Minnesota is forgiving 2020 jobless benefits and PPP loans. So where's the money?

Minnesota will take weeks or months to refund taxes paid on unemployment benefits and COVID-19 pandemic-related business loans.

About 500,000 Minnesotans are in line to get money back from the tax break on the first $10,200 of 2020 unemployment benefits. More than 100,000 Minnesota businesses received Paycheck Protection Program loans and now are in line for a refund.

One month ago, Gov. Tim Walz and top lawmakers agreed on the tax breaks. That deal is in the tax omnibus bill during the special session, and lawmakers expect to pass the measure before the end of June. But officials at the Minnesota Department of Revenue say they are waiting for the bill to become law before deciding whether they can automatically issue refunds or will require amended returns.

The chairs of the House and Senate tax committees said the agency needs to announce a decision quickly.

"When is this decision going to be made? It should be made soon," Senate Taxes chairwoman Carla Nelson, R-Rochester, said in an interview. "There’s nothing new here. The department has known for a month what the law will be."

Minnesota is one of few states that required people to pay income taxes on 2020 unemployment benefits and businesses to pay on Paycheck Protection Program loans. The federal government has long since forgiven jobless benefits and PPP loans from federal income taxes.

The deal struck on the last day of regular session -- which happened to be tax day -- assured individual filers and business owners that they'd eventually get their money back. At the time, the only question was when.

A spokesman for the Revenue Department said the agency would wait until the bill becomes law before updating and testing its systems to learn whether automatic refunds can happen.

"This system update and testing is a process the department does on an annual basis when implementing a tax law change and can take a number of weeks to a few months depending on the complexity and resources required to make the changes," said Ryan Brown, the agency's spokesman. "Hundreds of thousands of Minnesota taxpayers received unemployment insurance or had forgiven PPP loans in 2020, and it will take time for the department to adjust impacted returns to the extent possible and process the amended returns that may need to be filed by taxpayers."

The Revenue Department has launched a subscription webpage to get email updates.

House Taxes chairman Paul Marquart said he expects the agency will be able to automatically issue refunds to most filers, except in the most complicated of cases.

"I see where they have to wait to (know) what the tax bill is going to be," Marquart, DFL-Dilworth, said in an interview. "But I would hope certainly it’s sooner rather than later, and we’ll be talking with the commissioner about that."

Beyond the tax breaks for PPP loans and unemployment benefits, Nelson and Marquart said the tax bill also includes:

  • A tax credit for film producers that shoot movies in Minnesota, at $5 million per year for four years
  • Eligibility for Minnesota's working family tax credit will expand to 19- and 20-year-olds who either have or don't have dependents
  • A one-year continuation of Minnesota's historic preservation tax credit
  • An expansion of the exemption on commercial industrial property up to the first $150,000 of value