SF 2263

Introduction - 94th Legislature (2025 - 2026)

Posted on 03/07/2025 10:13 a.m.

A bill for an act
relating to taxation; individual income; providing subtractions for overtime pay,
tips income, bonuses, and winnings from nonprofit lawful gambling organizations;
making changes to withholding provisions; amending Minnesota Statutes 2024,
sections 290.0132, by adding subdivisions; 290.091, subdivision 2; 290.92,
subdivision 2a, by adding a subdivision.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 36. new text end

new text begin Overtime pay. new text end

new text begin (a) The amount of overtime pay is a subtraction.
new text end

new text begin (b) For the purposes of this subdivision, "overtime pay" means wages, salaries, tips, and
other employee compensation earned for hours worked in any workweek in excess of the
maximum workweek applicable to the employee under chapter 177 or United States Code,
title 29, section 207.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2024.
new text end

Sec. 2.

Minnesota Statutes 2024, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 37. new text end

new text begin Tip income. new text end

new text begin (a) The amount of tips is a subtraction.
new text end

new text begin (b) For the purposes of this subdivision, "tips" means amounts that an individual reports:
new text end

new text begin (1) to the individual's employer as required under section 6053(a) of the Internal Revenue
Code; or
new text end

new text begin (2) to the Internal Revenue Service as wages which are subject to notice and demand
for payment of employer taxes under section 3121(q) of the Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2024.
new text end

Sec. 3.

Minnesota Statutes 2024, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 38. new text end

new text begin Bonus pay. new text end

new text begin (a) The amount of bonus pay is a subtraction.
new text end

new text begin (b) For the purposes of this section, "bonus pay" means bonus remuneration amounts
that are not regular wages and are supplemental wage payments under Code of Federal
Regulations, title 26, section 31.3402(g)-1.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2024.
new text end

Sec. 4.

Minnesota Statutes 2024, section 290.0132, is amended by adding a subdivision
to read:

new text begin Subd. 39. new text end

new text begin Winnings from lawful gambling. new text end

new text begin The amount of winnings and prizes from
lawful gambling received from an organization licensed under chapter 349 is a subtraction.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2024.
new text end

Sec. 5.

Minnesota Statutes 2024, section 290.091, subdivision 2, is amended to read:

Subd. 2.

Definitions.

For purposes of the tax imposed by this section, the following
terms have the meanings given.

(a) "Alternative minimum taxable income" means the sum of the following for the taxable
year:

(1) the taxpayer's federal alternative minimum taxable income as defined in section
55(b)(1)(D) of the Internal Revenue Code;

(2) the taxpayer's itemized deductions allowed in computing federal alternative minimum
taxable income, but excluding:

(i) the charitable contribution deduction under section 170 of the Internal Revenue Code;

(ii) the medical expense deduction;

(iii) the casualty, theft, and disaster loss deduction; and

(iv) the impairment-related work expenses of a person with a disability;

(3) for depletion allowances computed under section 613A(c) of the Internal Revenue
Code, with respect to each property (as defined in section 614 of the Internal Revenue Code),
to the extent not included in federal alternative minimum taxable income, the excess of the
deduction for depletion allowable under section 611 of the Internal Revenue Code for the
taxable year over the adjusted basis of the property at the end of the taxable year (determined
without regard to the depletion deduction for the taxable year);

(4) to the extent not included in federal alternative minimum taxable income, the amount
of the tax preference for intangible drilling cost under section 57(a)(2) of the Internal Revenue
Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative minimum taxable income, the amount
of interest income as provided by section 290.0131, subdivision 2;

(6) the amount of addition required by section 290.0131, subdivisions 9, 10, and 16;

(7) the deduction allowed under section 199A of the Internal Revenue Code, to the extent
not included in the addition required under clause (6); and

(8) to the extent not included in federal alternative minimum taxable income, the amount
of foreign-derived intangible income deducted under section 250 of the Internal Revenue
Code;

less the sum of the amounts determined under the following:

(i) interest income as defined in section 290.0132, subdivision 2;

(ii) an overpayment of state income tax as provided by section 290.0132, subdivision
3, to the extent included in federal alternative minimum taxable income;

(iii) the amount of investment interest paid or accrued within the taxable year on
indebtedness to the extent that the amount does not exceed net investment income, as defined
in section 163(d)(4) of the Internal Revenue Code. Interest does not include amounts deducted
in computing federal adjusted gross income;

(iv) amounts subtracted from federal taxable or adjusted gross income as provided by
section 290.0132, subdivisions 7, 9 to 15, 17, 21, 24, 26 to 29, 31, deleted text begin 34, and 35 deleted text end new text begin and 34 to 39 new text end ;

(v) the amount of the net operating loss allowed under section 290.095, subdivision 11,
paragraph (c); and

(vi) the amount allowable as a Minnesota itemized deduction under section 290.0122,
subdivision 7.

In the case of an estate or trust, alternative minimum taxable income must be computed
as provided in section 59(c) of the Internal Revenue Code, except alternative minimum
taxable income must be increased by the addition in section 290.0131, subdivision 16.

(b) "Investment interest" means investment interest as defined in section 163(d)(3) of
the Internal Revenue Code.

(c) "Net minimum tax" means the minimum tax imposed by this section.

