House Tax Committee lays over bill to revive Minnesota pass-through entity tax through 2027

The Minnesota House Tax Committee on March 3 considered House File 31-27, a bill to revive and extend the state's pass-through entity (PTE) tax election through tax year 2027 and laid the measure over for possible inclusion in the omnibus tax bill.

The bill’s author and staff told the committee the PTE election allows partnerships, S corporations and other pass-through entities to pay state tax at the entity level; owners then receive a credit at the individual level, which can increase federal deductibility tied to the federal SALT (state and local tax) limitations created by the 2017 Tax Cuts and Jobs Act (TCJA). Policy staff explained the bill would “revive and reenact” the PTE election that expired when federal SALT-related rules changed.

Supporters from business and professional groups said the law helps small firms and real-estate investors retain federal deductibility parity with other states and provides filing clarity ahead of looming tax deadlines. “This provision has no fiscal cost to the state,” said Rise Peterson, public policy director for a Minnesota commercial real-estate association, citing the committee packet. CPAs and small-business advocates testified the measure reduces uncertainty for thousands of Minnesota pass-through entities ahead of March and April filing deadlines.

Nonpartisan revenue staff told the committee there is a revenue estimate for HF3127 and that the effect of the proposed PTE election is effectively revenue neutral under the assumptions shown to the committee. Members asked about competitiveness and whether reviving the election would reduce state receipts; witnesses and staff reiterated the estimate showing neutrality and emphasized the timing urgency for taxpayers.

After multiple witnesses—representing CPAs, the Minnesota Chamber, the National Federation of Independent Business and individual small firms—members debated whether to expedite the bill. Several members urged rapid action to provide certainty to taxpayers; Chair renewed a motion and the committee laid HF3127 over for possible inclusion in the omnibus tax bill. No final committee vote to pass the bill occurred that day.

Next steps: HF3127 is laid over for possible inclusion; the committee may take additional testimony or move the bill to the General Register in follow-up hearings.