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HF 940

Income tax; definition of resident trust modified.

2025-2026 Regular Session Introduced by Greg Davids

HF 940 redefines Minnesota resident trusts for income tax, potentially changing which trusts owe Minnesota tax on their income.

Introduction and first reading, referred to Taxes
#taxation-income #trusts
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Bill Summary · HF 940

Summary: HF 940 (2025-2026) – Income Tax; Definition of Resident Trust Modified

Overview

HF 940, introduced in the 2025-2026 session of the Minnesota Legislature (introduced Feb 17, 2025; referred to Taxes), seeks to modify the definition of “resident trust” for Minnesota income tax purposes. The bill is sponsored with a co-sponsor by Greg Davids. The primary aim is to adjust criteria used to determine whether a trust is considered a Minnesota resident for tax purposes, with potential implications for who pays Minnesota income tax on trust income.

Purpose and Intent

  • Change how Minnesota defines a “resident trust” for state income tax.
  • Clarify and/or tighten the criteria under which a trust is treated as resident in Minnesota.
  • Potentially adjust the tax obligations of trusts with respect to Minnesota-source income or residency status.

Key Provisions (Aspects to Expect Based on Title)

While the full legislative text is not provided here, the title indicates the following likely focal points:
- Redefinition or modification of the statutory standard used to determine resident trust status.
- Possible criteria adjustments such as:
- Beneficiaries’ residency considerations (e.g., if a majority of beneficiaries reside in Minnesota).
- Trust administration location or nexus factors (e.g., presence of trustees, governing law, or principal place of administration).
- Allocation or sourcing rules for trust income, deductions, and credits within Minnesota.
- Potential alignment with other states’ rules or with federal definitions for consistency, or a narrowing/broadening of Minnesota’s reach over trust income.

Who Is Affected

  • Trusts that are currently considered resident trusts under Minnesota law.
  • Nonresident trusts that could become resident trusts under the new criteria, or vice versa, depending on the specific changes.
  • Beneficiaries of trusts, as residency status can affect who is taxed and how trust income is allocated.
  • Trustees and financial institutions that manage or administer trusts, due to administrative and reporting implications.

Procedural and Timeline Aspects

  • Introduced and first read in February 2025.
  • Referred to the House Taxes committee for consideration, where policymakers would review, amend, and potentially advance the bill.
  • If advanced, subsequent readings and votes would occur in the House, then potentially move to the Senate and onward toward enactment, subject to committee and floor action.
  • Any effective date would typically be specified in the bill text (e.g., a prospective effective date for when the new resident-trust rule applies).

Potential Impacts and Considerations

  • Taxable impact on trusts that shift residency status, possibly altering Minnesota income tax obligations and distributions to Minnesota residents.
  • Administrative burden on trustees and tax preparers to determine and document residency criteria under the new standard.
  • Revenue implications for Minnesota’s general fund or tax administration budgets, depending on whether more trusts become taxable in Minnesota or more trusts are limited from Minnesota taxation.
  • Policy considerations around whether the change prevents erosion of the tax base or imposes additional compliance costs.

Note

The description above is based on the bill’s title and basic metadata. For a precise understanding of the modified definition, its specific criteria, effective dates, transition rules, and any associated conforming amendments (to other sections or to related credits/deductions), the full bill text and fiscal note would be required.

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

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