The 2026 Minnesota Tax Bill signed into law on May 27, 2026 introduces new guidance for Minnesota taxpayers. For individuals and businesses, the practical question is simple: do these changes require an amended 2025 return or a closer look before 2026 year-end?
In general, Minnesota adopted federal conformity, incorporating many provisions of the 2025 Federal Tax Budget and Reconciliation Bill (otherwise known as The One Big Beautiful Bill or H.R.1). Conformity is generally retroactive and effective at the same time as the federal provisions, but Minnesota has not conformed to everything. That creates both planning opportunities and compliance traps.
Key Changes
Federal Conformity and Amended Returns
Minnesota will not automatically adjust returns affected by retroactive conformity items. Impacted taxpayers should evaluate whether they need to file amended returns. This is especially important where federal changes affect income, deductions, credits, or pass-through reporting. Minnesota updated the 2025 tax forms in July of 2026 and they are now available in most tax preparation software if your return is an extension or if you need to amend.
Bonus Depreciation
Prior to the conformity, if a business claimed 100% bonus depreciation on the 2025 federal tax return, Minnesota still followed the old rules that allowed 40% bonus depreciation in 2025 with the remaining 60% to be depreciated over the life of the asset. This difference was calculated at the business level and if organized a passthrough, was evident on the Minnesota K-1 nonconformity schedules provided to the owners to use in their individual or corporate tax return.
Now Minnesota retroactively conforms to 2025 100% bonus depreciation and no longer has the issue of maintaining separate state and federal depreciation schedules. Please keep in mind there is no change to the rule that Minnesota requires the end taxpayer to addback 80% of federal bonus on the current year and a subtraction of 20% of that addback over five years (the only exception is for the new Qualified Production Property which is specific to the Manufacturing and Production industry).
Research and Development Expenditures
Minnesota generally conforms to domestic research and development expenditure expensing for partnerships, S corporations, estates, trusts, and individuals. C corporations, however, must add back 80% of the current-year federal deduction and may subtract one-fourth of the addition over the following four taxable years. C corporations should also pay close attention to the treatment of previously capitalized amounts and any future entity conversion planning.
Pass-Through Entity Tax, Composite Tax, and Nonresident Withholding
The Minnesota Pass-Through Entity Tax has been extended through tax year 2027. For 2026, first-quarter estimated PTE tax payments are considered timely if paid by the second quarter estimated payment due date. However, taxpayers cannot transfer estimated payments from an individual income tax account to a business PTE tax account.
If Pass-Through Entities already filed their 2025 Minnesota return, they need to amend their returns for conformity changes and provide updated Minnesota K-1s to the investors and owners. The refund treatment depends on whether the entity paid PTE tax, composite tax, or nonresident withholding. In some situations, both the entity and its owners will need to amend the 2025 Minnesota tax returns if taxes were filed using the old rules.
Other Business Items
The 2026 changes also address business meals and entertainment, interest on loans secured by rural or agricultural real property, opportunity zone capital gains, controlled foreign corporation rules, and sustainable aviation fuel credits. These items can be significant for businesses in the relevant industries or ownership structures. More information is available on the Minnesota Department of Revenue Tax Law Changes webpage.
Next Steps
Taxpayers should review filed returns, federal adjustments, ownership schedules, and estimated tax payments to determine whether Minnesota conformity changes create an amendment requirement, refund opportunity, or an adjustment to 2026 tax planning. Businesses should also preserve supporting records and monitor updated Minnesota forms and instructions before filing amended returns.
For Pass-Through Entities, the analysis should include whether the owners already claimed PTE tax credits or withholding. That detail can determine whether the refund request belongs at the entity level or the individual owner level.
Contact our Tax Department to discuss your situation.