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Two-state tax talks still possible

Negotiations could resume on a near-defunct income tax reciprocity agreement between Minnesota and Wisconsin, a state lawmaker said.

Wisconsin legislators expressed interest in resuming talks on the deal set to end in December, Minnesota state Sen. Kathy Saltzman, DFL-Woodbury said.

The 41-year-old agreement allowed people living in one state and working in the other to file one tax return. Without it, they will have to file in each state.

Wisconsin Senate Democrats have contacted Minnesota officials about reopening reciprocity negotiations and their willingness to pass legislation if that is needed to maintain the agreement, Saltzman said.

However, Minnesota Revenue Commissioner Ward Einess said any negotiations will not occur before Minnesota state budget estimates are released in early December.

"While we are still a long way from finalizing any sort of new reciprocity agreement, this new dialogue between Minnesota finance officials and Wisconsin lawmakers is an important first step," Saltzman said in a statement. "I am hopeful that the administration will build on these conversations and work with Wisconsin lawmakers on a mutually beneficial deal that serves taxpayers in both states."

Minnesota Gov. Tim Pawlenty said in September that he was ending the deal because Wisconsin did not agree to an accelerated schedule for tax reimbursement payments to Minnesota.

Legislative efforts to continue the states' agreement come after a Nov. 1 deadline by which Einess said a deal must be reached to not affect 2010 tax preparations. That deadline was not met.

Also, Wisconsin Gov. Jim Doyle told the Hudson Star-Observer newspaper in late October that his state had already adopted its next two-year budget when Pawlenty sought an accelerated payment of $72.5 million from Wisconsin.

"There really is nothing that Wisconsin can do," Doyle said.

Without an agreement, some 46,000 people working across state lines will have to file income tax returns in both states, not just their home state.

Minnesota revenue estimates show that includes 13,000 Minnesotans and 33,500 Wisconsin residents. One-third of Minnesotans working in Wisconsin will pay more in Wisconsin taxes because the states' tax laws are different.