HF370

Purpose

• Create a temporary two-year income tax exemption (income tax holiday) for certain direct support professionals (DSPs) working in Minnesota.
• The exemption applies to taxable years beginning after December 31, 2024 and before January 1, 2027.

Main Provisions

• Eligible DSPs may elect to receive an exemption from Minnesota income tax under Chapter 290 for the eligible years.
• If an eligible DSP has a refundable credit that would exceed their tax liability, they may still file and claim a refund for the year covered by this section.
• The bill provides specific definitions to identify who is an eligible DSP and which facilities count as eligible workplaces.

Eligible Direct Support Professionals (DSPs)

• An eligible DSP is:
  • An individual who was an employee (as defined in Minnesota Statutes section 290.92, subdivision 1, clause 3) of an eligible facility in Minnesota during the taxable year.
  • Who worked at least 1,000 hours at an eligible facility in Minnesota during the taxable year.
  • Whose adjusted gross income (AGI) for the year does not exceed $75,000 for single filers or $150,000 for married taxpayers filing a joint return.
• The exemption applies only to those who meet these criteria in the relevant year.

Eligible Facilities

An eligible facility includes: - A nursing facility (as defined in Minnesota Statutes section 256R.02, subdivision 2.1). - An assisted living facility (as defined in Minnesota Statutes section 144G.08, subdivision 7). - An adult foster care home licensed under Minnesota Rules parts 9555.5105 to 9555.6265. - A community residential setting (defined in Minnesota Statutes section 245D.02, subdivisions 4a or 5). - An intermediate care facility for persons with developmental disabilities licensed under Minnesota Statutes sections 144.50 to 144.56.

Administration and Definitions

• The definitions in Minnesota Statutes section 290.01 apply for this section.
• The bill clarifies that the tax exemption is an election by the eligible DSP, and it applies only during the two-year window specified above.

Significant Changes to Existing Law

• Establishes a temporary, targeted tax exemption (income tax holiday) for a defined group of workers (DSPs) and specific workplace settings.
• Allows eligible DSPs to forgo the standard tax and instead claim an exemption, with an additional provision permitting a refund if a refundable credit would exceed tax liability.
• Introduces specific eligibility criteria (hours worked, AGI limits) and lists the types of facilities that qualify as eligible workplaces.
• Creates a defined timeframe (taxable years 2025 through 2026, given the date range in the bill) during which this exemption is available.

Practical Notes

• Participation is optional—the eligible DSP must elect the exemption.
• The policy targets workers in certain care facilities who have a qualifying level of work hours and income.
• This is a temporary measure; once the two-year window ends, the exemption would no longer apply unless renewed or replaced by another law.

Relevant Terms - two-year income tax holiday - direct support professional (DSP) - eligible direct support professional - eligible facility - nursing facility - assisted living facility - adult foster care - community residential setting - intermediate care facility for persons with developmental disabilities - refundable credit - adjusted gross income (AGI) - Minnesota Statutes chapter 290 - taxable years beginning after December 31, 2024 and before January 1, 2027