ST. PAUL (WCCO) — Businesses that received forgivable payroll loans from the federal government and Minnesotans who got extra jobless benefits last year will begin seeing state tax refunds in the next few weeks, the Minnesota Department of Revenue said Thursday, after the legislature signed off on a tax relief package before ending their work.

About 560,000 tax returns are impacted by the change, which was the last bill to clear the state capitol during special session. Gov. Tim Walz signed the bill into law Thursday.

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The new law includes $1 billion total in tax breaks, including for small businesses that took federal Paycheck Protection Program loans. The federal government made those exempt from federal taxes, but since Minnesota doesn’t automatically conform with federal law, the legislature had to tax the step.

Otherwise, the relief to help businesses keep people employed during the pandemic is considered taxable income in the state. Up to $10,200 of extra unemployment benefits are also tax-free for people making less than $150,000 per year.

A spokesman for the Minnesota Department of Revenue said taxpayers don’t need to take any action unless otherwise told. The department expects most of the adjustments will be made automatically.

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If a taxpayers do qualify for an automatic adjustment, they will get a letter from Revenue describing the changes and what they might expect in a refund. More complex tax returns might need to be amended, the spokesman said, in which case the department will again notify taxpayers impacted.

The broad tax package was a victory for Republicans, said Senate Majority Leader Paul Gazelka, R-East Gull Lake, who counted the tax relief as a top priority. The bill was the last deal negotiated in special session with last-minute changes tacked on before final passage.

House Speaker Melissa Hortman says the DFL wanted fewer tax cuts, but welcomed the provisions on unemployment insurance and PPP loan forgiveness.

“The tax cuts for workers who received unemployment compensation and the tax cuts for small businesses in the bill were really important because so many people were so impacted by COVID-19,” she told reporters Thursday.

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The tax deal also includes $250 million for frontline worker bonuses, though the details surrounding who is eligible and how much they will receive still needs to be worked out. There will be a nine-member working group that will make recommendations to the legislature.

Caroline Cummings