GOLDEN VALLEY, Minn. — Days after President Joe Biden's executive order that would forgive $10,000 to $20,000 in student loan debt, many questions remain.
During a news briefing Friday, Bharat Ramamurti, the National Economic Council deputy director, said applications for loan forgiveness will become available in early October, with relief expected before the end of the year.
Though legal challenges and processing issues could mean longer delays, there's another looming question for Minnesotans who qualify for forgiveness: Will the state tax it?
The answer is yes... for now.
According to the Minnesota Department of Revenue, Minnesota tax law is currently out of conformity with federal law when it comes to student debt relief. That means any money that is forgiven would be considered taxable income by the state.
However, the Minnesota legislature could change that by passing tax conformity legislation. A tax bill last year would have fixed the issue, but it failed to pass on the final day of the session despite having bipartisan support.
On Friday, Senator Carla Nelson, who is chair of the Senate Tax Committee, said she believes there should be a special session to fix the issue and pass the tax bill. If that doesn't happen, she says she will push for it in the next regular session.
"I do not believe, for one minute, that the good work that was done in the last session, providing much needed, permanent, ongoing tax relief, to Minnesotans stricken with 40 year high inflation, is going to go away," Nelsons aid. "I think that should be one of the first bills out the door, next session. Just like we did with unemployment insurance — not taxing those unemployment insurance benefits — or not taxing those Pandemic PPP loans, we felt the same the same about the forgiven student loans."
Senator Nelson says she will push to pass tax conformity at the start of session, to avoid headaches for taxpayers and tax preparers.
In the meantime, accountant Scott Kadrlick says Minnesota tax payers should be ready for anything.
"Hold off filing their Minnesota tax return until the Minnesota legislature either tells you that they're going to pass it, or they actually do pass it and get it signed into law," he said. "In these types of cases, the state of Minnesota, usually, will fix that for you, so even if you pay the tax early, the liklihood is that, once they make the change, they're probably going to automatically send out refunds if you've overpaid your tax."
Watch more Breaking The News:
Watch all of the latest stories from Breaking The News in our YouTube playlist: