Minneslate Logo

SF3739 (Legislative Session 94 (2025-2026))

Federal deduction for qualified overtime compensation adoption

Related bill: HF3524

AI Generated Summary

Purpose

  • Align Minnesota individual income tax with a federal rule by allowing a subtraction from Minnesota taxable income for the amount of qualified overtime compensation that is deductible under the federal Internal Revenue Code. The change aims to let overtime compensation reduce a Minnesota filer’s taxable income, similar to the federal treatment.

Main Provisions

  • Adds a new subdivision (Subd. 40) to Minnesota Statutes 2024 section 290.0132.
  • Overtime income: The amount of qualified overtime compensation that would be allowed as a deduction under the federal Internal Revenue Code is treated as a subtraction to Minnesota taxable income.
  • The subtraction is allowed for taxable years beginning after December 31, 2028 (i.e., starting in 2029).
  • Notwithstanding section 225, paragraph g of the Internal Revenue Code, the subtraction described in this subdivision is allowed for the specified future taxable years.

Significance and Changes to Law

  • New tax deduction: Creates a Minnesota subtraction for qualified overtime compensation, mirroring the federal deduction.
  • Delayed effective date: The subtraction does not apply before 2029; it begins with tax years starting after December 31, 2028.
  • Overrides federal limit for Minnesota purposes: The not-withstanding language signals Minnesota will allow this subtraction despite the federal limit in IRC Section 225(g).
  • Potential impact: Could reduce Minnesota individual income tax for workers who receive qualified overtime compensation, starting in 2029.

Relevant Terms - qualified overtime compensation - subtraction - Internal Revenue Code - Section 225 - Notwithstanding - taxable years beginning after December 31, 2028 - overtime income - Minnesota Statutes 290.0132 - Subd.40

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
February 23, 2026SenateActionIntroduction and first reading
February 23, 2026SenateActionReferred toTaxes

Citations

 
[
  {
    "analysis": {
      "added": [
        "Subd.40. Over-time income: a subtraction equal to the amount of qualified overtime compensation deductions allowed under the Internal Revenue Code."
      ],
      "removed": [],
      "summary": "Adds Subd.40 'Overtime income' to Minnesota Statutes 2024, section 290.0132, creating a subtraction for qualified overtime compensation as allowed by the Internal Revenue Code.",
      "modified": [
        "Amends Minnesota Statutes 2024 section 290.0132 by adding a subdivision."
      ]
    },
    "citation": "290.0132",
    "subdivision": "Subd.40"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "References federal law (IRC § 225 and § 225(g)) to define the treatment of the deduction for qualified overtime compensation; the Minnesota subtraction is allowed notwithstanding IRC § 225(g) for taxable years after December 31, 2028.",
      "modified": [
        "Notes that the Minnesota subtraction is based on IRC § 225 and that § 225(g) is overridden by the Minnesota provision for the applicable years."
      ]
    },
    "citation": "Internal Revenue Code § 225",
    "subdivision": "(g)"
  }
]

Progress through the legislative process

17%
In Committee

Sponsors

Loading…