The state Legislature passed a tax-update bill this week that will impact many Minnesotans filing taxes this spring. It also contains a special provision for our area — Mower, Freeborn and Fillmore counties and other areas in the Midwestern Disaster Relief Area.

Until this bill passed, Minnesota tax law only conformed to federal tax definitions that stood on Feb. 13, 2008, but the federal government has made many changes to the tax code since that date. The new law will update Minnesota’s tax code to reflect some of these additional changes that have taken place through Dec. 31, 2008, meaning new state deductions could be available to many Minnesota taxpayers.

The tax update bill contains many changes, but there are a few that are more high-profile than others. All Minnesota taxpayers age 70 1/2 and older may transfer up to $100,000 from a traditional or Roth IRA directly to a qualified charity and deduct that amount from their 2008 and 2009 adjusted gross income.

Additionally, Minnesota military members will receive an additional benefit. Combat pay currently is tax-exempt; under this bill, that tax-exempt pay may be counted as earned income to calculate the Working Family Income Tax Credit and maximize those tax benefits.

Qualified farmers and ranchers may take a deduction for contributions of conservation property that are valued at more than 50 percent of adjusted gross income. In addition, the bill provides for accelerated depreciation for certain farming and business machinery and equipment.

The bill also temporarily suspends the limit on casualty losses and on charitable contributions for residents of the Midwestern Disaster Relief Areas, which include the counties of Cook, Fillmore, Freeborn, Houston, Mower and Nobles. This is to address natural disasters that have occurred in those areas in recent years. More generous depreciation and expensing rules also are provided for residents in these areas.

As you know, the deadline to file 2008 taxes is rapidly approaching on April 15. If Gov. Tim Pawlenty signs this bill by that date, new instructions will be updated for those filing taxes between now and April 15.

If you already have filed 2008 taxes, you will be eligible to file an amended return to take advantage of any more recent changes.

To see if any of these changes apply to you, visit the Department of Revenue’s Web site at www.taxes.state.mn.us, or call the Individual Income Tax Help Line with any questions at 1-800-652-9094. If the governor signs this bill, new instructions should be immediately available.

The Legislature would have liked to pass this bill earlier, but making these tax changes costs money — something that is hard to come by this year with a $6.4 billion deficit. We were able to find enough to pass these limited provisions; however, the federal government continues to pass tax changes in light of the economic situation and legislators will continue working on conforming to as many of those as possible as the session continues.

The Senate also passed some bills this week that will open the door to federal stimulus funds being used. A transportation bill approves state receipt and use of $500 million in federal economic recovery funds, an important step since the first transportation contracts will be let by the end of the week. Another bill provides for the use of federal stimulus funds for clean water revolving fund loans. Half of these funds must be used by June 16 and the balance must be used within one year of the passage of the federal bill. The final related bill conforms state law to requirements for the use of about $130 million in federal stimulus funds for unemployment insurance.

Next week, the Legislature is taking a couple days off to observe the Easter and Passover holidays. Once we return, we plan to pass all budget bills and the tax bill before the end of the month. At that point, we can begin negotiations with the House and governor to determine a final budget before the May 18 legislative deadline.

If you have any questions or concerns as this process continues, please do not hesitate to contact me at 651-296-9248; sen.dan.sparks@senate.mn; or Room 317 Capitol, St. Paul, MN 55155.