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Minnesota Legislature

Tax bill could reduce farmers’ ‘sticker shock’

Rep. Paul Marquart answers a question during discussion on HF3023, which would provide tax relief to farmers and small businesses trading in older equipment for new. Photo by Paul Battaglia

A rough year for farmers was made worse for many when their taxes came due.

If they had traded in old equipment for new during the year, the exchange value of the old equipment was showing up as income, often leaving them on the hook for thousands of dollars in taxes for which many hadn’t planned.

That’s because Minnesota tax law isn’t in full conformity with the Federal Tax Cuts and Jobs Act of 2017. But a bill considered Thursday by the House Taxes Committee, HF3023, sponsored by Rep. Paul Marquart (DFL-Dilworth), is designed to soften the “sticker shock” of farmers and small businesses making such purchases. It would reduce the taxable portion of these “like-kind” gains to one-fifth of their current level by spreading them over five years.

The bill was laid over for possible inclusion in an omnibus tax bill, but not before some of the committee’s Republican members voiced concerns that the tax relief promised was either not fast enough or not large enough.

Rep. Joe McDonald (R-Delano) and Rep. Dan Fabian (R-Roseau) both felt it wise to bring the bill quickly to the House Floor as a standalone measure. And the committee’s Republican lead, Rep. Greg Davids (R-Preston), sponsors a bill that he said goes further in bringing Minnesota tax law into full conformity with the federal tax code’s Section 179 on accelerated depreciation, and brings tax relief in the year of the purchase, rather than spreading it over multiple years.

But Marquart, the committee chair, defended his proposal. “Basically, we’re taking the gain and matching it with the deduction. … The ultimate goal would be to get back the total S179 deduction. I want to make sure that we have an option on the table that will alleviate a lot of the problem. It’s absolutely crucial that we do something.”

A Department of Revenue representative said the measures proposed in HF3023 would affect about 5,000 farmers and small businesses.

A companion, SF3168, sponsored by Sen. Kent Eken (DFL-Twin Valley), awaits action by the Senate Taxes Committee.

A similar measure was included in the omnibus tax bills that passed the House and Senate last year, and was supported by Gov. Tim Walz, but it wasn’t included in the final tax bill that came out of conference committee and signed into law.


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