Conforming bill becomes law

The third time’s a charm for an omnibus tax bill.

On March 7, Gov. Tim Pawlenty signed it into law — the third omnibus tax bill presented to the governor this biennium. He vetoed the first two bills presented in 2007.

Sponsored by Rep. Ann Lenczewski (DFL-Bloomington) and Sen. Tom Bakk (DFL-Cook), the new law will affect primarily tax preparers and Minnesotans who qualify for new updates to the state tax code. The law conforms to most of the changes Congress made over the year, including several new benefits for members of the military and civil servants.

The new law:

• allows members of the military to put nontaxable combat pay toward IRA contributions;

• allows a direct transfer of money from IRAs to charities;

• limits some charitable contributions, like used household items and clothes, and requires appraisals for items valued more than $500;

• permanently increases contribution limits to several retirement plans;

• allows public safety retirees to exclude $3,000 from government pensions to pay for qualified health insurance premiums;

• creates an itemized deduction for mortgage insurance premiums;

• allows a one-time rollover to health savings accounts;

• excludes from gross income the indebtedness on a house; and

• excludes up to $360 of income paid to volunteer firefighters and emergency medical technicians.

Most provisions in the new law took effect March 8.

Because many of the changes apply to the current tax season, Minnesotans who have already filed must send an amended tax return in order to receive any new deductions that may apply. To amend a 2007 return, filers can use the M1X form, available with instructions on the Department of Revenue Web site.

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