Wisconsin Lawmakers Pushing a Study on Income Tax Reciprocity with Minnesota

Sunday, January 21st, 2024 -- 10:01 AM

(Sarah Lehr, Wisconsin Public Radio) Wisconsin lawmakers hope a new study could be the first step toward reviving a deal that would simplify income tax filings for the tens of thousands of people who cross the Minnesota-Wisconsin border for work.

According to Sarah Lehr with Wisconsin Public Radio, for more than 40 years, a reciprocity agreement allowed Wisconsinites who work in Minnesota and Minnesotans who work in Wisconsin to file one state income tax return instead of two.

But Minnesota ended that agreement in 2010 because of delayed payments from Wisconsin. Now, more than a decade later, Wisconsin lawmakers are continuing their push to restart a deal by advancing legislation that would commission a study into the effects of income tax reciprocity with Minnesota. Rep. Shannon Zimmerman, R-River Falls, is an author of the Assembly bill, which advanced to a public hearing this month.

“Without having tax reciprocity … Wisconsin residents have to file taxes twice,” said Zimmerman, who represents a northwest Wisconsin district near the Twin Cities. “Now, if you’re a professional accounting firm or maybe a CPA, you know, that might be good for you. But it’s certainly not good for our residents.”

When the agreement was in place, cross-state commuters filed a single income tax return in their state of residence. Since more than twice as many Wisconsinites worked in Minnesota than the other way around, Wisconsin would settle up later by reimbursing Minnesota.

Minnesota canceled the deal in 2010, however, citing complaints about the timeliness of those payments from Wisconsin. In the decade since, attempts to restart a deal have been derailed by disagreements, including about how much Wisconsin should owe Minnesota.

In 2017, Minnesota shelved a proposed reciprocity deal with Wisconsin and instead began offering tax credits to Minnesotans who work in Wisconsin. Even so, Zimmerman argued both Minnesotans and Wisconsinites would save time by filing one return instead of two.

Feel free to contact us with questions and/or comments.