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.

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