2024 legislative session review
Advocacy
Geno Fragnito, MNCPA director of government relations | August/September 2024 Footnote
Editor's note: Updated August 1, 2024
The 2024 legislative session began Feb. 12, a later start than 2023 but typical for an even-year session. Legislators passed a two-year budget in 2023 and were expected to focus on a capital bonding bill and policy legislation that carried over from 2023, as well as possible supplemental budget appropriations for state agencies. Sports betting, paid sick and family leave changes and adjustments to cannabis laws are a few topics that were at the top of legislators priorities in 2024.
Each year, the MNCPA identifies topics to include as part of its legislative agenda. Occasionally, some items pass the first year. Often, it takes multiple sessions for a new concept to become law or for changes to be made to an existing statute. That was the case with some of the MNCPA 2024 legislative priorities; these topics will carry into 2025.
Federal conformity
After passing a tax bill in 2023, legislators didn’t allocate resources for additional federal conformity in 2024. They passed a very limited tax bill passed on the last day of session. The Legislature did pass two small tax bills to correct errors from the 2023 tax bill but didn’t address additional federal conformity to items such as bonus depreciation and estate tax.
Nonconformity continues to add unnecessary complexity and increases the cost for filing a Minnesota return. If Minnesota continues to be a static conformity state, the complexity and increased compliance costs will remain.
Private letter rulings
Authoritative guidance from tax administrators is an integral part in ensuring taxpayers and tax preparers comply with tax laws. This guidance is also vital in determining the correct tax liability. Businesses and their CPA advisers throughout Minnesota may find themselves in need of guidance and clarifications to properly apply tax law and ensure the proper amount of tax is collected and remitted.
Minnesota is one of 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 effi cient and cost effective than expensive and protracted litigation after the fact.
Legislation to create a private letter ruling program in Minnesota was introduced in the Minnesota House and Senate but was not included in any tax bill.
Department of Revenue and Tax Court decision
The Legislature established the Minnesota Tax Court as an executive branch agency with the responsibility of hearing 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.
In the past, the Tax Court has ruled against the DOR and, in certain cases, the DOR chose not to appeal, yet did not follow the court’s ruling without public notice of the Department’s position. Tax professionals and businesses often rely on Tax Court rulings when deciding what position to take on future tax questions. 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. This guidance is also vital in determining the correct tax liability.
The House and Senate Tax Committees held hearings on this issue but didn’t include any clarifications in the 2024 tax bill. This issue remains unresolved; discussions will continue with legislators, the DOR and the Tax Court and addressed again in 2025.
Tax on professional (accounting) services
Legislation to tax professional services is not a new issue and has been introduced many times in the past 30 years but not during the 2023-24 sessions. When tax reform and state spending are discussed, legislators have talked about taxing professional services as a possible source of additional state revenue or as part of a broader discussion on tax reform.
State revenue forecasts show a “negative structural balance” in the next biennium. If state revenues don’t increase with the current tax laws, state leaders will need to make cuts, find new sources of revenue — or a combination of both — to pay for government services when they create the next state budget in 2025.
Residency factors for Minnesota trusts
Past guidance and questionnaires 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, the result will be business leaving Minnesota to advisers in other states.
Legislation was introduced to provide clarity while not placing Minnesota businesses at a disadvantage but was not included in the 2024 tax bill.
Broadening pathways to CPA licensure
CPAs are trusted advisers to businesses small and large and are an integral part of financial market stability. While the demand for CPA services continues to increase, the number of CPAs available to provide the services continues to decrease. Increased retirements, fewer students enrolling in accounting programs and fewer candidates sitting for the exam, along with other factors, have resulted in the need to reevaluate the requirements to become a CPA.
MNCPA-supported legislation providing two additional paths to become a CPA was approved and passed out of the Senate State Government Committee. The legislation was amended to eliminate the second additional path and would have created one additional path. The additional option would require 120 hours of college education and two years of work experience. The current path of 150 hours of education and one year’s experience would remain as an option. None of the pathways would change the exam requirements. Candidates would still be required to pass the exam to be a CPA.
Neither the House nor Senate put forth a state government omnibus bill this year. As a result, the legislation wasn’t voted on in 2024.
The leadership of the MNCPA started national discussions about the shrinking CPA pipeline and has resulted in at least 10 additional states moving forward with more states preparing to move forward with similar changes to those introduced by the MNCPA. Read more about what’s happening around the country
here.
Learn more about the MNCPA's
Broadening the Pathways initiative.
Mobile workforce
Income tax withholding and reporting requirements vary from state to 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 the 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 the federal mobile workforce legislation and would require other states to adopt similar laws if they want their residents to receive the same benefit.
Legislation to reduce state income tax filing complexity was not included in the 2024 tax bills. Reducing the compliance burden and increasing tax administration efficiency remain priorities that will return in 2025.
Get involved
Are there issues you think the MNCPA should consider for 2025? You can reach out to me or any of the committee members if you would like to add something to the list of items on our radar. Reach out at
govrelations@mncpa.org.
Geno Fragnito is the MNCPA director of government relations. You may reach him at govrelations@mncpa.org.
