Minnesota lawmakers are advancing a significant tax proposal that would establish a first‑of‑its‑kind, state‑level wealth tax beginning in tax year 2026. House File 4616 (HF4616), authored by Rep. Aisha Gomez, would impose an annual 1% tax on “taxable wealth” exceeding $10 million for individuals and certain trusts. The bill reflects the recent national conversation about taxing accumulated wealth rather than income and adds Minnesota to a growing list of states considering similar measures, including California, Illinois and New York. However, Minnesota’s proposed taxing threshold – at $10 million – would be the lowest in the country by a wide margin.
Scope and Structure of the Proposed Tax
HF4616 defines taxable wealth as the value of a taxpayer’s real or personal property – tangible or intangible – located in Minnesota, minus debts and financial obligations. Property valuation would follow the methodology used for the federal estate tax, which relies on fair market value principles.
The tax applies only to wealth with a Minnesota situs. For nonresidents holding interests in pass‑through entities, the bill adopts a “look‑through” approach: property owned by the entity is treated as if owned directly by the taxpayer, and situs is determined proportionally based on ownership share. This prevents taxpayers from shielding Minnesota‑based assets behind multilayered entity structures.
Who Would Be Affected
The Minnesota Department of Revenue estimates that approximately 5,600 taxpayers – including both residents and nonresidents with Minnesota‑situs assets – would be subject to the tax annually. This estimate is based on historical estate tax filings and demographic modeling of Minnesotans with net worth above $10 million. It is unclear if the department’s estimate includes Minnesota resident trusts not otherwise subject to estate tax – if not, the true number of affected taxpayers could be much higher.
Legislative Context and Policy Debate
HF4616 was introduced during the 2025-2026 legislative session and referred to the House Taxes Committee, where it has been laid over for possible inclusion in a broader omnibus tax bill. If enacted, the wealth tax is projected to generate $288.3 million in FY 2027, with modest annual increases thereafter.
The proposal has sparked strong partisan debate. Supporters contend that Minnesota already taxes the primary asset of most middle‑class households – their homes – through annual property taxes, and that high‑net‑worth individuals should be subject to a comparable annual assessment on their wealth. Opponents argue that the tax is unworkable, would drive high‑income residents out of the state, and could ultimately shift the tax burden onto the middle class if wealthy taxpayers relocate.
Key Considerations for High‑Net‑Worth Individuals
If enacted, HF4616 would:
- Require affected taxpayers to undertake burdensome annual valuations of diverse asset classes, including closely held business interests, investment portfolios and intangible property.
- Potentially cause nonresidents with Minnesota‑based business holdings to face new compliance obligations.
- Subject trusts with a Minnesota situs or strong Minnesota connections to taxation, meaning it may be prudent to consider moving those trusts to other, more tax-friendly jurisdictions.
Lathrop GPM’s Private Client Services group will continue monitoring – and reporting on – HF4616 as it progresses through the legislative process. While there is no guarantee that this tax proposal will ultimately be enacted, taxpayers with significant Minnesota‑situs wealth should begin modeling potential impacts and consider whether restructuring, relocation of assets or other planning strategies may be appropriate.
If you have concerns or questions about how this proposed wealth tax may affect you, please contact Jim Thomson, or your regular Lathrop GPM attorney.