Wipfli Alerts & Updates: 2014 Minnesota Tax Bill


March 24, 2014
(PDF 69 kB)
Bookmark and Share

The long-awaited 2014 Minnesota tax bill finally passed on Friday, March 22, after a week of political fireworks and finger pointing. The bill effectively distributes a portion of the $1.2 billion budget surplus back to the taxpayers through a combination of federal tax conformity benefiting individuals and the elimination of the gift tax and contentious business-to-business sales tax. These changes do come with a price. The proposed upfront capital equipment sales tax exemption for manufacturing and industrial equipment has been pushed back from September 1, 2014, to July 1, 2015.
 
Benefits for Individual Taxpayers
 
The Minnesota tax law is now in conformity with most IRS provisions as of December 20, 2013, providing retroactive relief for most tax provisions. The bill provides a number of benefits for individual taxpayers, including:
 
  • Elimination of the married penalty for married couples beginning for the 2014 tax filing.
  • An increase in the Working Family Tax Credit.
  • An increase in child care tax credits.
  • An increase in student loan interest.
  • An increase of $1,500 in the eligible contribution to an Education Savings account, from $500 to $2,000.
  • Tax-free tuition and adoption assistance offered by small businesses.
  • Minnesotans over the age of 70 ½ will be able to transfer up to $100,000 of their IRA to charity and exclude that amount from their income.
  • Teachers will be eligible for a $250 tax deduction for any personal expenses on books and classroom supplies.
  • A deduction for home mortgage insurance for those earning less than $110,000.
  • Elimination of the gift tax.
  • The estate tax is simplified, raising the exemption from $1 million to $2 million—the first increase in over a decade.
 
 
Benefits for Business Taxpayers
 
Businesses also received some significant tax breaks:
 
  • The sales tax on the repair and maintenance of electronic, precision, farm, and commercial equipment has been eliminated effective April 1, 2014.
  • The warehousing and storage services sales tax will not occur. This tax was scheduled to go into effect on April 1, 2014.
  • The sales tax on telecommunication equipment has been repealed as of April 1, 2014.
  • The Angel Investor Credit program has been increased.
 
 
A number of other tax laws have been proposed and may be passed before the end of the session. One issue that remains is the sales tax on webinars and other electronic presentations while the in-person sessions remain exempt. The House version of the tax bill offered a refund mechanism for sales tax on business-to-business services, and this refund has been eliminated in the final bill. The Minnesota Department of Revenue is left with interpreting these changes. One question is whether an annual maintenance fee on equipment is refundable for the portion applicable to the periods after March 31.
 
For individuals, the Department will review tax returns already filed and make the appropriate adjustments. If additional information is required, the Department will contact taxpayers for this information. This is a new bill, with some broad and sweeping changes, so more information is expected to be released as the legislative session continues and the Minnesota Department of Revenue reviews the new law.
 
 
We expect more clarification of these law changes in the coming weeks as the Minnesota Department of Revenue issues further guidance.
 
Please contact Mike Herold, Director of State and Local Tax, at 952.548.3373 or mherold@wipfli.com or your Wipfli relationship executive for further information.
 

Click here to sign up to receive future "Wipfli Alerts & Updates" email communications as they are released.

 

View all