Minnesota 2013 Nonconformity (Part 2)

Part 1 was all about the debt forgiveness, but there are a number of other items where Minnesota does not conform to the federal rules in 2013. Some items are relatively small dollar amounts like the tuition and fees and educator deductions, and a few others are obscure like the qualified advanced mine safety equipment, the depreciation for motor sports entertainment facilities and interest related dividends from a RIC. There are a few others that have broader applicability.

For older taxpayers that donate directly to a charity from their IRA, the federal return allows them to exclude the IRA distribution from income rather than picking up income and then claiming a charitable deduction. Minnesota won’t allow that so you have to add back the income, but then also add the charitable contribution to the Minnesota return.

Perhaps the item of nonconformity that has the broadest application is the adjustment for leasehold improvements. The federal return allows business owners to treat qualified leasehold improvements as 15-year depreciable property. Minnesota has accepted that treatment in the past, but now is requiring a recalculation of those leasehold improvements as 39-year depreciation. Considering the federal also allows 50% bonus depreciation when it qualifies for 15-year treatment, this can be a big adjustment for business owners that have qualified leasehold improvements during 2013.

Nonconformity is complicated and there are so many items I can’t blog about all of them with all of the nuances, but it’s important to take a look at your specific situation and see if this will affect your 2013 Minnesota return.

2 thoughts on “Minnesota 2013 Nonconformity (Part 2)

  1. Chris – you are to be commended for giving TC community a “heads up” with your Executive Summary of MN nonconformity with Fed tax law for issues having broad impact. Wondering if these sorts of reconciling items get reported on the MN Schedule S ? Also, if memory serves me correctly, the 15 year recovery period permitted for specific qualifying leasehold improvements made by restaurants was initially available for 2009 tax returns (American Taxpayer Recovery & Re-investment Act). So will calendar year qualifying MN taxpayers using this provision for qualifying expenditures in 2009 need to calculate a cumulative adjustment for differences in each year’s amounts using both 15 yr recovery and 39 yr recovery for tax years 2009 to 2012 ? Thanks for any feedback you might have !

  2. Chris says:

    James – it all gets reconciled on Form M1NC. Those depreciation adjustments only apply to the items placed in service during 2013, it doesn’t affect prior year assets.

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