Minnesota Section 179 Addition for 2020

In October of 2020, as a result of the 2020 5^th Special Session, the Minnesota legislature passed and the Governor signed into law conformity to federal Section 179 expensing.

Generally, the law change is effective for property placed in service in tax years beginning after December 31, 2019.  There are some circumstances where a Minnesota section 179 addition is required on Minnesota 2020 tax year returns, or later tax year returns. Two of those circumstances are described below.

A Minnesota Section 179 addition is required on the 2020 Minnesota income tax return in these circumstances:

Shareholders and partners of a fiscal-year flow-through business

• The Minnesota Section 179 addition applies to property placed in service during a flow-through business’s 2019 fiscal year.
• While a flow-through business’s 2019 fiscal year began before January 1, 2020, its partners and shareholders filing on a calendar year must report that income on their 2020 income tax return.
• Partners and shareholders must report the Minnesota Section 179 addition on their 2020 Minnesota income tax return that was generated by and flows through from a fiscal-year flow-through business’s 2019 Minnesota income tax return.

Taxpayers with a carryover of federal Section 179 expensing limited in a prior year

• Taxpayers whose federal Section 179 expense deduction is limited in the year the property is placed in service can carry the expense deduction to future years.
• If taxpayers elected federal Section 179 expensing for property placed in service in a tax year that began prior to January 1, 2020, and they report a federal carryover amount on income tax returns for tax years beginning after December 31, 2019, they must report the addition relating to this property on their 2020, and potentially subsequent years, Minnesota income tax return.

Updated Minnesota Tax Forms
We updated the 2020 Minnesota income tax forms and instructions to account for these circumstances. The Section 179 addition line will be included on the 2020 forms.

Contact us with questions
Business Income Tax 651-556-3075 or businessincome.tax@state.mn.us
Individual Income Tax 651-296-3781 (toll-free 1-800-652-9094) or individual.incometax@state.mn.us