Another tax bill has emerged. The tax conference committee for HF 2323 has pulled a large number of tax provisions that have already been agreed to by the committee and are noncontroversial (read: don’t have a fiscal impact), and amended them to HF 1298, which is the public finance bill (and indeed, many of these provisions are public finance and local economic development provisions). Read the newly amended bill here.
The strategy for this bill is to get the tax policy provisions that everyone agrees on signed into law. The tax chairs have repeatedly checked in with the Department of Revenue on whether the Governor objects to provisions, and just before closing the bill they removed several provisions where the Governor had concerns. Some provisions of interest in this bill are:
Creating a process to recommend changes to maintenance of effort requirements (MOE). MOEs are when the state requires that local units of government spend a certain amount of money each year in a particular area. Most MOEs apply to county spending in areas of social service delivery (e.g., mental health, chemical dependency and child care). MOEs represent an important source of funding for services that many Minnesotans use. The Commissioner of Human Services, consulting with representatives from local governments, organizations representing people who receive services, and the Commissioner of Revenue, will make recommendations for transitioning to a “new consolidated local county property tax contribution across all mandated health and human services” to the legislature by February 2010 (the language on this starts on page 63 of the bill). As we have noted in previous blogs on this subject, the challenge of the MOE issue is to balance the need for flexibility in local budgeting with the need for adequate services in every county. The bill also includes a moratorium on any new MOEs or local matching requirements being implemented between January 1, 2009 and July 1, 2011. The Minnesota Budget Project is working on a more detailed analysis of this subject, so stay tuned.
Implementing consensus language that clarifies charitable property tax exemption status for nonprofits. Responding to a state supreme court case that endangered the property tax exemption status of some nonprofits, the Minnesota Council of Nonprofits (MCN), the Department of Revenue, and Minnesota Association of Assessing Officers worked together and came up with consensus language that clarifies the test for tax exemption. MCN is pleased that the consensus language, which neither expands nor contracts the pool of currently tax exempt nonprofits, was adopted in HF 1298. For the specifics, see pages 23 and 24 of the bill, and visit MCN’s Charitable Tax Exemption Education web page for more about the history on this issue.
There are also some federal conformity provisions that adopt changes to Minnesota’s tax system to keep it in line with federal tax changes.
This bill passed the House and Senate on Tuesday night, so is on its way to the Governor.
What’s left out? Anything that was controversial in the conference committee and/or had much of a fiscal impact, including tax increases, cuts aids to local governments and several more economic development provisions. The tax conference committee will continue working on reconciling their respective tax omnibus bills (the next meeting is tomorrow).
-Katherine Blauvelt and Nan Madden