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HF3955 (Legislative Session 94 (2025-2026))

Tax refunds; tip income tax subtraction provided, Minnesota child tax credit expanded, onetime expansion of property tax refunds provided, and new fifth tier individual income tax rate established.

AI Generated Summary

Purpose

  • The bill aims to update Minnesota tax laws to provide targeted tax relief and changes in how certain income and credits are treated. It adds a new deduction for tip income, expands the Minnesota child tax credit, offers a one-time increase in property tax refunds, and creates a new top income tax bracket (a fifth tier). The changes involve updates to several sections of Minnesota statutes to implement these provisions.

Main provisions

  • Tip income subtraction: Adds a new Subdivision 40 to Minnesota Statutes 2024 section 290.0132. It makes the amount of qualified tips that can be deducted under Internal Revenue Code (IRC) section 224 a subtraction from Minnesota taxable income. In plain language, tip income would be subtracted from Minnesota taxes, effectively reducing taxable income for tipped workers up to the IRC limit.
  • Expansion of the Minnesota child tax credit: The bill expands the state child tax credit, meaning eligible families could receive a larger credit or have expanded eligibility compared to current law.
  • One-time expansion of property tax refunds: The bill provides a temporary, one-time increase in property tax refunds for qualifying taxpayers.
  • New fifth tier tax rate: Establishes a new highest tax bracket (a fifth tier) for individual income, increasing the top rate that applies to higher earners.
  • Statutory updates: The changes require amendments to multiple statutes, including Minnesota Statutes 2024 and 2025 Supplement sections 290.06 (subdivisions 2d and 2c), 290.0661 (subdivisions 3–7), and the newly added Subdivision 40 in 290.0132, to implement these provisions.

Significant changes to existing law

  • Taxable income calculations: Introduces a tip income subtraction, affecting how tip income is treated for Minnesota tax purposes.
  • Tax brackets: Adds a new fifth income tax tier, altering the structure of Minnesota’s income tax brackets.
  • Credits and refunds: Modifies the Minnesota child tax credit and the property tax refund program, including a one-time expansion of refunds.
  • Legal references: Requires updates to several statute provisions (290.0132, 290.06, 290.0661) to align with the new provisions and ensure proper administration.

Practical impact and who is affected

  • Tip-earning workers: Potential tax relief due to the new tip income subtraction.
  • Families with children: Potentially larger benefits from an expanded Minnesota child tax credit.
  • Property taxpayers: Possible one-time increase in refunds.
  • Higher earners: Possible higher tax payments due to the new top income tax bracket.

Implementation notes

  • The changes reference specific statutory subdivisions and sections (e.g., 290.0132 Subd.40, 290.06 subdivisions 2d and 2c, 290.0661 subdivisions 3–7) that will be amended to reflect the new provisions. Administrative details will depend on how the amendments are enacted and implemented.

Relevant Terms tip income subtraction Internal Revenue Code section 224 Minnesota tax Minnesota child tax credit property tax refunds one-time expansion fifth tier rate income tax bracket Minnesota Statutes 2024 section 290.0132 Subd.40 Minnesota Statutes 2024 section 290.06 Subd. 2d Minnesota Statutes 2024 section 290.0661 Subd. 3–7 Minnesota Statutes 2025 Supplement section 290.06 Subd. 2c

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
March 05, 2026HouseActionIntroduction and first reading, referred toTaxes

Citations

 
[
  {
    "analysis": {
      "added": [
        "Subd. 40 Tip income added to 290.0132."
      ],
      "removed": [],
      "summary": "Adds Subd. 40 'Tip income' to Minnesota Statutes section 290.0132; provides a subtraction for tip income equal to the amount of qualified tips allowed as a deduction under the Internal Revenue Code section 224.",
      "modified": []
    },
    "citation": "Minnesota Statutes 2024 section 290.0132",
    "subdivision": "Subd. 40"
  },
  {
    "analysis": {
      "added": [
        "New Subd. 2d added to 290.06."
      ],
      "removed": [],
      "summary": "Adds a new subdivision 2d to Minnesota Statutes section 290.06 as part of the bill text.",
      "modified": []
    },
    "citation": "Minnesota Statutes 2024 section 290.06",
    "subdivision": "Subd. 2d"
  },
  {
    "analysis": {
      "added": [
        "New Subd. 3 and Subd. 7 added to 290.0661."
      ],
      "removed": [],
      "summary": "Adds subdivisions 3 and 7 to Minnesota Statutes section 290.0661.",
      "modified": []
    },
    "citation": "Minnesota Statutes 2024 section 290.0661",
    "subdivision": "Subd. 3, Subd. 7"
  },
  {
    "analysis": {
      "added": [
        "New Subd. 2c added to 290.06 in the 2025 Supplement."
      ],
      "removed": [],
      "summary": "Adds subdivision 2c to Minnesota Statutes section 290.06 in the 2025 Supplement.",
      "modified": []
    },
    "citation": "Minnesota Statutes 2025 Supplement section 290.06",
    "subdivision": "Subd. 2c"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "References federal law; the Minnesota tip income subtraction is linked to the deduction allowed under Internal Revenue Code § 224.",
      "modified": []
    },
    "citation": "Internal Revenue Code § 224",
    "subdivision": ""
  }
]

Progress through the legislative process

17%
In Committee

Sponsors

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