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HF 1368

Tip income exempted from the individual income tax and tax withholding requirements.

2025-2026 Regular Session

Exempts tip income from Minnesota personal income tax and state withholding, benefiting tipped workers; may alter payroll reporting for employers and affect state revenue.

Introduction and first reading, referred to Taxes
#taxation-income
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WeVote Research Nonpartisan
Bill Summary · HF 1368

Summary of HF 1368 (Tip income exempted from the individual income tax and tax withholding requirements)

Overview

HF 1368 is a Minnesota bill introduced on February 24, 2025, titled “Tip income exempted from the individual income tax and tax withholding requirements.” The measure is in its introduction and first reading and has been referred to the House Taxes Committee. A companion Senate bill is SF 1525.

What the bill would do (as indicated by the title)

  • Exempt tip income from Minnesota individual income tax.
  • Exempt tip income from the state tax withholding requirements.

Note: The exact design—whether the exemption applies to cash tips, reported tips, or all tip income, and how it interacts with wages and other compensation—will be specified in the bill’s text. This summary reflects the stated objective based on the title.

Potential provisions and changes to expect (subject to full text)

  • A statutory exclusion or deduction related to tip income that reduces a tipped employee’s taxable income for state purposes.
  • Modification or elimination of withholding requirements by employers with respect to tip income (e.g., no MN withholding on tips), while other wages may remain subject to withholding.
  • Administrative rules clarifying how tip income is treated for wage reporting, payroll duties, and reconciliation with federal tax rules.
  • Any transitional provisions, effective dates, or sunset provisions if included.

Who would be affected

  • Primary beneficiaries: tipped workers (e.g., servers, bartenders, bussers, and other employees who regularly receive tips) who would see tip income excluded from state income tax and withholding.
  • Employers: establishments that pay tip income may face changes to payroll withholding, wage reporting, and tip-tracking practices; potential administrative adjustments for payroll systems.
  • State revenue and tax administration: potential impact on state income tax collections and withholding compliance unless offset by other provisions.

Procedural status and timeline

  • Introduction and first reading on February 24, 2025.
  • Referred to the Taxes committee for consideration and possible amendments.
  • Next steps include committee hearings, potential amendments, floor votes, and passage by the House, then continuation to the Senate (or conference committee if needed). A timeline will depend on committee action and broader legislative priorities.

Relationship to related legislation

  • SF 1525 is the companion bill in the Senate, and parallel consideration may occur there, with potential differences in drafting or timing.

Key considerations and questions for readers

  • How exactly will the exemption be structured (exclusive to tip income, or also affecting wages and other compensation)?
  • How would withholding be administered if tip income is exempt—would employers withhold on non-tip wages only?
  • What is the estimated fiscal impact on Minnesota state revenues, and are there offsetting provisions or tax neutrality measures?
  • How would the change affect federal tax reporting and compliance for tipped employees?

Note: This summary is based on the bill’s title and status. The full text may include more detailed provisions and exceptions.

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

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