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SF1332 (Legislative Session 94 (2025-2026))

Subtraction provision for overtime pay

Related bill: HF1365

AI Generated Summary

Purpose

  • The bill would change how overtime earnings are treated for Minnesota individual income tax by creating a subtraction that excludes overtime pay from taxable income. This means overtime pay would not be included when calculating state income tax.

Main provisions

  • Adds a new subdivision (Subdivision 36) to Minnesota Statutes 2024, section 290.0132.
  • Defines overtime pay as wages, salaries, tips, and other employee compensation earned for hours worked in any workweek in excess of the maximum workweek applicable to the employee under:
    • Minnesota law (chapter 177), or
    • The United States Code (title 29) section 207 (the federal Fair Labor Standards Act).
  • Establishes that the amount of overtime pay is a subtraction from Minnesota individual income tax (i.e., it reduces taxable income).

How it would operate

  • Employers’ overtime earnings, once earned in a workweek that exceeds the applicable maximum, would be excluded from an individual’s taxable income for state tax purposes.
  • The rule relies on the defined “overtime pay” to determine what qualifies for the subtraction, tying the threshold to either Minnesota’s overtime standard (chapter 177) or federal standards (FLSA, 29 U.S.C. § 207).

Notable changes to current law

  • Introduces a new tax subtraction specifically for overtime pay, altering how overtime earnings are treated in calculating Minnesota's individual income tax.
  • Aligns the tax treatment of overtime with the defined concept of a workweek exceeding the maximum under state or federal law.

Practical considerations

  • The subtraction applies to “wages, salaries, tips, and other employee compensation” earned as overtime, potentially widening the scope beyond base wages to include other compensation types.
  • The measure references both state and federal overtime thresholds, which could require consistency between Minnesota law and federal overtime rules when applying the subtraction.

Relevant Terms - overtime pay - subtraction - wages - salaries - tips - other employee compensation - workweek - maximum workweek - chapter 177 - United States Code title 29 section 207 - Minnesota individual income tax - taxable income

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
February 13, 2025SenateActionIntroduction and first reading
February 13, 2025SenateActionReferred toTaxes
May 18, 2025SenateActionChief author stricken
May 18, 2025SenateActionChief author added

Citations

 
[
  {
    "analysis": {
      "added": [
        "Subd. 36, 'Overtime pay', establishing that overtime pay is a subtraction.",
        "Definition of overtime pay as wages, salaries, tips, and other employee compensation earned for hours worked in any workweek in excess of the maximum workweek under chapter 177 or the federal standard in 29 U.S.C. § 207."
      ],
      "removed": [],
      "summary": "Adds Subd. 36 to Minn. Stat. § 290.0132 to treat overtime pay as a subtraction from gross income for Minnesota individual income tax purposes.",
      "modified": [
        "No modification to existing provisions; this is a new subdivision added to § 290.0132."
      ]
    },
    "citation": "290.0132",
    "subdivision": "Subd.36"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Chapter 177 is referenced to define the maximum workweek used in Subd. 36 of § 290.0132.",
      "modified": []
    },
    "citation": "177",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "References the federal overtime standard under the Fair Labor Standards Act (29 U.S.C. § 207) as part of the definition of overtime pay in Subd. 36.",
      "modified": []
    },
    "citation": "29 U.S.C. § 207",
    "subdivision": ""
  }
]

Progress through the legislative process

17%
In Committee

Sponsors

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