(d) "Regular tax" means the tax that would be imposed under this chapter (without regard
to this section, section 290.033, and section 290.032), reduced by the sum of the
nonrefundable credits allowed under this chapter.

(e) "Tentative minimum tax" equals 6.75 percent of alternative minimum taxable income
after subtracting the exemption amount determined under subdivision 3.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2024.
new text end

Sec. 6.

Minnesota Statutes 2024, section 290.92, subdivision 2a, is amended to read:

Subd. 2a.

Collection at source.

(1) Deductions. Every employer making payment of
wages shall deduct and withhold upon such wages a tax as provided in this section.

(2) Withholding on payroll period. The employer shall withhold the tax on the basis
of each payroll period or as otherwise provided in this section.

(3) Withholding tables. Unless the amount of tax to be withheld is determined as
provided in subdivision 3, the amount of tax to be withheld for each individual shall be
based upon tables to be prepared and distributed by the commissioner. The tables shall be
computed for the several permissible withholding periods and shall take account of
allowances allowed under this section; and the amounts computed for withholding shall be
such that the amount withheld for any individual during the individual's taxable year shall
approximate in the aggregate as closely as possible the tax which is levied and imposed
under this chapter for that taxable year, upon the individual's salary, wages, or compensation
for personal services of any kind for the employer.

(4) Miscellaneous payroll period. If wages are paid with respect to a period which is
not a payroll period, the amount to be deducted and withheld shall be that applicable in the
case of a miscellaneous payroll period containing a number of days, including Sundays and
holidays, equal to the number of days in the period with respect to which such wages are
paid.

(5) Miscellaneous payroll period. (a) In any case in which wages are paid by an
employer without regard to any payroll period or other period, the amount to be deducted
and withheld shall be that applicable in the case of a miscellaneous payroll period containing
a number of days equal to the number of days, including Sundays and holidays, which have
elapsed since the date of the last payment of such wages by such employer during the
calendar year, or the date of commencement of employment with such employer during
such year, or January 1 of such year, whichever is the later.

(b) In any case in which the period, or the time described in clause (a), in respect of any
wages is less than one week, the commissioner, under rules prescribed by the commissioner,
may authorize an employer to determine the amount to be deducted and withheld under the
tables applicable in the case of a weekly payroll period, in which case the aggregate of the
wages paid to the employee during the calendar week shall be considered the weekly wages.

(6) Wages computed to nearest dollar. If the wages exceed the highest bracket, in
determining the amount to be deducted and withheld under this subdivision, the wages may,
at the election of the employer, be computed to the nearest dollar.

(7) Rules on withholding. The commissioner may, by rule, authorize employers:

(a) to estimate the wages which will be paid to any employee in any quarter of the
calendar year;

(b) to determine the amount to be deducted and withheld upon each payment of wages
to such employee during such quarter as if the appropriate average of the wages so estimated
constituted the actual wages paid; and

(c) to deduct and withhold upon any payment of wages to such employee during such
quarter such amount as may be necessary to adjust the amount actually deducted and withheld
upon wages of such employee during such quarter to the amount required to be deducted
and withheld during such quarter without regard to this paragraph (7).

(8) Additional withholding. The commissioner is authorized to provide by rule for
increases or decreases in the amount of withholding otherwise required under this section
in cases where the employee requests the changes. Such additional withholding shall for
all purposes be considered tax required to be deducted and withheld under this section.

deleted text begin (9) Tips. In the case of tips which constitute wages, this subdivision shall be applicable
only to such tips as are included in a written statement furnished to the employer pursuant
to section 6053 of the Internal Revenue Code and only to the extent that the tax can be
deducted and withheld by the employer, at or after the time such statement is so furnished
and before the close of the calendar year in which such statement is furnished, from such
wages of the employee (excluding tips, but including funds turned over by the employee to
the employer for the purpose of such deduction and withholding) as are under the control
of the employer; and an employer who is furnished by an employee a written statement of
tips (received in a calendar month) pursuant to section 6053 of the Internal Revenue Code
to which subdivision 1 is applicable may deduct and withhold the tax with respect to such
tips from any wages of the employee (excluding tips) under the employer's control, even
though at the time such statement is furnished the total amount of the tips included in
statements furnished to the employer as having been received by the employee in such
calendar month in the course of employment by such employer is less than $20. Such tax
shall not at any time be deducted and withheld in an amount which exceeds the aggregate
of such wages and funds as are under the control of the employer minus any tax required
by other provisions of state or federal law to be collected from such wages and funds.
deleted text end

deleted text begin (10) deleted text end new text begin (9) new text end Vehicle fringe benefits. An employer shall not deduct and withhold any tax
under this section with respect to any vehicle fringe benefit provided to an employee if the
employer has so elected for federal purposes and the requirement of and the definition
contained in section 3402(s) of the Internal Revenue Code are complied with.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2024.
new text end

Sec. 7.

Minnesota Statutes 2024, section 290.92, is amended by adding a subdivision to
read:

new text begin Subd. 32. new text end

new text begin Tip income exempt from withholding requirements. new text end

new text begin Income that is tips,
as defined in section 290.0132, subdivision 36, is exempt from the withholding requirements
of this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2024.
new text end