(DCWatchdog.com) – Sparking frustration and outrage among law-abiding taxpayers facing economic problems, Minnesota’s rebate checks, initially intended to provide financial relief to residents, are now subject to federal taxation.
Democratic Governor Tim Walz expressed his exasperation with the Biden administration and the Internal Revenue Service’s (IRS) decision, calling it “bulls—” during a news conference about the state’s budget surplus. This decision has placed Minnesota in a unique and unfavorable position compared to other states whose pandemic-era relief payments were exempt from federal taxes.
During his discourse about the state’s financial outlook for 2024, Governor Walz highlighted the unfair treatment of Minnesotans who received rebate checks. He noted that while other states’ pandemic-era relief payments were tax-free, Minnesotans’ rebates, amounting to $260 per person, will now face federal taxes ranging from $26 to $286.
This decision impacts households differently, with those claiming at least three dependents potentially seeing a tax bill as high as $286 on their rebates. Walz voiced his concerns directly to Joe Biden’s Chief of Staff Jeff Zients, emphasizing that Minnesotans were “being treated unfairly” due to a missed deadline by just 15 days to qualify for tax-free status.
The frustration extends beyond the governor’s office. Revenue Commissioner Paul Marquart expressed disappointment. He clarified that these rebates are not taxable at the state level.
However, the IRS’s decision means that a significant portion of the $1 billion overall rebate pot, estimated at over $100 million, will end up with the federal government. While about 18% of rebate recipients may not owe anything due to having no federal tax liability, the remaining majority of the 2.1 million recipients will be affected.
The IRS’s stance marks a significant shift from how it treated similar rebates distributed by 21 states in 2022. This change follows the federal pandemic emergency declaration’s end on May 11, 2023; Minnesota’s Legislature approved its rebate ten days later, with the governor signing it on May 23.
The IRS’s recent guidance drew a distinction between checks issued in 2022 and those approved afterward, resulting in Minnesota’s rebate being subject to federal taxes.
Minnesota Republicans echoed the sentiment of indignation, highlighting the difference between expected and actual rebate amounts and the added burden of federal taxes. Despite hopes that the IRS might reconsider its stance during a public comment period, the final determination has remained unchanged.