A provision in Minnesota law that allows pass-through businesses such as limited liability companies, S-corporations, and partnerships to deduct state taxes from their federal tax returns expired at the end of 2025. The expiration was confirmed in a statement released on Mar. 30.
The change could affect many small businesses across Minnesota by increasing their federal tax liabilities starting in 2026. The Pass-Through Entity Tax (PTET) provision, also known as the State and Local Taxes (SALT) workaround, was created in 2021 to address changes made at the federal level but included a sunset clause that caused it to automatically expire after 2025.
If lawmakers do not restore or extend this provision, business owners who file as pass-through entities may face higher taxes next year. “If it’s not restored and extended, Minnesota businesses that file their taxes as pass-through entities could see their federal tax liabilities rise in 2026,” according to the release.
The National Federation of Independent Business – Minnesota advocates for small business interests in state policy and legislation according to the official website. Jon Boesche has served as the state director for the National Federation of Independent Business – Minnesota according to the official website. The organization serves small business owners across Minnesota according to its official website and influences policy through advocacy against burdensome regulations according to its official website.
The group also offers resources and updates on issues impacting small businesses, such as labor mandates and tax policies according to its official website. The National Federation of Independent Business – Minnesota operates as an advocacy group for small businesses according to its official website.
The expiration of this deduction is expected to be an important issue for many local entrepreneurs going forward.
