Law Change FAQs for Tax Year 2020

Did Minnesota conform to the Employee Retention Credit (ERC)?

No. The Minnesota tax laws enacted on July 1, 2021, did not conform to the ERC. Taxpayers must still report a nonconformity adjustment relating to this provision on their nonconformity schedule.

Do I report Paycheck Protection Program loan forgiveness, and related business expenses that were not deductible for federal purposes, on my Minnesota return? 

No. Minnesota tax law now allows the same treatment of loan forgiveness amounts and related business expenses as federal tax law

If I need to repay Paycheck Protection Program loans, are these amounts included in Minnesota taxable income?

For Minnesota purposes, repaid loan amounts will be treated the same way as they are on the federal return.

Does Minnesota match the federal provision for excluding up to $10,200 in unemployment compensation from adjusted gross income?

Yes. For taxable year 2020, Minnesota tax law now allows the same unemployment income exclusion as federal tax law.

Are the IRS economic impact payments included in household income for the Minnesota Property Tax Refund?

No. These payments are considered a federal tax credit.

Has COVID-19 affected the turnaround on substitute forms and electronic filing certification testing?

No. The expected turnaround is still 10 business days from submission.

Have the 2020 tax forms been updated as a result of the recent Minnesota tax law changes?

Yes. Please visit www.revenue.state.mn.us/find-form to find updated 2020 forms and instructions.

Do pass-through entities have to amend their 2020 returns to issue updated Schedule KPI, KPC, or KS to their owners?

No. We will adjust the end taxpayer’s 2020 return for the recent Minnesota tax law changes for as many taxpayers as possible. (If we cannot adjust your return, we will let you know that you will need to amend it.) Pass-through entities do not need to amend their 2020 Minnesota return to update their Schedule KPI, KPC, or KS solely due to those tax law changes.

Are the Economic Injury Disaster Loans (EIDL) taxable in Minnesota for 2020?

No. For taxable years beginning after December 31, 2019, and before January 1, 2021, Minnesota law conforms to Internal Revenue Code section 278(b).

Are taxpayers required to amend their Minnesota return to reduce the addback on qualifying depreciable property?

No. You may choose not to reduce the addback for qualifying depreciable property and continue to claim the related one-fifth subtractions on subsequent returns. If we audit a return with qualifying depreciable property, the addback and subsequent subtractions will be adjusted.  

Will Minnesota conform to federal tax law changes enacted after December 31, 2018?

A state tax bill was enacted on July 1, 2021, that conforms to certain federal law changes enacted after December 31, 2018. See the 2021 Legislative Bulletins for more information. 

What is Minnesota’s dependent exemption amount for tax year 2020?

The dependent exemption amount is $4,300 per qualifying dependent. It phases out at certain income levels depending on your filing status:

• Single: $197,850
• Married Filing Jointly and Qualifying Widow(er): $296,750 
• Married Filing Separately: $148,375
• Head of Household: $247,300 

When the department adjusts 2020 Minnesota income tax returns for tax law changes, will they include the 2020 Minnesota Working Family Credit (2020 Schedule M1WFC) if I’m eligible?

We will only adjust your 2020 Form M1 to include the Working Family Credit if you filed 2020 Schedule M1WFC, Minnesota Working Family Credit, with your original 2020 Form M1.

What should I do if I’m now eligible for the Working Family Credit due to Minnesota’s tax law changes?

If you’re eligible for the credit after we adjust your return, complete 2020 Schedule M1WFC and include it with 2020 Form M1X, Amended Minnesota Income Tax.

If you already received a letter with our return adjustments due to tax law changes, and we did not include the credit in our adjustments, you may amend your return to include the credit.

If you have not received a letter with our return adjustments due to tax law changes, wait until we have adjusted the return. If you qualify for the Working Family Credit after the adjustments for tax law changes, you may amend your Minnesota returns to include it. Complete 2020 Schedule M1WFC and include it with 2020 Form M1X.

Minnesota adjusted my return, but the Working Family Credit was not added even though I now qualify for it. Should I amend my return or appeal the tax order?

We will not adjust the return to include the Working Family Credit if you did not file Schedule M1WFC with your original return. If you qualify for the Working Family Credit after we adjusted your return, you must file an amended return to claim the credit.

I received an adjustment to my 2020 Minnesota Individual Income tax return because of recent tax law changes. Will Minnesota notify me if I now qualify for the Working Family Credit, but did not claim it on my originally filed return?

No. The department will not be notifying filers of potential changes to their eligibility to the Working Family Credit if they did not claim the credit on their originally filed 2020 Minnesota Individual Income tax return.

Did Minnesota conform to the Qualified Improvement Property (QIP) technical correction?

No. The Minnesota tax laws enacted on July 1, 2021, did not include conformity to the QIP technical correction. Taxpayers must still report a nonconformity adjustment relating to this provision on their nonconformity schedule.

If I amend my federal income tax return for a net operating loss carryback, do I also need to amend my Minnesota return?

Yes, file Form M1X, Amended Minnesota Income Tax, within 180 days after filing the amended federal return. Include a copy of the amended federal return. For details, see the Form M1X instructions.

Does Minnesota's 2020 quarterly estimate grace period (of 75% of 2018 tax) apply to all four quarters of 2020?

