By Alexander Korzhen

Minnesota Retroactive Like-kind Exchange and Expensing Conformity

Minnesota lawmakers passed a bonding bill during the October 2020 special session, and the Governor signed it into law on October 21, 2020. As released by the Minnesota Department of Revenue:

The Act contains tax provisions, including retroactive full conformity to section 179 of the Internal Revenue Code (“Section 179”) for certain property acquired in a like-kind exchange under section 1031 of the Internal Revenue Code generally completed after December 31, 2017 and full conformity for all Section 179 expensing beginning in tax year 2020. These amendments impact tax years 2017 to 2020, and beyond.

Does this law change affect me?
This law change may affect you if you made additions or claimed related subtractions for Section 179 expensing. The provision is generally effective beginning with tax year 2020 and is retroactive for certain property for tax years 2017, 2018, and 2019.

For Tax Year 2020 and After
The Minnesota addition is not required for federal Section 179 expensing claimed on business property that qualifies for federal and state Section 179 expensing. We will remove the addition line from 2020 state tax forms and schedules.

Minnesota subtractions from prior year additions will continue until the five-year subtraction period ends.

For Tax Years 2017, 2018, and 2019
The Minnesota Section 179 addition is no longer required for property received as part of a transaction that qualified as a Section 1031 like-kind exchange under the Internal Revenue Code, as amended through December 16, 2016, but not thereafter.

You will need to amend your Minnesota return to reduce your Section 179 addition by the amount attributable to the property for which the addition is no longer required. If you amend to reduce the addition, you must also reduce subsequent year subtractions by the amount attributable to the reduced addition. We are not able to make this adjustment for you.

Minnesota will update 2017, 2018, and 2019 state tax forms and instructions by mid-November to include these changes.

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Contact Alexander Korzhen at or 763.703.5713.

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