Walz signs fix to $350 million drafting error in last year’s tax bill

Gov. Tim Walz on Monday signed a bill that fixes an error in the state’s 2023 tax bill that would have cost Minnesotans over $350 million. 

Lawmakers last year in their $3 billion tax package inadvertently used the 2019 standard deduction amount, meaning it didn’t include four years of inflation adjustments, a significant sum considering the rapid inflation of those years. Department of Revenue Commissioner Paul Marquart said during one of the bill’s committee hearings that the error would mean married joint filers would lose about $3,400 of tax deductible income.

The bill (HF2757/SF2405) passed the House 128-2 and the Senate 66-0. The tax fix is the first bill Walz has signed into law this year.

Republicans attempted to amend the bill to include another fix to a mistake in the 2023 tax bill that affects businesses. 

Lawmakers last year made changes to how businesses report net operating losses beginning in tax year 2023, but they intended for the change to go into effect in tax year 2024. 

The net operating loss error would cost businesses about $15 million. Democrats said they will tackle the net operating loss fix after the state budget forecast on Thursday, so they have a better understanding of how the change would impact the state’s budget.