I help local entrepreneurs run small businesses in Minneapolis. This is not a hobby for them, not a vanity project, these are actual, payroll-meeting, community-supporting, taxpaying businesses. The kind politicians love to name-drop in speeches right before they forget they exist when it’s time to do something useful.
So, forgive me if my patience is running a little thin.
As businesses continue to recover from Operation Metro Surge, there is an opportunity to match that resilience with meaningful support — especially for immigrant- and BIPOC-owned businesses. Extending Minnesota’s pass-through entity tax election (MN PTE) is a straightforward, impactful way for elected officials to provide certainty and demonstrate that they are committed to helping businesses move forward.
Yes, I’m talking about the MN PTE election, a tax tool that small business owners can use to reduce their federal tax liability. In simpler terms, Minnesota’s Pass-Through Entity (PTE) tax option is a special way for small businesses to pay their taxes. Many small businesses — like partnerships or S-corporations — don’t pay income tax themselves. Instead, the owners report the business income on their personal tax returns. This is called a “pass-through” business.
Normally, when these owners pay state taxes (like taxes to Minnesota), there is a limit on how much they can deduct on their federal taxes. This limit can make their federal tax bill higher.
The PTE option changes that. Instead of the owner paying the state tax personally, the business pays the state tax at the business level. Then, the business can deduct that full amount on its federal taxes. This helps lower the total income that gets taxed by the federal government.
This isn’t controversial. It’s not radical. It’s not even expensive. According to the Minnesota Department of Revenue, extending the PTE election costs the state exactly nothing. Zero. It’s revenue neutral.
Without PTE, owners pay more federal taxes because of deduction limits. With PTE, the business pays the tax and can deduct more, so owners owe less federal tax.
Here in Minnesota, where the cost of doing business is already higher than our neighbors, we’re apparently debating whether we deserve the same basic tax relief as 36 other states including California and Illinois, not exactly tax havens.
If this extension doesn’t happen? Thousands of us will see our effective federal tax rate jump by 2.3% to 4% starting in 2026.
Let me translate that into plain English: higher taxes, less cash flow, fewer hires, slower growth. For some businesses, that’s the difference between staying open and closing the doors.
And yet — despite bipartisan support, despite backing from the Minnesota Chamber of Commerce, the Minnesota Society of CPAs, and even the Commissioner of Revenue, Paul Marquart — we’re stuck waiting. Waiting on politics. Waiting on hesitation. Waiting on people who don’t have to make payroll next Friday.
Gov. Tim Walz, make the extension of the MN PTE election retroactive to Jan. 1, 2026. Send a clear message that small businesses in this state matter more than legislative gridlock.
Right now, the silence is deafening. So much so that small-business owners like the many I represent are left wondering why we’re always the ones expected to absorb the hit.
We’ve already taken hits — from the pandemic, from rising costs, from disruptions like Operation Metro Surge that made it harder to operate safely and confidently in our own neighborhoods.
We don’t need another one from our own state government.
This isn’t about handouts. It’s not about loopholes. It’s about fairness and survival. It’s about not putting Minnesota businesses at a disadvantage compared to nearly three-quarters of the country.
Most of all, it’s about whether the people making decisions understand what it’s like to sign the front of a paycheck instead of the back of one.
Because out here, in the real economy, we don’t have the luxury of dragging our feet.
Kristel Porter is executive director of the West Broadway Business & Area Coalition.
