S.F. No. 3174 Summary

• Establishes a new public pension income subtraction allowing eligible retirees to exclude qualified public pension benefits from Minnesota state income tax based on federal and state exclusion calculations.

• Federal exclusion phases out based on provisional income: 100% of benefits if below base amount, 50% if between base and adjusted base amount, and 15% if above adjusted base amount.

• State exclusion provides maximum of $5,450 for joint filers, $2,725 for married filing separately, and $4,260 for other taxpayers, reduced by 20% of income exceeding thresholds of $82,770, $41,385, and $64,670 respectively.

• Qualified benefits include payments from Minnesota pension plans under chapters 3A, 352B, 353, 354, or 354A, federal retirement systems, and reciprocal public retirement systems of other states.

• Amends Social Security benefits subtraction and alternative minimum tax provisions; all changes effective for taxable years beginning after December 31, 2022.