Minnesota Legislature Passes Section 179 Fix
Many Minnesota farmers had a huge sigh of relief when the Minnesota Legislature passed the section 179 fix during the special session. The bill fixing the problem had bipartisan support and Governor Walz also supported the section 179 fix. It was moving through the Minnesota Legislature until the COVID-19 pandemic hit in March. The issue as I understand it, relates way back to the Federal Tax Reform that was passed early in the Trump Presidency.
Without getting too "deep in the weeds" here is what happened. After the President Trump tax reform the Minnesota Legislature did not completely change our tax laws to conform to the Federal Code. Accountants and farmers I guess did not understand Minnesota's section 179 or changing like property. Let's use an example.
I own a combine and decide to trade it in for a newer and larger one. My combine still has value so my John Deere Dealer subtracts the value of my old combine from the price I have to pay for the newer one. We call that the "boot price." The value of my old combine is rolled into the value of my newer combine. I still own the combine. Section 179 refers to exchanging "like property" which it is.
However, a while later farmers and accountants were informed the value of our old combine is a taxable event so farmers have to consider the value of the old combine traded in as income. I was talking with the President of the Minnesota Soybean Growers Association and she said she knew of some farmers that had traded combines a couple years ago and were now notified by the Minnesota Department of Revenue that they owed an additional $100,000 in taxes!
It was not an intentional "foul up" but sometimes things happen! So, it was great to see that the Minnesota Legislature and Governor Walz got the section 179 fixed!