MN Legislature passes tax relief measure

The bill included a provision that will allow for deductions of up to $1 million for certain equipment, up from $25,000.

Minnesota farmers will be able to deduct up to $1 million for certain equipment purchases, up from $25,000, under a bill that passed the Minnesota Legislature in October. (Liz Harder / Grand Vale Creative LLC)

The Minnesota Legislature has passed a bonding and tax bill expected to provide tax relief to the state's farmers.

The Legislature passed the bill that included the provision providing full conformity with Section 179 Small Business Expensing with bipartisan support on Oct. 17. Farm organizations strongly supported the measure, which allows for up to $1 million in expensing for certain equipment, up from $25,000.

“Section 179 is a key tool to allow farmers to invest in their businesses and in their rural communities,” said Kevin Paap, president of the Minnesota Farm Bureau. “We appreciate the bipartisan support in both chambers for this important tax tool that provides certainty in the midst of financial challenges in the ag economy."

Section 179 refers to the federal income tax code section that sets the expensing rules for when businesses can deduct the cost of purchasing certain equipment. Minnesota previously has allowed $25,000 of immediate expensing, while the federal government and most states allow $1 million in immediate expensing.

A 2019 Minnesota tax bill enacted retroactive state income tax increases on many farmers and businesses by conforming to the tax increases from the Federal Tax Cuts and Jobs Act, but without adopting most of the federal offsets, including the changes to Section 179.


"This has been a huge priority the last two years, the last two legislative sessions and all the special sessions to try to get this fixed and done," said Minnesota Soybean Growers Association executive director Joe Smentek. "We utilized all of our available resources, taking action to reach legislators. Our farmers, staff and lobbying team put in the time and hard work. There was no quit in our MSGA team in its efforts to get this passed."

Minnesota previously had fully conformed with 1031 federal like-kind exchange rules resulting in an increase in income tax liability for trade-in of certain equipment but did not conform with the tax offset of Section 179 tax immediate expensing. The result was that some businesses and farmers received unexpected tax bills stating they owe more income taxes in Minnesota.

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