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April 18, 2024
2024-0816

Minnesota enacts retroactive change to corporate net operating loss deduction - amended returns may be required

On April 8, 2024, Governor Tim Walz signed House File 3769 (HF 3769), which retroactively extends by one year the effective date of Minnesota's decoupling from the federal 80% limitation on corporate net operating losses (NOLs) to tax years beginning after December 31, 2023.

Retroactive change of NOL limit

With the enactment of HF 3769, the limit on Minnesota's NOL deduction retroactively returns to 80% (rather than 70%) of taxable net income for tax years beginning after December 31, 2017, and before January 1, 2024. For tax years beginning after December 31, 2023, the limit on the NOL deduction decreases to 70% of taxable net income.

The Minnesota Department of Revenue has updated its 2023 NOL schedule to account for this change.

Implications

Taxpayers that have filed their 2023 Minnesota income tax return should consider filing an amended return to claim the additional NOL deduction.

The Minnesota Legislature is also considering other tax provisions this legislative session including the following:

  • Senate File 5422, which would reduce Minnesota's corporate income tax rate from 9.8% to 8.25% for tax years beginning after December 31, 2023
  • House File 4513/Senate File 4750, which would require the Department of Revenue to make publicly available on its website the franchise tax information from corporations with annual gross sales or receipts exceeding $250. Disclosure of federal returns or federal return information on the state return would be prohibited.
  • House File 4535/Senate File 4663, which would call for a study of the extent of corporate tax base erosion and legislative options for addressing it, including the administrative impact of a worldwide combined reporting system

Taxpayers should monitor the progress of this pending legislation.

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Contact Information

For additional information concerning this Alert, please contact:

State and Local Tax Group

Published by NTD’s Tax Technical Knowledge Services group; Chris DeZinno, legal editor
 

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