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SF 5290

Addition requirement for certain pharmaceutical marketing expenses

2025-2026 Regular Session Introduced by Matt Klein

Minnesota would require adding back to income the IRC 162 deduction for direct-to-consumer pharmaceutical marketing, effective for years after 12/31/2026.

Referred to Taxes
#taxation #taxation-corporate #taxation-income
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Bill Summary · SF 5290

Summary of SF 5290 (2025-2026) – Minnesota

Purpose and intent

SF 5290 proposes to change how certain pharmaceutical marketing expenses are treated for Minnesota state income and corporate franchise taxes. Specifically, it requires that amounts deducted for direct-to-consumer pharmaceutical marketing under the Internal Revenue Code be added back to income for Minnesota tax purposes. The bill defines direct-to-consumer marketing and pharmaceutical manufacturers and sets an effective date for tax years beginning after December 31, 2026.

Key provisions and substantive changes

  • Definitions (new subdivision in Minn. Stat. § 290.0131):

    • Direct-to-consumer pharmaceutical marketing: Includes advertising and promotional activities aimed at U.S. consumers intended to promote the use, purchase, or prescription of prescription drugs or biologics. This encompasses TV, radio, print, digital, social media ads, and patient-directed outreach and disease awareness campaigns funded by a pharmaceutical manufacturer that are linked to a specific product.
    • Pharmaceutical manufacturer: Any person or entity involved in producing or handling prescription drugs or biologics.

  • Add-back to Minnesota taxable income (for Individual and Corporate taxes):

    • The amount that a taxpayer deducts under Section 162 of the Internal Revenue Code for direct-to-consumer pharmaceutical marketing must be added back to Minnesota income. In effect, Minnesota does not allow this deduction for state tax purposes; it is treated as an addition to income.

  • Consistency with corporate and individual tax provisions:

    • The same add-back applies both for purposes of Minn. Stat. § 290.0131 and § 290.0133 (the latter governs corporate franchise and additional tax-related provisions). This ensures the add-back is applied uniformly across the relevant tax calculations.

  • Effective date:

    • The addition back applies to taxable years beginning after December 31, 2026.

Who would be affected

  • Taxpayers who are Minnesota-resident individuals or Minnesota-based corporations (and their affiliates) that:

    • incur direct-to-consumer pharmaceutical marketing expenses deductible under IRC Section 162, and
    • claim those deductions when calculating Minnesota taxable income or Minnesota corporate franchise tax.

  • Pharmaceutical manufacturers and affiliates engaged in marketing activities directed at U.S. consumers, including campaigns tied to specific products.

Procedural and timeline aspects

  • Introduction and status: Referred to Taxes on May 13, 2026.
  • Effective date: The add-back is applicable to taxable years beginning after December 31, 2026, providing a transition window for taxpayers to adjust planning.
  • Implementation: The bill adds new subdivisions to Minn. Stat. § 290.0131 (for individual income tax) and § 290.0133 (for corporate franchise tax), establishing the definitional framework and the mandatory add-back requirement.

Potential considerations and impact

  • Revenue effect: By requiring an add-back of direct-to-consumer pharmaceutical marketing deductions, Minnesota tax revenue would likely increase relative to current law for taxpayers that claim IRC § 162 marketing deductions.
  • Compliance: Taxpayers with DTC marketing spend will need to reallocate or adjust their state tax filings for years after 2026 to reflect the add-back.
  • Policy implications: The bill narrows the tax preference for DTC marketing expenditures at the state level, aligning Minnesota with a stricter treatment compared to some other jurisdictions.

If you’d like, I can provide a side-by-side comparison of current law versus SF 5290’s changes, or a brief FAQ addressing common questions about the definitional terms and how the add-back would be calculated in practice.

Compiled from official sources — confirm details with the bill’s official record.

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