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April 27, 2018


Supplemental Appropriation Bills Come Together

Following a flurry of activity in finance committees last week, the Minnesota Legislature’s supplemental appropriation bills have taken shape. This week, the Senate Finance Committee discussed and compiled all 13 supplemental appropriation bills into one omnibus bill authored by committee chair Sen. Julie Rosen (R-Vernon Center). While sizable (coming in at nearly 600 pages), SF 3656 makes only modest adjustments to the state’s biennial budget passed in 2017. During the nearly 11 hours of debate, Senate Democrats offered dozens of amendments to the omnibus bill, including a controversial attempt to require background checks for gun sales, but were generally unsuccessful. The bill eventually passed on a 34-31 party-line vote.

While the Senate opted to assemble a single omnibus supplemental appropriations bill, the House of Representatives elected to combine their various budget proposals into four. The Ways and Means Committee worked throughout the week to assemble and review the three bills before eventually sending each one to the House floor. Those bills include:

  • HF 4328 (Loon) contains the omnibus E-12 education finance bill and the omnibus higher education finance bill
  • HF 3138 (Dean) contains the omnibus health and human services finance bill and the omnibus transportation finance bill
  • HF 2856 (Johnson, B.) the omnibus public safety finance bill
  • HF 4099 (Knoblach) contains the omnibus employment, economic development, and energy finance bill, the omnibus environment and natural resources finance bill, the omnibus agriculture finance bill and the omnibus state government finance bill

The House took up and passed HF 4328 on a 94-29 vote Thursday afternoon and is scheduled to take up HF 3138 and HF 2856 on Tuesday.

Legislators Begin to Focus on Tax Conformity
On Monday morning, the chair of the House Tax Committee Rep. Greg Davids (R-Preston) released his omnibus tax conformity proposal. While omnibus tax proposals in the second year of the biennium are rare, HF 4385 comes forward as Minnesota attempts to align its tax code with substantial changes made by Congress as part of the federal Tax Cut and Jobs Act of 2017. The Minnesota Department of Revenue estimates that without legislative action, Minnesota taxpayers could pay as much as $813 million in increased taxes for tax years 2018 and 2019.

While presenting HF 4385 to the House Tax Committee, Rep. Davids noted that in crafting the legislation he attempted to guarantee that new individual tax income revenue was directed toward individual tax relief while new corporate tax revenue was directed toward corporate tax relief. As part of that effort, Rep. Davids has proposed reducing the second-lowest income tax tier from 7.05 percent to 6.75 percent and reducing the corporate tax rates from 9.8 percent to 9.1 percent by fiscal year 2020. In total, it is estimated that HF 4385 would result in a $104.8 million tax revenue reduction for the general fund in the 2018-19 biennium, and a $33.7 million reduction in the 2020-21 biennium.

However, perhaps the most long-lasting and significant element of the tax conformity discussion stems from Gov. Dayton’s proposal (which is included in Rep. David’s bill) to move the state away from using federal taxable income as a starting point for tax calculations in favor of an adjustable gross income. Minnesota is one of the few remaining states that rely on federal taxable income for state returns and, as a result, Minnesota tax liabilities are disproportionately impacted by changes to the federal tax code.

Having been passed out of the House Tax Committee Tuesday and the House Ways and Means Committee Thursday, HF 4385 will be taken up by the full House of Representatives Monday. In the Senate, Sen. Roger Chamberlain (R-Lino Lakes) is expected to release his tax proposal early next week.

Legislative Calendar and Committee Deadlines
The 2018 Minnesota legislative calendar, complete with announced committee deadlines and holiday recesses, is below:

March 22 First committee deadline (The first deadline is for committees to act favorably on bills in the house of origin.)
March 29 Second committee deadline (The second deadline is for committees to act favorably on bills, or companions of bills, that met the first deadline in the other house.)
March 30-April 8
Legislative recess for Easter/Passover holidays 
April 20 Final committee deadline (The third deadline is for committees to act favorably on major appropriation and finance bills.) 
May 21 Constitutional deadline to adjourn sine die 


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Larkin Hoffman provides counsel to a wide variety of ‎organizations, from ‎small businesses and nonprofits to  Fortune 500 companies, in ‎many areas of practice including ‎corporate and governance matters, litigation, real ‎estate, government relations, labor and employment, intellectual property, ‎information technology, ‎franchising and taxation. The firm also serves the needs of individuals in many ‎areas ‎including trusts and estates, personal injury and family law.

 

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