Many Minnesotans will see automatic tax refunds soon after legislative deal

Many Minnesota tax filers will get an automatic refund within weeks because of tax breaks passed overnight by lawmakers, state Revenue Department officials said. 

The state Legislature voted to fully forgive business Paycheck Protection Program loans and the first $10,200 of 2020 unemployment benefits. Gov. Tim Walz signed the bill into law Thursday afternoon.

Revenue Department staffers have started reviewing 560,000 impacted returns. Taxpayers do not need to take any action right now, said Ryan Brown, a spokesman for the agency.

"Depending on the complexity of their return, we will either adjust it and issue a refund, or ask them to amend their return," Brown said in an email. "We expect to be able to adjust the majority of them on our end."

If the agency can adjust a return automatically, the taxpayer will get a letter describing any refund he or she will receive, Brown said. He said his department will contact taxpayers who will have to file an amended return.

Lawmakers and Walz struck a deal on the tax breaks on May 17, the last day of the regular session. But the issue was tied up in budget negotiations and didn't get wrapped up until all 12 budget bills passed just before Wednesday's deadline to avoid a government shutdown.

More than 100,000 Minnesota businesses received PPP loans to keep workers on the payroll during the COVID-19 pandemic. The U.S. government had already exempted them from federal income tax, along with the 2020 unemployment benefits. Minnesota was one of the last states in the country to subject both to state income tax.

September special session likely

Lawmakers made the tax bill a catch-all for last-minute agreements. It includes $6.2 million for project development of a lid over Interstate 94 in St. Paul's Rondo neighborhood. And it offers up to $28.5 million in cash incentives for a planned engineered wood mill in Itasca County.

The measure starts the process to dole out $250 million in pandemic bonus pay to some frontline essential workers, though lawmakers expect to come back for a September special session to decide who qualifies and how much money they'll receive.

Lawmakers failed to pass a package of public construction projects known as a bonding bill, which has a more challenging requirement of 60 percent support in both the House and Senate. House Speaker Melissa Hortman and Senate Majority Leader Paul Gazelka expressed interest in working on a bonding bill, meaning that could also see movement in a future special session.

Ethics changes

The House added a last-minute amendment to the tax bill that will ban lawmakers from holding jobs at lobbying firms starting in 2023.

The change is seen as targeting House GOP Leader Kurt Daudt after he took a job at Washington-based consulting firm Stateside Associates in 2019. Daudt has said he does no lobbying for the firm.

The amendment was offered by the New House Republican caucus, which broke away from the House GOP in 2019 over a dispute with Daudt. The breakaway caucus members have been pushing the ethics proposal ever since, and got it added to the tax bill just before it passed the House. The Senate later passed the same version, sending it to Walz.

House Speaker Melissa Hortman called it "pretty simple, straightforward ethics reform" -- yet she didn't vote for or against it.

Asked why not, Hortman said "I work very hard to preserve relationships. I give people the benefit of the doubt. I give people a lot of grace, and I thought in that moment that my role as presiding officer was to be a little distant from the fray on the floor."