A tax provision buried in Minnesota's HF2438 gives auto service business owners a window to claim federal deductions their competitors may not know about.
Most auto service owners don't realize that Minnesota just revived a tax election that expired—and made it retroactive to the start of 2026. If your business is structured as a partnership, LLC taxed as a partnership, or S corporation, this matters.
Minnesota's pass-through entity (PTE) tax is an optional election that lets your business pay income tax at the entity level instead of passing all income through to your personal return. Here's the key: your business pays tax at Minnesota's highest individual rate—9.85%—on your behalf.
That sounds like a cost. But the real value is federal. When your entity pays this state tax, it generates a federal SALT (state and local tax) deduction at the business level. Normally, federal law caps individual SALT deductions at $10,000 per year. This election bypasses that cap entirely, because the deduction sits at the entity level, not your personal return.
For auto service businesses with solid profits, this can mean significant federal tax savings.
The PTE tax election had expired. HF2438, Minnesota's taxation bill for financing state and local government, revived it—and crucially, made the revival retroactive to January 1, 2026. That means if you're eligible and your business year began in 2026, you may be able to claim this election for 2026 and 2027, even though the bill passed later.
The provision is found in Article 2, Section 9 of HF2438, which amends Minnesota Statute § 289A.08, subdivision 7a (pages 33, lines 33.1–33.5).
The election is available for taxable years beginning after December 31, 2025, and expires for taxable years beginning after December 31, 2027. In practical terms: you have a window through the end of 2027 to benefit from this election.
This applies to auto service businesses structured as:
If you're a sole proprietor or C corporation, this doesn't apply. If you're unsure of your structure, ask your accountant.
The retroactive effective date means timing matters. If your business year began in 2026 or 2027, you may still have time to make this election on your return or through an amended return—but deadlines vary. Contact your tax advisor or accountant soon to determine whether this election makes sense for your situation and to understand the filing requirements.
This is a real tax benefit with a real expiration date. It's worth a conversation with your CPA before the end of the year.
Source: Minnesota HF2438, Article 2, Section 9 (Minn. Stat. § 289A.08, subd. 7a).