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Minnesota Legislature Passes Welcomed Section 179 Conformity

Last week, the Minnesota State Legislature passed a bonding bill, which now heads to Governor Tim Walz’s desk for his signature. The bonding bill is a $1.36 billion package, that also contains tax and supplemental spending provisions.

Of note, the bill contains language supported by MHA regarding Section 179-full expensing and conformity with federal tax laws.

Tax laws generally require businesses to spread deductions for capital expenditures (i.e. computers, fixtures, store equipment, etc.) over the useful lives of the purchased property. Under federal tax rules, businesses may elect to use Section 179 expensing to deduct the entire cost of the purchased property in the year it is placed in service (subject to certain limits), rather than having to recognize depreciation expense on the property over what is generally a 3 to 15-year time period.

Since 2006, Minnesota law has not conformed with federal law in terms of immediate expensing of capital expenditures. Businesses were limited in how much Section 179 expense (i.e. an immediate deduction) they could claim on their Minnesota income tax return in the year they placed the property in service.

If signed into law, the bonding bill would change that by allowing immediate expensing of qualifying capital expenditures at the same levels currently allowed under federal tax rules.

Update
Governor Walz signed the bill into law on Wednesday, October 21.

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