Yes. To qualify for the grace period, you must pay the minimum payment in four equal installments. 

What is considered additional nontaxable income for the K-12 Education Credit and Property Tax Refund?

For differences between the definitions of additional nontaxable income and household income, see the instructions for:

• Schedule M1ED, K-12 Education Credit
• Form M1PR, Homestead Credit Refund and Renter's Property Tax Refund

For income additions on:

• Schedule M1ED, see Minnesota Statute 290.0674
• Form M1PR, see Minnesota Statute 290A.03

Is line 3 of 2020 Schedule M1HOME limited at $50,000 ($100,000 for Married Filing Jointly)?

Yes. Minnesota law limits the total amount of contributions for all years to $50,000 ($100,000 for Married Filing Jointly).

Will the Schedule M1NR instructions be updated to include Minnesota income adjustments for nonresident aliens who cannot use the standard deduction?

Yes. We will include filing requirements for nonresident aliens in the Form M1 instructions. 

Does Minnesota have a form to disclose disregarded entities?

No.

How will the recent tax bill affect income used to determine my 2020 Property Tax Refund?

The tax law signed on July 1, 2021, did not change the definition of household income used to determine property tax refunds for property taxes payable in 2021 or rent paid in 2020.   All unemployment compensation is included in income for purposes of property tax refund claims.

Do I need to include forgiven Paycheck Protection Program (PPP) loan amounts as income on my Form M1PR, Property Tax Refund Return?

Yes, include forgiven PPP loan amounts as additional nontaxable income on Form M1PR and Schedule M1PR-AI, Additions to Income for the year that the PPP loan was forgiven.

How do property owners electronically submit Certificates of Rent Paid (CRPs) to Minnesota?

At this time, electronic CRP filing is only available to property owners and managing agents already registered in e-Services. They can log in to e-Services to upload a file.

When will the 2020 Certificate of Rent Paid and its instructions be available?

We will provide them in early November.

Was the Certificate of Rent Paid updated for tax year 2020?

Yes. We do not expect significant changes to the form other than clarifying some of the instructions. 

On the Property Tax Refund return, do co-occupants need to include adult children still living at home if they are not claimed as dependents?

Yes. Include the income of adult nondependent children on Worksheet 5 in the instructions for Form M1PR, Homestead Credit Refund and Renter's Property Tax Refund.

How is alimony I received treated on the Property Tax Refund return?

Alimony is treated as household income. If you did not include it in adjusted gross income, you must add it back to household income. 
 

Is the Minnesota addition for bonus depreciation repealed?

No. The Minnesota addition for bonus depreciation remains unchanged.

Can I claim Section 179 expensing on my Minnesota return for property I elected to depreciate using bonus deprecation on my federal return?

No. You may not claim a different bonus depreciation or Section 179 expensing treatment on your Minnesota return from the treatment elected on your federal return. If you amend your federal return to change this treatment, you must amend your Minnesota return within 180 days to reflect your federal changes.

Is the qualified depreciable property the received property or the relinquished property of a like-kind exchange?

The qualified depreciable property is the property received as a part of the transaction that qualified for like-kind exchange treatment under the Internal Revenue Code, Section 1031, as amended through December 16, 2016, but not as amended through December 31, 2018.

If my Section 179 expensing includes both qualified depreciable property and other property, how do I calculate the Minnesota modification?

Remove qualified depreciable property from the total invested property when calculating the Minnesota modification.

For example, in tax year 2018 if you invested in Section 179 property in the amount of $125,000 and $60,000 of this amount is qualified depreciable property, the Minnesota addition is calculated as follows:

Am I required to complete a Minnesota addition for Section 179 expensing if the only property for which I claimed federal Section 179 expensing is like-kind exchange property?

For tax years 2017, 2018, and 2019, you must complete a Minnesota addition for Section 179 expensing unless you meet at least one of these conditions:

• You received property that is “qualifying depreciable property” under Minnesota Statute 290.0131, subd. 10.
• You did not claim federal Section 179 expensing for property other than “qualifying depreciable property”

Do I need to amend my Minnesota return in the year of the like-kind exchange transaction to reduce my Minnesota Section 179 addition?

No. If you choose not to amend your Minnesota return solely to reduce your addback, you may continue claiming related one-fifth subtractions on your subsequent returns.

If you amend your Minnesota return for a reason other than to reduce the Section 179 addition, you must make all adjustments to comply with Minnesota law, including reducing your 179 addback for qualifying depreciable property and the related subsequent subtractions. If we audit a return with qualifying depreciable property, we may adjust the addback and related subsequent subtractions.

Will we be able to electronically file Schedule M2RT, Resident Trust Questionnaire?

Yes. We released a draft schema of this form on September 30, 2020.

What are the criteria for filing Schedule M2RT, Resident Trust Questionnaire?

Trusts must file Schedule M2RT if both of these apply:

• The trust meets the statutory definition of a resident trust
• The trust may not have sufficient minimum connections to Minnesota for due process purposes

These trusts must check both the Statutory Resident and Due Process Nonresident checkboxes on Form M2, Minnesota Income Tax for Estates and Trusts. They must also include Schedule M2RT.