Minnesota lawmakers’ first action of the 2024 session is a quick fix to a drafting error discovered in last year’s tax bill that could have cost taxpayers $352 million over the next two years.
Gov. Tim Walz signed a tax correction bill on Monday, which fixed a few lines in the nearly 400-page bill related to the standard deduction amount. The bill also changes a definition to allow tribal nations in the state to apply for local housing aid and allows a local sales tax passed in Beltrami County last fall to go into effect.
In last year’s $3 billion tax package, lawmakers inadvertently used the 2019 standard deduction amount for tax year 2024, but that number didn’t include four years of adjustments to account for inflation. The mistake meant most married taxpayers would lose roughly $3,200 on their standard deduction, while single filers would lose $1,600.
Roughly 2.3 million returns would have been affected starting in the 2024 tax year. A Revenue Department staffer combing through the bill to prepare future tax forms caught the error more than a month after it was signed into law.
The broader package included more than $2 billion in tax cuts through direct rebates, Social Security income tax reductions and a new child tax credit. It also raised more than $1 billion in new taxes on higher earners and some corporations with a presence overseas.
Republicans pushed Democrats to correct another error in the 2023 tax law regarding the effective date for changes in recording net operating losses for businesses, which could cost them nearly $15 million more in taxes this year.
“They’ve had a tough year of finding employees trying to help them operate their business, maybe they’ve had a catastrophe ... and now they’re operating at a loss,” said Senate Minority Leader Mark Johnson, R-East Grand Forks. “This will penalize those businesses who have always been able to rely on some of those net operating losses to help them in that time of need to stabilize their cash flows.”
Democrats have said they agreed to make this correction in another bill after the updated February economic forecast, which will be released on Wednesday.
