Summary — HB 1324 (North Dakota, 69th Legislative Assembly, 2025 session)
Status
- Introduced: November 14, 2024.
- Legislative action: Read first time (Jan 23, 2025); second reading — failed to pass (yeas 23, nays 71).
- Effective date (as drafted if enacted): applies to taxable years beginning after December 31, 2024.
Purpose and intent
- To provide a state income tax subtraction (deduction) for tips — both cash and noncash — received by employees who work in food or beverage service establishments, reducing their North Dakota taxable income by the amount of tips that were included in federal taxable income.
Key provisions
- Adds a new subdivision to subsection 2 of NDCC § 57‑38‑30.3 to allow taxpayers to reduce their North Dakota taxable income by the amount of cash and noncash tips they received in the course of employment at a “food or beverage service establishment,” but only to the extent those tips were already included in the employee’s federal taxable income.
- Defines “food or beverage service establishment” as a place primarily engaged in the sale of prepared food or beverages for on‑premises consumption.
- Effective for taxable years beginning after December 31, 2024.
Who is affected
- Primary beneficiaries: employees of restaurants, bars, cafes, and similar establishments who receive tips and report them as income on their federal tax returns.
- Secondary effects: potentially reduces state individual income tax revenue; administratively affects taxpayers and the Department of Revenue in processing state returns claiming the new subtraction.
- Employers: the bill does not change employer withholding, reporting obligations, or employer treatment of wages/tips.
Potential fiscal and policy impacts
- State revenue: likely a reduction in individual income tax collections, but the magnitude is indeterminate and depends on (1) the aggregate amount of federally reported tips by ND residents and (2) taxpayer uptake of the subtraction.
- Equity: targeted tax relief for tipped workers (often lower‑wage workers), which could increase after‑tax income for those workers.
- Administration: limited added complexity because the deduction is tied to tips already reported on federal returns; compliance and verification would generally rely on existing federal reporting of tips.
Sponsors / authorship (as filed)
- Introduced by Representatives D. Johnston, Bolinske, Christianson, Heilman, Rohr, Schatz, Toman; Senators Boehm, Castaneda, Paulson (per bill text header).
Notes and context
- The materials provided also included texts of unrelated HB 1324 measures from other states; this summary focuses on the North Dakota HB 1324 described at the top and in the ND bill text.
- Because the measure failed second reading, it is not law. Interested parties may watch for reintroduction or similar proposals in subsequent sessions.
