State & Local Tax Impacts of COVID-19 for Minnesota

Thoughtware Alert Published: Dec 11, 2020
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Information current as of January 31, 2021.

The SARS-CoV-2 virus and the incidence of COVID-19 are changing life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to Minnesota

  • The DOR will provide a 30-day extension until April 20 for sales tax returns due March 20.
    • Minnesota DOR Notice, March 18, 2020.
  • The DOR will provide a 60-day filing extension for MinnesotaCare excise tax returns that were due on March 16, provided: 1) taxpayers must request an extension by April 15; and 2) taxpayers can request penalty and interest relief for reasonable cause on payments that were due March 16.
    • Minnesota DOR Notice, March 20, 2020.
  • The DOR will extend individual income tax return and payment deadlines to July 15, 2020. The grace period does not apply to state estimated tax payments for individual income taxes or to income taxes for business entities.
    • Minnesota DOR Notice, March 23, 2020.
  • Minnesota is extending the grace period for sales and use tax payments for specified types of business in Minnesota Executive Order 20-04, such as bars, restaurants and other places of public accommodation. The DOR won’t assess penalties or interest on monthly sales and use tax payments due March 20 or April 20 if paid by May 20.
    • Minnesota DOR Notice, April 9, 2020.
  • Minnesota announced an automatic 60-day excise tax grace period extension to June 15 from April 15 applicable to provider tax, hospital tax, surgical center tax, wholesale drug distributor tax and legend drug use tax. An additional 60-day filing extension is available on request for 2019 annual MinnesotaCare returns that were due March 16. Taxpayers also can request relief from penalties and interest for late payments for reasonable cause, including emergency declarations by the president and governor due to the COVID-19 pandemic.
    • Minnesota DOR Notice, April 10, 2020.
  • Minnesota won’t seek to establish nexus for any business tax solely because an employee is temporarily working from home due to the COVID-19 pandemic. Taxpayers have until Oct. 15 to file a 2019 tax return by paying 90 percent of the tax due by July 15. Taxpayers may calculate their present year estimated tax payments on 75 percent of their 2018 liability. If a refund results from a payment made after April 15, it won’t prevent an underpayment of the estimated tax penalty on the present year return.
    • Minnesota DOR Notice, April 14, 2020.
  • Minnesota has extended the occupation tax annual payments due May 1 to July 1. The DOR won’t assess penalties or interest during the grace period as long as full payment, or 90 percent of the amount due for extension filers, is paid by July 1. The grace period only applies to payments. Excise taxpayers should still file the annual occupation tax return by May 1, unless they plan to file under the extension guidelines. Returns filed on extension are still due December 1.
    • Minnesota DOR Notice, April 24, 2020.
  • Minnesota has extended the MinnesotaCare monthly estimated payments originally due May 15 to June 15, 2020, with full abatement of penalty and interest. The 30-day grace period is automatic and applies to provider tax, hospital tax, surgical center tax, wholesale drug distributor tax and legend drug use tax.
    • Minnesota Department of Revenue Notice, May 14, 2020.
  • Minnesota legislation clarifies that recyclable materials are exempt from taxation when the materials are delivered to a disposal facility or resource recovery facility for reasons related to COVID-19 and the delivery is authorized by the commissioner of the Pollution Control Agency.
    • Minnesota H.F. 37, Laws 2020, passed June 18, 2020, and available for recyclable materials delivered after April 1.
  • Minnesota announced the tax court is closed to in-person filing and until further notice; all appeals from orders of the Commissioner of Revenue may be filed only by mail. The date of the U.S. postmark stamp appearing on the envelope will be considered the date of filing. Requests for 30-day extensions of the time to appeal should be made by email to submissions@taxcourt.state.mn.us. All other documents filed in any case pending before the tax court should be filed by electronic means to submissions@taxcourt.state.mn.us. The tax court remains operational and will receive electronic submissions. 
    • Minnesota Tax Court Notice, August 3, 2020.
  • Minnesota specified that certain COVID-19 relief payments aren’t subject to provider, hospital, or surgical center taxes, which includes payments received under certain federal laws to prevent, prepare for, and respond to the COVID-19 pandemic; payments received from the Public Health Response Contingency Account; and payments received from the Health Care Response Fund and Provider Grant Program. 
    • Minnesota DOR Notice, August 20, 2020.
  • Minnesota provided guidance on certain COVID-19 relief payments, clarifying that local government Coronavirus Relief Fund aid to individuals or families may qualify for a federal income tax exclusion as disaster relief payments; COVID-19 Economic Impact Payments to individuals or families is not included in the calculation of state income tax or property tax refunds; taxpayers can’t update their direct deposit information with the DOR for federal payments; the additional $600 weekly payment for Federal Pandemic Unemployment Compensation is taxable income; and state and federal taxes aren’t withheld from the additional $600 weekly payment. 
    • Minnesota DOR FAQs, August 20, 2020.
  • Minnesota issued guidance on the state’s tax treatment of COVID-19 relief payments to businesses. The DOR states that it is likely the payments would be gross income to the businesses and taxable. Because a tax exclusion or exemption was not provided by the CARES Act or state law for these payments, state and federal tax treatment will be determined by the IRS under existing law. Payments made to small businesses are gross income to the recipient unless an exclusion or exemption applies. In general, there are no federal income tax exclusions that apply to businesses. 
    • Minnesota DOR Notice, August 20, 2020.
  • Minnesota issued information on income tax law changes in response to the federal changes due to COVID-19. Minnesota didn’t enact tax law changes coming from the CARES Act, Families First Coronavirus Response Act and Paycheck Protection Program Flexibility Act of 2020. If a taxpayer amends a federal return due to the federal acts, Minnesota returns also must be amended within 180 days after filing the amended federal return. 
    • Minnesota DOR Notice, August 28, 2020.
  • Minnesota clarified the federal payroll tax deferral doesn’t affect withholding for Minnesota taxes. 
    • Minnesota DOR Notice, September 1, 2020.
  • Minnesota clarified income and property tax issues related to COVID-19. Taxpayers must make an adjustment on Minnesota Schedule M1NC, Federal Adjustments, to report PPP loan forgiveness amounts excluded from gross income for federal purposes and related business expenses that were not deductible for federal purposes. Minnesota will treat repaid PPP loan amounts the same way they are treated on the federal return. Taxpayers must include the $600-a-week federal pandemic unemployment compensation payments in Minnesota adjusted gross income. All unemployment insurance payments are taxable income in Minnesota. The federal economic impact payments are not household income for the Minnesota property tax refund. Minnesota considers these payments federal tax credits.
    • Minnesota DOR Law Change FAQs for Tax Year 2020, October 19, 2020.
  • Minnesota legislation will provide approximately $216 million in direct COVID-19 support. The bill waives certain business fees and penalties and extends state unemployment insurance benefits by 13 weeks.
    • Minnesota S.F. 31 (Special Session), Laws 2020, effective December 27, 2020.
  • Minnesota sent COVID-19 Business Relief Payments to restaurants, bars, gyms, and bowling centers affected by the COVID-19 pandemic on January 13, 2020. This program is part of a state economic relief measure signed into law in December. If a business isn’t eligible for a COVID-19 Business Relief Payment, the business may qualify for a state or county grant under this law. The state has issued a release detailing what businesses are eligible for the program, program requirements, relief payment amounts, and the payment process. The release specifies the payments are considered taxable income. The release also notes that if the DOR is collecting a tax or other debt from a business, the DOR won’t take (offset) these payments to apply to the debt. 
    • Minnesota DOR, COVID-19 Business Relief Payments; January 19, 2021.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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