2019 tax season likely won’t be too messy after all. But Minnesota’s code may still need a rewrite

Minnesota Capitol
Minnesota Capitol

ST. PAUL — A mess. Six months ago, if you asked anyone involved in state tax collections how the 2019 filing season would go, there’s a good chance that would have been their prediction.

But many have changed their tune.

After months of work, Cynthia Bauerly, state revenue commissioner, says Minnesota is poised to efficiently process state tax returns despite the fact that the state’s tax code is now vastly different from recent federal changes.

Last spring, state lawmakers failed to agree on a rewrite of the state’s tax laws to bring them more into line with changes in the federal Tax Cuts and Jobs Act of 2017. That means a taxpayer’s’ federal and state returns will look a lot different next year.

Bauerly says not to worry. Hundreds of state workers in the revenue department have been updating tax forms and software to make the transition as seamless as possible.

“We have been able to work through this process to make sure we have a filing system that works,” Bauerly said. “A lot of things for Minnesotans will feel the same.”

The update isn’t a one-time thing. Revenue workers do it every year, but this year there was a lot more collaboration with tax professionals to make sure the state’s forms and programs were up to par.

That doesn’t mean some things won’t be different. And yes, some people might pay more because of the state’s lack of a so-called tax conformity bill.

But Bauerly said it likely won’t be as bad as many first feared. Minnesotans will still be able to take many of the popular deductions and credits on their state taxes even though many were eliminated or modified under the federal changes.

Finding common ground

State officials and lawmakers on both sides of the aisle now agree everyone will be better off if the Legislature takes another deliberate look at finding common ground on conformity legislation. Rushing changes through early next year would create the mess everyone wants to avoid.

They came close to an agreement on tax changes a year ago. But Gov. Mark Dayton vetoed legislation passed by the Republican-led House and Senate, arguing it gave too much to businesses and the wealthy and too little to low- and middle-income Minnesotans.

Despite the governor’s veto, state Democrats and Republicans did agree on several key issues. Those included maintaining many popular deductions and credits.

But the two sides were further apart on how to modify business taxes to conform with federal changes.

Political cooperation needed

In January, Democratic-Farmer-Labor Party members will take control of the House and continue to hold the governor’s office with Tim Walz taking office. Republicans will maintain a slim, one-vote majority in the Senate.

Rep. Paul Marquart, DFL-Dilworth, who will take over leadership of the tax committee, and Sen. Roger Chamberlain, R-Lino Lakes, who leads the counterpart in the Senate, both agree that tax conformity will be a priority during the coming legislative session.

“We need to work together,” Marquart said, noting that Minnesota is the only state with a divided Legislature. “I think it would be great if we could show the nation that this works. That divided government can lead to great results for taxpayers.”

Chamberlain said Republican senators will again present their “vision” of the best way to update state tax laws. He cautioned that there are a lot of pieces that need to be addressed and agreed rushing legislation would be a mistake.

“This isn’t just a onesy, twosy little fix,” he said. “This is a major deal.”