Summary of HF 5055 (2025-2026) – Minnesota
A comprehensive tax bill making broad changes to income, corporate, sales, gross receipts, and other taxes; expanding federal conformity; modifying tax credits (notably sustainable aviation fuel), and imposing new taxes (firearms gross receipts tax and a social media tax). The measure also creates a commission on artificial intelligence and reallocates money through various credits and program changes.
Sections at a glance
- Article 1: Federal conformity updates and administrative provisions
- Article 2: Individual income and corporate franchise tax changes, pass-through entity tax, and related provisions
- Other articles: Credits, incentives, and new tax-related provisions including the sustainable aviation fuel (SAF) credit and new taxes
Key Provisions and Changes
1) Federal Conformity and Tax Code Updates
- Internal Revenue Code (IRC) conformity updated to reflect changes through May 1, 2023, with retroactive alignment for years benefiting from federal changes.
- Several sections specify that Minnesota’s tax code follows federal changes as of the federal effective dates, with retroactive applicability where applicable.
2) Individual Income Tax Changes
- New tax rate schedules for individuals (MFJ, single, head of household) with specified brackets and rates (e.g., top marginal rates around 9.85% for high incomes). Bracket thresholds are detailed, and certain provisions allow for simplified bracket-based calculation for low incomes.
- Nonresidents’ Minnesota tax computed on their Minnesota source income with proportional adjustments.
- Expanded/adjusted credits and modifications to deductions, with new conformity provisions tying state additions and subtractions to federal rules.
3) Corporate Franchise and Pass-Through Entity Tax
- Revisions to net income definitions for corporations and pass-through entities, including how add-backs and subtractions align with federal code.
- Pass-through entity tax (PTET) regime updated to specify how qualifying owners, entities, and elections function:
- Qualifying entities electing to pay the PTET must be owned by qualifying owners and the election is irrevocable for the tax year.
- The PTET is computed as the sum of each qualifying owner’s tax liability, with adjustments applying the highest individual marginal rate and other authorized deductions/credits.
- Nonresident qualifying owners and owners of S corporations are allocated to Minnesota in accordance with statutory allocation provisions.
4) Sustainable Aviation Fuel (SAF) Credit
- Establishment of a SAF credit: $1.50 per gallon for SAF produced in Minnesota or blended in Minnesota and sold for use in aircraft departing Minnesota airports.
- Certification and allocation process for credit certificates; credits can be claimed after commissioner certification.
- A supplemental credit: $0.02 per gallon for each additional percentage point of carbon intensity reduction beyond a 50% baseline, capped at $2.00 per gallon.
- Credit allocation limits and rollover provisions: total annual credit certificates capped (with specified dollar amounts by fiscal year) and unused credits carried forward, but with expiration tied to a sunset date unless extended.
5) Other Tax Provisions and Credits
- Firearms gross receipts tax imposed.
- Social media tax imposed with dedicated revenue use (receipts directed to specific programs; details dependent on implementing language).
- Cannabis gross receipts tax changes.
- Revisions to dependent care credit and historic structure rehabilitation credit.
- Creation of a Commission on Artificial Intelligence with appointment and reporting requirements.
- Various technical and filing provisions (retroactive effective dates, penalties, reporting timelines like January 31 deadlines for payee statements).
Effective Dates and Timeline
- Overall effective dates: Several provisions are effective the day after final enactment; many conform with federal changes retroactively to the dates federal changes became effective.
- SAF credit: Effective for SAF sold after June 30, 2025, with retroactive applicability for taxable years beginning after December 31, 2024.
- PTET and income tax changes: Effective for tax years beginning after December 31, 2024 (with retroactive federal conformity where indicated).
- Credit allocation limits: Effective for fiscal years beginning after December 31, 2025, with carryforward provisions for unused credits; expiration tied to a specified year (2030-2035 depending on section).
Who is Affected
- Minnesota individuals (residents and nonresidents) subject to updated income tax structures and conformity adjustments.
- Minnesota corporations and pass-through entities (owners, partners, members, and shareholders) under the revamped PTET framework.
- Businesses producing or blending SAF in Minnesota (and purchasers using SAF) eligible for the SAF credit.
- Taxpayers affected by new taxes: firearms retailers (gross receipts tax) and certain digital platforms (social media tax) with dedicated revenue uses.
- Taxpayers with charitable contributions, depreciation, and other credits modified by the bill's conformity changes.
Notes
- The bill is technical and broad, touching many tax code provisions, credits, and administration. Specific dollar amounts, brackets, and dates are provided in the text and would require analysis against current Minnesota law to quantify net impacts for particular taxpayers or industries.
If you’d like, I can create a side-by-side by taxpayer type (individual, business, nonprofit) with estimated impact ranges and highlight sections most likely to affect your sector.
