March 31, 2017

Minnesota Weekly Legislative Update: Senate Releases Tax Bill in Advance of Final Committee Deadline

This week, the House and Senate committees have been working toward the third committee deadline of March 31, 2017. The third and final deadline requires committees to act favorably on major appropriation bills.

Many of these bills have already been debated on the floor. It is expected that each body will have passed its version of the spending and tax bills before the start of the legislative break April 7, 2017. The legislature returns from break April 18, 2017.

Senate Tax Bill

On Wednesday, March 29, Senate Republicans released their tax proposal. The bill provides for $900 million in tax relief and reductions. SF 2255, authored by Sen. Roger Chamberlain (R–Lino Lakes), has many of the same key provisions as the House bill HF 4, which we covered in detail in our March 24 update. The differences are listed below:

  • Income Tax Relief: Reduces the first income tax tier for individual filers from 5.35 percent to 5.15 percent for tax year 2017, and then lowers it to 5.0 percent for 2018 and beyond. This is estimated to save filers $393 million for this biennium and $402 million in the next.
  • Social Security Tax Exemption: Authorizes a subtraction of Social Security benefits up to $2,500 for married filers ($1,955 for individuals), which results in savings of $75 million in FY 2018-19 and $82 million in FY 2020-21.
  • Business Property Tax Relief: Provides an exemption of the first $100,000 of market value for commercial industrial property from the state general levy and eliminates the annual inflator. Businesses will see savings of $95 million in FY 2018-19 and $195 million in FY 2020-21.
  • Ag. School Bonding Credit: Provides relief to farmers by exempting 40 percent of agricultural land from local bond levy obligations resulting in relief to farmers in the amounts of $35 million this biennium and $99 million in the next.
  • Estate Tax Conformity: Provides $30 million this biennium and $116 million in the next biennium to conform Minnesota’s estate tax to federal levels. This would be phased in fully by 2023 and conform to the federal exclusion amount thereafter. The federal amount is $5.49 million and is indexed for inflation.
  • Business Tax Fairness: Defines “marketplace provider” and “total taxable retail sales.” Establishes collection and remittance requirements for marketplace providers.

Revenue Commissioner Cynthia Bauerly, speaking on behalf of Governor Mark Dayton, reiterated many of the same concerns she stated regarding the House tax proposal. She offered that the $900 million in tax cuts is too high and results in investments that are too low in other areas of the budget. She questioned if the bill will maintain the state's overall structural balanced budget.

Additionally, the bill does not contain the state’s working family credit, the child and dependent care credits or the corporate tax reforms proposed by Governor Dayton.

Reinsurance Program Passed to the Governor

Legislation establishing a reinsurance pool for health insurance carriers is on its way to Governor Dayton for his signature. The proposal is intended to help stabilize rising insurance premiums in the individual marketplace by providing a financial cushion to health carriers. The $542 million conference committee report passed primarily along party lines in the House (74-57) and Senate (35-32).

Governor Dayton has three days in which to sign or veto the measure.

Real ID Reaches Conference Committee

The Senate passed legislation (60-7) this week to begin compliance with the Federal Real ID Act. The bill had previously failed to pass the Senate because of concerns related to undocumented immigrants and data privacy issues. We covered Real ID legislation in more detail in our March 3 update.

The bill was modified to remove rulemaking authority from the Department of Public Safety (DPS), but allows DPS to continue making progress toward compliance with Federal Real ID requirements.

The House had previously passed a version of the bill which set in law current DPS practice of not issuing undocumented immigrants driver licenses. The differing provisions of the legislation will be discussed and resolved in a conference committee.

Upcoming Important Dates

  • Third Committee Deadline. Friday, March 31, 2017: Committees must act favorably on major appropriation and finance bills by this date. This deadline does not apply to the House Committees on Capital Investment, Ways and Means, Taxes, or Rules and Legislative Administration, nor to the Senate committees on Capital Investment, Finance, Taxes, or Rules and Administration.
  • Legislative Break. The House and Senate will be in recess starting Saturday, April 8 through Monday, April 17. No Committee, floor, or other action will take place in either body that week.
  • Adjournment. The legislative session has a constitutional adjournment date of May 22 this year.

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