SF4961
Scholarships, dependent flexible spending accounts, and health spending accounts exclusion from the income definition used by the homestead credit refund program provision
Legislative Session 94 (2025-2026)
Related bill: HF4647
AI Generated Summary
Purpose
- To change how income is defined for the Minnesota homestead credit refund program by refining what counts as income and what can be excluded or deducted. The bill focuses on excluding certain items (like scholarships and some flexible spending account amounts) from the income used to determine property tax refunds, and it clarifies how dependents and certain retirement-related amounts affect the calculation.
Main Provisions and What It Seeks to Accomplish
- The bill amends Minnesota Statutes to redefine “Income” for the homestead credit refund program.
- It specifies what items are included in income (inclusion list) and what items are not included (exclusion list), affecting how much refund a homeowner may receive.
- It introduces a structured approach to subtracting amounts for dependents, using multipliers for each dependent (up to five), and adds a factor if the claimant or spouse has a disability or is age 65 or older.
- It adds definitions for key terms used in these calculations:
- Exemption amount
- Retirement base amount
- Traditional or Roth retirement accounts
- It aligns the treatment of income with federal tax concepts (federal adjusted gross income) while ensuring certain items are treated differently for Minnesota’s refund program.
Significant Changes to Existing Law
- Reframes what counts as Income for the homestead credit refund by:
- Broadly listing items that are included in Income, including non-taxable income in some cases, certain types of retirement-related amounts, disability and sickness payments, public assistance, alimony receipts, and nontaxable scholarships.
- Specifying items that do not count as Income, such as certain Social Security-related amounts, some pension/annuity funding, surplus food relief, child support, restitution, veterans disability compensation, and specific health-related allowances like health flexible spending arrangement contributions in certain contexts.
- Allowing deductions from Income for up to five dependents using multiplier-based exemption amounts and exceptions for disability or age.
- Introduces the concept of a “retirement base amount” and ties it to inflation adjustments and specific Internal Revenue Code provisions (e.g., sections 219b5A and 219b5C) for determining deductions related to retirement accounts.
- Ensures federal adjusted gross income (FAGI) is not reduced by certain losses or carrybacks/forwards when determining Minnesota’s Income for the refund calculation.
How the Provisions Work in Practice (Overview)
- Income is the starting point for calculating the homestead credit refund.
- A broad list of income items is included, while a separate list of exclusions notes what should not be counted as Income.
- After determining Income, taxpayers may subtract dependent-related exemptions (up to five dependents) with multipliers, plus an additional consideration if there is disability or age 65+.
- The bill defines key terms (exemption amount, retirement base amount, and traditional/Roth retirement accounts) to standardize how these deductions are applied.
- For fiscal-year filers, FAGI is defined to reflect the calendar year ending in that year and is not reduced by certain tax-loss carrybacks/forwards.
Potential Impacts
- Could increase or decrease homestead refunds depending on individual income sources and how they are classified as Income or excluded.
- The treatment of health FSA contributions, scholarship income, and dependent care-related items may shift refund amounts for some households.
- The dependent exemptions multiplier structure may change how much is subtracted for dependents, affecting net refund amounts.
- Clarity and consistency in how retirement accounts and related deductions affect refunds.
Notable Terms and Phrases from the Bill (Key Concepts)
- Income (for homestead credit refund)
- federal adjusted gross income (FAGI)
- nontaxable income
- passive activity loss (IRC 469)
- discharge of qualified farm indebtedness (IRC 108g)
- cash public assistance and relief
- Social Security Act, SSI, veterans benefits
- interest from government or state government
- workers’ compensation
- disability income, sick pay
- lump-sum distribution (IRC 402e3)
- retirement contributions and accounts (IRAs, 401k, 403b, 408, 408A, 457)
- distributions from retirement accounts (traditional or Roth)
- nontaxable scholarships or fellowships
- alimony received
- alimony paid
- veterans disability compensation
- dependent care assistance (IRC 129)
- health flexible spending arrangement (health FSA) and Section 125
- exemption amount (as defined in 290.0121)
- retirement base amount (IRC 219b5A; inflation adjustments under 219b5C)
- traditional or Roth style retirement accounts (sections 401, 403, 408, 408A, 457)
Relevant Terms - Income, FAGI, homestead credit refund, nontaxable income, passive activity loss, discharge of indebtedness, public assistance, Social Security, SSI, veterans benefits, workers’ compensation, disability income, scholarships, alimony, dependent care, health FSA, Section 125, exemption amount, retirement base amount, traditional retirement accounts, Roth retirement accounts, 401(k), 403(b), 408, 408A, 457.
