Tax refunds are starting to go out Monday for Minnesotans who collected unemployment insurance or businesses that received federal loans during the height of the COVID-19 pandemic.
The Minnesota Department of Revenue announced last week that about 1,000 refunds will go out this week, a process that officials hope will ramp up to roughly 50,000 per week by late October. More than 540,000 Minnesotans are eligible for a refund through the tax cuts, which were passed by lawmakers in the state's budget agreement.
"We know these refunds are important to those taxpayers who have experienced hardships over the last year and a half," Department of Revenue Commissioner Robert Doty said in a release. "We made the decision to adjust nearly all of these returns on our end so that impacted taxpayers would not need to take the time and resources to file an amended return, which would further delay the refund they're due."
It's taken months to get here. Lawmakers broadly agreed back in May to conform state and federal tax code to provide refunds for most people who collected unemployment insurance and businesses that got forgivable federal Paycheck Protection Program loans.
Minnesota tax law had treated those forgiven loans as taxable income, even though Congress moved late last year to make the assistance tax-free at the federal level.
But things always take longer than expected in divided government. Lawmakers didn't reach a final agreement on the tax breaks and the rest of the state budget until the end of June, after regular session adjourned.
The package conforms state and federal tax code for the tens of thousands of state businesses that received PPP loans, which were used to help cover employee salaries, and it excludes from income up to $10,200 in unemployment insurance compensation.
Since July, the state's Revenue and IT departments have been working to update 2020 tax forms to reflect the new law changes. They are automatically adjusting most of the returns, meaning affected Minnesotans don't need to file an amended return.
Letters were sent in mid-August to about 8,000 individual income-tax payers who need to file amended returns to get the benefits.
Senate Taxes Committee Chair Carla Nelson, R-Rochester, has been critical of how long it's taken the Department of Revenue to administer the refunds. She's hopeful the "long overdue" action will "provide much needed clarity for those hardest hit by COVID economic downturns."
"The refunds will help them get back on their feet, provide stimulus to the economy, and incentivize workers to find employment with the businesses to fill job openings," she said in a statement.
Doty has defended the department's process, noting that every time lawmakers update the state's tax laws, agencies must develop tax systems to reflect those changes.
"We have a process in place, and we are following that process," Doty said in a statement. "With taxpayer dollars at stake, we must always find the balance between speed and accuracy."