The 2026 legislative session ended at midnight on May 18th, 2026. It concluded in a relatively orderly fashion after lawmakers passed final legislation incorporating a supplemental budget deal agreed to by Governor Walz and legislative leaders.

From a small business perspective, the biggest wins of the legislative session include no new personal income or business taxes, federal tax conformity, and no new workplace mandates. Here is a broad overview of what did (and did not) make it through the end of the session.

VICTORIES

• Pass-Through Entity Tax Election – Lawmakers voted to restore and extend Minnesota’s Pass-Through Entity Tax election for two additional years. This option was originally enacted in 2021 to provide a workaround to the SALT deduction cap. It expired after December 31, 2025, resulting in an increased federal tax burden for small businesses that use this option.
• Federal Tax Conformity – Included in the final supplemental budget agreement were several federal conformity updates to Minnesota’s tax code. The most significant of these include conformance to the increased Section 179 deduction limits, immediate R&E expensing for pass-through entities, and updating Minnesota’s conformity to federal bonus depreciation rules that allow for 100% of the costs of qualifying assets to be written off.
• Changes to Certain Employer Notice Requirements – The Legislature passed a bill that repealed employer notification requirements for the Secure Choice Retirement Plan, as well as the penalties for failure to provide such notice to their employees. This is a small, but meaningful, change that will hopefully relieve small businesses from the added burden of having to notify employees about yet another state program.
• No New Individual Income or Business Taxes – Legislative proposals that sought to increase or impose new taxes on individual or business income failed to make it across the finish line. These proposals include: a so-called “wealth” tax, a 5th tier income tax rate, and an expansion of the Net Investment Income Tax.
• No New Employment Mandates – Legislation that sought to impose a “suitable seating” mandate on all employers was defeated, as was legislation that sought to expand the requirements for job postings, increase the minimum wage, mandate holiday overtime pay, and allow striking workers to collect Unemployment Insurance benefits. A bill that sought to prohibit certain employer repayment agreements was also defeated.
• No Sales Tax Expansion – Legislative proposals that attempted to expand the state sales tax to advertising services and certain professional services were not included in the final budget deal.
• No Climate Superfund – A new retroactive liability scheme that sought to impose massive penalties and fines on fossil fuel companies was rejected. This bill would retroactively penalize these companies for fossil fuel extraction activities dating to 1995, which would result in increased costs for consumers and higher energy prices across the board.

ONGOING CHALLENGES

• Mandate Reform – Common sense reforms to Minnesota’s Paid Family & Medical Leave and Earned Sick & Safe Time mandates remain an ongoing challenge that needs to be addressed. Proposals such as a small business exemption, broader seasonal exemptions, reduced weeks of benefits, and other modifications failed to gain bi-partisan support during the 94th Legislative Session.
• New Workplace Mandates – This session saw a handful of new proposed mandates, ranging from suitable seating to mandatory overtime pay on holidays. Certain lawmakers seem to possess a lack of understanding as to how these proposed mandates result in very real operational challenges for small businesses. Continued efforts will be needed to educate lawmakers on the impact of these mandates and to diligently push back against proposals that interfere with an employer’s right to own, operate, and grow their business.
• Permanent PTE Tax Election Fix – While the restoration of the PTE Tax election was a positive development, additional work needs to be done to make this option permanent and provide small businesses with greater certainty as they plan for their yearly tax liabilities.
• Improve Minnesota’s Tax Climate – Minnesota currently ranks 44th in overall tax competitiveness, with individual and corporate tax rates that are among the highest in the country. An ongoing challenge will be to improve Minnesota’s tax climate by lowering the overall tax burden on small businesses, while simultaneously pushing back against any renewed threat of increased taxes in the future.
• Small Business Affordability Issues – Small businesses continue to grapple with the rising costs of energy and health insurance. Increased legislative hostility toward insurance companies and fossil fuel companies are likely to spur future legislation that will directly and negatively impact the costs of energy and health insurance for small businesses in Minnesota.