Minnesota Enacts Retroactive Depreciation Changes That May Affect 2018 Tax Return

The Minnesota legislation has retroactively changed allowable Minnesota depreciation of fixed assets relating to federal bonus depreciation and Section 179 expensing. This change may affect 2018 business and individual returns retroactively. The following is a guide for our clients, as we continue to monitor the issue closely.

Jennifer Verly June 26, 2019

On May 30, 2019 Minnesota Governor Tim Walz signed a 2019 omnibus tax bill that brings several of Minnesota’s tax laws into conformity with the federal Tax Cuts and Jobs Act of 2017. Prior to May 30, 2019 Minnesota’s non-conformity required many deviations from 2018 federal tax law.

The Minnesota legislation has retroactively changed allowable Minnesota depreciation of fixed assets relating to federal bonus depreciation and Section 179 expensing. This change affects 2018 business and individual returns retroactively.

 

NOTICE TO OUR CLIENTS

If your 2018 return has already been filed:
The Minnesota Department of Revenue (MNDOR) has advised that it will be sending out notices to affected taxpayers making the required 2018 tax adjustments. No amended 2018 returns are to be filed. We request that when you receive a notice, please forward to us as soon as possible so we may verify the adjustment the State is making. In some cases we may need to work with the MNDOR to provide information so that accurate adjustments are made. In several cases these notices will result in a refund to you. We also need to see these notices to update our records for the adjustment made since this affects your returns in future years.

If your 2018 return has not yet been completed:
The MNDOR is working with software providers to make this midyear change. They request that we not file returns until software accurately reflects the retroactive changes. The State has generally indicated software updates may be available by mid-July, 2019. We request your patience as we wait for further direction from the MNDOR on these mid-year retroactive changes.

 

What’s Next?

Although this news brings some clarity on how the Minnesota Legislature will respond to the 2017 federal tax law, it still raises large questions about how and when Minnesota taxpayers must retroactively conform for the 2018 tax year. DS+B tax professionals are closely monitoring MNDOR guidance and will communicate further updates as soon as possible.