.0132 Subd. 36",
    "subdivision": "Subd. 36"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "The bill amends Minnesota Statutes 2024 section 290A.03, incorporating changes related to the treatment of discharged indebtedness for tax purposes (specific subdivision noted as Subd. 3 in the text).",
      "modified": []
    },
    "citation": "290A.03 Subd. 3",
    "subdivision": "Subd. 3"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "References discharge of indebtedness awarded to a claimant under Minnesota Statutes section 332.74, subdivision 3, designating it as a subtraction for income purposes.",
      "modified": []
    },
    "citation": "332.74 Subd. 3",
    "subdivision": "Subd. 3"
  }
]

Progress through the legislative process

17%
In Committee

Sponsors

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