Refundability removal of the child tax credit and working family credit
Summary
SF2103 would change Minnesota individual income tax law by removing refundability from two tax credits: the Minnesota child tax credit and the working family credit. Under current law, if a taxpayer’s credit exceeds their income tax liability, the excess is refunded to the taxpayer. This bill repeals those refundability provisions, meaning the credits would no longer generate a cash refund beyond tax owed. The bill also repeals the child tax credit’s advance-payment provisions, which currently allow eligible taxpayers to elect to receive advance payments during the year.
The bill amends filing requirements to account for taxpayers who elect advance payments of the child tax credit, but because the advance-payment authority is repealed, that filing rule would no longer operate in the same way going forward. It also revises the child tax credit’s minimum-credit formula to reflect the elimination of advance payments and refundability. The changes apply to taxable years beginning after December 31, 2024.
Impact
The bill would narrow the practical value of the Minnesota child tax credit and working family credit by limiting them to nonrefundable credits, so taxpayers could use them only to offset tax liability rather than receive refunds in excess of tax owed. It would repeal Minnesota Statutes 2024, section 290.0661, subdivisions 6 and 8, and section 290.0671, subdivision 4, and amend related filing and credit-calculation provisions in sections 289A.08 and 290.0661. The Department of Revenue would no longer administer advance payments for the child tax credit, and the general fund appropriation tied to refundable child tax credit payments would effectively be removed with the repeal.
Sentiment
Based on the bill text and available context, the measure appears to be a tax-policy change aimed at reducing refundable credit outlays rather than expanding benefits. The bill was introduced by Senate Republicans and referred to the Senate Taxes Committee, suggesting a fiscally restrictive approach to tax credits. No committee transcript or vote record is available here, so there is no documented public debate in the provided materials, but the structure of the bill indicates a generally conservative stance on refundable tax credits.
Contention
The main point of contention is likely the elimination of refundability, because refundability allows low-income taxpayers with little or no income tax liability to still receive the full benefit of the child tax credit and working family credit. Supporters would likely view the bill as reducing state spending and limiting credits to offset actual tax liability, while opponents would likely argue that it weakens support for working families and children, especially households that rely on refundable credits as direct cash assistance. The repeal of advance payments for the child tax credit may also be controversial because it removes a mechanism intended to provide support during the year rather than only at filing time.
Individual income tax; child credit marriage penalty eliminated and credit phaseout increased, and working family credit limited based on earned income to taxpayers with qualifying children.
Tax refunds; tip income tax subtraction provided, Minnesota child tax credit expanded, onetime expansion of property tax refunds provided, and new fifth tier individual income tax rate established.