Paid gratuities to employees tax subtraction provision
Summary
SF 587 creates a new individual income tax subtraction for gratuities paid to employees. In practical terms, it would allow taxpayers to subtract the amount of tips or other gratuities from Minnesota taxable income, using the definition of “gratuities” already found in Minnesota law. The bill amends Minnesota Statutes, section 290.0132, by adding a new subdivision for this purpose.
The subtraction would apply to taxable years beginning after December 31, 2024. Because it is an income tax change, the bill affects the calculation of Minnesota taxable income for individuals who receive gratuities, and it would reduce state tax liability for qualifying amounts. The bill does not create a new credit or deduction structure beyond this subtraction, but it would directly alter the state tax base for tipped workers.
Impact
The bill amends Minnesota’s individual income tax subtraction provisions in section 290.0132 by adding a new subtraction for gratuities paid to employees. This would reduce taxable income for affected taxpayers and could lower state income tax collections to the extent gratuities are claimed under the new subtraction. The bill relies on an existing statutory definition of gratuities in section 177.23, subdivision 9, tying the tax treatment to current labor-law terminology.
Sentiment
The available record shows the bill was introduced and referred to the Senate Taxes Committee, but there are no committee transcripts or recorded votes provided. Based on the bill’s caption and text, the measure appears to be framed as tax relief for tipped workers, which generally suggests supportive intent. However, without hearing testimony or votes, there is no documented evidence here of broader support or opposition.
Contention
No specific points of contention are documented in the provided materials because there are no committee transcripts or votes. Potential areas of debate, based on the bill’s structure, would likely include the revenue impact on the state, whether the subtraction should apply broadly to all gratuities or only certain tipped employees, and how the subtraction would be administered and verified. The bill’s use of an existing definition may reduce ambiguity, but it could still raise questions about scope and compliance.