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2021 What's New for Fiduciaries
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For taxpayers affected by federal tax law passed after December 31, 2018.
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Under current law, definitions used in determining Minnesota taxable income are based on the Internal Revenue Code, as amended through December 31, 2018, with certain exceptions. Since that date, Congress has enacted the following significant acts:
- Taxpayer Certainty and Disaster Tax Relief (TCDTR) Act of 2019
- Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019
- Families First Coronavirus Response Act (FFCRA) of 2020
- Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020
- Taxpayer Certainty and Disaster Tax Relief (TCDTR20) Act of 2020
- COVID-related Tax Relief Act (COVIDTRA) of 2020
- American Rescue Plan Act (ARPA) of 2021
These acts contain changes affecting estates and trusts for tax year 2021. A bill signed into law on July 1, 2021, conforms Minnesota law to certain provisions from these federal acts.
Because Minnesota has not adopted certain federal changes, adjustments are required to correctly determine your Minnesota taxable income. Use Schedules M2NC and M2SBNC to calculate nonconformity adjustments relating to these acts.
The tax bill establishes a fully refundable pass-through entity (PTE) tax allowing electing pass-through businesses to pay state income tax at the entity level rather than at the owner level. By making the PTE election, owners can reduce the impacts of the $10,000 deduction limit for state and local taxes (SALT) endorsed federally under Notice 2020-75.
Pass-through entities may only make this election:
- In taxable years where the SALT cap is in place
- When owners collectively holding more than 50% ownership in the entity make the election
Once made, elections are irrevocable. The PTE tax is calculated in the same manner as required for composite tax and provides similar withholding, penalty, credit, and nonresident allocation requirements.
This law change is effective for taxable years beginning after December 30, 2020.