The pandemic impacted several institutions across the world, as restrictions and the rising number of cases devastated both national and local economies.
To provide relief to local businesses, the Minnesota legislature signed the tax 2021 into law last July. In it are tax changes related to unemployment compensation and the Paycheck Protection Program or PPP loan forgiveness.
Now we’re seeing a change to the July 1st Tax Code that could offer relief to Minnesota Businesses.

Let’s get a few facts out of the way really quick, for those who still may not understand all the players and parts…
What is PPP?
The PPP is a loan program backed by the Small Business Administration – or SBA – designed to help business owners provide job opportunities to their workers throughout the pandemic.
What is the SBA?
The SBA is an independent US government agency that promotes economic growth by helping small businesses through one-on-one counseling services, training programs, and other tools.
What Else is in the New Tax Law?
Aside from the tax code changes affecting PPP and unemployment compensation, the 2021 tax bill also contains other retroactive provisions affecting 2017 to 2020.
Some of its key highlights include full conformity to the PPP loans exclusion, the $10,200 unemployment insurance or UI compensation exclusion, and the retirement plan distributions for the tax year 2020.
It also specifies the exclusion for the economic injury disaster loans or EIDL grants and the SBA loan repayment assistance.
Another important feature in this year’s tax law is that pass-through businesses will be allowed to file taxes as C-corporations, offering a means to work around the state and local tax or SALT cap.
The new tax law contains a technical fix to Section 179, which the legislature passed last year. It removes the state addition for carryovers of Section 179 involving properties placed into service before 2020.
Other highlights include the approval of 21 new local option sales taxes and the partnership audit conformity or CAPR.
What is the MDOR Doing?
Following the signing of the tax bill, the Minnesota Department of Revenue or MDOR has updated its tax forms and has been working closely with tax software companies to incorporate the changes into its systems. In addition, MDOR has been laying the groundwork by making the necessary preparations in the weeks leading up to the July 1 signing.
MDOR has also been communicating with impacted taxpayers to amend their returns and provide the information needed, so they know when refunds start going out.
What is the Latest Update on the New Tax Law?
Processing for the returns began on the week of September 13, and it has been a big help to taxpayers who were hit hard by the COVID-19 crisis in the past year and a half.
Below is an update on the progress made as of October 5, 2021:
- The number of returns with UI compensation and PPP loan forgiveness filed at the individual income tax level reached a total of over 540,000 in the week of September 13. MDOR started processing them manually at a target rate of 1,000 per week. As of October 5, around 11,900 have been processed, and 2,000 of them had PPP loan forgiveness adjustments.
- Around 2,100 returns affected by the tax code changes have been filed at the corporate entity level. Almost all of them have been processed manually. However, it is important to note that these returns represent a small fraction of the total amount of impacted returns.
- MDOR is continuously advancing its testing system, allowing it to process more returns. Its goal is at 50,000 per week by the end of October.
This is the third update released by MDOR. The first two were released last August 13 and August 30. We will provide more updates as they are made available by the agency.
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