~ Quick action allows higher education, teacher expenses and other deductions this year ~

Governor Tim Pawlenty today signed the first bill of the 2007 legislative session – legislation that provides a $24.2 million tax cut for higher education tuition, teacher expenses, and other deductions that will impact 2006 income tax filings for an estimated 170,000 Minnesotans.

Joining the Governor at the Capitol bill signing ceremony were Senate Tax Committee Chair Sen. Thomas Bakk (DFL-Cook), House Tax Committee Chair Rep. Ann Lenczewski (DFL-Bloomington), House Speaker Rep. Margaret Anderson Kelliher (DFL-Minneapolis), House Minority Leader Rep. Marty Seifert (R-Marshall), Rep. Sandy Wollschlager (DFL-Cannon Falls), Rep. Dean Simpson (R-Perham), Senate Minority Leader Sen. Dave Senjem (R-Rochester), and Sen. Julianne Ortman (R-Chanhassen).

“We needed to act quickly so Minnesotans can take advantage of these deductions when they file their taxes this year,” Governor Pawlenty said. “This is a good example of Republicans and Democrats working together to do the right thing for Minnesotans.”

Because Minnesota uses federal taxable income to compute Minnesota tax, changes at the federal level can impact the state income tax paid by Minnesotans. Late last year, the U.S. Congress passed several bills that affected taxes for calendar year 2006 including the Tax Relief and Health Care Act of 2006 that was enacted on December 20, 2006.

The legislation passed unanimously by both the House and Senate matches Minnesota law with the new federal provisions and provides $24.2 million in income tax deductions for taxpayers.

The two largest deductions address educational expenses:

• Deduction for tuition and related expenses - $18.3 million - Approximately 110,000 low and middle-income Minnesota taxpayers will be able to deduct higher education tuition and related expenses. The deduction is up to $4,000 if income is less than $65,000 for single filers and $130,000 for those filing joint returns. For incomes between $65,000 and $80,000 (single) and $130,000 and $160,000 (joint), the deduction is up to $2,000.
• Deduction for classroom teacher expenses - $1 million - Minnesota K-12 teachers will continue to deduct up to $250 for classroom supplies through an extension of this current provision. Approximately 54,000 Minnesota teachers utilize this deduction.

Other personal and corporate tax deductions that now conform Minnesota tax law with the recent federal changes include:

• Tax-free distributions up to $100,000 from an IRA for charitable purposes for taxpayers age 70½ and older - $775,000
• Extend accelerated depreciation for business property on Indian reservations - Individual Income Tax $750,000, Corporate Franchise Tax $600,000
• Extend 15-year straight-line cost recovery for leasehold and restaurant improvements - Individual Income Tax $400,000, Corporate Franchise Tax $650,000
• Encourage contributions of real property made for conservation purposes - $125,000

Because this tax bill was passed and signed early in the legislative session, Minnesotans will encounter fewer complications for computing 2006 taxes and decrease the need for taxpayers to file amended state tax returns.