Special account proposed to help state tax filers get what’s coming

It’s a frustration for state income taxpayers: Having to file an amended return because the state did not act quickly enough to conform its tax code to federal changes that may have taken place late in the prior calendar year.

For instance, last year’s omnibus tax bill would have conformed the state to some federal tax provisions enacted in 2015. The bill, however, was vetoed due to a technical error. Even if it hadn’t, many Minnesotans would have needed to file an amended state tax return to receive a possible refund due to the federal changes. It wasn’t until January 2017 that the 2015 conformity changes were signed into state law.

Rep. Paul Thissen

Rep. Paul Thissen (DFL- Mpls) sponsors HF816 that would annually setup a mechanism for federal conformity to take place, even if the Legislature is not in session. The bill was held over Tuesday by the House Taxes Committee for possible omnibus bill inclusion. It has no Senate companion.

“It’s really aimed at minimizing complexity for taxpayers,” he said. “When we are delayed after the feds act, it is a challenge for taxpayers who have to file amended returns.”

A $20 million special account is at the heart of the plan.

Money from a new federal tax conformity account could be drawn on to pay out as needed for conformity. Once it convenes, the Legislature would act to transfer money from the General Fund to replenish the account to the $20 million level.

If federal conformity provisions exceed $20 million, the state’s revenue commissioner would be empowered to exclude items from the list for consideration. The amount needed to cover the revenue loss must be transferred from the account to the General Fund.

Thissen said his narrowly drawn bill lays out specific tax conditions that seem to annually be acted on at the federal level. He said that historically, it costs the state around $20 million to conform to the changes.

The measure was met with bipartisan accolades.

Rep. Jerry Hertaus (R-Greenfield) called it a “logical and sensible thing to do,” while Rep. Paul Marquart (DFL-Dilworth) said it’d create “some certainty for taxpayers.”