S.F. No. 496 Summary

• Establishes a public pension income subtraction for Minnesota individual income tax, allowing taxpayers to exclude certain qualified public pension benefits from taxable income effective for tax years beginning after December 31, 2022.

• Provides a tiered federal exclusion based on provisional income: 100% exclusion if provisional income is at or below the base amount, 50% or greater of qualified benefits if income exceeds the base amount but not the adjusted base amount, and 15% or greater if income exceeds the adjusted base amount.

• Creates a state exclusion capped at $5,450 for joint returns, half that amount for married separate filers, and $4,260 for all other taxpayers, with the maximum reduced by 20% of provisional income exceeding $82,770 for joint returns or $64,670 for other filers.

• Defines "qualified benefits" as amounts received from Minnesota public pension plans under chapters 3A, 352B, 353, 354, or 354A, federal retirement systems, or other states' public retirement systems (if reciprocal treatment exists), provided the annuity is based on service where the recipient is not also receiving Social Security.

• Requires the commissioner to annually adjust the maximum exclusion and phaseout thresholds under section 270C.22, with the statutory year as tax year 2022, rounded to the nearest $10 (up if ending in $5).