Minnesota Legislative Update: Movement Before Third Committee Deadline

The Minnesota House and Senate spent most of this week moving omnibus finance bills through committee. Committees held day and evening meetings to allow time for public testimony and amendments and to ensure that the third committee deadline, which is today, is met. Early next week, the House Ways and Means Committee and Senate Finance Committee will begin hearings on omnibus bills. The Senate is expected to combine all finance bills into a single omnibus bill prior to being sent to the Senate floor. The House is expected to pass their bills off the floor individually, combining them in conference.

The House and Senate Tax Committees continued to meet and consider proposals to include in omnibus tax bills. It is anticipated that the House Tax Committee’s omnibus tax bill, which contains the Committee’s proposed approach on federal conformity, will be released early next week.

Governor Dayton’s Tax Conformity Proposal Heard

Both the House Tax and Senate Tax Committees heard HF4385/SF3982, Governor Dayton’s tax proposal, which includes his proposal to conform to federal tax legislation passed late last year. Governor Dayton proposes changing Minnesota’s income tax starting point from federal taxable income to adjusted gross income. It also provides relief to over two million Minnesotans by enhancing the working family credit, establishing a dependent credit, and allowing taxpayers to take the standard deduction on the federal return and itemize on their state return. Governor Dayton’s proposal also revisits three contentious items from last session: it reinstates the state general levy inflator and the inflator on tobacco taxes, and repeals last session’s estate tax changes. Leadership in the House and Senate have stated their unwillingness to address provisions in the 2017 Omnibus Tax Bill, as they were part of last year’s budget negotiations. Finally, Governor Dayton proposes to repeal the sunset on the provider tax, currently scheduled to expire on January 1, 2020.

House and Senate Republicans contend that the Governor’s proposal is actually a tax increase, citing the Department of Revenue’s analysis showing a potential tax increase at nearly every income level. The study took into consideration the proposal’s tax cuts and the extension of the provider tax. Governor Dayton and his administration disputed that extension of a current tax is an increase in taxes. The Governor’s proposal was laid over in both Committees for further consideration.

For a more detailed description of Governor Dayton’s proposal, click here.

Increasing the State General Levy Exemption

The House Property Tax and Local Government Finance Division heard HF3937, authored by Rep. Jerry Hertaus (R-Greenfield), which increases the exemption for C/I properties from $100,000 to $200,000. Representative Hertaus testified that increasing the current exemption, enacted last session, will further help small businesses and improve the state’s business climate. Opponents, including some in the business community, believe that lowering the overall levy would have a larger and more uniform impact on C/I properties. The bill was laid over as amended for possible inclusion in the division report. The companion bill SF3519, authored by Sen. Roger Chamberlain (R-Lino Lakes), is awaiting action in the Senate Tax Committee.

Dayton Appoints Thissen to Minnesota Supreme Court

Governor Dayton has appointed Rep. Paul Thissen (DFL-Minneapolis) to serve as the next Associate Justice of the Minnesota Supreme Court, filling the vacancy created when Justice David Stras was appointed to the Eighth Circuit Court of Appeals. Thissen served in the Legislature for sixteen years, leading the House DFL Caucus from 2011 to 2016 and serving as Speaker during the 2013-2014 biennium. Governor Dayton will not call a special election to fill his seat. Thissen is one of 18 legislators in the state’s history to be appointed to the state’s highest court.

Important Dates

• May 21, 2018 – Last day of session