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Tax loophole hitting Minn. farmers, businesses likely to get closed this year, leaders say

The comments came at the Minnesota Chamber of Commerce's annual legislative priority dinner Tuesday, Feb. 11.

CombineHead.jpg
A trend in the last decade included bigger farming equipment like this combine head. Michael Johnson/Pioneer Journal

ST. PAUL — Minnesota farmers and businesses hit with unexpected state taxes after trading in equipment and machinery could see a fix in the tax code that caused problems last year.

The four leaders of Minnesota's Legislature on Tuesday night said they expected a proposal to align the state's tax code with federal tax code would pass in 2020. Existing state tax code includes a loophole that forced some farmers and business owners to immediately pay income taxes for the financial gain they saw after trading in equipment in 2018.

House Speaker Melissa Hortman, House Minority Leader Kurt Daudt, Senate Majority Leader Paul Gazelka and Senate Minority Leader Susan Kent each said they expected Section 179 would be conformed to meet the federal section this year.

"My tax chair would like that," Hortman, D-Brooklyn Park, said during a "lightning round" of questions at the Minnesota Chamber of Commerce's annual legislative priority dinner Tuesday evening. She referred to House Taxes Committee Chair Paul Marquart, of Dilworth. The two Republicans on the panel, Gazelka and Daudt, said they "definitely" expected the change to be adopted this year and Kent, a Democrat, said it likely would.

Rep. Greg Davids, R-Preston, last year put forth a bill aimed at bringing the state code into conformity with the federal code. And under his bill, those who face penalties or interest from the Minnesota Department of Revenue stemming from the unpaid debts would have those expenses canceled.

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“We owe it to our farmers and small business owners to get this fixed — it's unreasonable to expect them to come up with tens of thousands of dollars, especially for farmers and businesses that may be struggling,” Davids said in a news release Wednesday. “It’s time to right this wrong for our farmers and small business owners across Minnesota—it's encouraging to hear that the four legislative leaders and Gov. Walz all agree on this, so let's get it done.”

The Minnesota Legislature began the roughly 14-week 2020 legislative session on Tuesday, Feb. 11.

Dana Ferguson is a Minnesota Capitol Correspondent for Forum News Service. Ferguson has covered state government and political stories since she joined the news service in 2018, reporting on the state's response to the COVID-19 pandemic, the divided Statehouse and the 2020 election.
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