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 reduction schedule for 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 accordingly. Additionally, it directs the revisor of statutes to identify necessary changes to fully repeal the taxes by January 1, 2026, and repeals numerous sections related to income and corporate taxes, with the effective date for these repeals set for taxable years beginning after December 31, 2029.

Moreover, 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 outlines detailed requirements for filing returns, mandates electronic filing for tax preparers handling more than ten Minnesota tax returns, and specifies estimated tax payment obligations. The bill also amends various definitions and provisions related to income tax, introduces new tax credits for specific groups, and clarifies the responsibilities of employers regarding tax withholding. Overall, the legislation aims to simplify the tax system, provide financial relief through various credits, and ensure compliance with state tax obligations.

Statutes affected:
Introduction: 290.09