According to a Minnesota Department of Revenue News Release, Minnesota has decided to end its income tax reciprocity program with Wisconsin, effective January 1, 2010. As a result, Minnesota residents who work in Wisconsin will be required to file returns in both states next year.
Termination of the reciprocity agreement will impact about 13,000 Minnesotans and 33,500 Wisconsin residents who meet the filing requirements and work across the border. No Minnesota resident will pay more in Minnesota tax, but some who work in Wisconsin will pay more Wisconsin taxes.
According to the news release, the reciprocity agreement was originally intended for taxpayer simplification, not to reduce taxes on cross-border workers. Due to technological advances, the burden on taxpayers is believed to have been relieved. Therefore, the state's financial budget concerns overrode the need to continue the program.
For more details, see the MN DOR News Release.