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Panel hears bill to exempt Minnesota residents’ National Guard pay when serving under neighboring states’ orders
Summary
Senate File 668 would expand Minnesota’s subtraction for certain National Guard pay so Minnesota residents who serve in neighboring states under that state’s call for aid would not owe Minnesota income tax on the pay; sponsor and a North Dakota Guard member described cross-border recruitment and the bill was laid over for omnibus consideration.
Senate File 668, presented by Senator Kupak, would amend Minnesota’s subtraction for state active duty pay to include service performed on behalf of a neighboring state. The change is aimed at Minnesota residents who are members of neighboring-state National Guards (for example, a Minnesota resident who serves in the North Dakota National Guard) and are called up by that neighboring state for state active duty in emergencies prior to federalization.
Sponsor explanation and witness testimony: Senator Kupak said bill language would add service performed “on behalf of a neighboring state” to the existing subtraction and added a definition of “neighboring state” so that residents called up by a bordering state government for state-declared emergencies would not owe Minnesota tax on that pay. Justin Abel, a Minnesota resident and member of the North Dakota National Guard, testified about paying Minnesota income tax on Guard earnings and about the difficulty of recovering past overpayments; he told the committee, “I am Justin Abel, a Minnesota resident of 14 years and a member of the North Dakota National Guard.” Abel described calls to the Department of Revenue and urged clarification so Minnesota residents serving under neighboring-state orders would not be taxed on that pay.
Fiscal and policy discussion: Committee staff cited small estimated counts of Minnesota residents serving in neighboring-state units (figures discussed included 147 and a staff estimate of about 90 likely claimants), and noted the subtraction could be large per person (example cited: $14,500 subtraction from adjusted gross income in some cases). Committee members asked about reciprocity (would neighboring states give an equivalent treatment); Department of Revenue staff said South Dakota lacks an income tax and offered to research reciprocity with other neighbors.
Outcome and next steps: After testimony the committee laid Senate File 668 over for possible inclusion in the omnibus tax bill.
