Net investment income tax expanded to apply to all trade or business income that is exempt from self-employment taxes.

A bill for an act

relating to taxation; individual income; expanding the net investment income tax

to apply to all trade or business income that is exempt from self-employment taxes;

amending Minnesota Statutes 2024, section 290.033.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 290.033, is amended to read:

290.033 NET INVESTMENT INCOME TAX.

(a) For purposes of this section, "net investment income" has the meaning given in

section 1411(c) of the Internal Revenue Code,
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excluding
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except:
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(1) it excludes
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the net gain attributable to the disposition of property classified as class

2a under section
273.13, subdivision 23
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.
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; and
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(2) notwithstanding section 1411(c)(2) of the Internal Revenue Code, it includes all

income from a trade or business that is not excluded from net investment income under

section 1411(c)(6) of the Internal Revenue Code.

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(b) In addition to the tax computed under section
290.06, subdivision 2c
, a tax is imposed

on the net investment income of individuals, estates, and trusts in excess of $1,000,000 at

a rate of one percent.

(c) For an individual who is not a Minnesota resident for the entire taxable year, the tax

under this subdivision must be calculated as if the individual is a Minnesota resident for the

entire year, and that amount must be multiplied by a fraction in which:

(1) the numerator is net investment income allocable under section
290.17
to Minnesota;

and

(2) the denominator is the total amount of net investment income for the taxable year.

(d) For an estate or trust, the tax on net investment income must be computed by

multiplying the net investment income tax liability by a fraction, the numerator of which is

the amount of the estate or trust's net investment income allocated to the state pursuant to

the provisions of sections
290.17
,
290.191
, and
290.20
, and the denominator of which is

the taxpayer's total net investment income.

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EFFECTIVE DATE.

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This section is effective for taxable years beginning after December

31, 2025.

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