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Committee lays over bill clarifying coerced-debt relief won’t be treated as taxable income
Summary
Representative Norris presented House File 385, which clarifies that debt relief obtained under the 2023 coerced-debt statute should not be treated as taxable income for state tax purposes or used in calculating renter or property tax-credit eligibility; the committee laid the bill over for possible inclusion.
Representative Norris presented House File 385, a technical bill intended to follow up on the 2023 coerced-debt law that allows survivors of domestic violence to obtain court relief from debts they incurred under coercion. House members heard that, without clarification, Department of Revenue guidance suggested forgiven coerced debt could be treated as taxable income (Form 1099-C) and could affect eligibility for renter and property tax credits. The bill would explicitly exclude that debt-relief from taxable income and from calculations for certain credits.
Representative Norris said the bill arose after the 2023 statute passed and after conversations with the Minnesota Department of Revenue, which provided technical assistance to draft clarifying language. Ron Elwood (Ellwood in portions of the transcript) of Legal Aid testified he had worked with Representative Norris and the Department of Revenue to prepare the technical language.
Committee action: Representative Norris moved to lay House File 385 over for possible inclusion; the motion was made and the bill was laid over. There was no roll-call vote recorded in the transcript for the layover motion.
Key points from testimony and committee questions: - Ron Elwood (Legal Aid) confirmed the bill’s language was developed with Department of Revenue technical assistance to avoid unintended tax liabilities for survivors who obtain court-ordered relief from coerced debt. - Committee members asked if the relief would apply regardless of marital status; Mr. Elwood confirmed the underlying 2023 law ties eligibility to a domestic-relationship definition and that relief requires proof of coercion and a court order finding the debt was coerced.
Next steps: The bill was laid over for possible inclusion in the tax omnibus; committee staff and the Department of Revenue will continue technical work.
