We are getting off to a quick start in House Tax Committee this session! This Wednesday, February 20, the committee heard and passed two bills.
HF 3200 takes care of federal conformity issues. What does that mean? Well, the state uses the federal income tax system as the starting point for our state income tax system. When the federal government makes changes to the income tax, the state of Minnesota needs to decide whether to adopt those changes (to conform). Conformity in general makes it easier for taxpayers to comply with tax laws, because the state and federal government will be in alignment in terms of whether a particular kind of income is taxable, for example. However, sometimes conformity would mean lower state revenues, something that can be hard for the state to afford at times of deficits.
HF 3201 takes a number of provisions from last year’s omnibus tax bill (which was vetoed by the Governor) that generally are non-controversial or do not have a big revenue impact. Some of these items have been updated or otherwise have minor tweaks compared to last year’s bill. The only item of significant controversy relates to property taxes on utilities – and since the Governor named this issue in his letter vetoing last year’s bill, it is unclear what the final fate of this bill will be if that provision remains in the bill.
Some of the larger items that were in last year’s omnibus tax bill that do not appear to be in HF 3201 include increased property tax refunds (PTR) for homeowners (aka the Circuit Breaker) and related efforts to build awareness of the PTR, provisions relating to Foreign Operating Corporations and accelerated Single Sales Factor, and tax incentives for Thomsen West and the Mall of America. (You can read more about last year’s tax bill debate in our issue brief). Unfortunately, some provisions that we called for as part of our Campaign for a Better Budget Process – including inflation in the forecast and building the budget reserve – are not in HF 3501.
– Nan Madden