Tax Law Changes
For Tax Years 2017 to 2020
Minnesota tax laws were changed to provide conformity with federal business expensing rules under Section 179 of the Internal Revenue Code (IRC). Signed into law October 21, 2020, this update includes:
- Full conformity for all Section 179 expensing for property placed in service in a taxable year beginning after December 31, 2019.
- Retroactive conformity to Section 179 for tax years 2017, 2018, and 2019 for certain business property acquired in a like-kind exchange under Section 1031 of the IRC
These changes may affect taxpayers who made additions or claim related subtractions for Section 179 expensing. For more information, see Law Change FAQs for 2020.
Note: Be sure to use the most current forms or update your tax software when filing or amending a Minnesota return. (Find a Form.)
Tax Year 2020 and After
The Minnesota addition is not required for federal expensing claimed on business property that qualifies for federal and state Section 179 expensing for property placed in service in a taxable year beginning after December 31, 2019. We have updated 2020 state tax forms and instructions.
Minnesota subtractions from prior-year additions will continue until the five-year subtraction period ends.
A Minnesota Section 179 addition is required on the 2020 Minnesota income tax return in these circumstances:
Shareholders and partners of a fiscal-year flow-through business
- The Minnesota Section 179 addition applies to property placed in service during a flow-through business’s 2019 fiscal year.
- While a flow-through business’s 2019 fiscal year began before January 1, 2020, its partners and shareholders filing on a calendar year must report that income on their 2020 income tax return.
- Partners and shareholders must report the Minnesota Section 179 addition on their 2020 Minnesota income tax return that was generated by and flows through from a fiscal-year flow-through business’s 2019 Minnesota income tax return.
Taxpayers with a carryover of federal Section 179 expensing limited in a prior year
Taxpayers whose federal Section 179 expense deduction is limited in the year the property is placed in service can carry the expense deduction to future years.
If taxpayers elected federal Section 179 expensing for property placed in service in a tax year that began prior to January 1, 2020, and they report a federal carryover amount on income tax returns for tax years beginning after December 31, 2019, they must report the addition relating to this property on their 2020, and potentially subsequent years.
Tax Years 2017, 2018, and 2019
The state Section 179 addition is no longer required for property received as part of a transaction that qualified as a like-kind exchange under Section 1031 of the IRC, as amended through December 16, 2016, but not thereafter (qualifying property).
Affected taxpayers may amend their Minnesota returns to reduce their Section 179 addition by the amount attributable to the qualifying property. If you make this change, you must also reduce any related subtractions claimed in subsequent years to account for the reduced addition. We cannot make this adjustment for you.