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HF3954

Tax refunds; overtime income tax subtraction provided, Minnesota child tax credit expanded, onetime expansion of property tax refunds provided, and new fifth tier individual income tax rate established.
Legislative Session 94 (2025-2026)

AI Generated Summary

Purpose

Explain how the bill aims to change Minnesota tax rules to provide relief in some areas (such as overtime income and property taxes) while also adding a higher income tax rate and expanding credits for families.

Main Provisions

  • Overtime income subtraction: The bill creates a subtraction from Minnesota taxable income for the amount of qualified overtime compensation that is deductible under the Internal Revenue Code (specifically referenced as a deduction under section 225). This means some overtime pay would be exempt from Minnesota income tax.

  • Minnesota child tax credit expansion: The bill expands the Minnesota child tax credit, increasing support for families with children.

  • One-time expansion of property tax refunds: The bill provides a temporary increase in property tax refunds to give property taxpayers some relief.

  • New fifth tier income tax rate: The bill establishes a new fifth tier of the individual income tax rate, effectively creating an additional tax bracket for higher income levels.

  • Statutory amendments: The bill would amend Minnesota Statutes by:

    • Adding Subdivision 40 to section 290.0132 to implement the overtime income subtraction.
    • Adding or updating subdivisions in section 290.06 (including 2d and 2c) and in section 290.0661 (subdivisions 3 and 7) to reflect these changes.
    • Referencing amendments in Minnesota Statutes 2025 Supplement to section 290.06 (subdivision 2c) and other related provisions.

Significant Changes to Existing Law

  • Creates an overtime income subtraction, altering how overtime pay is taxed at the state level.
  • expands the Minnesota child tax credit, broadening eligibility or benefit amounts.
  • Provides a one-time boost to property tax refunds, offering temporary financial relief to property owners.
  • Introduces a new fifth tax bracket, increasing the top marginal tax rate for higher earners.
  • Requires specific statutory updates across multiple sections of Minnesota tax law (290.0132, 290.06, 290.0661) to implement these changes.

Potential Impacts (Overview)

  • Taxpayers who earn overtime pay could see lower Minnesota taxable income due to the subtraction, potentially increasing take-home pay.
  • Families with children may receive larger credits, lowering after-tax costs or increasing family support.
  • Property taxpayers could receive extra relief this year through a one-time refund expansion.
  • Higher earners may face higher tax liability due to the new top tax rate.
  • Overall fiscal effects depend on how the new rate thresholds, credit amounts, and refund expansions are set in the final law.

Implementation Notes

  • The exact amounts, thresholds, and effective dates are not specified in the provided text; these would be defined in the enacted version of the bill and the corresponding administrative rules once enacted.

Relevant Terms

  • overtime income
  • subtraction
  • qualified overtime compensation
  • Internal Revenue Code
  • Section 225
  • Minnesota child tax credit
  • property tax refunds
  • fifth tier income tax rate
  • Minnesota Statutes 2024 290.0132
  • Subd. 40 (Overtime income)
  • 290.06 subdivision 2d
  • 290.06 subdivision 2c
  • 290.06 subdivision 3
  • 290.06 subdivision 7
  • 290.0661 subdivisions 3
  • 290.0661 subdivisions 7
  • Minnesota Statutes 2025 Supplement

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
March 05, 2026HouseActionIntroduction and first reading, referred toTaxes
March 26, 2026HouseActionAuthor added

Citations

 
[
  {
    "analysis": {
      "added": [
        "Subd. 40: Overtime income subtraction referencing the Internal Revenue Code."
      ],
      "removed": [],
      "summary": "Adds Subd. 40 to Minnesota Statutes 2024 section 290.0132 establishing an overtime income subtraction linked to the Internal Revenue Code.",
      "modified": [
        "Amends §290.0132 by adding a new subdivision."
      ]
    },
    "citation": "290.0132",
    "subdivision": "Subd. 40"
  },
  {
    "analysis": {
      "added": [
        "Reference to §290.06 Subd. 2d in the context of the tax-related amendments."
      ],
      "removed": [],
      "summary": "References Minnesota Statutes 2024 §290.06 Subd. 2d as part of the bill's amendments.",
      "modified": []
    },
    "citation": "290.06",
    "subdivision": "Subd. 2d"
  },
  {
    "analysis": {
      "added": [
        "Reference to §290.0661 Subd. 3-7."
      ],
      "removed": [],
      "summary": "References Minnesota Statutes 2024 §290.0661 Subdivisions 3 through 7 as part of the bill's proposed changes.",
      "modified": []
    },
    "citation": "290.0661",
    "subdivision": "Subd. 3-7"
  },
  {
    "analysis": {
      "added": [
        "Reference to 2025 Supplement §290.06 Subd. 2c."
      ],
      "removed": [],
      "summary": "References Minnesota Statutes 2025 Supplement §290.06 Subd. 2c as part of the bill's amendments.",
      "modified": []
    },
    "citation": "290.06",
    "subdivision": "Subd. 2c"
  },
  {
    "analysis": {
      "added": [
        "Links Minnesota's overtime income subtraction to IRC Section 225."
      ],
      "removed": [],
      "summary": "Federal reference: section 225 of the Internal Revenue Code used to determine the overtime income subtraction referenced in Minnesota Statutes.",
      "modified": []
    },
    "citation": "Internal Revenue Code §225",
    "subdivision": ""
  }
]

Progress through the legislative process

17%
In Committee

Sponsors

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