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Panel lays over bill clarifying tax treatment of coerced-debt relief for survivors
Summary
Senate File 860 would exclude forgiven coerced debt (relief provided under the 2023 coerced-debt law) from taxable income and from income calculations for renter and homeowner refund programs beginning in tax years 2025/2026; committee laid the bill over for the omnibus tax bill.
Senate File 860, carried by Senator Gustafson, would make forgiven coerced debt — debt the courts have determined a survivor of domestic abuse did not voluntarily incur — nontaxable in Minnesota and exclude that forgiven amount from household-income calculations used for the renter's credit and homeowner property-tax refund.
Sponsor testimony recalled the 2023 law that established a civil process allowing survivors of economic abuse to have coerced debt declared not owed. Senator Gustafson said the 2023 law inadvertently raised a tax issue: a creditor-issuable 1099‑C reflecting canceled debt could be treated as taxable income unless explicitly excluded by state statute. The bill would add that exclusion and also make clear forgiven coerced debt does not count toward household income for the renter credit (effective 2025 tax year) and homeowner property-tax refund (property taxes payable in 2026).
Ron Elwood of Legal Aid testified in support. Department of Revenue staff provided technical assistance in drafting, and committee members noted the 2023 bill had bipartisan, unanimous support.
Senate File 860 was laid over for possible inclusion in the omnibus tax bill.
