Minnesota Enacts IRC Conformity Law

Minnesota Gov. Mark Dayton has signed legislation retroactively conforming the state’s corporate franchise and personal income tax to most federal changes enacted since December 31, 2014, for tax year 2015 and following years.

As a result of the legislation, the Internal Revenue Code (IRC) conformity tie-in date for purposes of computing corporate franchise and personal income tax liability is December 16, 2016. However, Minnesota does not conform to federal bonus depreciation or the increased IRC Sec. 179 expensing amounts. Instead, the state retains its current law requirement that taxpayers add back to taxable income 80% of the additional expensing or depreciation amount in the first tax year. Taxpayers may then subtract one-fifth of the amount added back in each of the five following years.

The Minnesota Department of Revenue has noted that the passage of this bill has resulted in changes to forms and that they are working to provide guidance to tax preparers and tax software providers on what they need to do to update their products. Taxpayers are advised to look for updates to their out-of-the box software, install software updates, and/or use forms or instructions posted to the department’s website after Friday, January 20, 2017, to ensure they are using updated versions when filing their 2016 taxes. Additionally, taxpayers should not amend their returns for new deductions or exclusions unless notified by the department via letter. The department will review and adjust 2015 tax returns and contact taxpayers as needed.

The department notes that no taxpayers will owe additional tax as a result of these changes.

At this time, the department anticipates opening the income tax filing season on January 23, 2017, which is the same date as the IRS.

The full text of the department’s update is available at https://content.govdelivery.com/accounts/MNREV/bulletins/17ffd1d.

The full text of the department’s news release is available at http://www.revenue.state.mn.us/newsroom/Documents/20170112%20Conformity%20release.pdf.

Ch. 1 (H.F. 2), Laws 2017, effective January 14, 2017, except as noted; Update on Federal Conformity Legislation for Tax Preparers, Minnesota Department of Revenue, January 12, 2017; More than 200,000 Minnesotans Now One Step Closer Tax Relief, Minnesota Department of Revenue, January 12, 2017

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