Minnesota Legislative Change to NOL Deduction Limitation

[IntuitRichard]

On April 8th, 2024, Minnesota Governor Tim Walz signed House File 3769 that may impact 2023 Minnesota Corporate Franchise Tax Return (Form M4) filings. The 70% net operating loss (NOL) deduction limitation has been delayed and is now effective for tax years beginning after December 31, 2023. As a result, the 80% NOL deduction limitation has been extended to include tax years beginning before January 1, 2024.

Proseries will be updating the software reverting the Minnesota NOL deduction limitation from 70% to 80% in a future release. Unfortunately, the timing of the tax law change and the proximity to the April 15th filing deadline is challenging for tax preparers and their clients. Filers expecting to utilize a net operating loss deduction in 2023 should consider waiting for the impending update to the software before submitting.

As a reminder, Minnesota provides all filers with an automatic seven-month extension to file the Form M4, Corporate Franchise Tax Return. Please note, this extension of time to file is not an extension of time to pay.

Additionally, any previously submitted Minnesota Corporate Franchise Tax Return 2023 filings with a net operating loss deduction should evaluate the need for an amended return to take advantage of the increased NOL deduction limitation from 70% to 80%.