Tip income exempted from the individual income tax and tax withholding requirements.

HF 1368 exempts tip income from Minnesota's individual income tax and eliminates the requirement for employers to withhold state income tax on tips. This affects service industry workers (such as restaurant servers and bartenders) who earn tips, as these earnings will no longer be included in their taxable income for state tax purposes. The bill amends state tax law to define "tips" as amounts reported to employers under federal guidelines or to the IRS as taxable wages, and removes withholding obligations for these amounts. The change takes effect for tax years beginning after December 31, 2024.