Democrats reject fix to save small businesses $15 million due to date error

ST. PAUL – Today the Senate voted on a tax corrections bill to repair mistakes from the rushed 2023 session that resulted in nearly $365 million in tax increases. The bill addresses changes for individual tax rates but leaves out corrections for small businesses and entrepreneurs.

“We know that mistakes can happen,” said Sen. Rob Farnsworth (R- Hibbing) “It was an easy vote to be sure taxpayers aren’t hit with even more taxes after last session. However, I am very disappointed this bill didn’t also include the fix for our main street businesses. Everyone agrees there was a wrong date, and now small business owners are facing even higher taxes. I’ll keep working to get this fixed sooner rather than later.”

The 2023 tax bill unintentionally used the 2019 standard deduction amounts for the starting point in tax year 2024 instead of the inflation adjusted amounts. Without updating this provision, filers would see their taxable income increase when filing their 2024 taxes by about $350 million total. Because it doesn’t affect filers this year, the fix has no fiscal impact to the state.  

Senate Republicans offered an amendment to include the Net Operating Loss (NOL) date change in the bill, it was defeated on party lines. Not fixing the NOL date will mean small businesses and entrepreneurs will pay about $14.8 million more in taxes this year. This is in addition to the $10 billion in tax increases Democrats passed last year.

Farnsworth voted for another amendment to give Minnesotans who paid federal taxes on their 2023 rebate check a tax credit on their Minnesota return to cover the cost of the federal tax. “Everyone knew there was a deadline to meet the requirements of the IRS. Democrats simply failed to meet the deadline. We shouldn’t penalize Minnesotans for their mistake,” Farnsworth said. The amendment was not adopted.