This bill proposes a significant overhaul of Minnesota's tax structure by phasing out the individual income tax and corporate franchise tax. It establishes a schedule for reducing taxpayer liability under Minnesota Statutes, chapter 290, starting with an 80% reduction for taxable years beginning after December 31, 2025, and decreasing to 20% for taxable years beginning after December 31, 2028. The bill also mandates that refundable credits exceeding taxpayer liability will be reduced according to this schedule and includes provisions for the revisor of statutes to identify necessary changes to fully repeal these taxes by January 1, 2026. Additionally, the bill repeals numerous sections of Minnesota Statutes related to income and corporate taxes, effectively eliminating the legal framework for these taxes, with the repeal taking effect for taxable years beginning after December 31, 2029.

Furthermore, the bill introduces a new taxation framework for qualifying entities, such as partnerships and S corporations, allowing them to elect to file a return and pay a pass-through entity tax based on the tax liability of each qualifying owner. It also outlines requirements for filing returns, mandates electronic filing for tax preparers handling more than ten Minnesota tax returns, and specifies conditions for estimated tax payments. The bill amends existing tax laws regarding estimated taxes, clarifying definitions and establishing rules for short taxable years and electronic payments. Overall, the legislation aims to streamline tax compliance, clarify obligations for various entities, and enhance tax equity while providing financial relief through various credits and deductions.

Statutes affected:
Introduction: 290.09