Under current law, business expenses, such as wages and rent, are generally deductible at the federal level for purposes of calculating federal taxable income, and Minnesota incorporates these deductions in calculating Minnesota taxable income. Federal law, however, prohibits the deduction for expenses incurred in a trade or business consisting of trafficking in controlled substances, such as medical cannabis, that are prohibited by federal law. Thus, the deduction does not flow through to Minnesota taxable income. As proposed to be amended, this bill would allow a subtraction for the federally disallowed expenses for purposes of calculating Minnesota income tax, corporate franchise tax, and alternative minimum tax.

Section 1 allows the subtraction from individual income tax; Section 2 allows the subtraction from corporate franchise tax; and Sections 3 and 4 allow the subtraction for purposes of calculating alternative minimum tax.

Effective beginning in tax year 2019.