MNCPA sets 2025 legislative agenda
Advocacy
Geno Fragnito, MNCPA director of government relations | February/March 2025 Footnote
Editor's note: Updated February 10, 2025
Since the November election, a lot happened at the Minnesota Capitol without the Legislature being in session. The courts ruled that a winning House candidate wasn’t a legal resident of the district where he won. The seat remains vacant with a special election to fill the vacancy likely being held sometime in March. This vacancy creates a 67-66 split in the House with Republicans holding a one-vote majority. Sen. Kari Dziedzic passed away in December, leaving the Senate tied 33-33. A special election was held Jan. 28.
For any bill to pass through a committee or the full House, it will need bipartisan support. Should the DFL win the March special election, it will be only the second time in state history (the first being 1979) where the House is split evenly. This year is also a budget year with an added step in the process before the final state budget can pass. The House will need to pass its own negotiated budget before negotiations can begin with the Senate and Gov. Tim Walz. This could result in a limited number of bills passing this session.
As the session progresses, legislators will rely on experts to help them better understand how legislation affects their constituents. MNCPA members are well positioned to help legislators understand how policy changes may affect Minnesota businesses and individuals and keep the state’s economy growing. Your input is invaluable as trusted advisers to hundreds of thousands of Minnesota taxpayers. You bring expertise, experience and firsthand knowledge to the conversation.
Items on the MNCPA 2025 legislative agenda focus on tax administration, guidance from tax administrators and expanding the pathways to CPA licensure. There are nearly two dozen new elected officials at the Capitol, and it’s very important CPAs continue sharing their knowledge and expertise to help new — and veteran — legislators understand the policies they debate. You are the best suited to help shape the conversation and affect the final outcome.
Broadening pathways to CPA licensure
CPAs are trusted advisers to businesses small and large and are an integral part of financial market stability. The demand for CPA services continues to increase but the number of CPAs available to provide the services continues to decrease. Factors contributing to the decline in CPAs include increased retirements, fewer students enrolling in accounting programs and fewer candidates sitting for the exam, along with other market regulatory factors have resulted in the need to reevaluate the requirements to become a CPA.
In 2023, the MNCPA was the first state to introduce and support legislation creating additional paths to become a CPA. Since that time, nearly 30 states have followed the MNCPA lead and are expected to introduce similar legislative changes to create additional pathways to licensure.
The MNCPA 2025 legislation is similar to the proposal in 2023 but will add additional changes based on collective input from many other states.
The 2025 legislation would create a pathway allowing for a bachelor’s degree along with two years general work experience and a master’s degree with one year of general work experience; this would join the current path of 150 hours and one year of general work experience. None of the education and experience paths would change the requirement to pass the CPA exam. A candidate must pass the exam to become licensed.
The legislation also includes automatic mobility and changing the regulations to make the Minnesota Board of Accountancy the entity determining substantial equivalency, not NASBA’s National Quality Appraisal Service (NQAS).
These changes don’t solve the entire pipeline problem but they do address barriers identified in several research studies. The research has shown cost of the additional education is a significant barrier. It also shows that 150 hours has resulted in a 15% reduction in first-time CPA exam candidates after the 150-credit requirement was implemented with the decline aggregating over multiple years. The research also shows there was not an increase in work quality after 150 hours was implemented.
Learn more about this issue at
https://mncpa.org/cpa-pathways
The MNCPA supports broadening the pathways to become a licensed CPA.
Private letter rulings
Authoritative guidance from tax administrators is vital to ensure tax preparers can accurately help taxpayers comply with tax laws. This guidance is crucial when determining the correct tax liability. Every day, businesses and their CPA advisers find themselves in need of clarification and guidance interpreting gray areas or ambiguous parts of the tax code and to ensure the proper amount of tax remitted.
Minnesota is one of only two states without some form of a private letter ruling program. The MNCPA supports creating a program in Minnesota to address unique tax situations that may not fit perfectly with the way a tax law is written. Guidance before filing taxes is much more efficient and cost effective for all and less expensive than protracted litigation after the fact.
The MNCPA continues to support the creation of a private letter ruling program.
Minnesota Department of Revenue and Tax Court decision
The Minnesota Tax Court was established as an executive branch agency whose sole responsibility is to hear tax-related cases. The court’s mission is to provide timely and equitable disposition of appeals of orders issued by the Minnesota Department of Revenue (DOR) commissioner and local property tax valuations, classification, equalization and/or exemptions.
A precedent has been set in cases where the Tax Court has ruled against the DOR, the DOR chose not to appeal those decisions, did not follow the court’s ruling and never let the public know of its position. Unless there is an appeal, tax professionals and businesses are bound by Tax Court rulings. The same should be true for the DOR. Consistent application of the law and authoritative guidance from tax administrators is an integral part in ensuring taxpayers and tax preparers comply with tax laws and helps when decisions are made to take a tax position on the interpretation of the law. This guidance is also vital in determining the correct tax liability.
In a November 2022 Minnesota Supreme Court case, Cities Management, Inc. vs. Commissioner of Revenue, the majority opinion the justices were: “troubled by the Commissioner’s conduct that this case brought light to. Rather than appealing the tax court’s interpretation of tax law with which the Department disagreed, the Commissioner decided internally — apparently without notice to the public — that the Department would ‘not acquiesce’ to the tax court’s interpretation of law. We fear that such actions do little to inspire the trust and confidence of taxpayers in Minnesota’s tax system.”
The dissenting justices went on to state: “Given the outrageous conduct of the Commissioner, I would instead announce an equitable rule that the Commissioner is bound by tax court decisions that are not appealed unless the Department of Revenue provides public notice of its disagreement with the tax court opinion. It is vital that taxpayers ‘have trust and confidence that Minnesota’s tax system is fairly and equitably applied to all.’”
The MNCPA supports legislation to clarify current statutes about who is bound by Tax Court case rulings.
Residency factors for Minnesota trusts
Questionnaires and past guidance from the DOR have indicated the location of advisers to a trust could be a determining factor to establish nexus for Minnesota tax purposes. The Legislature prohibited this practice for individuals, but trusts were not included when the legislation passed. If the adviser’s location is considered a factor, it will result in business leaving Minnesota for advisers in other states.
The MNCPA supports legislation to prohibit using the location of an adviser as a determining factor to establish Minnesota nexus for a trust. Current guidance provides a reason to not hire Minnesota-based professionals.
Mobile workforce
Income tax withholding and reporting requirements vary by state, creating complexity and a compliance burden on both employees working in multiple states and employers withholding taxes for employees working in multiple states.
Mobile workforce legislation would reduce the compliance burden and increase the efficiency of administration by creating a 30-day safe harbor for filing requirements in states with an income tax withholding requirement. An individual working outside their home state for 30 days or less would not need to file multiple state income tax returns but would simply file a return in their home state. If the individual worked more than 30 days in other states, then the filing requirements would start and a return would need to be filed in any state the individual worked.
The legislation is modeled after federal mobile workforce legislation and, if it’s passed by Congress, then state legislation is not needed. The state model legislation requires other states to adopt similar laws if they want their residents to receive the same benefit.
The MNCPA supports legislation to reduce filing complexity, reduce the compliance burden and increase income tax administration efficiency.
Geno Fragnito is the MNCPA director of government relations. You may reach him at govrelations@mncpa.org.