Bill text versions
- Introduction PDF PDF file
Actions
| Date | Chamber | Where | Type | Name | Committee Name |
|---|---|---|---|---|---|
| April 07, 2026 | Senate | Action | Introduction and first reading | ||
| April 07, 2026 | Senate | Action | Referred to | Taxes |
Citations
[
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Minn. Stat. § 290A.03, subd. 3 (income definition used by the homestead credit refund program) as amended by the bill.",
"modified": []
},
"citation": "290A.03",
"subdivision": "subdivision 3"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Minn. Stat. § 290.0121, subd. 1, paragraph b (exemption amount) as a basis for subtracting the exemption from income.",
"modified": []
},
"citation": "290.0121",
"subdivision": "subdivision 1, paragraph b"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Minn. Stat. § 8.37, subd. 5 (consumer enforcement or public compensation reference) as part of the income exclusions.",
"modified": []
},
"citation": "8.37",
"subdivision": "subdivision 5"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Minn. Stat. § 332.74, subd. 3 (discharge of indebtedness) as a potential source of income that may be excluded or treated under the homestead refund program.",
"modified": []
},
"citation": "332.74",
"subdivision": "subdivision 3"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Public Law 107-16 (Economic Growth and Tax Relief Reconciliation Act of 2001) as a federal reference related to tax provisions incorporated into the income calculation.",
"modified": []
},
"citation": "Public Law 107-16",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 469(i) (passive activity loss rules) as a component of income definitions.",
"modified": []
},
"citation": "Internal Revenue Code § 469(i)",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 469(m) (passive activity loss carryover) as a component of income definitions.",
"modified": []
},
"citation": "Internal Revenue Code § 469(m)",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 108(g) (discharge of indebtedness) as part of income exclusions.",
"modified": []
},
"citation": "Internal Revenue Code § 108(g)",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 402(e)(3) (lump-sum distributions) as part of income calculations.",
"modified": []
},
"citation": "Internal Revenue Code § 402(e)(3)",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 469(b) (certain pension/annuities) as exclusions from income.",
"modified": []
},
"citation": "Internal Revenue Code § 469(b)",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 219(b)(5)(A) (retirement-related deductions or exclusions) as part of the income calculation.",
"modified": []
},
"citation": "Internal Revenue Code § 219(b)(5)(A)",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 219(b)(5)(C) (additional retirement-related provisions) as part of the income calculation.",
"modified": []
},
"citation": "Internal Revenue Code § 219(b)(5)(C)",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 401(k) (retirement savings plan) as part of retirement account references.",
"modified": []
},
"citation": "Internal Revenue Code § 401(k)",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 403 (eligible annuity/employee benefit plans) as part of retirement account references.",
"modified": []
},
"citation": "Internal Revenue Code § 403",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 408 (traditional IRAs) as part of retirement account references.",
"modified": []
},
"citation": "Internal Revenue Code § 408",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 408A (Roth IRAs) as part of retirement account references.",
"modified": []
},
"citation": "Internal Revenue Code § 408A",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 457 (deferred compensation plans) as part of retirement account references.",
"modified": []
},
"citation": "Internal Revenue Code § 457",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 129 (dependent care assistance) as an exclusion from gross income.",
"modified": []
},
"citation": "Internal Revenue Code § 129",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 125 (cafeteria plans) as excluding certain benefits from gross income.",
"modified": []
},
"citation": "Internal Revenue Code § 125",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 62(a)(2)(D) (certain education and related deductions) as part of income adjustments.",
"modified": []
},
"citation": "Internal Revenue Code § 62(a)(2)(D)",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 222 (tuition deduction) as part of the income calculation.",
"modified": []
},
"citation": "Internal Revenue Code § 222",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 220 (educational deductions) as part of the income calculation.",
"modified": []
},
"citation": "Internal Revenue Code § 220",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cites Internal Revenue Code § 223 (special education tax benefits) as part of the income calculation.",
"modified": []
},
"citation": "Internal Revenue Code § 223",
"subdivision": ""
}
]Progress through the legislative process
In Committee