Minnesota leaves pandemic relief in tax limbo

With tax season in full swing, Minnesota businesses and individual filers remain in limbo about whether they owe the state for pandemic relief.

What's happening: Most states are following the federal government's lead and excluding PPP loans from taxable income, according to the nonprofit Tax Foundation.

• So far, Minnesota is not one of them.

The state of play: Proposals to lower state taxes on pandemic relief, including on unemployment benefits, have yet to gain full approval at the Legislature, despite Gov. Tim Walz's signals that he's on board with at least a partial waiver.

• Legislation to fully forgive PPP loans and cut taxes on extra federal unemployment benefits cleared the GOP-led state Senate with bipartisan support earlier this month.
• Majority Democrats in the House have yet to bring the issue to the floor for a vote, though the chamber's tax chair has said he's hopeful a deal can be reached. House Democrats will release their own tax and spending plan tomorrow.
• Business groups, like the Minnesota Chamber, are urging swift action on a full waiver.

Worth noting: Most business taxes were due last week, despite a last-minute deadline shift for individuals, prompting calls to get the PPP deal done ASAP.

• House Speaker Melissa Hortman has called the deadline a "red herring" and said any changes for businesses would be retroactive.

The catch: The exemptions are expensive, adding up to hundreds of millions of dollars. Approving them means lawmakers can't spend the projected surplus on other things.

Between the lines: With a number of big issues in play at the Legislature right now— like the SAFE Act for Chauvin trial security and proposals to increase summer school funding — the tax provisions could be used as a bargaining chip in a bigger deal.

This story first appeared in the Axios Twin Cities newsletter, designed to help readers get smarter, faster on the most consequential news unfolding in their own backyard.

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