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Lawmaker pushes to restore adoption tax breaks in Minnesota

Posted by: Jennifer Brooks under Gov. Mark Dayton, Minnesota legislature, State budgets Updated: November 22, 2013 - 5:54 PM

Adoption got more expensive for some Minnesota families this year.

Workers who received money from their employers to help offset adoption expenses will now face a state tax bill for that help. Adoptive parents used to be able to write off up to $12,970 in employer assistance. Congress made those tax breaks permanent. Minnesota did not.

It was one of dozens of federal tax breaks that no longer exist in Minnesota, after the Legislature opted against bringing the state tax code into full compliance with Washington. The result are a series of small gaps between state and federal tax returns that could hit everyone from homeowners going through foreclosures to workers who got college tuition assistance from their employers.

Signing off on every single one of Congress's recent tax breaks and extensions would have cost Minnesota $300 million over the next two years. But Gov. Mark Dayton and many lawmakers say there may be enough money in the budget to restore some of the tax breaks.

Restoring the adoption tax break would cost the state an estimated $400,000 in 2014. Allowing workers tax-free employer tuition assistance would cost $4.4 million. Exempting homeowners who go through foreclosures or mortgage debt forgiveness from additional taxes would cost $7.2 million.

Saturday is National Adoption Day and state Rep. Pat Garofalo, R-Farmington, is pledging to introduce legislation next session to eliminate the state adoption tax. There are plenty of items in the state budget that could be trimmed to pay for the tax breaks, Garofalo said: "a very easy way would be to get rid of the $90 million Senate office building."

"Everybody's pro-adoption. Why would you make it more expensive?" Garofalo said. "If we can find hundreds of millions of dollars to build a new Vikings stadium, we can find hundreds of thousands of dollars to fix the adoption tax credit problem."

Gov. Mark Dayton has also said he's "very willing" to look at closing some of the gaps in the tax code, particularly for homeowners who could be hit with a sizable tax bill after going through a foreclosure or short sale.

The Minnesota Legislature returns to work in late February 2014, after many taxpayers begin filing their taxes.

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