Minnesota residents who commute across the border into Wisconsin for work could soon save money on their income tax returns. The 2017 tax bill, which passed the legislature last week and was signed into law by Gov. Mark Dayton on May 30, included a provision authorizing a new income tax reciprocity agreement between Minnesota and Wisconsin.
The income tax reciprocity provision calls for a dual track approach: for tax year 2017, Minnesota residents working in Wisconsin will be eligible for an income tax reciprocity tax credit. Additionally, the bill instructs the commissioner of the Minnesota Department of Revenue to work with the secretary of the Wisconsin Revenue Department to enter into a new income tax reciprocity agreement for tax year 2018. If the two states are unable to reach an agreement, the tax credit will continue for Minnesota residents.
“Income tax reciprocity is a huge issue for our area,” said Sen. Jeremy Miller (R-Winona), who authored an income tax reciprocity bill early in session. “Thousands of people live in Minnesota but commute to Wisconsin for work – in fact, Houston County is the number one county in Minnesota impacted by the lack of a reciprocity agreement. I have spent years working with Rep. Davids and others toward a bipartisan solution to make filing tax returns more convenient for these residents. I’m very happy we were finally able to get this signed into law.”
The tax bill stipulates that a reciprocity agreement must include the following:
- A provision providing for suspending the agreement if either party does not pay on time
- A provision setting the interest rate that will be applied
- A provision stating a time for annual reconciliation
- A provision requiring both parties to conduct joint benchmark studies about the agreement every five years
- A provision providing for an annual application for taxpayers who request an exemption
- A provision stating the quarterly payments must be a reasonable estimate of loss
“This was one of the most productive legislative sessions we have had in a long time,” continued Sen. Miller. “In addition to tax reciprocity, the tax relief package included targeted relief to middle income families, senior citizens, small businesses, and farmers, as well as a first-in-the-nation student loan tax credit, which I authored in the Senate. Finally, this bill included additional permanent, ongoing local aid for cities and counties. I’m proud of the things we were able to get done for the people of Minnesota.”
There was an income tax reciprocity agreement in place from 1968 to 2009, but it was terminated because Wisconsin was not making timely reimbursement payments. An income tax reciprocity tax credit was included in the bipartisan tax bill that passed at the end of the 2016 before ultimately being vetoed by the governor.